1. I was appointed as the Adjudicating Officer under Rule 3 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 to enquire into and to adjudge under Sec.15-I of Securities and Exchange Board of India Act, 1992 for the alleged violation of 15A read with Sec.11 C of Securities and Exchange Board of India Act, 1992 against the following persons vide order of Securities and Exchange Board of India� (hereinafter referred to as �SEBI�) dated December 28, 2004 in place of Shri K.R.C.V. Seshachalam, Deputy Legal Adviser who was initially appointed as the Adjudicating Officer in the matter:

a)      Shri Ashlesh Shah, 16, Vasupujyakrupa Society, S.M. Road, Ahmedabad � 380 015.

b)     Smt. Swati A. Shah, 16, Vasupujyakrupa Society, S.M. Road, Ahmedabad � 380 015.

c)      �Shri Ashish P. Shah, 2, Ghar Aangan Flat, Behind Child Care Hospital, Near Vijay Char Rasta, Navrangpura, Ahmedabad � 380 001.

d)     Smt. Rina A. Shah, 2, Ghar Aangan Flat, Behind Child Care Hospital, Near Vijay Char Rasta, Navrangpura, Ahmedabad � 380 001.

e)      �Smt. Alpa Shah, 1, Ruby Flat, Navrangpura, Ahmedabad � 380 013.

f)       Shri Sanjeev P. Shah, 1, Ruby Flat, Navrangpura, Ahmedabad � 380 013.

g)     Shri Hemandra Shah, M-87/1040, Karnavati Apartment, Parasnagar, Sola Road, Navrangpura, Ahmedabad � 380 013.

h)     Shri Dixit Patel, 2080/ Patel Vas, Usmanpura Gam, Ashramroad, Ahmedabad � 380 014.

i)        Shri Pannalal L. Shah, 2, Ghar Aangan Flat, Behind Child Care Hospital, Near Vijay Char Rasta, Navrangpura, Ahmedabad � 380 001.

 

2. �All the above persons from (a) to (i) are hereinafter referred collectively as �the noticees� in this order for the sake of brevity and convenience.

 

3. SEBI conducted investigations with regard to the advertisement appeared in several newspapers in June/July 2002 issued by Universal Media Network Ltd., (hereinafter referred to as �UMNL�). The said investigation was initiated to ascertain as to whether any provisions of Securities and Exchange Board of India Act, 1992 and various rules and regulations made thereunder were violated. Shri R. Ravichandran, Officer on Special Duty of SEBI was appointed as the Investigating Authority.

 

4. Summons dated May 7, 2004 was issued by the investigating authority to the aforesaid Shri Ashlesh Shah for production of �certain documents/ information by June 11, 2004. The said summons was forwarded to Shri Ashlesh Shah through Standard Chartered Bank with whom he was holding depository account and the receipt of the said summons was acknowledged. �However, Shri Ashlesh Shah failed to furnish the documents/ information required to be produced to the investigating authority. �The investigating authority issued another summons on July 6, 2004 requiring to furnish Shri Ashlesh Shah, the documents/ details which were directed to be furnished vide summons dated May 7, 2004. The said summons was also forwarded through Standard Chartered Bank. The due date for compliance of the said summons was July 19, 2004. However, despite receipt of the said summons, Shri Ashlesh Shah failed to furnish the required information/ documents to the aforesaid investigating authority.

 

5. Summons dated May 7, 2004 was issued by the investigating authority to the aforesaid Smt. Swati Shah for production of �certain documents/ information by June 11, 2004. The said summons was forwarded to Smt. Swati Shah through Pravin Ratilal Share & Stock Brokers Ltd., with whom she was holding depository account and the receipt of the said summons was acknowledged. Vide letter dated June 10, 2004, Smt. Swati Shah informed SEBI that the desired information would be provided within a few days time. Vide the said letter Smt. Swatishah nominated her husband Shri Ashlesh Shah as her representative for furnishing the documents on her behalf. However, either Smt. Swati Shah or her representative failed to furnish the documents/ information required to be produced to the investigating authority.� The investigating authority issued another summons on July 6, 2004 requiring to furnish Smt. Swati Shah, the documents/ details which were directed to be furnished vide summons dated May 7, 2004. The said summons was also forwarded through Pravin Ratilal Share & Stock Brokers Ltd. The due date for compliance of the said summons was July 19, 2004. However, despite receipt of the said summons, Smt. Swati Shah failed to furnish the required information/ documents to the aforesaid investigating authority.

