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 SMT. ASMITA R. SHAH
1. I was appointed as the adjudicating officer by the Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) vide its order dated March 3, 2005, 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 Smt Asmita R. Shah (hereinafter referred to as the noticee) by not complying with the summons issued by SEBI seeking information regarding her dealings in the scrip of Soundcraft Industries Ltd. (hereinafter referred to as SIL).
2. SEBI conducted investigation into the trading in the scrip of SIL with regard to the sudden price rise and volume in 2001. During the course of the investigation it was observed that a group of entities entered into various transactions in the scrip with the intention of artificially raising the price of the scrip. Further prima facie it appeared to the investigating authority that the noticee executed many transactions in the scrip during the period. In view of the same the investigating authority required the noticee to furnish information regarding her trading in the scrip.
3. In this regard Section 11C (3) of the SEBI Act 1992 empowers the investigating authority to require any person associated with securities market to furnish such information or produce such records as may be required by the authority. Further Section 11C (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 stated that SEBI issued summons / letters dated June 21, 2004, July 16, 2004, August 24, 2004 and October 25, 2004 requiring the noticee to submit certain information in respect of her dealings in the scrip of SIL. It is alleged that the noticee did not submit the information sought by SEBI. Further, it is also alleged that the noticee did not 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
4. A notice no. A&E/BS/38083/2005 dated April 8, 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 her for the violation alleged to have been committed by her.
5. Though the noticee did not reply to the above notice, it was felt that an inquiry may be conducted and the noticee was advised to attend the hearing scheduled on May 20, 2005. However as the noticee failed to attend the said hearing. Subsequently, one more opportunity of hearing was granted to the noticee and the noticee was advised to attend the inquiry on July 19, 2005. 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
6. The allegation against the noticee is that she failed to comply with the summons issued by SEBI. In this regard it is noted that SEBI issued summons / letter June 21, 2004 wherein it was advised to submit the details regarding her dealings in SIL for the period 2nd July 2001 to 2nd December 2002. The noticee was asked to provide details such as source of income, latest income, details of brokers, number of shares purchased by the noticee during 2nd July 2001 to 2nd December 2002, whether the noticee was holding shares of SIL prior to the aforementioned period, mode and source of payments to the brokers, details of off market trades in SIL etc. The noticee was advised to submit the said information by 30th June 2004 to the investigating authority.
7. As no information was received from the noticee SEBI vide letter dated July 16, 2004 advised the noticee to submit the information by July 26, 2004.
8. As no information was received from the noticee, the investigating authority vide its letter dated August 24, 2004 forwarded the summons to the noticee’s stock broker Parklight Investment Pvt. Ltd advising it to deliver the same to the noticee. Vide the said letter the noticee was advised to furnish the information by August 30, 2004.
9. Subsequently, the investigating authority issued a summons on October 25, 2004 advising the noticee to appear in person on 24th November 2004 at 4:00 pm before the investigating officer in connection with the investigations initiated by SEBI in the scrip of SIL.
10. In this regard it is pertinent to note that the noticee failed to appear before the investigating authority and also failed to submit required details despite being given sufficient time and opportunities to do so vide communication dated June 21, 2004, July 16, 2004, August 24, 2004 and October 25, 2004. The noticee was required to submit information which are available with her. In this regard it is also pertinent to note that the noticee did not reply to the notice issued in the adjudication proceedings and also failed to attend inquiry in the adjudication proceedings despite being provided the opportunity for hearing on May 20, 2005 and July 19, 2005.
11. It is noted from the facts of the case that 4 notices requiring the noticee to submit details regarding her dealings in the scrip were issued to her. However, the noticee failed to appear before the investigating authority. Further, the noticee also failed to appear before the investigating authority in response to the summons issued on October 25, 2004.
12. As stated before, the presence of the noticee was required in connection with the investigation conducted by SEBI. Failure on the part of the noticee to furnish necessary information This conduct of the noticee hampered the effort of the investigating authority to gather information in the investigation process. As stated before, Section 11C (3) of the SEBI Act 1992 empowers the investigating authority to require any person associated with securities market to furnish such information or produce such records as may be required by the authority. Further in terms of the provisions of Section 11 C (5) of the SEBI Act, the investigating authority may 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 appearing before the investigating authority the noticee violated the provisions mentioned above.
13. In view of the above it can be concluded that the failure on the part of the noticee to appear before the investigating authority of SEBI and submit the required information is established.
14. In this regard Section 15A(a) of SEBI Act provides the following :
15A. Penalty for failure to furnish information, return, etc : If any person, who is required under this Act or any rules or regulations made thereunder,
“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”.
15. 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.
16. 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
17. 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. However, with regard to the repetitive nature of the default it is noted that the investigating authority had issued 4 summonses /letters to the noticee and the noticee failed to submit the required information in response to the above and also failed to appear before the investigating authority . The failure on the part of the noticee to furnish necessary information to the investigating authority despite being granted four opportunities to do so indicate that the default is in repetitive nature.
18. Further, non submission of any reply to the show cause notice dated April 8, 2005 issued a per the provisions of Rule 4 of Securities and Exchange Board of India (Procedure for holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, shows that the noticee has been adopting a non co-operative attitude. Timely submission of information is very important in concluding investigation proceedings and non co-operation by an entity can be detrimental to the interest of investors and securities market. Hence the violation committed by the noticee has to be taken seriously in view of the facts and circumstances of the case.
ORDER
19. Considering the facts and circumstances of the case though it is established that Smt Asmita R Shah failed to appear before the investigating authority of SEBI in response to the summons issued by it, in terms of the provisions of Section 15 A(a) of the SEBI Act, I , hereby impose a penalty of Rs.50,000/- on Smt Asmita R Shah. In view of the facts and circumstances of the case I am of the view that the said penalty is commensurate with the violation committed by Smt. Asmita R. Shah.
20. 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 (ID-3), Securities and Exchange Board of India, Mittal Court, ‘B’ Wing, First Floor, 224, Nariman Point, Mumbai -400 021.
21. 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 Smt Asmita R Shah and to Securities and Exchange Board of India.
PLACE: MUMBAI BIJU. S
AUGUST 25, 2005 ADJUDICATING OFFICER