Hon'ble Judges/Coram:
Ranjan Gogoi and Prafulla C. Pant

JUDGMENT

Ranjan Gogoi, J.

1. The core question of law arising in this group of appeals being similar and the facts involved being largely identical, all the appeals which were heard analogously are being decided by this common order.

2. The question of law arising in this group of appeals may be summarized as follows.

What is the degree of proof required to hold brokers/sub-brokers liable for fraudulent/manipulative practices under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations and/or liable for violating the Code of Conduct specified in Schedule II read with Regulation 9 of the Securities and Exchange Board of India (Stock-Brokers and Sub-Brokers) Regulations, 1992? (hereinafter referred to as the 'Conduct Regulations, 1992').

3. At the outset facts of each case on which the above question of law have arisen may be taken specific note of.

The Respondent-Kishore R. Ajmera is a broker registered with the Bombay Stock Exchange. M/s. Prakash Shantilal & Company is one of the sub-brokers through whom the two clients, namely, Mayekar Investments Pvt. Ltd. and M/s. K.P. Investment Consultancy are alleged to have indulged in matching trades thereby creating artificial volumes in the scrip of one Malvica Engineering Ltd. (MEL) during the period 20.12.1999 to 31.3.2000 and 7.8.2000 to 31.8.2000. The gravamen of the allegations levelled against the sub-broker for which the Respondent has been held to be vicariously liable is that during the aforesaid period the two clients, who are related to each other through majority shareholding in the hands of common family members, had through the sub-broker bought 66,300 shares and sold 77,700 shares of MEL during the first period and a total of 32,500 and 28,800 shares of MEL, respectively, during the second period. Not only both the clients were related but they were also beneficiaries of the allotment of the shares made directly by the parent company i.e. MEL. The said allotment incidentally was made out of the shares that were forfeited on account of failure to pay call money by the allottees, following a public offer. The scrip in question was a illiquid scrip where the volume of trading is normally minimal. A note of caution had also been struck by the Bombay Stock Exchange by circulating an advice requiring brokers to be aware of any unnatural (voluminous) trading in any such illiquid scrip. Yet, the transaction in question was gone through by the sub-broker acting through the terminal of the broker i.e. Respondent-Kishore R. Ajmera. It is on the said facts that charges of negligence, lack of due care and caution were levelled against the sub-broker and in turn against the broker.

The said charges were found to be proved after holding a d........