ORDER OF THE ADJUDICATING OFFICER 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 AGAINST SHRI VIKAS BENGANI IN THE MATTER OF BRIJLAXMI LEASING AND FINANCE LTD.
ADJ.ORDER No: EAD 05/ 01/ 2005
1. Vide order dated September 01, 2005, issued by Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’), I was appointed as the Adjudicating Officer under Rule 3 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 to enquire into and to adjudge under Sec.15-I of Securities and Exchange Board of India Act, 1992, the alleged violation of Section 11(3) and Section 11(C) (3) of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) against Shri Vikas Bengani having his address at 2, Devkiran Mansion, IInd Floor, 63B, Princess Street, Mumbai – 400 002. For the sake of convenience, the said Shri Vikas Bengani will be referred hereinafter in this order as ‘the noticee’.
- As per information provided to me by SEBI, SEBI is conducting investigation into the alleged price manipulation in the scrip of Brijlaxmi Leasing and Finance Ltd. During the course of said investigation, the investigating authority of SEBI initially sent letters to the noticee seeking details of his trading in the shares of Brijlaxmi Leasing and Finance Ltd. during the period January 01, 2002 to June 06, 2002. Details regarding delivery of securities / DP account statement and bank statements were also sought. It has been submitted that although letters dated April 08, 2004 and May 26, 2004 were sent in this regard which were duly delivered but the noticee allegedly did not provide the information.
As the noticee allegedly did not respond to the letters, the investigating authority issued summons dated January 18, 2005 directing the noticee to furnish the information/ documents specified in the annexure to the said summons by January 27, 2005. The annexure contained specific details of information / documents required such as detail of trading by the noticee in the shares of Brijlaxmi Leasing and Finance Ltd. during the period January 01, 2002 to June 06, 2002, delivery details / DP account statement and bank statements etc. As per the photocopies of documents made available to me, it appears that the said summons dated January 18, 2005 were sent by Registered post A.D. and were duly received by the noticee as per acknowledgement card received. However, as per SEBI there was no compliance of the said summons by the noticee. Subsequently, on March 18, 2005, the investigating authority of SEBI issued fresh summons to the noticee directing the noticee to provide the information/ documents specified in the Annexure to the said summons by March 28, 2005. The said summons dated March 18, 2005 was sent by the investigating authority of SEBI to the noticee by Registered Post A.D. which was also duly received. It has been alleged that there was no compliance of the said summons also by the noticee. A further summons were issued by the investigating authority of SEBI on April 12, 2005 directing the noticee to supply by April 21, 2005 the information / documents specified in the Annexure to the said summons. As per the information furnished to me by SEBI, the said summons dated April 21, 2005 was sent by the investigating authority to the noticee by hand delivery which was duly received and acknowledged on April 16, 2005. It has been alleged that there was no response from the noticee even to this summons. The details of efforts made by the SEBI investigating authority for procuring the information from the noticee are summarized below:
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Sl. No.
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Issued by
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Date of issue
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Delivery details
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Response
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1
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Investigating authority
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Letter no IVD/ID2/BS/7102/2004 dtd 08.04.2004
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delivered
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No response
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2
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Investigating authority
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Letter no IVD/ID2/BS/10864/2004 dtd 26.05.2004
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Delivered by hand
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No response
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3
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Investigating authority
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Summons dated 18.01.2005 ( Ref No.IVD/ID2/PKN/BS/31349/05
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Regd A.D.
Delivered on 19.01.2005
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No response
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4
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Investigating authority
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Summons dated 18.03.2005 ( Ref No.IVD/ID2/PKN/BS/36409/05
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Regd A.D.
Delivered on 23.03.2005
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No response
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5
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Investigating authority
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Summons dated 12.04.2005 ( Ref No. IVD/ID2/PKN/BS/38543/05
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Delivered by hand delivery on 16.04.2005
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No response
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From the above it is evident that the investigating authority made numerous attempts to get the information from the noticee but the noticee did not respond despite having received the letters / summons and having reasonable time for compliance thereof. In view of the alleged non compliance of summons issued by SEBI, adjudication proceedings were initiated against the noticee.
3. I issued a notice dated September 13, 2005 to the noticee under Rule 4(1) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 calling upon the noticee to show cause as to why an inquiry should not be held against him and penalty be not imposed under Sec. 15A (a) of Securities and Exchange Board of India Act, 1992. The said notice dated September 13, 2005 was sent to the noticee by registered post acknowledgment due and the same was duly delivered on September 16, 2005 as is evident from the postal stamp on the acknowledgement card received. However, no reply was received by me to the aforesaid show cause notice dated September 13, 2005.
