SECURITIES AND
EXCHANGE BOARD OF
[ADJUDICATION ORDER NO. AP/AO- 26 /2006-07]
In the matter of
Investigations in
ALKA INDIA LTD
AND
In respect of
01.
Securities and Exchange Board of India (SEBI) conducted
investigation into suspected manipulation in the scrip of Alka India Ltd.
(hereinafter, AIL). Pursuant to the aforesaid investigation, SEBI appointed the
undersigned as the Adjudicating Officer under Section 15 I of SEBI Act, 1992,
vide order dated June 02, 2006, to inquire into and adjudge the alleged failure
of Mr. Mayur Jadeja (hereinafter, Noticee) to comply with the summons issued by
the Investigating Officer (IO), SEBI. It was alleged that noticee failed to
discharge his statutory obligation by not furnishing the information under the
provisions of Section 11(3), 11C (2) and 11C (3) of SEBI Act, 1992 for which
penalty can be imposed under Sections 15A of SEBI Act, 1992. The aforesaid
appointment was communicated vide proceedings of the Whole Time Member, SEBI,
dated
02.
A show cause notice (SCN) dated October 10, 2006 under
Rule 4(1) of SEBI (Procedure For Holding Inquiry And
Imposing Penalties By Adjudicating Officer) Rules, 1995 (hereinafter,
Adjudication Rules) was issued to noticee,
communicating the allegations levelled against it and calling up on him as to
why an inquiry in terms of the said Rules should not be conducted. �The noticee however failed to respond to the
said notice despite the same being served upon him.
03.
Under the aforesaid
circumstances, the undersigned thought it fit to hold an inquiry in the matter.
Accordingly, a notice of inquiry dated
04.
Having carefully
perused the material on record I proceed to record my finding as follows, but
before that, it is important to at least briefly understand the background
under which information was sought from the noticee and also the relevant
definitions in this regard:
(i) SEBI Act,
1992
Section 15A (a):
Penalty for
failure to furnish information, return, etc.
15A.� If any person, who is required under this Act
or any rules or regulations made thereunder,-
(a)
to furnish any document, return or report to the Board, fails to furnish
the same, he shall be liable to [a penalty of one lakh rupees each day during
which such failure continues or one crore rupees, whichever is less]
( Section 15A(a) of SEBI
Act, 1992, is applicable only if a person is required under SEBI Act to furnish
details/documents, and for this purpose following are the relevant provisions)
:
Section 11 (3) : Notwithstanding
anything contained in any other law for the time being in force while
exercising the powers under clause (i) or clause (ia) of sub-section (2) or
subsection (2A), the Board shall have the same powers as are vested in a civil
court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit,
in respect of the following matters, namely :
(i)
the discovery and production
of books of account and other documents, at such place and such time as may be
specified by the Board;
(ii)
summoning and enforcing the
attendance of persons and examining them on oath;
(iii)
inspection of any books,
registers and other documents of any person referred to in section 12, at any
place;
(iv)
����� inspection of any book, or register,
or other document or record of the company referred to in sub-section (2A);
(v)
������ issuing commissions for the
examination of witnesses or documents.
Section 11 C (1) � ���
Section 11 C (2)Without prejudice to the
provisions of sections 235 to 241 of the Companies Act, 1956(1 of 1956), it
shall be the duty of every manager, managing director, officer and other
employee of the company and every intermediary referred to in section 12 or
every person associated with the securities market to preserve and to produce
to the Investigating Authority or any person authorised by it in this behalf,
all the books, registers, other documents and record of, or relating to, the
company or, as the case may be, of or relating to, the intermediary or such person,
which are in their custody or power.
Section 11 C (3):The Investigation 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 person authorized by it in this behalf as it may consider necessary if
the furnishing of such information or the production of such books, or
registers, or other documents, or record is relevant or necessary for the
purpose of its investigation.�
(ii) SEBI (Prohibition of Fraudulent and Unfair
Trade Practices relating to Securities Market) Regulations, 2003
Regulation 8: ���������� Duty to
co-operate, etc.
