JUDGMENT
N.K. Sodhi, J. (Presiding Officer)
1. The issue of alleged manipulations in initial public offerings (IPOs) of various companies had been engaging the attention of the Securities and Exchange Board of India (for short the Board). While examining the IPO dealings of Yes Bank Ltd., the Board noticed that certain entities had cornered IPO shares reserved for retail applicants. The Board is also examining the dealings in the IPO of Infrastructure Development Finance Co. Ltd. (IDFC) and the investigations are still on. By an ex parte order dated 12.1.2006 the whole time member of the Board issued directions under Sections 11(4) and 11B of the Securities and Exchange Board of India, Act, 1992 directing among others, the appellant not to but, sell or deal in the securities market directly or indirectly till further directions. This ex-parte order was later confirmed after an opportunity of post decisional hearing was granted to all concerned including the appellant. It is common case of the parties that these interim directions are still continuing. After the ex parte order was issued, the appellant sold on 13.1.2006, among other, 19000 shares of Reliance Industries on the National Stock Exchange (NSE) through respondent no. 3 as the broker. These shares were sold for a sum of Rs.1,68,54,964.63. It appears that these transactions of the appellant which were in contravention of the ad-interim order came to the notice of the Board and the latter directed NSE as under:
It appears that the sale transactions executed on behalf of Shri. Manojdev Seksaria on January 13, 2006 is in contravention of the ad interim order of SEBI dated January 12, 2006 in the matter of IDFC. That being the case, it stands to reason that the client is not entitled for the payout for the sale transactions executed in contravention of the SEBI Order.
In view of the aforesaid directions NSE has not allowed respondent no. 3 to make payment of the sale proceeds to the appellant. It is against this action of the Board and NSE that the present appeal has been filed with a prayer that the respondent be director to release the sale proceeds of the aforesaid shares. In the alternative, a prayer has been made to direct the Board to reverse the transaction and restore 19000 shares of Reliance Industries to the appellant.
2. Despite notice no one has appeared on behalf of the appellant to prosecute the appeal. We have heard the learned Counsel for the respondent and perused the record. The plea taken by the appellant is that he was not aware of the ex parte order dated 12.1.2006 passed by the Board when he sold the shares on 13.1.2006. His case is that he was served with the ex- parte order only on 14.1.2006 at 2.30 p.m. and therefore, the transaction executed by him through respondent no. 2 was perfectly legal. This stand of the appellant is strenuously controverted by the learned Counsel for the respondent and she has produced before us a large number of newspaper cuttings of 13.1.2006 wherein the ex-parte order of the Board was prominently reported in all the newspapers particularly those carrying reports pertaining to the securities market. The name of the appellant also figures in those news items very prominently. She urged before us that the appellant is a regular market player and that he knew about the order that was passed against him by the Board. A mere look at those newspapers makes it clear that the name of the appellant also prominently figures and very wide publicity was given to the ad- interim order passed by the Board. We have no reason to believe that the appellant was unaware of the order. The sale of shares on 13.1.2006 was obviously contrary to the ad -interim order and therefore the Board and NSE were within their rights to withhold the payment of sale proceeds to the appellant. The alternative prayer made by the appellant that the transactions be reversed cannot be accepted because the innocent purchasers who are large in numbers cannot be penalized and the only reasonable course open in the circumstances of the case was to withhold the payment of the sale proceeds to the appellant. The money is lying with respondent no. 3 as admitted by its learned Counsel and by our interim order the amount has been kept in a separate fixed deposit which is earning interest. The present arrangement shall continue till such time the Board concludes its investigations in the IPO of IDFC. At the time of the conclusion of the investigations or thereafter the Board shall pass an appropriate order issuing direct ions as to how the sale proceeds are to be dealt with. It will also be open to it to pass any appropriate order even before the conclusion of the investigations if the circumstances so demand. Before concluding, it is clarified that respondent no. 3 shall not utilize the money for any purpose whatsoever otherwise than in accordance with the directions issued by the Board.
3. The appeal stands disposed of as above with no order as to costs.