| Home | Back |
|
ORDER� UNDER� RULE 5 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF ADJUDICATION PROCEEDINGS AGAINST M/S. KISHOR CORPORATION 1.
I was appointed
as the Adjudicating Officer by the Securities and Exchange Board of India
(hereinafter referred to as �SEBI�) vide its order dated October 14, 2004 to
inquire into and adjudge under Section 15I�
of the Securities and Exchange Board of India Act, 1992 (hereinafter
referred to as the �SEBI Act�), the violation of Section 11C of the SEBI Act
alleged to have been committed by M/s. Kishor Corporation (hereinafter referred
to as the noticee) by not complying with the summons issued by SEBI seeking
information regarding its dealings in the scrip of Sword & Shield Pharma
Ltd. (hereinafter referred to as SSPL). 2.
�It is stated that SEBI conducted investigation
into the trading in the scrip of SSPL as the scrip witnessed large trading
volume and price rise in 2001.� During
the investigation prima facie it appeared to the investigating authority of
SEBI that M/s Kishor Corporation traded substantially in the scrip. In view of
the same, the investigating authority vide the following summons / letters a)
IVD/ID3/PKB/AA/SSPL/12305/2004
dated 11.06.2004 b)
IVD/ID3/PKB/AA/SSPL/13615/2004
dated 25.06.2004 c)
IVD/ID3/PKB/AA/SSPL/15380/2004
dated 14.07.2004 d)
IVD/ID3/PKB/AA/SSPL/16785/2004
dated 30.07.2004 e)
IVD/ID3/PKB/AA/SSPL/20292/2004
dated 09.09.2004 required the noticee to furnish certain information and also
to� appear before the Investigating
Authority. The noticee was required to provide the details of its promoters,
associates and group companies, its business activity, details of branch
offices, net worth, whether there was any relationship with SSPL or their
promoters / directors, details of shares of SSPL held by the noticee in 2001
and 2002 and the mode of acquisition of these shares, details of trades in the
shares of SSPL and brokers through whom the trades were executed, copies of relevant
demat statements and bank statements, details of off market trades etc. In view
of the alleged non compliance of summons issued by SEBI, Adjudication
Proceedings were initiated against the noticee. NOTICE AND REPLY3.
A notice no.
A&E/BS/33252/2005 dated February 9, 2005 was issued to the noticee in terms
of Rule 4 of Securities and Exchange Board of India (Procedure for Holding
Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995
(hereinafter referred to as the �Rules�) seeking the reply of the noticee as to
why an inquiry should not be held against the noticee for the violation alleged
to have been committed by it. 4.
Though the
noticee did not reply to the above notice, it was felt that an inquiry may be
conducted and the noticee was advised to attend the hearing scheduled on 5.
In the interest
of justice one more opportunity of hearing was granted to the noticee on 6.
As the noticee
failed to attend the inquiry, I am constrained to proceed with the inquiry in
the absence of the noticee. CONSIDERATION
OF EVIDENCE AND FINDINGS 7.
The allegation
against the noticee is that the noticee failed to comply with the summons
issued by SEBI. It is noted that SEBI issued the following summons / letters to
the noticee a)
IVD/ID3/PKB/AA/SSPL/12305/2004
dated 11.06.2004 b)
IVD/ID3/PKB/AA/SSPL/13615/2004
dated 25.06.2004 c)
IVD/ID3/PKB/AA/SSPL/15380/2004
dated 14.07.2004 d)
IVD/ID3/PKB/AA/SSPL/16785/2004
dated 30.07.2004 e)
IVD/ID3/PKB/AA/SSPL/20292/2004
dated 09.09.2004 requiring the noticee to submit the information sought by the Investigating Authority in connection with the investigations initiated by SEBI in the scrip of SSPL.� 8.
In this regard
Section 11C (3) of the SEBI Act 1992 empowers the investigating authority to
require any person associated with securities market to furnish such
information or produce such records as may be required by the authority. 9.
In this regard
it is pertinent to note that the noticee failed to submit the required
information to the investigating authority in response to the summons dated
summons dated 10. �It is further
noted that the investigating authority vide summons / letter dated June 25,
2004 informed the noticee that the information required vide summons dated June
11, 2005 was still not received and this was causing inordinate delay in the
investigation proceedings. The noticee was therefore advised to submit the
required details latest by 11. As the noticee failed to submit the details and also
failed to appear in person as required vide the above summons, the
investigating authority vide summons dated July 14, 2004 informed that the same
is being considered as gross non compliance of the earlier summons issued to
the noticee. The noticee was advised to submit the required information latest
by 12. Vide summons dated July 30, 2004 the noticee was
informed that non receipt of information and non appearance before the
investigating authority as required vide the previous summons issued is being
considered as gross non compliance of summons issued to the noticee. The
noticee was informed that it is being given last opportunity to comply with the
summons. The noticee was advised to submit the information called for by 13. �The noticee
was again advised vide summons dated September 9, 2004 to appear in person with
all related documents on September 17, 2004 at 11:00 AM before the
investigating authority. It is noted that the noticee did not submit the
required information nor appeared before the investigating authority despite
being issued repeated summons as discussed above. 14. It is also pertinent to note that the noticee did not
appear for the personal hearing in the adjudication proceedings despite being
provided the opportunity for hearing� on 15. As the noticee failed to reply to the show cause
notice in the adjudication proceedings and also failed to attend the personal
hearing, on the basis of the facts of the case and on perusal of the evidence
available on record it is concluded that the noticee failed to provide the
required information to the Investigating Authority. It is further noted that
as the information sought by the investigating authority was pertaining to the
noticee and its dealings the same were available with the noticee. 16. This conduct of the noticee hampered the effort of
the investigating authority to gather information in the investigation process.