(1)
It shall be the duty of every person in respect of whom an investigation
has been ordered under regulation 7
(a)
to produce to the Investigating Authority or any person authorized by him
such books, accounts and other documents and record in his custody or control
and to furnish such statements and information as the Investigating Authority
or the person so authorized by him may reasonably require for the purpose of
the investigation;
(b)
to appear before the Investigating Authority
personally when required to do so by him under regulation 9 or regulation 7 to
answer any question which is put to him by the Investigating Authority in
pursuance of the powers under the said regulations.
05.
SEBI had conducted
an investigation in the scrip of AIL as it witnessed a sudden spurt in the
price and volume during the period
06.
There was also an increase in the daily volume
traded in the scrip during the period
07.
�The top 10
purchasing member brokers together purchased 241,21,846 shares out of the total
volume of 605,08,686 shares accounting for 39.87% of the total volume. Out of
this, the top 2 member brokers viz. ICICI Webtrade and MSE Financial Services
Ltd. purchased 77,88,687 and 56,88,285 shares accounting for 12.87% and 9.40%
of the total volume.
�
08.
The top 10 selling member brokers together sold
382,68,003 shares out of the total volume of 60508686 shares accounting for
63.24% of the total volume. Out of which the top 4 member brokers viz. MSE
Financial Services Ltd., Ramaben Samani Finance Pvt. Ltd., Ruchiraj Shares
& Stock Brokers� and Galaxy together
sold� 27257286 shares accounting for
45.05% of the total volume.
09.
The selling was concentrated among 5 clients, as
shown below, they together sold 253,59,540
shares accounting for 41.61% of the total market volume.
|
|
Client
Name |
Broker |
Buy
Qty |
Sell
Qty |
Sell
Qty % to Mkt Volume |
|
1 |
Vikramsingh
J Rajput |
Ramaben
Samani |
71802 |
5047500 |
|
|
|
|
Ruchiraj
Stock Broker |
0 |
3890000 |
|
|
|
|
Galaxy
Broking |
0 |
587500 |
|
|
|
|
Total |
71802 |
9525000 |
15.74 |
|
2 |
Mahesh
K Mehta |
Aryan
Sec & holdings P Ltd. |
2000 |
7725302 |
12.77 |
|
3 |
Ahswin
Kanjibhai Patel |
Ramaben
Samani |
0 |
893577 |
|
|
|
|
Galaxy
Broking |
0 |
200000 |
|
|
|
|
Equisearch
Broking |
0 |
1822100 |
|
|
|
|
Total |
0 |
2915677 |
4.82 |
|
4 |
Kaushtubh
Credit and Holding |
Galaxy
Broking |
0 |
1540000 |
|
|
|
|
Equisearch
Broking |
0 |
147700 |
|
|
|
|
Bijal
Securities Pvt. Ltd. |
50000 |
1250000 |
|
|
|
|
Total |
50000 |
2937700 |
4.86 |
|
5 |
Mayur
Jadeja |
Aryan
Sec & holdings P Ltd. |
6161 |
2255861 |
3.73 |
|
|
Grand Total |
|
129963 |
25359540 |
41.91 |
|
|
Total Market Volume |
|
60508686 |
60508686 |
|
10.
It was noticed that the 5 major selling clients
accounted for 45% of the total gross sales and that they had sold from
11.
Investigations revealed that Mayur Jadeja sold
22,55,861 shares through Aryan Securities & Holdings Pvt. Ltd.� a sub broker of MSE Financial Securities
Ltd.� The shares sold by Mayur Jadeja
were less than 1% shareholding of the company and his name also did not appear
in the shareholding pattern. So, it was essential to know the source of the
shares sold by him.
12.
