| Home | Back |
|
ORDER UNDER RULE 5(1) OF THE
SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING
OFFICER) RULES, 1995 READ WITH SECTION 15A (a) OF THE SEBI ACT, 1992 AGAINST M/s RAJKAR ELECTRICALS
AND ELECTRONICS PRIVATE LIMITED ��������� BACKGROUND: 1.������ The Securities and
Exchange Board of India (for brevity�s sake, hereinafter referred to as �SEBI�)
had initiated an investigation into the alleged market manipulation and
irregularities in the trading of the shares of Shonkh
Technologies International Ltd. (for brevity�s sake, hereinafter referred to as
�STIL�) which were listed on the Stock Exchange, Mumbai and the Delhi Stock
Exchange (BSE and DSE respectively) at the time of the investigation.� As per the findings of the investigation, M/s
Rajkar Electricals
And Electronics Pvt. Limited (for brevity�s sake, hereinafter referred
to as �REPL�) was found to be one of the entities, who had traded substantially
in the scrip of STIL at the DSE through M/s A. Nitin
Capital Services Ltd, member of the said exchange. 2. ����� In view of the same, the Investigating Authority issued summons
under Section 11C (3) of the SEBI Act, 1992 (for brevity�s sake referred to as
the Act) to REPL on March 24, 2003, where under REPL was advised to appear in
person before the said authority on 3rd �April, 2003 along with all the
documents that REPL intended to rely upon in their defense or any other documents
relevant to the proceedings initiated by SEBI in this regard. It was further made clear to REPL that
in case they failed to appear before the investigating authority; necessary
action would be initiated against them under the relevant provisions of the
Act. 3.������ However,
REPL failed to appear before the investigating authority and also failed to
submit the required information. ��������� SHOW
CAUSE NOTICE/ REPLY/ PERSONAL HEARING: 4.������ In view thereof, adjudication proceedings
were initiated in the first instance by the issuance of a show cause notice
dated September 15, 2003 by the previously appointed adjudicating officer to REPL
under Section 15-I of the Act read with Rule 4 of the SEBI (Procedure for
Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, ( Rules) where
under REPL was asked to
show cause as to� why adjudication
proceedings should not be held against them and why penalty should not be
imposed upon them under Section 15A(a)
of the Act. REPL was advised to make their submissions, if any, along with
supporting documents that they wished to rely upon, within 14 days from the
date of the receipt of the notice. 5.� �The notice sent by registered post was duly
acknowledged by REPL. However, REPL did not reply to the same. Subsequently, a
notice of hearing dated 6.�� �Subsequently, I was appointed as the
Adjudicating Officer vide the order of the Chairman,
SEBI dated 7.������ It is thus apparent that even though REPL
was given sufficient opportunities to appear before SEBI as well as before the
adjudicating officer and present their case, they failed to avail the said
opportunities. Therefore, the matter is proceeded with based on the material on
record. � CONSIDERATION OF EVIDENCE AND FINDINGS 8.������ I
have taken into consideration the facts and circumstance of the case, the
material available on record, and the relevant regulatory provisions as also
the rationale behind the said provisions. 9.������ The
allegation against REPL is that they failed to appear before the investigating
officer of SEBI on April 3, 2003 in response to the summons dated March 24,
2003 served upon them under Section 11C(3) of the Act, which reads as under: �������
�The Investigating Authority may require any intermediary or any person
associated with securities market in any manner to furnish such information to
or produce such books, or registers, or other documents, or record before them
or any person authorised by it in this behalf as it
may consider necessary if the furnishing of such information or the production
of such books, or registers or other documents, or record is relevant or
necessary for the purposes of its investigation�. 10.��� From the records it is noted that REPL were
clearly advised to appear before the investigating authority in connection with
the investigations initiated by SEBI in the scrip of STIL and also produce the
documents pertaining to their dealings in the scrip of STIL. However, REPL neither
appeared before the investigating authority nor submitted the required information
and documents. 11. ��From
the manner in which REPL failed to appear before SEBI or participate in the
adjudication proceedings and in the absence of any explanation on record by REPL
for non appearance before the investigating authority and non submission of the
said information or even their failure to participate in the adjudicating
proceedings, it can be reasonably concluded that they have consistently tried
to evade the summons process and that the default on their part in co-operating
in the investigation proceedings is willful. 12.���� Every
entity connected with an investigation process is under an obligation to provide
the information as sought for by the Investigating Authority.� The decision to call for such information and
the judgment as to its relevancy is completely the discretion of the investigating
authority and is in furtherance of the discharge of its official duties. The noticee under the summons is in turn, under a legal and
moral obligation to cooperate with the Investigating Authority and furnish the
required information. 13.���� The
said principle also finds mention in the provisions of Regulation 9 of the SEBI (Prohibition
of Fraudulent and Unfair Trade Practices relating to Securities Market)
Regulations, 1995 (hereinafter referred to as FUTP Regulations); the relevant
portion of which has been reproduced hereunder: �������
1)����� It shall be the duty of every person in respect of whom an
investigation has been ordered under regulation 8 to produce to the
Investigating Officer such books, accounts and other documents in its custody or
