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Adjudication
order in respect of Hiranandani Steels and Tubes Ltd.,
under Section 15 I of the SEBI Act read with Rule 5 of SEBI (Procedure for
Holding Inquiry by Adjudicating Officer) Rules, 1995. The instant proceeding is directed against the non
furnishing of information, �compliance of summon issued by the
Investigating Authority appointed U/S 11C(1) of the Securities and Exchange
Board of India Act 1992 (herein after called the �Act�). Pursuant to complaint
received by SEBI forwarded by the DCA in September 1999 wherein the complainant
Sh Anand Mody having holding of 700 shares in the Datapro Information Technology Limited (herein after
referred as �DITL�) alleging irregularities by the Datapro
and its share transfer agent SRG Infotech that they
by planting stories of tie-up with firm and change in the shareholding patter
of the company DITL manipulating the prices of the shares of DITL artificially.
Consequently, an investigation had been conducted by
the Securities and Exchange Board of India (herein after called as �Board�) to
find out the alleged irregularities and possible violation of provisions of the
Act and various rules and regulations framed there under. During the said
investigation by the Board, the Hiranandani Steel
& Tubes Pvt Ltd (herein after called as Company
or HSTPL) was summoned to provide certain information relating to transaction
of the company in the shares of DITL during the investigation period.�� Based on the finding of the investigation report,
prima facie it appeared to the Board that the company had failed to provide
information in response to summon issued by the Investigating Authority and
there by non compliance with the summon issued by the Investigating Authority,
the company has made itself liable for initiation of action U/S 15A(a) of the Act. Consequently, the undersigned has been
appointed as an Adjudicating Officer vide order dt
July 21,2004 under rule 3 of SEBI (procedure for holding Inquiry and Imposing
Penalties by Adjudicating Officer) Rules 1995 (herein after called as �Rules� )
to enquire into the alleged violation of non compliance of summon issued by the
Investigating Officer.�� NOTICE :- Pursuant to the aforesaid appointment the show cause
notice under Rule 4 (1) of the said rules show cause notice was issued to the
company on REPLY :- Reply to the aforesaid notice was received from the
company vide letter dated January 13, 2005 and by January 29, 2005 reply from Sh Rajeev Arora former CMD was
also received. The company in its reply mentioned that there is an ongoing
dispute between the Directors of the Company involving matters related to
ownership and control of the company and the matter is pending before the
Company Law Board. Company asked for postponement of hearings till their dispute
is resolved. �It is also submitted by the
Company that they were not served with the summon
issued U/S 11C (3) of the Act by the Investigating Authority and resultantly
being not aware of any such proceeding could not file the information/documents
sought by the Board during the investigation. � PERSONAL
HEARING:- The personal hearing in the matter was fixed on In view of the above, I now deal with the written
submissions made by the company before me for the purpose of this
adjudication proceedings. BACKGROUND:- Hiranandani� Steels and
Tubes Ltd. Hiranandani�
Steels and Tubes Ltd.(Hiranandani) has been stated by DITL to be an associate
company with a common director-Shri Rajeev Arora vide letter dated Having regard to the fact that Hiranandani
was associated company of DITL, further queries were raised with it.
Letters/summons were issued to it as under
REPLY : In response to the reply to the show cause notice dt 21.09.2004 the company vide
reply dt 13.01.2005 stated the summon issued by the
Investigating Authority was not address to the correct address and therefore,
the Company was not in receive of any summon to provide the reply to the same.
