Supreme Court

Securities and Exchange Board of India v. Kishore R. Ajmera

MANU/SC/0212/2016

23.02.2016

Capital Market

What degree of proof to find brokers liable for fraudulent practices

The Supreme Court disposed off several appeals against the creation of artificial volumes by two brokers who matched volumes for related clients. The transactions were notable in that volume of trading in such scrips was usually minimal. The Court opined in the absence of direct substantive evidence, courts can take note of immediate and proximate facts and circumstances surrounding the events on which the charges are founded to reach a reasonable conclusion. As such, the test would be: “what inferential process that a reasonable/prudent man would adopt to arrive at a conclusion.” On the facts of the case, though voluminous trading of illiquid scrips was not impermissible per se, the Bombay Stock Exchange had cautioned against the same and asked traders to exercise caution in case of high volume of trading. When over a period of time such transactions had been made between the same set of brokers or a group of brokers a it could be reasonably concluded that there was a concerted effort to indulge in synchronized trades, which resulted in large volumes of fictitious trading, culminating in an unnatural rise in hiking the price of the scrips. By the overall conduct of brokers and their transactions could the court infer not only a lack of due care and caution but also a deliberate intention to indulge in trading beyond forbidden limits.

Relevant

Section 15J Securities and Exchange Board of India Act, 1992

Section 24 of the Act, 1992

Tags : Sebi matched trading proof circumstantial

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