4. Since there was no reply to the said notice by the noticee within 14 days, the time which was stipulated by me for the noticee to file his reply, I was of the opinion that an inquiry should be held in the matter and accordingly a notice of inquiry in terms of Rule 4(3) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, dated October 11, 2005 was issued by me fixing October 21, 2005 as the date of inquiry. Vide the said notice, the noticee was advised to appear before me on October 21, 2005 for the inquiry. The said notice was sent to the noticee by registered post A.D. With a view to ensure delivery of the notice so that the noticee is able to make his submissions before the Adjudicating Officer, a copy of the above notice was also sent by courier and ordinary mail. The notice sent by registered post A.D. was returned undelivered with the remarks “Refused” by the postal authorities. The notice sent through courier was returned undelivered to my office with the comments “Shifted”. On October 21, 2005, the noticee failed to appear in my office to attend the inquiry. Subsequently, on October 25, 2005 a fresh notice of inquiry was issued to the noticee fixing November 11, 2005 as the date of inquiry. The said notice was sent by registered post A.D. and copies thereof were sent by courier and ordinary post so as to provide opportunity to the noticee to make submissions. The notice sent by registered A.D. was received back with the remark “Not Known” by the postal authorities. The copy of notice sent through courier also returned undelivered with the remark “Person is not there”. The notice copy sent by ordinary mail also was returned undelivered with the remark “Not Known”. The details pertaining to the notices issued and opportunities provided to the noticee in the adjudication proceedings are summarized below:
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Sl. No.
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Issued by
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Date of issue
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Delivery details
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Response
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1
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Adjudicating Officer
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Show Cause Notice No . EAD/PG/49291/2005 dated 13.09.2005
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Delivered on 16.09.2005
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No response
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2
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Adjudicating Officer
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Notice of hearing (ref no EAD/PG/51608/2005 dated 11.10.2005
Sent by Regd A.D.
Sent by courier and ordinary mail
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Returned undelivered with remark ‘ Refused’
Returned undelivered with remark ‘ Shifted’
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No response
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3
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Adjudicating officer
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Notice of Hearing (ref no EAD/EA 05/PG/ 52634/2005 dated 25.10.2005)
Sent by regd A.D.
Sent by ordinary mail
Sent by courier
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Returned undelivered with remark ‘ Not known’
Returned undelivered with remark ‘ not known’
Returned undelivered with remark ‘ person is not there’
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5. However, neither the noticee nor his representative appeared before me on November 11, 2005 or on any subsequent date. In these circumstances, I am of the opinion that the noticee is intentionally evading the adjudication proceedings and therefore I decided to proceed with the inquiry in the absence of the noticee, based on the records made available to me by SEBI.
6. Before deciding the issues which are required to be examined by me, the provisions of Securities and Exchange Board of India Act, 1992 with respect to the issuance of requisitions by the investigating authorities of SEBI for production of documents/ information and the consequences of non- compliance are perused by me. Sec. 11C(3) of Securities and Exchange Board of India Act, 1992, inter-alia provides that the Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to or produce such books, or registers, or other documents, or record before him or any persons authorized by it. Section 15A (a) of Securities and Exchange Board of India Act, 1992 provides for imposition of monetary penalty of one lakh rupees for each day during such failure continues or one crore rupees, whichever is less by the Adjudicating Officer in case any person, who is required under Securities and Exchange Board of India Act, 1992 or any rules or regulations made thereunder to furnish any document, return or report, fails to furnish the same.
7. It was alleged by SEBI that the noticee failed to comply with the summonses dated January 18, 2005, March 18, 2005 and April 12, 2005 issued by the investigating authority as mentioned above.
8. Apparently, the noticee buys and sells securities; therefore, there is no doubt that he is a person associated with securities market.
9. There was no representation from the side of the noticee to answer the charges leveled against him. From copies of documents made available to me, I noticed that letters dated April 08, 2004 and May 26, 2004 were duly delivered to the noticee. I also noticed that all the three summonses, viz., summonses dated January 18, 2005, March 18, 2005 and April 12, 2005 issued by the investigating authority were duly delivered to the noticee. Further all the summonses that were received by the noticee were well before the due date of compliance and the noticee therefore had adequate time and opportunity to respond to the same.
