Shri Divan narrated the sequence of events, that in February, 2001, Shri Harinarayan Bajaj was introduced to the Appellant through its Ghatkopar Branch, by one Shri Vipul Shah who was known to the Appellant through one of its employees, that on 13.2.2001 Shri Vipul Shah visited the office of the Appellant at Veena Chambers, Fort and during this visit, Shri Shah was introduced to Shri Janak Mehta, Director of both the Appellant and LKPSS, that Shri. Nirav Kapadia, the Ghatkopar Branch Manager, was also present at the meeting, that in the meeting, various discussions took place and it was agreed that Shri Bajaj would give a 10% margin in respect of his trading activities consistent with the prevailing market norms applied by the Appellant and other brokers relating to the margin money collected from individual investors. On 13.2.2001, Shri Nirav Kapadia visited the office of Shri Bajaj at Fort, Mumbai to verify, inter alia, the authenticity of the address and he filed a client visit report in respect of the visits and a copy thereof was produced before the Chairman of the Respondent in the enquiry proceedings, that thereafter, on 15.2.2001 Shri Bajaj executed a customer enrolment form and a member-client agreement with the Appellant and also furnished photocopies of his voter identity card and his passport. He referred to the copy of the customer enrolment form and the said agreement together with its enclosures filed with the appeal. Shri Divan submitted that simultaneously, Shri Bajaj who also desired to trade in shares on BSE, filed in a customer enrolment form and executed a broker-client agreement with LKPSS, that in these documents, Shri Bajaj indicated that he was already registered with another member / borker namely, Mukesh Babu Securities Ltd., under client Code No. H1119 of BSE. He referred to the copy of the customer enrolment form and agreement in respect of LKPSS, both dated 15.2.2001 filed along with the appeal He submitted that Shri Bajaj had agreed that he would maintain a 10% margin in respect of his trading activity within the trading limit of Rs.50 lakhs to start with and then up to a maximum limit of Rs. 2 crores and had also agreed to deposit the requisite margin money before undertaking any trade, that Shri Bajaj thereafter deposited the margin money of Rs.4 lakhs with the Appellant’s sister concern, LKPSS after which the first orders were executed by the Appellant, that on 16.2.2001, the Appellant purchased 25000 shares of ARBL at the rate of Rs.261.60 per shares for Shri Bajaj and thereafter the Appellant transacted business for Shri Bajaj on only 8 occasions / trading days, that the Appellant ensured that the margin deposited by Shri Bajaj was at all times 10% or more of his total exposure, and accordingly, commensurate with the increased trading activity of Shri Bajaj, larger amounts as and by way of margin were required to be deposited by the Appellant, and were in fact deposited by Shri Bajaj with the Appellant / LKPSS. Learned Counsel referred to the contract notes issued by the Appellant and LKPSS in respect of the transactions with Shri Bajaj filed along with the appeal. The ledger account of Shri Harinarayan Bajaj as appearing in the books of the Appellant and LKPSS showing, inter alia, the deposits received from time to time filed with the appeal was also referred to by the learned Counsel.
