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Anand Rathi case adjourned once again

BS Markets Bureau

The Anand Rathi versus Securities and Exchange Board of India case has been adjourned yet again and the next hearing has been slated for Wednesday May 2, as the two-member division bench was unable to come to a conclusion based on the arguments presented by the opposing counsels.

Sebi is expected to give a timeframe for the enquiry -- an enquiry officer has been appointed by Sebi to enquire into the violations of Sebi's regulations by Rathi -- by Wednesday, when the court is expected to give a judgement.

The court was in a quandary over the legitimacy of the ban in view of the evidence against Rathi so far, and posed the question as to what would be the course of action in case Rathi were to be absolved of all charges. "What is troubling us is the future," averred Justice Vazifdar.

The entire argument revolved around whether Section 11B could be used as a punitive measure by Sebi and whether its continuance to bar Rathi's firms from trading was necessary.

Rathi's lawyer Abhishek Singhvi asked, "Can the exercise of 11B continue indefinitely. Can the ban continue indefinitely in complete disregard of all canons of fairplay?'' The post decisional hearing, he argued was completely unprecedented. Even the transcripts of the tapes exhibited an intra-disciplinary conflict among the officials of the exchange. "We have written three letters to Sebi," he said, on the preliminary investigation report adding that no replies had been received by them.

"It is imperative on the part of Sebi to justify on a minute-by-minute basis as to the continuance of the suspension order," he said.

In response to verbal allegations made by Sebi's lawyer that Rs 37 million of Global Tele-Systems, Infosys and Satyam, and Rs 15 million of other technology stocks were purchased by Navratan Capital, Singhvi said Sebi had presented only one side of the picture -- that is only the sale position.

Navratan Capital, he said, had a net outstanding buy position of Rs 29 million in the three scrips at the beginning of the trade on March 5. During the course of the day, the firm had allegedly purchased shares worth Rs 20 million and sold shares worth Rs 37 million thereby entailing a net buy position of Rs 12 million at the end of the trade, the same day.

Further, Rathi had his firms had a net outstanding buy position of Rs 79 million in the three scrips and had made purchases of Rs 97 million against sales of Rs 86 million, Singhvi said.

The Sebi counsel, advocate general Ghoolam Vahanvatti, said that it was necessary to ban Rathi and his firms from trading in the interests of the investors. "How can the investor confidence in the market be maintained if you allow such people to operate," he asked.

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