Order against Shri Raju B. Shah

1. Vide order dated December 28, 2004, issued by Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’), I was appointed as the Adjudicating Officer under Rule 3 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 to enquire into and to adjudge under Sec.15-I of Securities and Exchange Board of India Act, 1992 the alleged violation of Sec. 11C of Securities and Exchange Board of India Act, 1992 against Shri Raju B. Shah, having his place of residence at 17, Haveli Apartments, Panchvati, 2^nd Lane, Panchwati, Ambawadi, Ahmedabad-15 For the sake of convenience, the said Shri Raju B. Shah will be referred hereinafter in this order as ‘the noticee’.
   
    
2. As per the information provided to me by SEBI, SEBI conducted investigation in to the alleged price manipulation in the shares of Avinash Information Technologies Ltd. During the course of the said investigation, Shri P. K. Nagpal, Investigating Authority of SEBI in the matter, issued summons dated August 29, 2003 directing the noticee, interalia, to furnish the information and produce certain documents mentioned in the annexure to the said summons by September 10, 2003 and the said summons, which was sent by registered post- acknowledgement due, was returned undelivered with a remark ‘left’. Subsequently, vide summons dated March 11, 2004, the aforesaid investigating authority directed the noticee to furnish the information and produce certain documents mentioned in the annexure to the said summons by March 17, 2004. The said summons was not returned undelivered. Subsequently on March 29, 2004, fresh summons was issued by directing the noticee, interalia, to furnish the information and produce certain documents mentioned in the annexure to the said summons by April 8, 2004. From the unauthenticated photocopies made available to me, it appears that three sets of summons were issued on March 29, 2004 and they were sent through different modes, viz., registered post, speed post and courier.  However, it was alleged that the summons sent by registered post were returned undelivered with remarks ‘not found’, ‘not claimed’ and ‘closed’. Further, the summons sent by speed post was returned undelivered with a remark ‘refused’ and the courier company returned the consignment containing the summary with a remark ‘refused to accept’. 
   
    
3. In view of the order of SEBI appointing me as Adjudicating Officer, I issued a notice dated March 10, 2005 to the noticee under Rule 4(1) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 calling upon the noticee to show cause as to why an inquiry should not be held against him and penalty be not imposed under Sec. 15A (a) of Securities and Exchange Board of India Act, 1992. The said notice dated March 10, 2005 was sent to the noticee by Registered Post with Acknowledgment Due. Since there was no reply to the said notice by the noticee within 14 days, the time which was stipulated by me for the noticee to file his reply, I was of the opinion that an inquiry should be held in the matter and accordingly a notice of inquiry dated April 11, 2005 in terms of Rule 4(3) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 was issued to the noticee fixing April 26, 2005 as the date of inquiry. The noticee or his authorised representative/ lawyer was advised to appear for the inquiry at my office at Mumbai on the above date. 
   
    
4. On April 26, 2005, Shri Deepak Shah, a company secretary in whole time practice appeared before me for the inquiry as the authorised representative of the noticee. The said authorised representative filed a letter of authority dated April 25, 2005 issued by the noticee authorizing him to appear before me. The following in this paragraph are the brief details of the inquiry proceedings and the summary of submissions made by the authorised representative: At the commencement of the proceedings, I explained the aforesaid authorised representative the violation, i.e., non compliance with the summons dated August 29, 2003, March 11, 2004 and March 29, 2004 issued by the investigating authority of SEBI. The Authorised Representative was also explained of the penalty prescribed under Sec. 15A (a) of Securities and Exchange Board of India Act, 1992. The authorised representative filed the written reply dated April 23, 2005 with respect to the charges contained in the show cause notice dated March 10, 2005. The authorised representative reiterated the contentions of the noticee raised vide the aforesaid written reply. As per the authorised representative, the noticee came to know about the issuance of summonses by the investigating authority only on receipt of show cause notice dated March 10, 2005 from the Adjudicating Officer. 
   