In this regard as stated before, Section 11C (3) of the SEBI Act 1992 empowers
the investigating authority to require any person associated with the
securities market to furnish such information or produce such records as may be
required by the authority. Further Section 11C (5) of the SEBI Act empowers the investigating authority to examine on oath any such person and for that purpose require any such person to appear before it personally. It is noted that by not providing the required information to the investigating authority, the noticee violated the provisions mentioned above. 17. In view of the facts and circumstances of the case
and on the basis of the available evidence it is concluded that the failure on
the part of the noticee to submit the required information to the investigating
authority of SEBI is established.� On
account of the failure on the part of the noticee to furnish necessary
information to SEBI,�
the noticee is liable to the penalty prescribed under Section 15
A (a) of the SEBI Act. 18. The Honorable Securities Appellate Tribunal in Appeal
No.95/04 in Mayfair Paper & Board Pvt. Ltd., Vs SEBI held that failure to
furnish information to the Investigating Authority of SEBI shall attract the
penalty prescribed under Section 15A of the SEBI Act. 19. In this regard Section 15A(a) of SEBI Act provides
the following : 15A.
Penalty for failure to furnish information, return, etc :
If any person, who is required under this Act or any rules or regulations made
thereunder, �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 for each day during which
such failure continues or one crore rupees, whichever is less�. 20. In this regard, the provisions of Section 15J of the
SEBI Act and Rule 5 of the Rules require that while adjudging the quantum of
penalty, the adjudicating officer shall have due regard to the following
factors namely; 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 c)
the repetitive
nature of the default 21. It is noted that no quantifiable figures are
available to assess the disproportionate gain or unfair advantage made as a
result of the default.� Further, the
amount of loss caused to an investor or group of investors also cannot be
quantified on the basis of the available facts and data.� However, with regard to the repetitive nature
of the default it is noted that the investigating authority had issued 4
summonses to the noticee and the noticee failed to furnish the required
information to the investigating authority of SEBI.� The failure on the part of the noticee to
furnish necessary information to SEBI despite being granted four opportunities
to do so indicate that the default committed by the noticee is repetitive in
nature.�� 22. �Failure to
reply to the show cause notice dated February 9, 2005 issued in terms of the
provisions of Rule 4 of Securities and
Exchange Board of India (Procedure for holding Inquiry and Imposing Penalties
by Adjudicating Officer) Rules, 1995, and also failure on the part of the
noticee to attend the personal hearing granted in the adjudication
proceedings on two occasions i.e. on May 20, 2005 and June 14, 2005 clearly
indicate that the noticee has been adopting a non co-operative attitude. Timely
submission of information is very important in concluding investigation
proceedings and non co-operation by an entity can be detrimental to the
interests of the investors and the securities market. Hence the violation
committed by the noticee has to be taken seriously in view of the facts and
circumstances of the case and further no mitigating circumstances are seen
which warrant a lenient view in the matter.�
���� ORDER23. Considering the facts and circumstances of the case
it is established that M/s Kishor Corporation failed to submit the required
information to the Investigating Authority of SEBI. In view of the failure on
the part M/s Kishor Corporation to furnish necessary information to SEBI, in
terms of the provisions of Section 15 A(a) of the SEBI
Act 1992 and Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing
Penalties by Adjudicating Officer) Rules, 1995, I, hereby impose a penalty of
Rs.50,000/- (Rupees Fifty thousand) on M/s. Kishor Corporation. In view of the
facts and circumstances of the case, I am of the view that the said penalty is
commensurate with the violation committed by M/s Kishor Corporation. 24. The penalty shall be paid by way of demand draft
drawn 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 shall
be forwarded to General Manager, Investigation Department (ID-3), Securities
and Exchange Board of India, Mittal Court, �B� Wing, First Floor, 224, Nariman
Point, Mumbai -400 021. 25. In terms of the provisions 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 M/s. Kishor Corporation and to
Securities and Exchange Board of India.���
PLACE: MUMBAI��������������������������������������������������� BIJU.
S |
|
 | Printer Friendly page |  | Email this page |