Considering the fact
that the noticee had sold large amount of shares the Investigating Officer
sought production of documents/information vide summonses issued to Mayur
Jadeja as tabulated below:
|
Date of summons |
Through |
Production of documents/information� by |
|
|
Aryan Securities
& Holding Pvt. Ltd |
|
|
|
Aryan Securities
& Holding Pvt. Ltd |
|
|
|
Direct to the
noticee thr RPAD |
|
13.
Despite
service of summonses, the noticee did not give any response to the IO.� It was allged that by not complying with the
requriement of the Investigating Officer as aforesaid, the noticee failed to
discharge his statuatory obligatoin, as aforesaid, which makes him liable for penalty under Section 15A(a) of SEBI Act.
14.
I have perused the
contents of the summonses issued in the case against the noticee and the
service of which is not disputed by the noticee. The summons clearly states
that � your personal appearance is not required at this stage and providing
information would be considered as compliance of the summons�. The following
information was sought from the notice
i.
Were you holding any
shares of M/s Alka India Ltd. Formerly � Alka Spinners Ltd.) as on
ii.
Datewise trading
details in the scrip of M/s. Alka India Ltd. (Formerly- Alka Spinners Ltd.) for
the period
If you have done any off market transactions
give details separately.� Details to be tabulated
as date of trading, purchase quantity, purchase rate, name of the entity from
whom purchased, date of payment, sale quantity, sale rate, name of the entity
to whom sold and date of payment received.
iii. ���Details of demat account including name of
the depository participant DP ID No. and Client ID No., Copy of the statement
of demat account transactions in the scrip of M/s Alka India Ltd. (Formerly �
Alka Spinners Ltd.) during the period April 01, 2002 to March 31, 2004.
iv.���� State whether the purchases as mentioned in
para 1 and 2 are through own funds or borrowing/financing.� Please provide details.
15.
As stated above it was important to know the sources of the shares sold by the noticee. The noticee Mayur Jadeja had
sold 22,55,861 shares through Aryan Securities & Holdings Pvt. Ltd.� a sub broker of MSE Financial Securities
Ltd.� The shares sold by Mayur Jadeja
were less than 1% shareholding of the company and his name also did not appear
in the shareholding pattern. The above information was also sought from NSDL
and CDSL but their data could not reveal much about the dealing of the noticee
in the shares of AIL. �It may be because
the noticee might have dealt in these shares in off-market trades not reported
to the exchange and therefore it was only the noticee who could have given the
information as sought through the summonses.� �The information sought vide the above
summonses was therefore crucial from investigation point of view.
16.
The noticee has, in response to the inquiry notice, given the details of
demat a/c no. and the Bank name. It is also submitted that he can not give
demat details as this will involve expenditure. Out of four informations sought
from the noticee he has only furnished part information with respect to query
no. 3 and that too not during the investigation but before me. I am very clear
about my role in the adjudication proceedings and certainly which is different
from an investigator. I have to proceed based on my authority as Adjudicating
Officer and within the frame work of my appointment. �Firstly, filing of the information at this
stage, by the noticee, is not discharge of his obligation before the IO, and
secondly I find this information to be too inadequate to discharge the noticee
from the summonses. Timely gathering/ submission of information, co-operation
with the IO during the investigations etc. are the essence of an investigation
without which the investigation can not come to a logical end. �In the instant matter the investigation
process has hampered due to the non co-operative attitude of the noticee
throughout the investigations. He has not even once attempted to respond to the
summonses. The non co-operation has also continued during this proceedings as
well. This is evident from the fact that when first time on 22.01.07 he was to
appear before me then he sought adjournment vide letter dated 20.01.07 citing
short notice as a ground. Second time when date was fixed on 06.02.07, he again
shown his inability to appear, citing his bad financial position as a ground
for absence. It may be mentioned here that this is the first time he is taking
this plea for non co-operation.�� �����
17.