    
5. The following is the summary of the submissions made by the noticee in its written reply dated April 23, 2005: (a) The summons dated August 29, 2003 was issued to a wrong address hence, the same was not received by the noticee; (b) the summons dated March 11, 2004 was not received by the noticee and (c) three sets of summons dated were not received by the noticee as his servant as the noticee was at home (d) the noticee is willing  to cooperate with the investigating authority (e) no harm was caused to any person due to the non- compliance and (f) no gain was made by him the aforesaid non compliance. The noticee requested me to drop the proceedings in view of the above submissions. The details of proceedings of the inquiry were recorded and a copy was furnished to the authorised representative.
   
    
6. Before deciding the issues which require to be examined by me, the provisions of Securities and Exchange Board of India Act, 1992 with respect to the issuance of summons by the investigating authorities and the consequences of non- compliance are perused by me. Sec. 11C of Securities and Exchange Board of India Act, 1992, interalia provides that 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 him or any persons authorized by it. Sec. 15A (a) of Securities and Exchange Board of India Act, 1992 provides for imposition of monetary penalty of Rupees one lakh for each day during such failure continues or Rupees one crore, whichever is less by the Adjudicating Officer in case any person, who is required under Securities and Exchange Board of India Act, 1992 or any rules or regulations made thereunder to furnish any document, return or report, fails to furnish the same.
   
    
7. It was alleged by SEBI that the noticee failed to comply with the summons dated August 28, 2003, March 11, 2004 and March 29, 2004 issued by the investigating authority as mentioned above.
   
    
8. The noticee did not dispute the fact that the investigating authority of SEBI issued the above summonses. It is the case of the noticee that the summons dated August 29, 2003 was sent to a wrong address. From the unauthenticated photocopies of documents made available to me, I noticed that the summons dated August 29, 2003 was sent to 505, Anand Mangal, 2, Inside Famine Towers, CG Road, Ahmedabad and the subsequent summons to a different address, i.e., 17, Haveli Apartment, Panchvati, 2^nd Lane, Panchvati, Ambavadi, Ahmedabad. As per the investigating authority the summons dated August 29, 2003 was returned undelivered with a remark ‘left’. From this, it is clear that the noticee was not in receipt of summons dated August 29, 2003. Since, the said summons was never received by the noticee, no charge of non- compliance with the same is sustainable.
   
    
9.  As per the noticee, the summons dated March 11, 2004 was never received by him. As per the investigating authority, the said summons dated March 11, 2004 was not returned undelivered. This implies that the investigating authority of SEBI is not in possession of any evidence to prove that the summons dated March 11, 2004 were received by the noticee. In view of the fact that no evidence is available with SEBI to prove that the summons dated March 11, 2004 was served on the noticee, the noticee is given a benefit of doubt and hence it cannot be held that the noticee committed any violation of law by not complying with the summons dated March 11, 2004.
   
    
10.  With respect to the summons dated March 29, 2004, the noticee claims that since he was not at home, his servant returned them. The postal/ courier endorsements are vague as to whether the said refusal was by the noticee himself or by any other person. Though, the noticee did not adduce any evidence in support of his claims, there exists an undisputed fact that the summons were not received by the noticee. Further, there is no material on record to nullify the contention of the noticee. Therefore, I find that there is no evidence on record to suggest that the contents of the summons dated March 29, 2004 was known to the noticee. Therefore, I cannot find the noticee guilty of not complying with the summons dated March 29, 2004.
    
    ORDER
    
     
11.  Since the failure of producing the documents before the Investigating Authority of SEBI by the noticee is not established, the question of imposing any penalty on him does not arise. Therefore, no monitory penalty is imposed on the noticee, Shri Raju B. Shah.
    
     
12. In terms 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 the noticee and also to Securities and Exchange Board of India.  

Date: April 27, 2005                               A. Chandra Sekhar Rao

Place: Mumbai                                        Adjudicating Officer