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SECURITIES AND EXCHANGE BOARD OF AP/AO-14/2005 ADJUDICATION
ORDER AGAINST M/S BOARD
OF 1.0 INTRODUCTION 1.1 ���The instant proceeding is directed against
the non furnishing of information, in compliance of summons issued by the
Investigating Authority (IA) appointed under Section 11C(1)
of the Securities and Exchange Board of India Act, 1992 (hereinafter called
"Act").� Pursuant to the BSE's
Investigation report received by SEBI wherein the trading pattern of the shares
of Somplast Leather Industries Ltd. (SLIL) for the period from 1.2 ��Based on the finding of the investigation
report, prima facie it appeared to the Board, that the said OGS had failed to
provide information in response to summon issued by the IA and made itself
liable for initiation of action U/S �15A (a) of the Act.� Consequently, the undersigned has been
appointed as an Adjudicating Officer under Rule 3 of SEBI (Procedure for
Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995
(hereinafter called as "Rules") to inquire into the alleged violation
of non-compliance of summon issued by the Investigating Officer. The aforesaid
appointment was communicated vide proceedings of the Whole Time Member, SEBI,
dated 2.0 NOTICE 2.1 ��A show cause notice (SCN) dated 3.0 REPLY 3.1 ��OGS did not reply to the SCN, though the time for filing the same had expired.�� 4.0 THE INQUIRY 4.1 ��In view of the above, the undersigned was of
the view that an inquiry should be held in the matter and a notice of inquiry
was therefore issued to OGS vide letter dated 5.0 BACKGROUND 5.1 ��SEBI
received investigation report of the BSE vide letter dated May 31, 2003, wherein
the trading pattern of the shares of Somplast for the period from January 02,
2002 to October 01, 2002
(settlement nos. 192 / 2001 � 2002 to 132 / 2002 � 2003) was examined.
It was alleged that the company made a preferential issue of 2.425 crore equity
shares of Rs. 10 each and dematerialized the additional shares with CDSL and
NSDL without listing the additional shares on the exchange. Further, the
company refused to dematerialize 900 shares held by
Rajkot Investment Trust Ltd. under the pretext that those shares were stolen. 5.2 ��A
preliminary investigation was initiated by SEBI to look into the matters.
Subsequently, a formal investigation into the dealings in the
shares of Somplast Leather Industries Ltd. was initiated by SEBI and vide order
dated 5.3 ��IA issued summons
to OGS and sought information relating to- (a)
Relevant Demat
account statements (b)
Details of
off-market transactions in the scrip of SLIL during the investigation period,
if any, (c)
Details of brokers
through whom OGS transacted (d)
Number of shares of
SLIL, OGS was holding as on 5.4 ��However, no reply was received from the
OGS.� The details of the summons seeking
information from OGS is explained as under:
5.5 ��Upon conclusion of Investigations certain
serious violations were allegedly observed in respect of OGS viz. such as �(i) indulging in circular trade/reversal of
trade/fictitious deals in connivance with other clients and trading members who
acted in tandem which is in violation of provisions of regulations 4 (a), (b),
(c) and (d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices
relating to Securities Market) Regulations, 1995, (ii) failure to furnish
information in violation of Section 11(3) and Section 11C (3) read with Section
15A of SEBI Act, 1992, etc. �� 6.0 REPLY� 6.1 ���It is observed that, OGS neither filed any
reply nor made any oral submissions as nobody appeared for the personal
hearing.� The notices were duly served on
OGS during the present proceedings.� I
now proceed with this inquiry on the basis of available material in the
records. 7.0 FINDINGS 7.1
It is
observed from the records that SEBI initiated investigations into the trading
pattern of the shares of SLIL for the period from 7.2
The Investigating
Officer of SEBI issued summons to OGS to appear in person and also to furnish
information / produce documents pertaining to its demat account, complete
details of transaction in SLIL scrip during the period of investigation and share
holding in SLIL as on specific dates. It is observed that following summons
were sent to OGS:
7.3
It is
found that OGS has failed to respond to above summons and in doings so OGS has
prevented the Investigating Authority from accessing the information /
documents, relating to its dealings in the shares of SLIL and other related
information as mentioned in the said summons. I have also observed that summons were issued quite in advance and sufficient time was
given to the company to respond and assist the investigations being carried
out.� 7.4
The
aforesaid information/documents sought vide above summons, according to me,
were vital and crucial for the regulator to ascertain occurance of any
irregularity and also enable it to take approriate counter measures to protect
the interest of investors, in a time bound manner. 7.5
The non co-operative
attitude of OGS has even continued during the present proceedings of
adjudication as well.� Show cause notice dated 7.6
Therefore it can be
concluded that OGS has not complied with the provisions of Section 11 (3) and
11C (3) of SEBI Act, 1992 by way of non-compliance of statutory summons
requiring it to file documents/informations, which was very crucial to the
whole investigation process.�� I am of
the considered view that it is a fit case for imposition of adjudication penalty
against OGS under Section 15A (a) of SEBI Act, 1992. 7.7
To determine the
quantum of penalty under Section 15A (a), the undersigned considered the
following factors as provided in the section 15J of SEBI Act, 1992 viz. (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 in group of investors as a result of the default and; (c) the repetitive
nature of the default. 7.8
From the material on
record, the figures of disproportionate gains, unfair advantage or loss to the
investors, cannot be ascertained.�
However, the persistent non-co-operative attitude of OGS can be seen
throughout the process of investigation and as well as in the present
adjudication proceedings.� This is
repetitive in nature and should be dealt firmly.� Further the charges, for which OGS was being
investigated in its dealings in the shares of SLIL, were very serious in nature
involving circular trading amounting to fraud.�
The Complete defiance on the part of OGS has been observed towards the
due process of law in the whole process. 7.9
Therefore, in exercise of the powers conferred under
section 15-I (2) of the SEBI Act, 1992, read with Rule 5 of SEBI Adjudication
Rules, I hereby impose a penalty of Rs. 50,000/-(Fifty Thousands Only) on M/s Om
Gayatri Securities for the reasons discussed above. This penalty is justified
and appropriate in the light of discussions aforesaid. 7.10
M/s Om Gayatri Securities shall pay the said amount of
penalty 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 Chief General Manager,
Investigation Department, ID-5, Mittal Court, 1st Floor, B- Wing, 224, Nariman
Point, Mumbai 400 021. DATE: PLACE: MUMBAI������������������������������������������������� ADJUDICATING
OFFICER |
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