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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 September 21, 2004.

     

    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 January 14, 2004. Shri J. P. Srivastava, Authorised Representative of the company attended the personal hearing.

     

    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 10/7/2003. Additionally, Mrs Poonam Arora, wife of Rajeev Arora was also on the Board of directors of the company and she was also the contact person with broker- Amrol as per letter of Amrol dated 7/4/2001. During the course of investigation, it was seen that Hiranandani had sold 58700 shares of DITL� in sett no. 30 (October 1999) through broker � Amrol on the BSE. This was stated by DITL vide letter dated 10/7/2003. It was also stated by sub broker in his deposition dated 25/9/03 that Hiranandani� dealt only in shares of DITL and in no other shares.

     

    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

     

    Date

    Name /Address

    Mode of dispatch

    Description

    Remarks

    18/6/2003

    Hiranandani� Steels and Tubes

    201, Embassy Centre, Nariman Point, Mumbai 21

    Hand Delivery

    Summons for information

    Returned undelivered

    18/6/2003

    Hiranandani� Steels and Tubes

    Mrs Punam Arora

    c/o Datapro information technology Ltd, EL -21, Electronic Zone, MIDC, Pune 26

    Courier

    Summons for information

    Partial reply*

     

    25/7/2003

    Hiranandani� Steels and Tubes

    Shri Rajeev Arora, Director

    EL -21, Electronic Zone, MIDC, Pune 26

    Regd A/d

    Summons for information

    Acknowledged- No reply received

    16/9/2003

    Hiranandani� Steels and Tubes

    EL -21, Electronic Zone, MIDC, Pune 26

    Regd A/d

    Summons for information

    Letter not accepted.

     

    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 16/06/2003, was returned unserved. Subsequently, reminder were sent vide summons /letter dated 25/7/2003 and 16/09.2003 but no reply came forward. The record suggest that the summon was served at the last correct address known.

     

    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 : February 28, 2005.

    Place : Mumbai

     

    AMIT PRADHAN

    ADJUDICATING OFFICER



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