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Order against Smt. Jyotiben M Patel

Aug 25, 2005
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Orders : Orders of AO

 

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. JYOTIBEN M PATEL

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 October 14, 2004 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 Jyotiben M Patel (hereinafter referred to as the noticee) by not complying with the summons issued by SEBI seeking information regarding her dealings in the scrip of Sword & Shield Pharma Ltd. (hereinafter referred to as SSPL).

2.       It is stated that SEBI conducted investigation into the trading in the scrip of SSPL 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 Smt. Jyotiben M Patel traded substantially in the scrip. In view of the same, the investigating authority issued summons / letters IVD/ID3/PKB/AA/SSPL/12305/2004 dated June 11, 2004, IVD/ID3/PKB/AA/SSPL/13315/2004 dated June 23, 2004, IVD/ID3/PKB/AA/SSPL/13615/2004 dated June 25, 2004 and IVD/ID3/PKB/AA/SSPL/15687/2004 dated July 16, 2004 requiring the noticee to furnish certain information and also 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/33258/2005 dated February 9, 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”) seeking the reply of the noticee as to why an inquiry should not be held against her for the violation alleged to have been committed by her.

4.      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 June 14, 2005. It is noted that the noticee failed to attend the said hearing. However the noticee vide her letter dated June 13, 2005 requested that the hearing may be postponed to another date. Considering the request of the noticee, one more opportunity of hearing was granted to her on June 30, 2005. However, it is noted that the noticee failed to attend the hearing on the above occasion also. As the noticee failed to attend the inquiry, I am constrained to proceed with the inquiry in the absence of the noticee.

CONSIDERATION OF EVIDENCE AND FINDINGS

5.      The allegation against the noticee is that the noticee failed to comply with the summons issued by SEBI. It is noted that SEBI issued summons / letters IVD/ID3/PKB/AA/SSPL/12305/2004 dated June 11, 2004, IVD/ID3/PKB/AA/SSPL/13315/2004 dated June 23, 2004, IVD/ID3/PKB/AA/SSPL/13615/2004 dated June 25, 2004 and IVD/ID3/PKB/AA/SSPL/15687/2004 dated July 16, 2004 requiring the noticee to submit the information sought by the Investigating Authority in connection with the investigations initiated by SEBI in the scrip of SSPL. . 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.

6.      In this regard it is pertinent to note that the noticee failed to submit the required information to the investigating authority in response to the summons dated summons dated June 11, 2004, June 23, 2004 June 25, 2004. It is further noted that the noticee appeared before the investigating authority on August 4, 2004. However it is pertinent to note that the noticee did not provide information pertaining to her trading in SSPL. The noticee had stated that her husband Shri. Mayur Patel had traded in the scrip of SSPL in her name. The noticee further refused to provide information pertaining to the whereabouts of her husband Shri. Mahesh Patel and also refused to provide the information in writing.

7.      In this regard it is also pertinent to note that the noticee did not appear for the personal hearing in the adjudication proceedings despite being provided the opportunity for hearing on June 14, 2005 and June 30, 2005.

8.      As the noticee failed to reply to the show cause notice in the adjudication proceedings and also failed to attend the personal hearing, on the basis of the facts of the case and on perusal of the evidence available on record it is concluded that the noticee failed to provide the required information to the Investigating Authority.

9.      This conduct of the noticee hampered the effort of the investigating authority to gather information in the investigation process. In this regard as stated before, Section 11C (3) of the SEBI Act 1992 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 11C (5) of the SEBI Act empowers the investigating authority to examine on oath any such person to appear before it personally. It is noted that by not providing the required information to the investigating authority, the noticee violated the provisions mentioned above.

10. In view of the facts and circumstances of the case, it can be concluded that the failure on the part of the noticee to submit the required information to the investigating authority of SEBI is established. On account of the failure on the part of the noticee to furnish necessary information to SEBI, the noticee is liable to the penalty prescribed under Section 15 A (a) of the SEBI Act.

 

11. 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.

 

12. 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”.

 

13. 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

 

14. 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 furnish the required information to the investigating authority of SEBI. The failure on the part of the noticee to furnish necessary information to SEBI despite being granted four opportunities to do so indicate that the default committed by the noticee is repetitive in nature.

 

15.  Failure to reply to the show cause notice dated February 9, 2005 issued in terms of the provisions of Rule 4 of Securities and Exchange Board of India (Procedure for holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, and also failure on the part of the noticee to attend the personal hearing granted in the adjudication proceedings on two occasions i.e. on June 14, 2005 and June 30 clearly indicate that the noticee has been adopting a non co-operative attitude. Timely submission of information is very important in concluding investigation proceedings and non cooperation by an entity can be detrimental to the interest of investors and the securities market. Hence the violation committed by the noticee has to be taken seriously in view of the facts and circumstances of the case and further no mitigating circumstances are seen which warrant a lenient view in the matter.

 

 ORDER

16. Considering the facts and circumstances of the case it is established that Smt Jyotiben M Patel failed to submit the required information to the Investigating Authority of SEBI. In view of the failure on the part Smt. Jyotiben M Patel to furnish necessary information to SEBI, in terms of the provisions of Section 15 A(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.50,000 (Fifty thousand) on Smt Jyotiben M. Patel. 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. Jyotiben M. Patel.

17. 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.

18. 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 Jyotiben M. Patel and to Securities and Exchange Board of India.

 

 

PLACE: MUMBAI                                                                                                                    BIJU. S

AUGUST 25, 2005                                                                                                                  ADJUDICATING OFFICER