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Order against HB Securities Ltd

Aug 31, 2007
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Orders : Orders of AO

ADJUDICATION ORDER NO. - BS/AO- 24/2007

ORDER UNDER SECTION 15- I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE ADJUDICATION PROCEEDINGS  AGAINST HB SECURITIES LTD.

  1. Pursuant to the investigation conducted by the Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) into the dealings in the scrip of Jagsonpal Pharmaceuticals Limited (hereinafter referred to as ‘JPL’) , SEBI 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, 1992’), the violation alleged to have been committed by HB Securities Ltd. (hereinafter referred to as the ‘noticee’) on account of its failure to furnish information to the investigating authority of SEBI.

     
  2. It is noted from the facts of the case that Shri Praveen Gupta, Director of the noticee appeared before the investigating authority on June 4, 2004 and his statement was recorded by the investigating authority. It is alleged that investigating authority required certain information pertaining to relationship of Alaknanda Capital Services Pvt. Ltd., Chinar Financial Services Pvt. Ltd., Gloria Investments Ltd. and Fincap Portfolio Ltd. with HB group and also other details such as addresses of certain entities.The said information was required to be submitted by June 20, 2004. In this regard, it is alleged that the noticee failed to provide the said information to SEBI.

     NOTICE AND REPLY
  3. A show cause notice in terms of the provisions of Rule 4(1) of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 was issued (hereinafter referred to as ‘SCN’) to the noticee on January 9, 2006 seeking reply of the noticee as to why an inquiry should not be held against the noticee in respect of the violations alleged to have been committed by it.

     
  4. The noticee replied to the SCN vide its letter dated January 23, 2006 and submitted that all the information sought by SEBI was forwarded vide letter dated June 17, 2004. The noticee also attached a copy of the letter dated June 17, 2004 along with proof of despatch.

     
  5. Considering the reply of the noticee it was decided to conduct an inquiry in the matter and the noticee was advised to attend the inquiry on March 29, 2007. The noticee vide its letter dated March 26, 2007 requested for postponement of hearing. In the interest of justice, the noticee was granted another opportunity of hearing on July 6, 2007.

     
  6. Shri U.C. Lakhwani, Advocate, authorized representative of the noticee attended the hearing on July 6, 2007 and submitted that the information sought by the investigating authority was furnished by the noticee vide its letter dated June 17, 2007. It was further contended that the said information was forwarded to the investigating authority by registered post. The noticee further submitted that the proof of dispatch by postal authority is also forwarded by the noticee. It was further contended by the noticee that they have written to the postal authority for proof of delivery, on March 26, 2007 and the copy of the letter was submitted.

    CONSIDERATION OF EVIDENCE AND FINDINGS
  7.  The issue for consideration in the matter is whether the noticee failed to provide the information required by the investigating authority and whether the failure if any, attracts monetary penalty in terms of Section 15 A(a) of the SEBI Act. Facts of the case as available on record show that SEBI conducted investigation into the alleged price manipulation in the scrip of the company Jagsonpal Pharmaceutical Ltd.

     
  8.  The allegation against the noticee is that it failed to submit information pertaining to relationship of Alaknanda Capital Services Pvt. Ltd., Chinar Financial Services Pvt. Ltd., Gloria Investments Ltd. and Fincap Portfolio Ltd. with HB group and also other details such as addresses of certain entities by June 20, 2004. These information were sought by investigating authority when the statement of Shri Praveen Gupta, Director of HB Securities Ltd., was recorded on June 4, 2004. As no information was received from the entity it is alleged that the noticee is liable to the penalty prescribed under Section 15 A (a) of the SEBI Act, 1992. In this regard it is pertinent to note that Section 11 C (3) of the SEBI Act empowers the investigating authority of SEBI to require any person associated with the securities market to furnish such information or to produce such records as may be required by the investigating authority. Further, Section 11 C (5) empowers the investigating authority to examine such persons. Timely submission of information is very important for concluding investigation proceedings and non co-operation by an entity can be detrimental to the interests of investors and securities market on account of any delay in the investigation.

     
  9. In this regard, the provisions of Section 15A(a) of SEBI Act provides the following:

    “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.”

     
  10.  It is alleged that the noticee failed to submit the information sought by the investigating authority.  On perusal of the documents submitted by the noticee, it is noted that the information sought by the investigating authority was forwarded by the noticee vide its letter dated June 17, 2004. On perusal of the said letter the following information were provided by the noticee :-  

    (a)The details of transactions entered into by HB Group companies,  namely M/s Harsai Investments Ltd. & HB Stockholdings Ltd. in Jagsonpal Pharma Ltd. through us during the period from 1st August , 2000 to     31st December, 2000 are as per the annexure enclosed. 

     (b)As submitted in the statement, we reiterate that we are not directly or indirectly related to M/s Fincap Portfolio Ltd., Alaknanda Capital Services Pvt. Ltd., Chinar Financial Services Pvt. Ltd., Gloria Investments Limited. All these companies except Fincap Portfolio Ltd. are our clients and we are working for them in our capacity as a Broker and we know Fincap Portfolio as a Member of National Stock Exchange of India.     

    (c) As per our records, the current address of Chinar Financial Services Pvt. Ltd. is 1555, S.P Mukherjee Marg,     Delhi- 110006 and the address of Alaknanda capital services Pvt. Ltd. is 56-B Block J (D), Pitampura Delhi-110034. 

    (d) Gloria Investments Ltd.’s correspondence address in     New Delhi is D-6/22, vasant Vihar, New Delhi.

     (e) The list of companies/ identities associated with HB Group is as per  the annexure enclosed. 

      During the course of the inquiry the noticee was advised to produce proof in respect of its contention that it had written to the postal authority seeking explanation as to the date of delivery of the said letter. In this regard the noticee submitted a letter dated 7.7.2007 received from the department of post which stated that record pertaining to proof of delivery of SPA No: EE252732430IN dated 18.6.2004 has been weeded out as per department rules.
  11. It is pertinent to note that no reminder was sent to the noticee by the investigating authority. Considering the above submissions made by the noticee and considering the fact that no further reminder was issued by the investigating authority to the noticee, on the basis of the facts and circumstances of the case and the evidence available on record, it cannot be concluded that the noticee failed to submit information sought by the investigating authority. As the violation committed by HB Securities Ltd is not established, no penalty is imposed on HB Securities Ltd in terms of the provisions of Section 15 A(a) of the SEBI Act.

     
  12.  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 HB Securities Ltd and to the Securities and Exchange Board of India.  

 

 Date: August 31, 2007   S. Biju

 Place: Mumbai  Adjudicating Officer