A. O. NO: ACR/78 /2005

 

1. Vide order dated December 28, 2004, issued by Securities and Exchange Board of India (hereinafter referred to as �SEBI�), 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 Sec. 11C of Securities and Exchange Board of India Act, 1992 against� ATN International Limited a company having its address at 10, Princep Street, 2^nd Floor, Kolkata � 700 072. For the sake of convenience, the said ATN International Limited will be referred hereinafter in this order as �the noticee�. Originally, Shri K.R.C.V. Seshachalam, Deputy Legal Adviser, SEBI was appointed as the Adjudicating Officer in the matter and vide the aforesaid order dated December 28, 2004, the case was transferred to me.

 

2.      As per the information provided to me by SEBI, SEBI conducted investigation in to the alleged price manipulation in the shares of Universal Media Network Ltd. During the course of the said investigation, summons dated May 07, 2004 was issued by Shri R. Ravichandran, investigating authority of SEBI in the matter, directing the noticee to furnish the information and produce certain documents mentioned in the annexure to the said summons by June 11, 2004 and the said summons was served through the Eastern Regional Office of SEBI at Kolkata.� However, it was alleged that there was no compliance of the said summons by the noticee, despite receipt of summons.

 

3.     Subsequently, the investigating authority issued a fresh summons on July 6, 2004 directing the noticee to furnish the information and to produce certain documents mentioned in the annexure to the said summons by July 19, 2004. The said summons dated July 06, 2004 was also served through the Eastern Regional Office of SEBI at Kolkata and the same was received by the noticee. However, as per the information furnished to me by SEBI, there was no compliance of the said summons by the noticee.

 

4.     I issued notice dated May 06, 2005 to the noticee under Rule 4(1) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 calling upon the noticee to show cause as to why an inquiry should not be held against it and penalty be not imposed under Sec. 15A(a) of Securities and Exchange Board of India Act, 1992 for the failure of the noticee to produce the documents and furnish the information as demanded by the investigating authority vide the aforesaid summonses. In reply, the noticee vide its letter dated May 30, 2005 submitted that it complied with the summons dated May 7, 2004 by submitting the desired information vide its letter dated June 8, 2004 i.e. within the stipulated time.� It further submitted that since it already complied with the summons dated May 07, 2004, it did not respond to the summons dated July 06, 2004.�� The noticee also forwarded a copy of the letter dated June 8, 2004 addressed to the investigating authority vide which, as per the noticee the required information was furnished to the investigating authority.

 

5.      On perusal of the reply received from the noticee, I was of the opinion that an inquiry should be held in the matter and accordingly, a notice 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 was issued to the noticee.� Vide the said notice, the noticee was advised that June 21, 2005 was fixed as the date of inquiry and the noticee or its authorized representative/ lawyer may appear for the inquiry at my office at Mumbai on the above date for inquiry/ personal hearing.

�

6.       On June 21, 2004, Shri Vijay Kumar Chandak, a chartered accountant appeared before me as the authorised representative of the noticee and filed a letter of authority issued by the noticee authorizing him to appear before me for the purpose of adjudication. The following is the summary of details of the proceedings and the submissions made by authorised representative at the time of inquiry/ personal hearing: At the commencement of the proceedings I explained the aforesaid authorised representative of the offence, i.e. non furnishing of information/ documents in compliance with the summonses dated May 07, 2004 and July 06, 0205 issued by the investigating authority. The authorised representative was also explained of the penalty prescribed under Sec. 15A (a) of Securities and Exchange Board of India Act, 1992. The authorized representative reiterated the submissions of the noticee made vide the written statement filed by it in response to the show cause notice issued by the Adjudicating Officer. The authorised representative further submitted that the noticee was willing to extend all cooperation as and when required by SEBI. On being specifically asked by me as to whether the noticee would be filing any further documents in support of its contentions made in the reply to the show cause notice, the authorised representative replied in negative.