The power to seek information under oath is derived by
IO from the provisions of Section 11C (2), 11C (3) and 11 (3) of SEBI Act,
1992.� Further, Regulations 8 (1) (a)
& (b) of SEBI (Prohibition of Fraudulent and Unfair Trade
Practices relating to Securities Market) Regulations, 2003 also makes it mandatory
for any entity to provide information as sought by the Investigating Officer.
Therefore, by not providing details and information in response to the summonses
issued by IO under statutory powers granted u/s 11C (3), 11C (5) and 11 (3) of
SEBI Act, 1992, the noticee has made himself liable for imposition of penalty
u/s 15A (a).
18.
The violation thus
being established, the undersigned considered the following factors as provided
in the section 15J of SEBI Act to determine the quantum of penalty that can be
imposed under Section 15A (a) of SEBI 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.
19.
As already discussed
2255861 shares of AIL were sold by the noticee during the relevant period of
investigations. There were many other entities who were also selling and there
was a selling pressure in the srip of AIL. It was important to know the sources
of these shares in order to investigate if there was any concerted effort on
the part of these entities including noticee, but the investigation could not
bring any conclusive findings due to the non compliance of summonses by the
noticee. The violation observed here is repetitive as noticee failed to comply
with summonses thrice. �
20.
The Hon�ble SAT in
its ruling dated May 04, 2001 in the appeal No. 36 of 2000 in the matter of
Yogi Sungwon (
�As already stated above, in terms of section 15I
whether penalty should be imposed for failure to perform the statutory
obligation is a matter of discretion left to the Adjudicating Officer and that
discretion has to be exercised judicially and on a consideration of all the
relevant facts and circumstances. Further in case it is felt that penalty is
warranted the quantum has to be decided taking into consideration the factors
stated in section 15J.� It is not that
the penalty is attracted perse the violation. The Adjudicating Officer has to
satisfy that the violation deserved punishment.�
21.
Guided by the
aforesaid ruling of SAT, I am fully satisfied that this case deserves penalty
since it is a deliberate matter of non compliance by the noticee. A substantial
quantity of shares was sold by the noticee which was not reflected in the demat
a/c details available with NSDL and CDSL. ��Had he co-operated with the IO., he could
have come clean and at the same time real culprits could have been identified
and dealt as per law.
22.
Further, it may be
emphasized that 870(approx) days have elapsed since the violation occurred and
the violation continues till date. For such violation, penalty of Rs. one lakh
per day of the violation or Rs. one crore, whichever is the least, is
prescribed u/s 15A (a) of SEBI Act, 1992. Therefore in the circumstances and
given the role of the noticee, I find it appropriate to impose a penalty of Rs.
5 Lakhs under Section 15A(a) of SEBI Act, 1992 on Mr. Mayur Jadeja for its
failure to provide information.
23.
Therefore, in exercise of the powers conferred under
section 15-I (2) of the SEBI Act, 1992, read with Rule 5 of SEBI Adjudication
Rules, I hereby impose a penalty of Rs. 5 Lakhs�
(Five Lakhs only) on Mr. Mayur Jadeja under section 15A (a) of SEBI Act,
1992 for failure to furnish information to the IO, in response to statutory
summons issued under the provisions of Section 11C (2), 11C (3) and 11(3) of
the SEBI Act, 1992.
24.
Mr. Mayur Jadeja shall pay the said amount of penalty
by way of demand draft in favour of �SEBI- Penalties Remittable to Government
of India�, payable at Mumbai within 45 days of receipt of this order. The said
demand draft should be forwarded to Shri P K Nagpal Chief General Manager,
Investigation, ID-1, Securities and Exchange Board of India, SEBI Bhavan, Plot
No. C4A, �G� Block, Bandra Kurla Complex, Bandra (East), Mumbai 400 051.
25.
This order of
adjudication is made and passed on 12th day of February 2007 at Mumbai. ������������ �������������
����������������������������������������������������������������������� ����������� (AMIT PRADHAN)
ADJUDICATING OFFICER