 

6. Summons dated May 7, 2004 was issued by the investigating authority to the aforesaid Shri Ashish P. Shah for production of certain documents/ information by June 11, 2004.� However, Shri Ashish P. Shah failed to furnish the documents/ information required to be produced to the investigating authority.� The investigating authority issued another summons on July 6, 2004 requiring Shri Ashish P. Shah, to furnish the documents/ details which were directed to be furnished vide summons dated May 7, 2004. The due date for compliance of the said summons was July 19, 2004. The aforesaid summonses were forwarded through Khandwala Integrated Financial Services Pvt. Ltd. However, despite receipt of the said summons, Shri Ashish P. Shah failed to furnish the required information/ documents to the aforesaid investigating authority.

 

7. Summons dated May 7, 2004 was issued by the investigating authority to the aforesaid Smt. Rina Ashish Shah for production of certain documents/ information by June 11, 2004.� However, Smt. Rina Ashish Shah failed to furnish the documents/ information required to be produced to the investigating authority.� The investigating authority issued another summons on July 6, 2004 requiring Smt. Rina Ashish Shah, to furnish the documents/ details which were directed to be furnished vide summons dated May 7, 2004. The due date for compliance of the said summons was July 19, 2004. The aforesaid summonses were forwarded through Khandwala Integrated Financial Services Pvt. Ltd. However, despite receipt of the said summons, Smt. Rina� Ashish Shah failed to furnish the required information/ documents to the aforesaid investigating authority.

 

8. �Summons dated July 7, 2004 was issued by the investigating authority to the aforesaid Smt. Alpa Shah for production of certain documents/ information by July 19, 2004.� However, Smt. Alpa Shah failed to furnish the documents/ information required to be produced to the investigating authority.� The aforesaid summons was forwarded through Parklight Investment Ltd., Member, BSE. �

 

9. Summons dated July 7, 2004 was issued by the investigating authority to the aforesaid Shri Sanjeev P. Shah for production of certain documents/ information by July 19, 2004.� However, Shri Sanjeev P.Shah failed to furnish the documents/ information required to be produced to the investigating authority.� The aforesaid summons was forwarded through Parklight Investment Ltd., Member, BSE.

 

10. �Summons dated May 7, 2004 was issued by the investigating authority to the aforesaid Shri Hemendra P. Shah for production of certain documents/ information by June 11, 2004.� However, Shri Hemendra P. Shah failed to furnish the documents/ information required to be produced to the investigating authority.� The investigating authority issued another summons on July 6, 2004 requiring Shri Hemendra P. Shah, to furnish the documents/ details which were directed to be furnished vide summons dated May 7, 2004. The due date for compliance of the said summons was July 19, 2004. The aforesaid summonses were forwarded through H. Nyalchand Financial Services Ltd. However, despite receipt of the said summons, Shri Hemendra P. Shah failed to furnish the required information/ documents to the investigating authority.

 

11. �Summons dated May 7, 2004 was issued by the investigating authority to the aforesaid Shri Dixit B. Patel for production of certain documents/ information by June 11, 2004.� However, Shri Dixit B. Patel failed to furnish the documents/ information required to be produced to the investigating authority.� The investigating authority issued another summons on July 6, 2004 requiring Shri Dixit B. Patel, to furnish the documents/ details which were directed to be furnished vide summons dated May 7, 2004. The due date for compliance of the said summons was July 19, 2004. The aforesaid summonses were forwarded through H. Nyalchand Financial Services Ltd. However, despite receipt of the said summons, Shri Dixit B. Patel failed to furnish the required information/ documents to the investigating authority.�

 

12. Summons dated May 7, 2004 was issued by the investigating authority to the aforesaid Shri Pannalal L. Shah for production of �certain documents/ information by June 11, 2004.� However, Shri Pannalal L. Shah failed to furnish the documents/ information required to be produced to the investigating authority.� The investigating authority issued another summons on July 6, 2004 requiring Shri Pannalal L. Shah,to furnish the documents/ details which were directed to be furnished vide summons dated May 7, 2004. The due date for compliance of the said summons was July 19, 2004. The aforesaid summonses were forwarded through HDFC Bank. However, despite receipt of the said summons, Shri Pannalal L. Shah �failed to furnish the required information/ documents to the investigating authority.�

 

13. �Consequent to my appointment as the Adjudicating Officer, I issued notices dated May 6, 2005 to the noticees under Rule 4 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 calling upon them to show cause as to why an inquiry should not be held against them and penalty be not imposed under Sec. 15A(a) of Securities and Exchange Board of India Act, 1992. The said notices dated May 6, 2005 were sent to the noticees by Registered Post with Acknowledgment Due and the same was received by all the noticees except Smt. Swati Shah and Shri Ashlesh� Shah.�

 

14. �The notices sent to Smt. Swati Shah and Shri Ashlesh Shah were returned undelivered by the postal authorities with endorsements �not claimed�.

 

15. Since there was no reply to the notices by the noticees, ��I was of the opinion that an inquiry should be held in the matter and accordingly notices of inquiry dated June 9, 2005� in terms of Rule 4(3) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 were issued to the noticees informing them that June 21, 2005 was fixed as the date of inquiry. �The noticees were advised to appear before me for inquiry/ personal hearing either themselves or through their authorized representatives/ lawyers.

