Order against Shri Tushar S. Jhaveri

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 for the alleged violation of Sec. 11C of Securities and Exchange Board of India Act, 1992 against Shri Tushar S. Jhaveri, having his address at M/s. Jhaveri Securities, A-11, Lavanya Apartment, Lavanya Society, Vasna, Ahmedabad- 380 007. For the sake of convenience, the said Shri Tushar S. Jhaveri 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, summons dated August 29, 2003, was issued by Shri P. K. Nagpal, Investigating Authority of SEBI in the matter, directing the noticee to furnish the information and produce certain documents mentioned in the Annexure to the said summons by September 10, 2003. As per the unattested photocopies of documents made available to me by SEBI, the aforesaid summons dated August 29, 2003 was sent by registered post- acknowledgement due and the same was received at the address of the noticee. From the legible signature of the recipient contained on the postal acknowledgement card, it appears that the envelope containing the summons was received by one B. T. Jhaveri. It was alleged that there was no compliance of the said summons by the noticee. 
   
    
3. In view of the above, 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. From the postal acknowledgement received by my office, it was noticed that the aforesaid notice dated March 10, 2005 was delivered at the address of the noticee. Since there was no reply to the said notice by the noticee within 14 days, 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 notice, fixing April 26, 2005 as the date of inquiry. It was advised that the noticee or his authorised representative/ lawyer may appear for the inquiry at my office at Mumbai on the above date. The said notice was sent by registered post acknowledgment due. 
   
    
4. On April 26, 2000, Shri Deepak Shah, a Company Secretary in Whole Time Practice appeared before me as the authorised representative of the noticee. The following is the summary of details of the proceedings and the submissions made by authorised representative at the time of inquiry/ personal hearing: At the commencement of the proceedings I explained the aforesaid authorised representative the offence, i.e. non compliance with the summons dated August 29, 2003. The authorised representative was also explained the penalty prescribed under Sec. 15A (a) of Securities and Exchange Board of India Act, 1992. The authorised representative submitted that the noticee will not be making any written submissions in the matter and requested me to consider the oral submissions made during the hearing by the authorised representative as the submissions of the noticee in reply to the charge leveled against him. As per the authorised representative, the summons dated August 29, 2003 was received by Smt. Beena T. Jhaveri, wife of the noticee. The said Smt. Beena T. Jhaveri, as per the authorised representative never handed over the envelope received by her to her husband Shri Tushar S. Jhaveri. The authorised representative submitted that since the noticee never received the envelope containing the summons from SEBI, the acknowledgement by the wife of the noticee cannot be treated as valid service on the noticee. The authorised representative has called the attention of the Adjudicating Officer to the photocopy of the postal acknowledgement with respect to the summons dated August 29, 2003 from which was seen that the signature of the person is legible and the same can be read as B.T. Jhaveri. The authorised representative submitted that the reason for the alleged non compliance of summons issued by the Investigating Authority of SEBI was due to the only reason that the summons issued by the investigating authority was never received by the noticee. The authorised representative further submitted that the noticee was willing to extend all cooperation as and when required by SEBI and was ready to furnish the information sought by the investigating authority now. The Adjudicating Officer asked the authorised representative as to whether the noticee would like to file any documents in support of his contentions, the authorised representative replied in negative.
   
   
    
5. 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 him. Sec. 15A (a) of Securities and Exchange Board of India Act, 1992 provides for imposition of monetary penalty by the Adjudicating Officer in case of 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, he shall be liable to a penalty of Rupees One lakh for each day during such failure continues or Rupees one crore, whichever is less. 
   
    
6. It was alleged by SEBI that the noticee failed to comply with the summons dated August 28, 2003 issued by the Investigating Authority as mentioned above.
   
