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SECURITIES
AND EXCHANGE BOARD OF ORDER
������ UNDER SECTION 15I OF THE SECURITIES AND
EXCHANGE BOARD OF IN INQUIRY AND ADJUDICATION
PROCEEDINGS IN THE MATTER OF ALLEGED VIOLATIONS OF REGULATION 8(3) OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997 BY M/s IQMS Software Limited. 1.0
Background 1.1
Pursuant to the investigations, conducted by the Securities and
Exchange Board of India (hereinafter referred to as �SEBI�) into the dealings
in the shares of M/s. IQMS Software Limited (hereinafter
referred to as �the company�),
vide order dated April 27, 2004, Shri J. Ranganayakulu,
Joint Legal Adviser, SEBI was appointed as the Adjudicating Officer under
section 15I of the Securities and Exchange Board of India Act, 1992 (the SEBI
Act) read with Rule 3 of Securities and Exchange Board of India (Procedure for
Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995
(hereinafter referred to as �the Adjudication Rules�) to inquire into and to
adjudge the alleged contraventions as mentioned in the original order dated
April 27, 2004. Subsequently, by an order dated 1.2
As per the said orders, the present inquiry and
adjudication proceedings is in respect of the alleged contravention by the company that it had
violated provisions of regulation 8(3) of the SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997 (hereinafter referred to as �the
Takeover Regulations�). 2.0 ���� Show
Cause Notice, Inquiry and personal hearing 2.1
A Show Cause Notice dated 15.07.2004 was issued to
the company under Rule 4 of the Adjudication Rules. From the records it was
noted that this show cause notice was not served upon the company. Therefore,
undersigned proceeded with the fresh inquiry under rule 4 of the Adjudicating Rules
and issued a show cause notice dated 04.10.06 to the company. In this show
cause notice, it was alleged that the company had made yearly disclosure for
the year ending on 31.03.01, under Regulation 8(3) of the Takeover Regulations,
on 01.11.2001 belatedly as the due date for making such disclosure was
30.04.01. It was also explained that alleged contravention by the company has
to be inquired into and adjudged under 15A (b) of the SEBI Act. 2.2
The company did not file any reply to the said show
cause notice. Considering the material available on record, in terms of rule
4(3) of the Adjudicating Rules a notice dated 27.10.06 was issued to the
company requiring it to appear on 15.11.06, either through its lawyer or
authorized representative. After seeking adjournment, Shri J.S. Suryanarayana,
Managing Director of the company appeared for hearing on 01.12.06. On the said
date, the contravention alleged to have been committed by the company and the
relevant provisions of the SEBI Act and regulation 8(3) of the Takeover
Regulations were again explained to him. 2.3
Shri J.S.Suryanarayana submitted that he has been taking
all steps to ensure that the company�s business is developed for the benefit of
the shareholders. He admitted that the company made the disclosure for the year
ending March 2001 as required under regulation 8(3) of the Takeover Regulations
belatedly on 01.11.01. According to him the company did not have a company
secretary during the relevant time therefore the alleged default occurred. He
submitted that the company has made disclosures for other financial years
within specified time. Therefore, no penalty may be imposed on the company.
When asked to submit evidence for such disclosures, he submitted that he had not been able
to study the charge, peruse the records of the company and prepare defence on account of
illness of his mother and her hospitalization. He requested further time to
file detailed reply alongwith all relevant documents after perusing the records
of the company and to appear personally. Considering the request of Shri
J.S.Suryanarayana hearing in the matter was adjourned to 11.12.06. As requested
by him a copy of show cause notice dated 04.10.06 was again provided to him. It
was explained to him that in view of admission of default, the matter would be
heard on adjudication of penalty under rule 5 of the Adjudicating
Rules
and he should also submit his reply on the same along with relevant documents
which he may choose to rely upon in support of his submissions. 2.4
The company vide its letter dated 04.12.06 admitted that
the company could not make disclosure as required under regulation 8(3) of the
Takeover Regulations for the year ending March 31, 2001 as it had not employed
a full time Company Secretary during the period and its directors were not
aware of the non submission of report under the Takeover Regulations and they
were busy with regular operation of the company. After appointment of Finance
Manager, the company made disclosure on 2.5
On
11.12.06, Shri J.S.Suryanarayana appeared for hearing. He reiterated the
submissions made by him and the company as mentioned hereinabove. He requested
that in view of his submissions that it was the only default by the company and
that the present management has initiated steps to develop the business
operations of the company, the monetary penalty may not be imposed for the
instant default. He undertook to file the proofs of subsequent disclosures by
the company within a week. However, no evidence or document, etc. has been
furnished by the company as undertaken by its Managing Director. 3.0
����CONSIDERATION OF
EVIDENCE AND FINDINGS 3.1 I have carefully considered the charge
leveled in the show cause notice, the replies and submissions on behalf of the
company and the relevant materials available on record. In view of the
admissions by and on behalf of the company it is established that the company
had failed to make disclosures
for the year ending 31st March 2001 within the time as specified
under regulation 8(3) of the Takeover Regulations which reads as follows:- �8(3).� Every company
whose shares are listed on a stock exchange, shall within 30 days from the
financial year ending March 31, as well as the record date of the company for
the purposes of declaration of dividend, make yearly disclosures to all the
stock exchanges on which the shares of the company are listed, the changes, if
any, in respect of the holdings of the persons referred to under sub-regulation
(1) and also holdings of promoters or person(s) having control over the company