It is submitted that in view of non receiving of the
summon, the reply of the same could no be provided and therefore, there is no
question of violation of any provision. It is further refused by the Company
that in spite of receiving of letters/ summons, the company did not reply the
same deliberately and for reason stated above, requested for the withdrawal of
the action initiated U/S 15 A (a) of the Act.� FINDINGS:- It has been observed that SEBI was carrying on
investigations into the affairs of the company relating to buying, selling and
otherwise dealings in the shares of M/s Datapro
Information Technology Ltd. During the course of investigation, SEBI issued
various letters and summons to the company and its above promoter / directors. Vide aforesaid summons company was repeatedly asked
to furnish details of� its major
shareholders, directors, press announcements, Board meetings etc., but no such
details were ever provided to SEBI. I observe that this information were vital
in nature and was necessary and required for the purpose of investigation. The
company has in their reply before me tried to demonstrate that they have not
responded to SEBI summons and failed to furnish any information owing to the
reason that they have not been served with the summon and was not aware of any
such proceeding of investigation. It is also informed that management dispute
is going on before CLB and with other courts and pending the same, adjudication
proceedings by postponed. A letter dated 29.1.05 was also received from the CMD
Mr. Rajeev Arora of the company alleging that he has
been prevented from accessing company premises. I observe from the
investigation findings that the first summons dated From perusing the records available, it is evident
that Hiranandani has also not replied to SEBI
summons. No reasons for the same have been given; in fact no communication has
been received from Hiranandani. As indicated earlier,
Hiranandani is an associated company and has sold
shares of only DITL during the period. Information from it would have been
helpful in furthering the investigation in a timely manner and reaching logical
conclusion. Summons have not been accepted at address from which replies was
received from them earlier. Accepted summons have not been replied to. Letter
addressed to former director � Punam Arora who is also wife of present director � Rajiv Arora has also not elicited
even preliminary information. It is pertinent to mention that in reply to the
summon dt 18.06.2003, a letter dt
10.07.2003 was received from the Director Ms Punam Arora stating therein that she was not being the Director
at the relevant point of time could not provide the requisite information. The
said very reply by Ms Punam Arora
manifest that the summon was duly served on the
Company. It appears that there is an attempt to delay investigation. It appears
that Hiranandani is deliberately not cooperating with
SEBI investigation. Further, the submission of the Company that they were
not served with the summon did not find support from
the evidence on record, because the entity was served at the same address even
under the present proceeding. No credible piece of evidence has been placed on
record to suggest that company had changed its address long back and the
Company has no connection with the previous address. � Moreover, the materials on record lead me to the
facts that against the summon dt
25.07.03 which was duly served on the CMD of the Company Sh
Rajeev Arora however, no reply came forward from
either the Company or the CMD Sh Rajeev Arora. The partial reply to the summon dt 18.06.03 by one of the Director Ms Punam Arora further testify the factum of service of the summon. The submission put by
Company that they have not been served with the summon to enable them to reply
or furnish the information sought does not hold any water and in the absence of
any plausible reason to support their contention it would not be legal to
accede to their prayer of dropping the action initiated U/S 15 A(a) of the Act.� The present proceeding is confined to arrive at
adjudication as to whether there was any non supply of information sought under
the summon issued by the Investigating Authority. It
is at this stage, Company is furnishing the detail sought by the Investigating
Authority whereas the Company failed to provide the same when desired
especially when the Company was duly served through its Directors. �The submission by the CMD Sh
Rajeev Arora and the submission made by the company
loss its credential when the reply of the company dt
13.01.2005 is confronted with the reply dt 29.01.05
of the CMD Sh Rajeev Arora,
wherein the CMD in para 3 states that he has been
prevented from entering the office premise situated at the address, where the
summon was issued. His further averments in para 1
& 2 of the said letter shows that he was very much aware of the reply filed
by the company and his reiteration and reaffirmation of the contents of the
reply filed by the company gives rise to the doubt that there is any dispute
and the CMD is prevented from having any access to the records of the company. � In view of the reply dt
10.07.03 by the Director Ms Punam Arora
to the Summon dt 18.06.03 and receiving of the summon
dt 25.07.03 by the CMD, it would be legal to hold
that Company was duly served through its Directors and by not furnishing the
information despite the service of the summon the company �and its directors Mr. Rajeev Arora have violated provisions of section 15 A (a) of SEBI
Act requiring the company to furnish information and documents. The violations
in this regard attracts the penalty as prescribed under section 15 A (a) of the
SEBI Act and in order to adjudge the quantum of penalty, I have to consider the
following factors : 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. As regards the disproportionate gain or unfair
advantage there are no quantifiable figures available with respect to the
default observed on the part of the company and its directors. There are also
no figures or data to quantify the amount of loss caused to an investor or
group of investors as a result of the default. However, since there has been
deliberate non � compliance of the statutory summons issued u/sec 11 C (2) of
SEBI Act, by the company, thereby causing interference in the statutory
investigation process, I consider that the monetary penalty needs to be imposed
as a corrective measure. I find the said violation as repetitive in nature
since number of times summons were issued to company which were not complied by
it in real sense. ORDER The submissions of the company have been considered
and dealt in detail as above and in view of the findings arrived at, I consider
it to be a fit case for imposition of penalty under sections 15 A (a) of the
SEBI Act, 1992. In view of the same and in exercise of the powers conferred
under section 15-I (2) of the SEBI Act, 1992, read with, Rule 5 of the said
Rules, I hereby impose penalty of Rs. One Lakh (Rs.1,00,000/-) on the
company. The aforesaid penalty shall be paid 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 the General Manager of SEBI, Investigation Department,
ID-6 at SEBI, Mittal Court, B- Wing, 1st Floor, 224 Nariman Point, Mumbai 400 0021. Date : Place : Mumbai AMIT
PRADHAN ADJUDICATING
OFFICER |
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