 

16. �Since Smt. Swati Shah and Shri Ashlesh Shah did not accept the notice dated May 6, 2005 issued to them, which was sent by registered post acknowledgement due, I considered that the notices were duly served on them and I was of the opinion that an inquiry should be held against them. Therefore, notices of inquiry dated June 13, 2005 were sent to them enclosing therewith copies of the notice dated May 6, 2005. Smt. Swati Shah and Shri Ashlesh Shah either themselves or through their authorised representatives / lawyers were advised to appear before me on June 21, 2005 for inquiry.

 

17. On June 21, 2005 neither any of the noticees nor their representatives/ lawyers appeared before me nor any communication was received by me from them. In these circumstances, I was left with no option but to proceed with the inquiry against the noticees as I was of the opinion that the noticees were �willfully neglecting to appear before me for inquiry.

 

18. �However, on June 28, 2005, Shri Deepak Shah, a company secretary in whole time practice appeared before me and filed an application on behalf of all the noticees to the effect that they could not appear for personal hearing on June 21, 2005 since they received the notice of inquiry just a few days before the scheduled date of hearing and requested the adjudicating officer to take up the personal hearing on June 28, 2005. Shri Deepak Shah filed letters of authority issued in his favour by the noticees authorizing him to appear before me. I considered the application filed by the authorised representative of the noticees and allowed the same in the interest of justice. �

 

19. ��At the commencement of the proceedings, I explained the authorised representative the offence i.e. failure to furnish documents/ information in compliance with the summonses issued by the investigating authority allegedly committed by the noticees. The authorised representative was also explained the penalty prescribed under Sec. 15A(a) of Securities and Exchange Board of India Act, 1992. The authorised representative submitted that the noticees would not be filing any written submissions and they prefer to make certain oral submissions through him.� The oral submissions made by the authorised representative are as follows:� All the noticees were small investors and were not aware of the seriousness of the summons issued by the investigating authority.� The provisions of the Securities and Exchange Board of India Act, 1992 and the regulations made thereunder are so complicated and the implications of which were not understood by the noticees. The noticees did not have any intention to hide any information or to defeat the investigation. It was not even the case of SEBI that the noticees indulged in any manipulations in the scrip of UMNL. The noticees did not get any undue benefit by not furnishing the information to SEBI nor their omission caused any loss to investors. None of the noticees had any record of not obeying the directions of statutory authorities or government agencies in the past. The noticees hail from middle class families and invested their hard earned monies in the securities market. The default on their part was not intentional and the noticees undertake to furnish the required information to SEBI as and when demanded in future.

 

20. In view of the above submissions, the authorised representative submitted that the adjudicating officer may not impose any penalty on the noticees.

 

21. �On being specifically asked by me as to whether the authorised representative would like to file any document, the authorised representative replied in negative.� Accordingly, the personal hearing/ inquiry was concluded. �

 

22. Sec. 11 C of Securities and Exchange Board of India Act, 1992, interalia provides that the investigating authority may require any intermediary or any person associated with securities market in any manner to furnish such information to or produce such books, or registers, or other documents, or record before him or any persons authorized by it. Vide the aforesaid summonses, the Investigating Authority of SEBI directed the noticees to produce various documents and information with respect to the investments made by the noticees in the scrip of UMNL. Sec. 15A (a) of Securities and Exchange Board of India Act, 1992 provides for imposition of monetary penalty by the Adjudicating Officer in case of any person, who is required under Securities and Exchange Board of India Act, 1992 or any rules or regulations made thereunder to furnish any document, return or report, fails to furnish the same, he shall be liable to a penalty of one lakh rupees for each day during such failure continues or one crore rupees, whichever is less. The charge of SEBI leveled against the noticees was that they failed to comply with summonses issued by the investigating authority as mentioned above. The noticees did not dispute the fact that the summonses issued by the Investigating Authority were received by them. They also did not dispute the charges leveled against them to the effect that they failed to furnish the documents/ information as directed by the Investigating Authority. The main contention of the noticees is that they were not aware of the seriousness of the summonses issued by the Investigating Authority. The noticees also submitted that they did not have any intention of hiding any information or to defeat the investigation launched by SEBI. The noticees further claimed that previously they never disobeyed the directions of the statutory authorities. The noticees undertook to furnish all the required information to SEBI as and when demanded.�
23. �I considered the submissions made by the noticees and I do not find any merit in the contention of the noticees that they did not understood the seriousness of summons issued by the Investigating Authority. �Sec.11C of Securities and Exchange Board of India Act, 1992 is very clear as to the powers of the Investigating Authority and the consequences of non compliance of the summons issued by the Investigating Authority. The noticees cannot get absolved of their liability by claiming ignorance of law.

