SECURITIES AND EXCHANGE BOARD OF INDIA versus RAKHI TRADING PRIVATE LTD.

SECURITIES AND EXCHANGE BOARD OF INDIA versus RAKHI TRADING PRIVATE LTD.

Synchronized and reverse trades with predetermined arrangement to book profits and losses, without genuine transfer of beneficial ownership or change in rights in contract, amount to fraudulent and unfair trade practice violating PFUTP Regulations; brokers cannot be held liable without evidence of connivance or...

Source-derived case information.

Parties
Appellant: Securities and Exchange Board of India; Respondent: Rakhi Trading Private Ltd.
Jurisdiction
India
Judgment Date
08 February 2018
Procedural Posture
Civil Appeal / Supreme Court Judgment on Appeal From SAT
Outcome
Appeals disposed; SEBI's appeal against traders allowed; appeal against brokers dismissed.
Legal Topics
Synchronized Trading, Fraudulent and Unfair Trade Practices, Market Manipulation, Derivatives, Stock Broker Regulations
Securities Law Financial Regulation Synchronized Trading Fraudulent and Unfair Trade Practices Market Manipulation Derivatives Stock Broker Regulations

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Summary, issues, holding and outcome

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Parties

Securities and Exchange Board of India

Appellant

Rakhi Trading Private Ltd.

Respondent

Procedural Posture

Civil Appeal / Supreme Court Judgment on Appeal From SAT

Legal Issues

  1. 1 Whether synchronized and reverse trades in the derivatives segment amounted to fraudulent and unfair trade practices under PFUTP Regulations, 2003
  2. 2 Whether there was violation of beneficial ownership in the trades
  3. 3 Whether brokers were liable under Stock Brokers and Sub-brokers Regulations, 1992 for facilitating the transactions

Ratio Decidendi

Synchronized and reverse trades with predetermined arrangement to book profits and losses, without genuine transfer of beneficial ownership or change in rights in contract, amount to fraudulent and unfair trade practice violating PFUTP Regulations; brokers cannot be held liable without evidence of connivance or negligence.

Court Disposition

Appeals disposed; SEBI's appeal against traders allowed; appeal against brokers dismissed.

Orders

  • Impugned order of SAT set aside as regards traders; SEBI appeal against brokers dismissed.
  • Traders found liable for violation of PFUTP Regulations; no liability found for brokers due to lack of evidence.