Order against Shri Ramesh K Jain

Aug 01, 2007

Orders : Orders of AO

ADJUDICATION ORDER NO. - BS/AO-23/2007

ORDER UNDER SECTION 15I OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF ADJUDICATION PROCEEDINGS AGAINST SHRI RAMESH K. JAIN

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 Aditya Infosoft Limited (hereinafter referred to as ‘AIL’) , I was appointed 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 alleged to have been committed by Shri Ramesh K. Jain (hereinafter referred to as the ‘noticee’) on account of his failure to furnish to SEBI, information regarding his dealings in the scrip of AIL.
It is alleged that the investigating authority of SEBI issued notices/ letters dated October 5, 2004, December 7, 2004, February 3, 2005, March 16, 2005, May 6, 2005, June 3, 2005, August 23, 2005 and September 29, 2005 to the noticee requiring the noticee to furnish the details regarding his dealings in the shares of AIL. It is alleged that the noticee failed to comply with the said summons and failed to submit the information to the investigating authority.

NOTICE AND REPLY
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 to the noticee on November 15, 2006 seeking reply of the noticee as to why an inquiry should not be held against him in respect of the violations alleged to have been committed by him.
It is noted that the noticee vide his letter dated December 8, 2006 replied to the show cause notice and submitted that he was suffering from ill health for the last two years. Further the noticee requested for a personal hearing in the matter. Considering the request of the noticee, it was decided to conduct an inquiry in the matter and the noticee was advised to attend the inquiry on July 18, 2007.
The noticee attended the hearing on July 18, 2007 and submitted that he did not respond to the summons issued by the investigating authority on account of his ill health and requested for time to submit additional reply in the matter. Considering the request of the noticee, it was granted seven days time for submission of documents. It is noted that no further documents are submitted by the noticee.

CONSIDERATION OF EVIDENCE AND FINDINGS
The allegation against the noticee is that he failed to comply with the notices/ letters dated October 5, 2004, December 7, 2004, February 3, 2005, March 16, 2005, May 6, 2005, June 3, 2005, August 23, 2005 and September 29, 2005 issued by investigating authority and in view of the same, he 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 11C (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 11C (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.
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.”
It is noted that investigating authority issued notices/ letters dated October 5, 2004, December 7, 2004, February 3, 2005, March 16, 2005, May 6, 2005, June 3, 2005, August 23, 2005 and September 29, 2005 to the noticee. The noticee was required to furnish details like its relationship with the promoters & directors and associate companies of AIL, details of trades in the shares of SIL, mode and source of payment to the brokers / sub brokers, details of off market trades, copy of demat statements etc.
It is further noted that the said notices/ letters were duly received and acknowledged by the noticee. However, the noticee failed to respond to the said notices/ letters and also failed to provide the required information to the investigating authority of SEBI. During the enquiry proceedings, the noticee has not denied the fact that he received the said notices/ letters. However, he submitted that the information could not be submitted on account of his ill health. The above contention of the noticee can not be accepted in view of the fact that the investigating authority issued as many as eight notices/ letters during the period October, 2004 to September, 2005. Non response of the notices/ letters issued to the noticee during a span of one year indicates that the noticee is deliberately adopting a non cooperative attitude.
In view of the above details, it is concluded that the noticee failed to comply with the notices/ letters dated October 5, 2004, December 7, 2004, February 3, 2005, March 16, 2005, May 6, 2005, June 3, 2005, August 23, 2005 and September 29, 2005. It is noted from the details stated in the preceding paragraphs that the Investigating authority was only seeking preliminary / basic details from the noticee like its relationship with the promoters & directors and associate companies of AIL, details of trades in the shares of SIL, mode and source of payment to the brokers / sub brokers, details of off market trades, copy of demat statements etc.
It is pertinent to note that the noticee failed to submit the details to the investigating authority. In view of the same, the failure on the part of the noticee to comply with the summons/notices attract penalty under Section 15A (a) of the SEBI Act.
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
From the details available on record though, it is not possible to quantify the gains made by the noticee or the loss caused to investors on account of the violation committed by the noticee, it is seen from the facts available on records, the noticee failed to comply with the notices/ letters dated October 5, 2004, December 7, 2004, February 3, 2005, March 16, 2005, May 6, 2005, June 3, 2005, August 23, 2005 and September 29, 2005., and hence the failure on the part of the noticee is repetitive in nature.

ORDER
Considering the facts and circumstances of the case it is established that Shri Ramesh K. Jain failed to provide necessary information to the Investigating Authority of SEBI in response to the summons issued by it. Considering the facts and circumstances of the case and the violation committed by the noticee, I impose a penalty of Rs.5,00,000/- (Rupees Five lakhs) on Shri Ramesh K. Jain in terms of the provisions of Section 15 A (a) of the SEBI Act, 1992 for failure to provide necessary information to SEBI. In the facts and circumstances of the case, I am of the view that the said penalty is commensurate with the violation committed by Ramesh K. Jain.
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 Chief General Manager, Investigation Department (ID3), Securities and Exchange Board of India, Plot No. C4-A, ‘G’ Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.
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 Shri Ramesh K. Jain and also to Securities and Exchange Board of India.

PLACE: Mumbai Biju. S

DATE: August 1, 2007 Adjudicating Officer