 

24. �I, therefore, conclude that the charges of non furnishing the documents/ information to SEBI in response to summonses issued by Investigating Authority are established with respect to the noticees and they are liable to penalty as prescribed under Sec.15A(a) of Securities and Exchange Board of India Act, 1992. ��

 

25. �Since the failure of producing the documents/ information before the Investigating Authority of SEBI by the noticees is established, the quantum of penalty has to be decided by me.

 

26. �As I mentioned above, Section 15A (a) of Securities and Exchange Board of India Act, 1992 prescribes a penalty of Rs. One lakh for each day during which the failure to furnish any documents etc. to SEBI continues or Rs. One crore whichever is less.

 

27. To determine the quantum of penalty under Section 15A (a), I�� considered the following factors as provided in the section 15J of Securities and Exchange Board of India Act, 1992 viz.(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default ; (b) the amount of loss caused to an investor or group of investors as a result of the default and; (c) the repetitive nature of the default.

 

28. As regards the disproportionate gain or unfair advantage there are no quantifiable figures available on record with respect to the default of the noticees. There are also no figures or data on record to quantify the amount of loss caused to an investor or group of investors as a result of the default. However, the failure of persons in furnishing the documents/ records to the investigating authority causes hindrance to the investigation of SEBI. Had the noticees furnished the required information, the Investigating Authority might be in a better position to unearth the manipulations committed by various persons with respect to the trading in the scrip of UMNL.

 

29. The violation committed by the noticees except Smt. Alpa Shah and Shri Sanjeev P. Shah was repetitive in nature as they failed to furnish the required information to the Investigating Authority of SEBI, even though summons were issued to them on two occasions. It is noticed that there was no repetition of default by Smt. Alpa Shah and Shri Sanjeev P. Shah as the summonses were issued to them only on one occasion. This factor will be taken into consideration by me while determining the quantum of penalty to be imposed on the noticees. There is no information on record to show that the noticees were imposed of any penalty by the adjudicating officers of SEBI for a similar violation in the past and therefore I presume that the defaults mentioned hereinabove are the first defaults by the noticees.

 

30. �While determining the quantum of penalty, I have also taken into consideration various recent decisions of the Hon�ble Securities Appellate Tribunal. The undertaking of the noticees that they would produce the required information to SEBI as and when demanded must also be taken into consideration, in my view should be seen from a positive angle and should be a mitigating factor in determining the quantum of penalty.

 

31. �In the matter of Mayfair Paper & Board Pvt. Ltd. v. SEBI (Appeal No.95 of 2004) the penalty of Rs.75,00,000 imposed by the Adjudicating Officer in a case facts of which are similar to the instant case was reduced to Rs.15,000 by the Hon�ble Securities Appellate Tribunal. In the said matter, the Hon�ble Securities Appellate Tribunal also observed that the provision for enhanced penalties in the year 2002 does not mean that SEBI should impose sky high penalties. I have also referred to various recent decisions of the Hon�ble Securities Appellate Tribunal with respect to the penalties imposed by adjudicating officers in cases similar to the instant one.

 

�ORDER

 

32. Therefore in exercise of the powers conferred under section 15-1(2) read with Sec. 11C, Sec. 15 A(a) of the Securities and Exchange Board of India Act, 1992 and Rule 5 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of Rs. 20,000/- (Rupees Twenty thousand only) each on (a) Shri Ashlesh Shah (b) Smt. Swati A. Shah (c) Shri Ashish P. Shah (d) Smt. Rina A. Shah (e) Shri Hemendra Shah (f) Shri Dixit Patel and (g) Shri Pannalal L. Shah.

 

33. I have taken into consideration of the fact that there was no repetition of default by Smt. Alpa Shah and Shri Sanjeev P. Shah as the summonses were issued to them by the Investigating Authority only at one instance each. �In view of the non repetition in default by the said Smt. Alpa Shah and Shri Sanjeev P. Shah, I impose a penalty of Rs.15,000 each on the said individuals.

 

34. �In my view, above penalty commensurates with the default of the noticees, in the facts and circumstances of the case.

 

35. The noticees shall pay the amount of penalty imposed with respect to each of them by way of demand drafts in favour of �SEBI- Penalties Remittable to Government of India�, payable at Mumbai within 45 days of receipt of this order. The said demand drafts should be forwarded to Shri R. Mohan, General Manager, Securities and Exchange Board of India, Mittal Court, �B� Wing, 1^st Floor, 224, Nariman Point, Mumbai � 400 021.

 

36. In terms of Rule 6 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, copies of this order are sent to the noticees and also to Securities and Exchange Board of India.��

 

 

Date:�� June 30, 2005������ ��������� ������������������ A. Chandra Sekhar Rao

Place: Mumbai����������������������������������� ��������� Adjudicating Officer