MUMBAI, Nov 2: The Mumbai High Court has stayed till Tuesday the directive of the Securities and Exchange Board of India (SEBI) barring three brokers of the Bombay Stock Exchange (BSE) from fresh trading in a case of price manipulation by a set of clients affiliated to the scam-accused Harshad Mehta. The matter will come up before a division bench on Tuesday. The stay was granted on Sunday by the vacation judge, Justice K K Baam on a petition filed by brokers, R R Bohra, Harvest Deal Securities of Rajendra Banthia is a director, and Mahico Securities, challenging SEBI's jurisdiction on the issue.Sebi had on Friday held 18 brokers, 12 from Bombay Stock Exchange and 6 from the National Stock Exchange, guilty of price manipulation and had decided to debar them from trading till the inquiry is completed. These brokers are alleged to have acted at the behest of seven front companies of Harshad Mehta in rigging up the prices of BPL, Videocon and Sterlite in May-June this year.Of the 12 BSE brokers,terminals of eight brokers had been deactivated prior to the SEBI order and while three brought a stay order, the terminal of Bharat J Patel was deactivated today, BSE President, J C Parekh said.In its petition, Mahico Securities has stated that the order passed by Sebi is illegal, contrary to and violative of Article 19 (1) (g) of the constitution of India and also operates as an unreasonable restriction on the brokers' rights.The petition has been filed on the grounds that no show cause notice was issued to the brokers and only those statements which were recorded by Sebi way back in June 1998 have been taken into consideration."The impugned order issued by Sebi is clearly violative of the principles of natural justice," highlights the petition. The petition also brings to light that these brokers under consideration were summoned for the second time in July to appear before the investigating officer. "No directions were issued, no notice issued, neither a show cause served upon us. For the firsttime we have learned from the press that we have been implicated in the said enquiry without result of the enquiry being made known to us," the petition has stated.The brokers have also made a case against the misuse of powers which have been delegated to Sebi. The petition states that while exercising its powers Sebi has acted like a civil court and therefore must adopt as required, judicial procedure and should not act without giving proper hearing to the parties concerned."This appears to be an unprecedented matter, where the action is announced in the press first without serving personally to the parties affected thereby, and to become effective without service," the petition states. "The directions for debarring have been given without issuing show cause notice and/or providing a hearing to the brokers themselves and instead announced in the press that such brokers were debarred," the petition adds.Of the seven common set of clients who have been charged for having cornered the shares, Mahicohas also admitted that it has acted only for one client, CDF Fincap & Leasing Pvt, prior to June 9, 1998 for a period of one month only. Interestingly, the petition also states that CDF Fincap incurred a total loss of Rs 3 crore during the concerned period."If the petitioners were intent on manipulating the price they would have atleast ensured that their client had made a profit. Such is not the fact and on the contrary the opposite is the fact", states the petition.The petition has also stated that Mahico has never issued any cheques. On the contrary Mahio has claimed to have received cheques from the other parties. "No notice has been received in the connection from Sebi for having crossed the exposure limits," the petition states.
