ORDER UNDER RULE 5 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF ADJUDICATION PROCEEDINGS AGAINST M/S ALAKNANDA CAPITAL SERVICES PVT. LTD.
1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) vide order dated December 14, 2004, appointed the undersigned as the Adjudicating Officer to inquire into and adjudge under Section 15I of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’), the violation of Section 11C of the SEBI Act alleged to have been committed by M/s.Alaknanda Capital Services Pvt. Ltd. (hereinafter referred to as the noticee) by not complying with the summons issued by SEBI seeking information regarding its dealings in the scrip of Jagsonpal Pharmaceuticals Ltd. (hereinafter referred to as JPL).
2. It is stated that SEBI conducted investigation into the trading in the scrip of JPL as the scrip witnessed large trading volume and price rise in 2001. During the investigation, prima facie it appeared to the investigating authority of SEBI that the noticee had traded substantially in the scrip. In view of the same, the investigating authority issued the summons dated April 28, 2004 and July 2, 2004 requiring the noticee to submit certain information in respect of its dealings in the scrip of JPL and also to personally appear before the investigating authority. It is alleged that the noticee did not submit the information sought by the Investigating Authority. Further it is alleged that the noticee failed to appear before the Investigating Authority. In view of the alleged non compliance of summons issued by SEBI, Adjudication Proceedings were initiated against the noticee.
NOTICE AND REPLY
3. A notice no. A&E/BS/37586/2005 dated April 4, 2005 was issued to the noticee in terms of Rule 4 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as the “Rules”) requiring the noticee to show cause as to why an inquiry should not be held against the noticee for the alleged violation committed by it.
4. Though the noticee did not reply to the show cause notice, it was felt that an inquiry may be conducted and the noticee was advised to attend the hearing scheduled on May 25, 2005. However as the noticee failed to attend the said hearing, one more opportunity of hearing was granted to it on June 15, 2005. However, it is noted that the noticee failed to attend the hearing on the above occasions. As the noticee failed to attend the hearing on the said date, the inquiry is proceeded with on the basis of the facts and material available on records.
CONSIDERATION OF EVIDENCE AND FINDINGS
5. The allegation against the noticee is that it failed to comply with the summons issued by SEBI. It is noted that SEBI issued summons dated April 28, 2004 requiring the noticee to submit certain information pertaining to its dealings in the scrip of JPL. The noticee was required to provide the details like names and address of its promoters, directors and associate companies, its shareholding in JPL and trading details as well as off market transactions details, demat and bank account details relevant to trading in JPL etc. The said information was required to be submitted to the Investigating Authority by May 7, 2004. Though the noticee had received the said summons, it is noted that no information has been submitted by the noticee to SEBI.
6. Subsequently, SEBI issued summons dated July 2, 2004 requiring the noticee to submit the information called for by SEBI and also appear in person before the Investigating Officer on July 12, 2004 at 11:00 am. It is noted that no proof of service of the said summons is seen in the records. Hence the same cannot be deemed to have been served on the noticee, However with regard to the first summons dated April 28, 2004, it is pertinent to note that the noticee failed to submit the necessary information to investigating authority. It is further noted that the information sought by the investigating authority pertaining to the noticee and its dealings in the scrip of JPL the said information is readily available with the noticee. No explanation has been provided by the noticee with regard to its failure to furnish the required information to SEBI.
7. Timely submission of information in the investigation proceedings is very important for concluding the proceedings in time that may be critical for investors confidence in the securities market. In this regard Section 11C (3) empowers the investigating authority to require any person associated with the securities market to furnish such information or produce such records as may be required by the authority. Further Section 11(5) of the SEBI Act empowers the investigating authority to examine on oath any such person and for that purpose may require any such person to appear before it personally. It is noted that by not furnishing necessary information to the investigating authority, the noticee violated the provisions mentioned above.
8. In this regard it is noted that the noticee failed to reply to the show cause notice dated April 4, 2005 issued in the adjudication proceedings and also failed to appear for the personal hearing on May 25, 2005 and June 15, 2005. This conduct of the noticee indicates that the noticee has been adopting a non cooperative attitude.
9. In this regard Section 15A(a) of the SEBI Act reads as under : Penalty for failure to furnish information, return, etc. : If any person, who is required under this Act or any rules or regulations made thereunder, (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 continues or one crore rupees, whichever is less”
10. The Honorable Securities Appellate Tribunal in Appeal No.95/04 in Mayfair Paper & Board Pvt. Ltd., Vs SEBI held that failure to furnish information to the Investigating Authority of SEBI shall attract the penalty prescribed under Section 15A of the SEBI Act.
11. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of the Rules require that while adjudging the quantum of penalty, the adjudicating officer shall have due regard to the following factors namely :
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
c) the repetitive nature of the default
12. It is noted that no quantifiable figures are available to assess the disproportionate gain or unfair advantage made as a result of the default. Further, the amount of loss caused to an investor or group of investors also cannot be quantified on the basis of the available facts and data. With regard to the repetitive nature of the default it is noted that though the investigating authority had issued 2 summonses to the noticee only one summons was served on the noticee. In view of the same the failure on the part of the noticee to appear before the investigating authority cannot be regarded as repetitive default.
ORDER
13. Considering the facts and circumstances of the case it is established that M/s Alaknanda Capital Services Pvt. Ltd. failed to furnish necessary information to SEBI. However it is noted that only one summons was served on M/s.Alaknanda Capital Services Pvt. Ltd. In view of the same, in terms of the provisions of Section 15A(a) of the SEBI Act 1992 and Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of Rs.10,000/- (Rupees ten thousand) on M/s.Alaknanda Capital Services Pvt. Ltd. Considering the facts and circumstances of the case and the violation committed by the noticee, I am of the view that the said penalty is commensurate with the violation committed by M/s.Alaknanda Capital Services Pvt. Limited.
14. The penalty shall be paid by way of demand draft drawn 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 shall be forwarded to General Manager, Investigation Department (ID5), Securities and Exchange Board of India, Mittal Court, ‘B’ Wing, First Floor, 224, Nariman Point, Mumbai -400 021.
15. In terms of the provisions 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 M/s.Alaknanda Capital Services Pvt. Ltd. and to Securities and Exchange Board of India.
PLACE: MUMBAI BIJU S
DATE: AUGUST 29, 2005 ADJUDICATING OFFICER