ORDER UNDER SECTION 15I OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT 1992 READ WITH 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 PARTH INVESTMENTS & CONSULTANTS PVT. 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 Sun Infoways Ltd., Shri S.V. Krishnamohan 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 Parth Investments & Consultants Pvt. Ltd. (hereinafter referred to as the noticee) on account of its failure to furnish to SEBI, information regarding its dealings in the scrip of Sun Infoways Ltd. (hereinafter referred to as SIL). Subsequently, I was appointed as the Adjudicating Officer vide order dated September 30, 2004 in place of Shri. S. V. Krishnamohan.
2. It is alleged that the Investigating Authority of SEBI issued summons dated June 11, 2002 and October 30, 2002 requiring the noticee to furnish information regarding its dealings in the shares of SIL. The noticee was also required to appear before the investigating authority. It is alleged that the noticee failed to comply with the notices/summons and also failed to submit information to the Investigating Authority.
NOTICE AND REPLY
3. A show cause notice A&E/BS/40016/2005 dated May 6, 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 reply of the noticee as to why an inquiry should not be held against it in respect of the violations alleged to have been committed by it. It is noted that the said notice sent by registered post was received by the noticee.
4. The noticee did not reply to the show cause notice. However, considering the facts of the case, it was decided to conduct an inquiry in the matter and the noticee was advised to attend the hearing on June 15, 2005 . It is noted that the hearing notice sent by registered post has been returned undelivered. Subsequently another notice was issued on August 9, 2005 requiring the noticee to attend the hearing scheduled on August 23, 2005. It is noted that the said notice has also been returned undelivered.
5. As the earlier notices for hearing were returned undelivered, another notice was issued to the noticee advising it to attend the inquiry on March 22, 2006 and substituted service of notice was effected in terms of Rule 7 (c) of the Rules.
6. As the noticee failed to reply to the show cause notice despite being granted sufficient time and opportunities, the inquiry is proceeded on the basis of the facts and material available on record.
CONSIDERATION OF EVIDENCE AND FINDINGS
7. The allegation against the noticee is that it failed to comply with the summons dated June 11, 2002 and October 30, 2002 issued by Investigating Authority and in view of the same, it is liable to the penalty prescribed under Section 15A(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 cooperation by an entity can be detrimental to the interests of the investors and securities market on account of any delay in the investigation.
8. It is noted that Investigating Authority issued summons dated June 11, 2002 to the noticee informing it that its attendance was required in connection with the investigation instituted by SEBI in the case of SIL. The noticee was advised to appear in person before the Investigating Authority on June 17, 2002. As it appeared that the noticee executed trades for Great Eastern Mercantile Ltd ( GEM), the noticee was advised to submit the following documents at the time of its appearance:
a. The member Client introduction form of Great Eastern Mercantile Pvt. Ltd. (GEM).
b. Documents in support of the identity of the Directors / Company, i.e. GEM
c. Its client investment details in SIL during January 2000 to May 2001.
d. Copy of Articles of Association of GEM.
e. Sauda book for the period.
9. It is noted that the said summons was duly acknowledged, however the noticee did not appear before the Investigating Authority and failed to provide the required details. In view of the same, Investigating Authority issued another summons dated October 30, 2002 to the noticee requiring it to appear before it on November 21, 2002 at 11:00 a.m. It is noted that no proof of service of the summons dated October 30, 2002 is available on record.
10. The noticee was required to submit details on Great Eastern Mercantile Pvt. Ltd. who is stated to be the client of the noticee and who traded substantially in the scrip. Non furnishing of information in the investigation proceedings will delay the proceedings.
11. As stated above, the notice/ summons dated June 11, 2002 was duly received by the noticee as no reply has been received from the noticee, it can be concluded that the noticee failed to comply with the said notice. It is also noted from the evidence available on record that the noticee did not seek extension of time or provided any explanation for its failure in providing the information to the investigating authority. In this regard it is also pertinent to note that the noticee failed to submit any reply to the show cause notice in the present adjudication proceedings. Hence, it appears that the noticee has been adopting a non co-operative attitude in furnishing necessary information. In view of the same, the failure on the part of the noticee in providing necessary information to the investigating authority attract penalty under Section 15A(a) of the SEBI Act. The provisions of Section 15A(a) of SEBI Act at the time the violation was committed by the noticee provided 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 not exceeding one lakh and fifty thousand rupees for each such failure.
12. 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 :
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
13. 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. With regard to the repetitive nature of the default it is noted that only one summons issued by the Investigating Authority was duly received and therefore the failure on the part of the noticee to appear before the Investigating Authority can not be regarded as repetitive in nature.
ORDER
14. Considering the facts and circumstances of the case it is established that Parth Investments & Consultants Pvt. Ltd. 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 same, in terms of the provisions of Section 15 A(a) of the SEBI Act, I impose a penalty Rupees Fifty Thousand (Rs.50,000/-) on Parth Investments & Consultants Pvt. Ltd for its failure in providing necessary information to SEBI.
15. 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 Deputy General Manager, Investigation Department (ID8), Securities and Exchange Board of India, Plot No. C4-A, ‘G’ Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.
16. 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 Parth Investments & Consultants Pvt. Ltd. and to Securities and Exchange Board of India.
| Place: Mumbai |
Biju. S |
| December 7, 2006 |
Adjudicating Officer |