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ORDER UNDER RULE 5(1) OF THE
SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING
OFFICER) RULES, 1995 READ WITH REGULATION
53A of SEBI (DEPOSITORIES AND PARTICIPANTS) REGULATIONS, 1996 AND SECTION
15HB OF THE SEBI ACT, 1992. AGAINST M/s RAM GOPAL POLYTEX LIMITED ��������� BACKGROUND: 1.
I
was appointed as the Adjudicating Officer by the Chairman, SEBI, vide order
dated September 30, 2004 to enquire into and adjudge the alleged contravention
of Regulation 53A of the SEBI (Depositories and Participants) Regulations, 1996
(for brevity�s sake referred to as the Regulations) read with Section 15HB� of the SEBI Act, 1992 (hereinafter referred
to as the Act) by M/s Ram Gopal Polytex Limited (hereinafter referred to as (RGPL),
in the matter of their failure to appoint a common share agency for handling
share registry work both for the dematerialised�
and physical securities. � � ������� SHOW CAUSE NOTICE/ REPLY/ PERSONAL
HEARING: 2.
Adjudicating
proceedings were initiated in the first instance against RGPL by the issuance
of a show cause notice dated January 12, 2004 in terms of Rule 4 of the SEBI
(Procedure for holding enquiry and imposing penalty by the Adjudicating
Officer) Rules, 1995� (Rules) where under
RGPL was asked to show cause as to why enquiry proceedings should not be held
against them for the alleged violation of the provisions of Regulation 53A of the
Regulations and ��������� as to why penalty should
not be imposed upon them under section 15HB
of the� Act. RGPL 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. �However, the notice was returned undelivered
by the postal authorities.� Another
notice dated August 09, 2004 sent to RGPL was also returned undelivered by the
postal authorities.� 3.
There after, a notice of hearing dated
November 29, 2004, in terms of Rule 5(1) of the Rules, 2004 was sent to RGPL and
vide the said notice, RGPL was advised to attend the hearing proceedings to be
held on December 23, 2004 and submit the documentary proof if any, in support
of their contentions.�� Although the said
notice was acknowledged by RGPL, nobody appeared on their behalf on the
scheduled date.� 4.
In view of the same, a notice dated 5.
Keeping in mind the principles of nature of
justice, a notice dated On
the said date, Mr Yogesh K Singhania, Consultant RGPL appeared on their behalf
and inter alia submitted as follows: i.
RGPL had received the earlier notice.� However as he as out of town and had returned
subsequent to the scheduled date of hearing, he could not attend the said
proceedings. ii.
There was a failure on the part of RGPL to
seek an alternate date of hearing.� iii.
The ratio of the dematerialised shares vs
physical shares of the company was 40:60. iv.
RGPL was listed during the year 1993 on the Bombay
Stock Exchange, Delhi Stock Exchange, Calcutta Stock Exchange and Ahmedabad Stock
Exchange. v.
However, as on date the trading of the shares
was suspended on the BSE while there was virtually no trading on the remaining
exchanges.� vi.
RGPL had appointed M/s Computronics Financial
Services (I) Limited as their RTA to handle the share registry work relating to
both the demat and the physical shares of the company.� vii.
M/s. Computronics Financial Services (I)
Limited had also established electronic connectivity with both the Central
Depository Services Limited and the National Securities Depositories Limited. � viii.
The documents substantiating the said facts
would be submitted by 6. ����� Shri
Singhania appeared once again before me on i.
Tripartite agreement dated ii.
Tripartite agreement dated iii.
Bipartite agreement dated 7. ����� Shri
Singania further submitted that as the bipartite agreement was due to expire on
March 31, 2005, he would file the fresh agreement entered into between RGPL and
the RTA by 8. ����� Subsequently,
a copy of the agreement stated to have been entered into between M/s
Computronics Financial Services (I) Limited; the RTA and ��RGPL on CONSIDERATION OF ISSUES: 9.
I
have taken into consideration the facts and circumstances of the case, the
material available on record including the documents submitted on behalf of the
RGPL, as also the relevant regulatory provisions. 10.
Regulation 53A of the Regulations which came into
force on September 02, 2003 reads as under: �All matters relating to the transfer
of securities, maintenance of records of holders of securities, handling of
physical securities and establishing connectivity with the depositories shall
be handled and maintained at a single point i.e. either in-house by the issuer
or by a Share Transfer Agent registered with the Board.� 11.
In
view of the above, it is imperative for all issuer companies to appoint a
common agency to handle the share registry work relating to both the physical
and demat shares of the company either in house or through a SEBI registered
RTA. 12.
The
object of the appointment of the common share agency as is evident from the
SEBI Circular No. D&CC/FITTC/CIR-15/2002 dated a) ����� any delay in dematerialization, and b)������ Non-reconciliation of the share holding
due to lack of proper co-ordination among the concerned agencies or
departments, which was adversely affecting the interest of the investors.� 13.���� Thus the provisions of Regulation 53A of
the Regulations would be applicable only to that company whose shares have been
dematerialized or to those companies whose shares are both in the physical and
demat mode. 14.���� In such a case, before the admission of any
security into the depository system, it would be necessary for the issuer
company to establish electronic connectivity with both the depositories either
directly or through a Registrar and Transfer Agent (RTA). 15.���� Regulation 53A of the Regulations in this
regard is thus an important investor protection measure introduced by SEBI. 16.
I have also perused the circular issued by SEBI
bearing No. FITTC/DC/ Policy-Cir-01/2001 dated August 03, 2001 which advises
all companies to establish connectivity with both the depositories on or before
September 30, 2001 so as to facilitate compulsory trading in rolling settlement
effective from January 2, 2002. In terms therein all stock exchanges have been
advised to submit a compliance report to SEBI by October 15, 2001. 17.
Subsequently SEBI circular No. D&CC/FITTC/
Cir-05/2001 dated December 26, 2001 brought out the list of all the scrips that
have established connectivity with the depositories. In terms of the said
circular, the shares of the companies which had not established connectivity
with the both depositories as on October 31, 2001 are to be traded on the
�Trade for Trade� settlement mode and not on the normal rolling settlement. 18.
Thus
on date, there are companies that have not yet dematerialized their shares and
instead have continued to retain their shares in a physical mode and the
transfers, maintenance of record of the holders of securities and handling of the
said physical securities in such cases is continued to be done in-house or
through share transfer agent. 19.
On
the basis of the contentions advanced on behalf of RGPL, it appears that they have
appointed a common agency, M/s Computronics Financial Services ( 20.
Since RGPL had established connectivity with both the
depositories to facilitate dematerialization of their shares through M/s �Computronics Financial Services (India)
Limited, and have entered into tri-partite agreements in this regard with both
NSDL and CDSL and have also appointed a common share agency, before Regulation
53A of the Regulations came into effect, they cannot be held liable for non compliance of Regulation
53A of the Regulations. 21.
Hence
on a judicious exercise of the discretion conferred upon me, bearing in mind
the facts brought out above, and after analysing all the material available on
record, I am of the considered opinion that the imposition of any penalty in
the present matter is not necessitated. ������� � ORDER: 22.���� Accordingly, 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, as M/s. Ram Gopal
Polytex Limited have complied with the provisions of Regulation 53A of the SEBI
(Depository Participants) Regulations, 1996, the proceedings initiated against
them are hereby dropped.� PLACE: MUMBAI�� ������ G. BABITA RAYUDU
DATE: April 13, 2005
ADJUDICATING OFFICER
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