 

7.       Subsequently, the noticee vide its letter dated June 22, 2005 forwarded the original airway bill no. 36201282 dated June 11, 2004 of Overnite Express Limited through which the reply to the summons dated May 7, 2005 was claimed to be forwarded to Shri R Ravichandran, investigating authority.� On receipt of this letter, I issued a notice on July 6, 2005 under Rule 4 (6) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 to Shri R Mohan, General Manager, SEBI (hereinafter referred to as the aforesaid General Manager) who is presently handling the investigation matter of Universal Media Network Ltd.� In the said notice it was advised to produce the document / documents which were received by the investigating authority from the noticee vide the aforesaid consignment dated June 11, 2004.�

 

8.       The aforesaid General Manager of SEBI �vide� note dated July 7, 2005 replied to my notice dated July 6, 2005: The following is the extract of the said note:

�Sub: Adjudication against ATN International Ltd.

 

Ref: Letter no.EAD/ACR/44383/2005 dated July 6, 2005.

 

1.      The case was received by ID-6 for follow-up. As per the records available with the division it is seen that the subject letter dated June 8, 2004 was not received at our end, as per the noting made by the investigation officer.

 

2.      However after the summons dated 6^th July 2004, ATN International Ltd. informed SEBI vide their letter dated 6^th August 2004 that they had already forwarded the information vide their letter dated 8^th June 2004. (Please note that the letter was sent on June 11, 2004).

 

3.      After the perusal of this copy of the letter the investigation officer noted the following.

a.                  1^st letter was not received by the investigation authority.

 

b.                  This letter (i.e., letter dated 6^th August 2004) was received after delay.

 

c.                  There was no SEBI acknowledgement in the first letter.

 

d.                  Incorrect information was provided by the company vide this letter (refer point c of the letter dated June 8, 2004 from ATN). While the company claimed that there were no transactions by the company in the shares of UMNL, the d-mat statements obtained from the depository proves otherwise. (Transaction statement enclosed).

 

4.      Under these circumstances it was felt that the company was trying to mislead the investigations by providing false information. Thus it was considered as non-compliance to the SEBI summons.

 

5.      Further the adjudicating officer may kindly verify the original waybill for SEBI acknowledgement.�

 

 

 

9.       Before deciding the issues which required to be examined by me, the provisions of Securities and Exchange Board of India Act, 1992 with respect to the issuance of summons by the investigating authorities and the consequences of non- compliance are perused by me. Sec. 11C 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 him. 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 Rupees One lakh for each day during such failure continues or Rupees one crore, whichever is less.

 

10.   It was alleged by SEBI that the noticee failed to comply with the summonses dated May 7, 2004 and July 6, 2004 issued by the Investigating Authority as mentioned above.

 

11.   The noticee did not dispute the fact that the investigating authority of SEBI issued the summonses. However, the noticee in its reply dated May 30, 2005 to the show cause notice issued by me, submitted� that it complied with the summons dated May 7, 2004 by submitting the desired information vide its letter dated June 8, 2004 i.e., within the stipulated time.� It further submitted that since it already complied with the summons dated May 07, 2004, it did not respond to the summons dated July 06, 2004.�� The noticee also forwarded a copy of the letter dated June 8, 2004 addressed to the investigating authority vide which, as per the noticee, the required information was furnished to the investigating authority. �Further, I also received a letter dated June 22, 2005 from the noticee in which the noticee forwarded the original airway bill no. 36201282 dated June 11, 2004 of Overnite Express Limited through which the reply to the summons dated May 7, 2005 was claimed to be forwarded to Shri R Ravichandran, investigating authority.�� On perusal of the reply sent by the aforesaid General Manager of SEBI, I noticed that the investigating authority was not in receipt of the reply dated June 8, 2004 from the noticee.� The said reply was received by the investigating authority after issuing the second summons i.e., summons dated July 6, 2004.� In the said reply, noticee submitted that there were no transactions by the company in the shares of Universal Media Network Ltd., during the period May 1, 2002 to September 1, 2002 and hence no details were required to be provided.� It was also submitted that since there was no transaction, no information was provided in soft copy.�� However, the aforesaid General Manager informed me citing the notings of the investigating authority that the noticee provided incorrect information and the d-mat statements obtained from the depository proved that the noticee dealt in the scrip of Universal Media Network Ltd.��

 

12.   The investigation report submitted by the investigating authority which was duly approved by the Board, clearly indicates that summonses dated May 7, 2004 and July 6, 2004 were issued to the noticee and no reply was received from the noticee though summonses were accepted. Based on the said statement contained in the investigation report, I issued show cause notice to the noticee in terms of Rule 4(1) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995. However, in the reply filed by the aforesaid General Manager of SEBI, in response to my notice issued under Rule 4(6) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995� it was mentioned that the noticee provided incorrect information in response to the summons and therefore, adjudication proceedings were initiated. In this connection, it may be noted that the instant proceedings of adjudication were initiated based on the statement contained in the investigation report that the noticee failed to comply with the summons. In the same investigation report, the allegation of furnishing false information was leveled against two other companies and the noticee�s name is not figuring therein.

 

13.   �From the above, it may be seen that as per the investigation report, the noticee failed to comply with the summonses issued by the investigating authority, however, during the course of adjudication, a new fact has been brought on record that the noticee filed the information but it was incorrect. The order of SEBI dated August 25, 2004 vide which Shri K.R.C.V. Seshachalam was initially appointed as the Adjudicating Officer in the instant matter also states that the noticee did not provide information to SEBI in response to summons and thus violated Sec.15A of Securities and Exchange Board of India Act, 1992.�

 

14.   It is the contention of the noticee that it responded to the investigating authority on receipt of summons dated May 7, 2004 and also furnished documentary evidence to me to prove that the said information was sent by courier. From the reply of the aforesaid General Manager of SEBI, the noticee filed the information, albeit delay, which was incorrect.�� However, it is �noted from the investigation report that the noticee received both the summonses i.e., summons dated May 7, 2004 and July 6, 2004 and it did not comply with both these summons.��� I find that there is a discrepancy in the investigation report and the information provided during the adjudication proceedings.� There is no mention in the investigation report that the noticee provided incorrect information.

 

15.   Further, as regards the aforesaid General Manager of SEBI�s suggestion that adjudicating officer may verify the original waybill for SEBI acknowledgement, I note that the said airway bill was not an acknowledgement received by the consignor; but it was a receipt issued by the courier company with respect to the deposit of the consignment.� Hence the question of acknowledgment of SEBI on the said receipt does not arise.�

 

16.   �From the above, it may be seen that there are glaring discrepancies between the investigation report based on which the instant adjudication proceedings were initiated and the information furnished to me in response to my notice dated July 6, 2005 issued under Rule 4(6) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995. The allegation of furnishing incorrect information to the investigating authority does not contain in the investigation report which was approved by the Board. In these circumstances, I am inclined to give precedence to the investigation report approved by the Board and the order appointing the Adjudication Officer issued by the Board wherein it was clearly stated that the noticee failed to comply with the summons issued by the investigating authority.

 

17.   �In view of the documentary evidence furnished by the noticee to prove that it complied with the summons dated May 7, 2004, I am inclined to give a benefit of doubt to the noticee, even though the noticee failed to furnish any proof of delivery of its letter dated June 8, 2004 to SEBI, and therefore find that the allegation of non compliance of summons issued by the investigating authority is not established.

 

18.   Since the failure of producing the documents before the investigating authority of SEBI by the noticee is not established, the question of imposing any penalty on the noticee does not arise. Therefore, no monitory penalty is imposed on the noticee, ATN International Limited.

 

19.   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 noticee and also to Securities and Exchange Board of India.��

 

Date:�� July 29, 2005���������� ��������� ��������� �������� A. Chandra Sekhar Rao

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