    
7. The noticee did not dispute the fact that the investigating officer SEBI issued the summons. However, the noticee submitted that the summons issued by investigating authority was never received by the noticee.  From an unauthenticated photocopy of postal acknowledgment made available to me, I noticed that the envelope containing the summons was sent to the address of the noticee at Ahmedabad and from the legible signature affixed thereon, it appears that the same was received by one B. T. Jhaveri. It is the case of the noticee that the summons were received by his wife Smt. B. T. Jhaveri and she never handed over the same to the noticee. In terms of Sec. 11(3) of Securities and Exchange Board of India Act, 1992, the Board while excercising its powers under clause (i) of sub-section (2) of section 11, shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a civil suit in respect of summoning and enforcing the attendance of persons. In the instant case, the investigating authority of SEBI issued the aforesaid summons to the noticee under Sec. 11(3) of Securities and Exchange Board of India Act, 1992. While exercising its powers under Sec.11C of Securities and Exchange Board of India Act, 1992. Therefore, the procedure that is prescribed under Order V, Rule 15 of the Code of Civil Procedure, 1908 for service of summons is applicable to the instant case. In terms of Order V, Rule 15 of the Code of Civil Procedure, 1908, where the defendant is absent from his residence at the time when the service of summons is sought to be effected on him at his residence and there is no likelihood of his being found at residence within a reasonable time and he has no agent empowered to accept the service of summons on his behalf, service may be made on any adult member of the family, whether male or female residing with him. The noticee did not show any reason why the summons was to be accepted by his wife. Therefore, I presume that the postman served the summons on the wife of the noticee since the noticee was away from his residence. The submission of the noticee that his wife never handed him over the envelope containing the summons to him is hard to be believed. No reason was shown by the noticee for such a negligent or deliberate act of an adult family member. In the absence of any material on record to believe the contentions of the noticee, I am inclined hold that there was a valid service of summons on the noticee. Therefore, I conclude that sufficient evidence exists on record to prove that the summons was duly served by the noticee and he failed to comply with the same.
   
    
8. Since the failure of producing the documents before the Investigating Authority of SEBI by the noticee is established, the quantum of penalty has to be decided by me.
   
   
9.  Section 15A (a) of Securities and Exchange Board of India Act, 1992 prescribes a penalty of Rs. one lakh for each day during which the failure to furnish any documents etc. to SEBI continues or Rs. one crore whichever is less.
   
   
    
10. To determine the quantum of penalty under Section 15A (a), I shall consider the following factors as provided in section 15J of Securities and Exchange Board of India 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 group of investors as a result of the default and; (c) the repetitive nature of the default. 
    
     
11. As regards the disproportionate gain or unfair advantage there are no quantifiable figures available on record with respect to the default of the noticee. There are also no figures or data on record to quantify the amount of loss caused to an investor or group of investors as a result of the default. Further, the default of the noticee was not repetitive in nature as it failed to furnish the required information to the Investigating Authority of SEBI only once.
    
     
12.  I also considered the decision of the Hon’ble Securities Appellate Tribunal (SAT) in the matter of Mayfair Paper & Board Pvt. Ltd. v. SEBI (Appeal No. 95 of 2004). In the said matter, the penalty of Rupees Seventy five lakhs imposed by the Adjudicating Officer was reduced to Rupees fifteen thousand by SAT. Adjudication in the said matter was initiated by SEBI for non-compliance of summons issued by the investigating authority of SEBI. SAT further held that provision for enhanced penalties in the year 2002 does not mean that SEBI should impose sky high penalties. I have considered all the aspects of the said judgment of SAT. 
    
    ORDER
    
    
13.  From the preceding paragraphs of this order, it can be seen that though the non- compliance of summons issued by the investigating authority by the noticee is established, none of the factors prescribed under Sec. 15J acted against the noticee. Further, I have noted that SAT in the matter of Mayfair Paper & Board Pvt. Ltd. v. SEBI (Appeal No. 95 of 2004) held that provision for higher penalties does not mean that SEBI should impose sky high penalties. I have also noted from the records made available to me by SEBI that there is neither any allegation nor a suspicion of price manipulation against the noticee in the scrip of Avinash Information Technologies Ltd. Further, the noticee is willing to extend all cooperation as and when required by SEBI and is ready to furnish the information sought by the Investigating Authority now. In my view the said undertaking must be viewed from a positive angle and it should be a mitigating factor to be considered by me while imposing the penalty. Therefore in exercise of the powers conferred under section 15-1(2) read with Sec. 15 A (a) of the Securities and Exchange Board of India Act, 1992 and Rule 5 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of Rs.20000/- (Rupees twenty thousand only) on Shri Tushar S. Jhaveri. The said Shri Tushar S. Jhaveri shall pay the said amount of penalty by way of a 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 Shri P. K. Nagpal, Chief General Manager, Securities and Exchange Board of India, Mittal Court, ‘B’ Wing, 224, Nariman Point, Mumbai- 400021.
    
    
14. 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 30, 2005                           A. Chandra Sekhar Rao

Place: Mumbai                                   Adjudicating Officer