control and furnish them with such statements and information as the said
officer may reasonably require for the purposes of the investigation. 2)������ Without
prejudice to the generality of the provisions of sub-regulation (1), such
person shall - ������� ���(a) ���; ���������� (b) ���; ���������� (c) ��.. ���������� (3) ��. �(4)
��� It
shall be the duty of every person concerned, to give to the Investigating
Officer, all such assistance and otherwise extend all such co- operation as may
reasonably be required in connection with the investigation and to furnish
information relevant to such investigation as may be reasonably sought by such
officer. 14.���� It
would also be relevant in this connection, to refer to the judgment of the Hon'ble High Court of Bombay in Writ Petition No.1972 of
1994 filed by ANZ Grindlays
and others which inter alia held as
under: �No person can
maintain the dignity or cherish prestige by avoiding due process of law.� Law being a guardian, it maintains and
protects the dignity and honour
of every person.� Dignified and honorable persons have to stand the test and trial
articulated by Law.� And in obedience, he
or she has to submit to the process.�
Cherishing majesty of law and its process is an
inner core of the dignity of individual in a Democratic World, which runs on
the wheel of Rule of Law.� 15.���� In view of the fact that REPL did not
comply with the summons issued by the investigating authority of SEBI or
furnish the documents and information mentioned in the summons, REPL has clearly
disregarded the summons of the regulator and consequently, REPL would be liable
for such penalty as I think fit to impose, in accordance with the provisions of
Section 15A (a) of the Act which is quoted below : �� ������ Penalty for failure to furnish information,
return, etc If any person, who is required
under this Act or any rules or regulations made there under (a)�� �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 16. �However, while
adjudging the quantum of penalty to be levied, it
would also be necessary to consider the following factors as provided in Section
15J of the Act, which also
find mention in Rule 5(2) of the Rules, i.e., the amount of
disproportionate gain or unfair advantage, wherever quantifiable, made as a
result of the default; the amount of loss caused to an investor or group of
investors as a result of the default and the repetitive nature of the default. 17.���� Upon perusal of the provisions enumerated
above, it is clear that the adjudicating officer is required to have due regard
to the factors stated in the section.�
The same is a direction and not an option, which is however to be
exercised with due regard to its discretion. This discretion is to be exercised
judiciously, depending upon the facts and circumstances of each case as well as
after analysing all the relevant material available
on record especially in the case of failure to perform statutory obligations. 18.���� In the present case, there is no dispute
regarding the fact that the investigating authority called upon REPL to
appear before him and produce all the documents relating to their transactions
in the scrip of STIL. REPL was given an adequate opportunity and reasonable
time to respond to the summons and furnish the information available with them.� The said information was required for the
purpose of the investigation being conducted by SEBI in respect to the manipulative
transactions in the scrip of STIL and verify their possible
involvement in the said transactions.� �The information was sought from REPL in terms
of Section 11C (3) of the Act. However, by failing to appear before the investigating
authority and furnish the documents and information sought by SEBI, REPL �not only thwarted the attempts of SEBI to
effectively gather vital evidence for the timely conclusion of the
investigation proceedings, but also acted in violation of the provisions of Section
11C(3) of the Act. Taking into account the sensitivity of the securities
market, an early conclusion of investigation is a very important objective. 19.�� Moreover an evasion of the regulatory provisions of
the regulator issued in the interests of the investors or non adherence to the
same for any reason whatsoever is bound to affect the interests of such
investors as also the sound and smooth functioning of the capital market. If no
cognizance were to be taken of any such a breach of such provisions and no
liability fixed there upon, the entire purpose of incorporating the provisions
in the said enactments would become redundant. 20.�� I have however noted that REPL was not given
a second opportunity to provide the information called for in the summons dated
21.���� Thus, bearing in mind these facts and
circumstances of this case, and also the factors enumerated in Section 15J of
the Act, on a judicious exercise of the discretion conferred upon me, I am
inclined to hold that although the penalty need not be imposed in terms of the quantum
prescribed in the provisions of Section 15 A(a) of the
Act, �the imposition of penalty is very much
necessitated. ���� � ORDER: 22.���� In
view of the foregoing, in exercise of the powers conferred upon me under Rule 5
of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the
Adjudicating Officer) Rules, 1995, and in the interest of justice, equity and
good conscience I think it appropriate to levy a penalty of Rs
15,000/- (Fifteen Thousand only) on M/s Rajkar Electricals & Electronics Pvt. Ltd. 23.���� The penalty amount
shall be paid within a period of 45 days from the date of receipt of this order
through a cross demand draft drawn in favour of �SEBI- Penalties remittable to the Government of India and payable at Mumbai
which may be sent to Shri R. Mohan, General
Manager, Securities and Exchange Board of India, Mittal �Court, B Wing, 224 Nariman Point,
Mumbai � 400021. ��� �� PLACE:
MUMBAI�����������������������������������������
�G. BABITA RAYUDU DATE:
|
|
 | Printer Friendly page |  | Email this page |
