Order against Sh Piyush Jhaveri

 

ORDER

UNDER RULE 5(1) OF SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 READ WITH SECTION 15A OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992.

AGAINST

SHRI PIYUSH JHAVERI

(PROPRIETOR OF SHRI PARSHWA FINANCE)

 

BACKGROUND:

   

1. The undersigned has been appointed as Adjudicating Officer (hereinafter referred to as "AO") by the Securities and Exchange Board of India (hereinafter referred to as "SEBI") in terms of Chairman’s order dated July 24, 2003 to inquire into and adjudge under Section 15A of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'the said Act’) the alleged contravention of Section 11C(2) of the said Act by Shri Piyush Jhaveri (Proprietor of Shri Parshwa Finance) (hereinafter referred to as "Jhaveri") having address at Shri Parshwa Finance, 2796, Zaveriwad, Opp. Laheria Pole, Relief Road, Ahmedabad 380 001 during the investigation of alleged price manipulation in the scrip of MOH Ltd. Jhaveri is also a sub-broker with P.Suryakant Shares & Stock Brokers P. Ltd. having registration No. INS-011245110.

2. MOH Granites Ltd. was incorporated on February 02, 1993 as public limited company. It came out with public issue of 67,00,000 equity shares of Rs.10 each at par in August 1996. The shares of MOH Granites Ltd. are listed on BSE and ASE (Regional Stock Exchange). The company changed its name to MOH Ltd. vide resolution dated May 03, 2000 and diversified into the Information Technology activity.

 

SHOW CAUSE NOTICE/ REPLY:

3. The undersigned as per 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") issued a notice dated October 29, 2003 calling upon Jhaveri to show cause within 21 days as to why an inquiry should not be conducted and levy a penalty in accordance with the said Act.

4. Jhaveri vide letter dated November 26, 2003 submitted as under:

a. Replied to two notices of the Investigating team dated June 13, 2002 and October 24, 2002.

b. Even a statement was recorded on November 21, 2002 and the documents desired by SEBI was despatched by him on November 25, 2002 by Under Certificate of Posting (UCP).

c. The documents were submitted within the stipulated time and that he has always co-operated with SEBI and this was the first time that he was served with such a notice.

d. Also enclosed with his letter the copies of the documents which were despatched on November 25, 2002. Further he undertook to furnish proof of despatch of those documents 

PERSONAL HEARING:

1.  
   1. Had sent the information as required by SEBI on November 25, 2002 by Under Certificate of Posting (UCP).

    

   2. The proof of sending by UCP was enclosed along with his reply to the Show Cause Notice.

    

   3. A copy of covering letter sent at that time would be sent to SEBI by February 4, 2004.

    

   4. He would get in touch with the Post office to get the proof of delivery and would try to submit the same by February 10, 2004.

     

2. Jhaveri was then given a personal hearing in terms of provisions of sub-rule (3) of the Rule 4 of the Rules on January 30, 2004 and he made the following submissions during the personal hearing :

 

6. Jhaveri vide letter dated January 31, 2004 submitted the covering letter dated November 24, 2002 regarding despatch of documents addressed to Shri S Ravindran, General Manager, SEBI, Mumbai.

 

7. Jhaveri vide letter dated February 06, 2004 submitted that the Post Master of Ambawadi Post office stated that except the UCP Certificate no other Certificate can be issued by the Post Office and that is a valid evidence in the eye of law.

 

 FINDINGS:

 

8. a. As per Clause (i) of sub-section (2) of Section 11 of the said Act Jhaveri is under an obligation to submit the required information as called for by the Investigating Authority.

b. Jhaveri has submitted that he had sent the information as required by the investigation team vide his letter dated November 24, 2002 and he has also enclosed a copy of the UCP dated November 25, 2002. This was also given in reply to the show cause notice issued under the current adjudication proceedings.

c. The Investigation Officer vide letter dated June 24, 2004 was requested to confirm whether the documents as claimed to have been submitted by Jhaveri were received by them during the course of the investigation and whether they were the same as required by them. A copy of the said letter was also forwarded to Jhaveri.

d. The Investigation Officer has confirmed that the said documents were not received by them during the course of the investigation, however the documents claimed to have been submitted earlier by UCP, which were forwarded to Investigation team who have confirmed that documents are the same as sought during the course of investigation.

e. I would like to refer the Order of Hon’ble Securities Appellate Tribunal in the case of Mega Resources Ltd. v/s Securities and Exchange Board of India in appeal no. 49 of 2001 dated March 19, 2002. The Jhaveri’s claim that submission of information by UCP is not acceptable since in the summons issued under 11(3) of the SEBI Act, it was very clearly stated that "give evidence or to produce the Books of Accounts and/or documents as required". In view of the same, mere submission of proof of despatch of information is not satisfactory. Therefore, I conclude that Shri Piyush Jhaveri has not submitted the information as asked for during the investigation in violation of Section 15A(a) of the Securities and Exchange Board of India, Act 1992.

f. Therefore, the Investigation Officer was grossly handicapped in view of the non-receipt of the required information/documents sought by the Investigating Authority and this hampered the progress of investigation into the alleged price manipulation in the scrip of MOH Ltd. Therefore, the entity has violated the provisions of section 11 C (2) of the said Act.

 

Order:

 

9. a. The said violation by the entity attracts penalty as prescribed under Clause (a) of section 15A of the said Act.

b. Though Section 15 A (a) prescribes a maximum penalty of Rs.1 crore for violation of Section 11C(2), however, in view of the above facts and circumstances of the case, the findings as recorded above, and taking into account the factors as contained in Section 15 J of the said Act, I am of the view that a penalty of Rs.5,00,000/- (Rupees Five Lakhs) only would be commensurate and justified.

c. Therefore, I hereby, impose a penalty of Rs.5,00,000/- (Rupees Five Lakhs) only on Shri Piyush Jhaveri, Proprietor of Shri Parshwa Finance for violation of Section 11 C (2) of Securities and Exchange Board of India Act, 1992, under Clause (a) of Section 15 A of Securities and Exchange Board of India Act, 1992. Shri Piyush Jhaveri, Proprietor of Shri Parshwa Finance shall pay this amount of penalty by way of crossed 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 Shri R. Mohan, General Manager, Investigations Department, SEBI, Mittal Court, B - wing, First Floor, Nariman Point, Mumbai 400021.

   

Date:  December 23, 2004	D.RAVI KUMAR
Place: Mumbai	ADJUDICATING OFFICER