10. The noticee was asked to furnish details regarding his trading in the shares of Brijlaxmi Leasing and Finance Ltd. during the period January 01, 2002 to June 06, 2002. Details regarding delivery of securities / DP account statement and bank statements were also sought. In my opinion, these details /documents are in the exclusive possession of the noticee and there is no possibility for the investigating authority to procure the said information from any other single source. Therefore, I am of the view that failure of the noticee to furnish the information and documents as required by the investigating authority has caused hindrance to the process of investigation being conducted by SEBI. The noticee also refused to accept the notice of inquiry issued by the adjudicating officer which indicates that the noticee has no respect for law.
11. During the adjudication proceedings, the show cause notice dated September 13, 2005 was delivered to the noticee but he did not respond to the same. It was therefore decided to conduct an inquiry in the matter and a notice of inquiry dated October 11, 2005 was sent by Registered A.D. which was refused to be accepted by the noticee. I am of the view that the noticee was well aware of the subject / issue which was being pursued with him by the investigating authority and thereafter by the adjudicating officer and he deliberately refused to accept the letter with a view to avoid its compliance. The noticee had already received the show cause notice dated September 13, 2005 issued by the adjudicating officer and was thus aware that adjudication proceedings had been initiated against him for non submission of the information / documents to the investigating authority. The deliberate refusal to accept the letter can be deemed to be serving of the notice of the proceedings with the adjudicating officer. With a view to provide adequate opportunity to the noticee, the notice of inquiry was also sent through courier and ordinary mail. It is noted that despite making efforts to provide opportunity to defend / explain the reasons for non-submission of the information to the investigating authority, the noticee failed to either submit a reply to the show cause notice or to appear for the inquiry / hearing.
12. Based on the records produced before me by SEBI, I find that the failure of the noticee to comply with the requisitions made by the investigating authority of SEBI to furnish the documents and information is established.
13. Since the failure to furnish the information / documents to the investigating authority of SEBI by the noticee is established, the quantum of penalty has to be determined by me.
14. As mentioned above, Section 15A (a) of Securities and Exchange Board of India Act, 1992 prescribes a penalty of one lakh rupees for each day during which the failure to furnish any documents etc. to SEBI continues or one crore rupees whichever is less.
15. To determine the quantum of penalty under Section 15A (a) of SEBI Act, 1992, I considered the following factors as provided in section 15J of SEBI Act, 1992 viz. (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 and; (c) the repetitive nature of the default.
16. As regards the disproportionate gain or unfair advantage there are no quantifiable figures available on record with respect to the default of the noticee. There are also no figures or data on record to quantify the amount of loss caused to an investor or group of investors as a result of the default. The noticee failed to comply with the letters issued by the investigating authority on two occasions and with the summonses issued by the investigating authority on three occasions. Therefore, I conclude that repetitive nature of the default is established.
17. While determining the quantum of penalty, I have taken into consideration various recent decisions of the Hon’ble Securities Appellate Tribunal, the conduct of the noticee and the documents on record. In the instant case, the noticee was given several opportunities by the investigating authority to produce information and documents and despite receipt of the letters / summonses issued by the investigating authority, the noticee failed to comply with the same. In the absence of any representation before me during the adjudication proceedings despite receiving the show cause notice, I am of the view that the noticee has deliberately avoided / withheld the information required by the investigating authority with a view to hinder and delay the investigation process. By not complying with the summonses issued by the investigating authority, the noticee has demonstrated disrespect to the process of law and any lenient stand taken by the adjudicating authority in such cases will set a bad precedent and send wrong signals to the potential defaulters.
ORDER
18. Therefore in exercise of the powers conferred under section 15 I (2) read with Section 15 A (a) of the Securities and Exchange Board of India Act, 1992 and Rule 5 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of Rs. 200000/- (Rupees Two Lakhs Only) on the noticee, Shri Vikas Bengani. In my view, the quantum of the above penalty is proportionate to the default of the noticee, in the facts and circumstances of the case.
19. The noticee shall pay the amount of penalty imposed by way of demand draft 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 should be forwarded to The Chief General Manager, Investigation Department (ID 2), Securities and Exchange Board of India, 221, Mittal Court, Nariman Point, Mumbai 400 021.
20. In terms 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 the noticee and also to Securities and Exchange Board of India.
Date: December 30, 2005 Piyoosh Gupta
Place: Mumbai Adjudicating Officer