as on 31st March.� 3.2 �Regulation 8(3) inter alia requires disclosure in respect of the holdings of the persons who hold 15% shares or voting rights in the company and holdings of the promoters or persons having control over the company. In the instant case, the due date for making such disclosures under regulation 8 (3) was 30.04.01 whereas these disclosures were made by the company on 01.11.01 after a delay of 184 days. Considering the above facts and circumstances, I find that the company has contravened regulation 8 (3) of the Takeover Regulations and is thus, liable for penalty under section 15A (b) of the SEBI Act. �� 4.0
ADJUDICATION OF THE
QUANTUM OF PENALTY
4.1 Section 15A (b) was amended with effect from 29.10.02 and the
penalties in respect of such failures has been enhanced. The failure in
the instant case relates to the period prior to such amendment. In
view of the same, I proceed to adjudge the failure by the company under section
15A (b) as it existed before 29.10.02. The provisions of unamended Section 15A
(b) reads as under
�
�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, - (b) to file any return or furnish
any document, books or other documents within the time specified therefor in
the regulations, fails to file return or furnish the same within the time
specified therefor in the regulations, he shall be liable to a penalty not
exceeding five thousand rupees for every day during which such failure continues,�
4.2
While adjudging the quantum of penalty in this case, I
have considered the factors provided under Section 15J read with rule 5(2) of
the Adjudication Rules.There
is nothing on record to suggest that as a result of the failure of the company
as found herein above; it has made any pecuniary gain or unfair advantage. The
loss caused to investors and the unfair advantage to the violator as a result
of non disclosure may also not always be possible to be specified in pecuniary
terms. The disclosure requirements as provided in the Takeover Regulations have
specific purpose. The requirement of making time bound disclosures to the stock
exchanges by a listed company as envisaged under the Takeover Regulations is an
important material information and has a bearing on the investment or
disinvestment decisions of the investing public. The object of disclosure
requirements provided in Takeover Regulations is to ensure transparency in the
transactions and to assist the regulatory bodies such as the stock exchanges to
effectively monitor such transactions. 4.3
In
this case an isolated default is the matter in inquiry and adjudication. There
is no reference on record of present proceedings that the company has committed
repeated defaults of such nature as found in this case nor the company has
shown any evidence that it has made disclosures for other
financial years within specified time as submitted by its authorized
representative. Therefore, it cannot be conclusively said that the
company has committed repeated defaults. The requirement of compliance of
regulation 8(3) is an annual feature. It is the primary obligation of the
company. The appointment of Company Secretary or the Finance Manager is not a
condition precedent for making disclosures in terms of regulation 8 (3) of the
Takeover Regulations. The failure in this case cannot be said to be on account
of any oversight or lack of knowledge. 4.4 The
Hon�ble Supreme Court of India in the matter of SEBI Vs. Shri Ram Mutual
Fund [2006]68SCL216(SC) has held that once the violation of statutory
regulations is established, imposition of penalty becomes sine qua non of
violation and the intention of parties committing such violation becomes
totally irrelevant.
Thus, disproportionate gain, unfair advantage, repeated default, etc. are not sine
quo non for imposing a monetary penalty when the violations of statutory
obligations contemplated in the SEBI Act and the regulations made thereunder
are established. 4.5
Further,
it must also be kept in mind that if no liability is fixed upon the violator,
the entire purpose of incorporating the provisions in the SEBI Act would become
redundant and the violators would continue to discard the law. In
this regard, the following observations of Hon�ble High Court of Bombay in the
matter of SEBI Vs. Sangeeta J. Valia, vide order dated 05.10.03, is
worth mentioning �
�The provisions of penalty in failure to furnish any documents, return or
report or any information or books, within the specified period as per the
regulations as contemplated under section 15A are in the form of
mandatory provisions. These compliances therefore, in our opinion, are
essential to serve the purpose and object of the Act, as referred above. The
provisions of penalty for non-compliance of the said mandate of the Act is
definitely with an object to have an effective deterrent to ensure better
compliances of the provisions of such laws, which is in the in the interest of
public at large, investors and essential to regulate and control such markets,
through the regulatory authority, like SEBI.� 4.6� ��I find that the company has failed to
comply with the provisions of regulation 8 (3) of the Takeover Regulations as
observed hereinabove, and is thus, liable for penalty under section 15A(b) of
the SEBI Act for such failure. As mentioned above, failure in compliance with
the provisions of regulation 8(3) has continued for substantial number of days.
As per the then existing provisions of section 15A (b) of the SEBI Act, the
penalty specified therein was five thousand rupees for every day during which
the failure continues. 4.7��
In view of the above, I am satisfied that the present case warrants
imposition of penalty. Having considered the facts and circumstances of this
case and after taking into account the factors under section 15J and other
relevant factors as mentioned above, I find that a penalty of twenty five
thousand rupees would be commensurate with the violation, as found in this case. 5.0 ORDER 5.1 Accordingly, in
exercise of the powers conferred upon me in terms of section 15I of the SEBI
Act read with Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing
Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of twenty
five thousand rupees on M/s IQMS Software Limited. 5.2 � M/s IQMS Software Limited
shall pay the penalty amount within a period of 45 days from the date of
receipt of this order through a demand draft drawn in favour
of �SEBI- Penalties remittable to the Government of India� and payable at
Mumbai and send the same to Shri Sanjiv Dutt, Chief
General Manager, Securities and Exchange Board of India, SEBI Bhawan, 5th
Floor, Plot No. C-4 A, G-Block, Bandra Kurla Complex, Mumbai- 400 051. As
required under rule 6 of the Adjudication Rules a copy of this order is being
sent to M/s IQMS Software Limited and also to SEBI. Dated: Mumbai
ADJUDICATING
OFFICER |
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