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Order in the matter of Adjudication proceedings against Shri Mangiram Sharma

Dec 28, 2007
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Orders : Orders of AO

ADJUDICATION ORDER NO. - BS/AO-30/2007

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 MANGIRAM SHARMA.

  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 Robinson Worldwide Trade Limited (hereinafter referred to as ‘RWTL’) , SEBI vide order dated 16th July, 2006 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’), the violation alleged to have been committed by Shri Mangiram Sharma (hereinafter referred to as the ‘noticee’) on account of his failure to furnish to SEBI, information regarding his dealings in the scrip of RWTL.
  2. It is alleged that the investigating authority of SEBI issued summons / letters dated December 27, 2004, February 25, 2005, November 10, 2005 and January 18, 2006 to the noticee requiring the noticee to furnish the details regarding his dealings in the shares of RWTL. 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
  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 to the noticee on September 19, 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.
     
  4. It is noted that the said notice sent by registered post was duly received and acknowledged but 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 inquiry on November 23, 2006. It is noted that the noticee failed to attend the inquiry on the said date.
     
  5. In the interest of justice, the noticee was granted another opportunity of hearing on March 28, 2007, however, the notice again failed to attend the hearing on March 28, 2007. Further, the noticee was granted another opportunity of hearing on September 26, 2007 and it is noted that the said notice sent duly received and acknowledged but the noticee failed to attend the inquiry on the said dates.
     
  6. As the noticee failed to reply to the show cause notice despite being given sufficient time and opportunity, the inquiry is proceeded with taking into account the facts and material available on record.

    CONSIDERATION OF EVIDENCE AND FINDINGS
  7. The allegation against the noticee is that he failed to comply with the summons / letters dated December 27, 2004, February 25, 2005, November 10, 2005 and January 18, 2006 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. 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.
     
  8. 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.”
  9. It is noted that investigating authority issued letter the dated December 27, 2004 to the noticee seeking the following information:
    1. Name of the brokers through whom you traded
    2. The client codes used by different brokers while trading for you.
    3. The reasons for buying the shares of a company which has continuously shown a dismal performance over a period of time, at a high price which ranged from Rs.86 to Rs.102.
    4. The overall gains or loss incurred in these transactions.
    5. Whether you are still holding the shares of this company? If yes, details thereof.
    6. Details of entering into any off market transactions in the scrip. When, with whom and for how many shares?
    7. The demat account statement for the period from 1st January 2004 to 30th September, 2004.

       
  10. The noticee was required to furnish the said details by January 3, 2005. It is noted from the records that the said letter was duly received and acknowledged. 
     
  11. It is noted from the facts available on record that investigating authority issued another letter dated February 25, 2005 to the noticee informing that the information sought vide its earlier letter dated December 27, 2004 is still not furnished by him. The noticee was advised to submit the required details latest by March 4, 2005. The noticee was also advised to send copy of bank account statements highlighting the payment / receipt of money for market / off market transactions in the scrip of RWTL during the period March 30, 2004 to July 30, 2004. The noticee was further advised to give the break up in case of consolidated payment.

     
  12. Subsequently, investigating authority of SEBI issued summons dated November 10, 2005 to the noticee. The noticee was advised to furnish the information as stated in the preceding paragraphs by November 17, 2005. The noticee was also informed that his personal appearance was not required at that stage of inquiry and providing information would be considered as compliance of summons. It is noted from the facts available on record that the said summons was sent by registered post and was duly received and acknowledged.

     
  13. Investigating authority of SEBI issued another summons dated January 18, 2006 to the noticee advising to submit the required details by January 27, 2006. The noticee was also informed that his personal appearance was not required at that stage of inquiry and providing information would be considered as compliance of summons.

     
  14. It is noted from the above facts available on record that although the Investigating authority issued four summons / letters, but there is sufficient proof of delivery only for two summons / letters dated December 27, 2004, & November 10, 2005. In view of the above it is concluded that the noticee failed to comply with the above stated summons / letters. It is noted from the details stated in the preceding paragraphs that the Investigating authority was only seeking preliminary details pertaining to the  trading in the scrip of RWTL by the notice, such as the names of its brokers, its client codes, details of off market transactions, demat account statement etc. Such details are readily available with anyone trading in the shares and providing the same will not cause much trouble to the person. In this regard, it is pertinent to note that the noticee was also informed that his personal appearance was not required at that stage of inquiry and providing information would be considered as compliance of summons. In spite of the above facts, the noticee failed to provide the basic / preliminary details to the investigating authority. It is also pertinent to note that the noticee also failed to reply to the show cause notice and attend the inquiry in the present adjudication proceedings. The said actions of the noticee are clearly indicative of his non co-operative attitude and also the fact that the noticee deliberately wants to avoid any inquiry in the said matter.

     
  15. The said actions of the noticee become more serious in view of the fact that he is stated to have purchased 54700 shares during the period March 2004 and July 2004. Thus, it can be presumed that he was executing substantial trades in this scrip. It is further stated that the noticee bought such a large number of shares of a company which has continuously shown a dismal performance over a period of time. In view of the above circumstances, the investigating authority of SEBI sought certain detains of the trades by the noticee and the noticee deliberately avoided to provide these details. In this regard, it is pertinent to mention that 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 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.

     
  16. 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;
    1. the amount of disproportionate gain or unfair advantage wherever quantifiable, made as a result of the default
    2. the amount of loss caused to an investor or group of investors as a result of the default
    3.  the repetitive nature of the default

       
  17. It is noted from the details available on record that the noticee had executed substantial trades in the scrip. Further, he is stated to have bought a large number of shares of a company which has continuously shown a dismal performance over a period of time. 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 notice. Further, as it is seen from the facts available on records, the noticee failed to comply with the summons / letters dated December 27, 2004 & November 10, 2005. In view of the same, the failure on the part of the noticee can be termed as repetitive in nature. Facts of the case indicate that noticee deliberately wants to avoid any inquiry in the matter. Hence the violation committed by the noticee has to be viewed seriously and attract penalty prescribed under Section 15A (a) of the SEBI Act.

    ORDER
  18. Considering the facts and circumstances of the case it is established that Shri Mangiram Sharma 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 Rupees Five Lakhs ( Rs. 5,00,000)on Shri Mangiram Sharma 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 Shri Mangiram Sharma.

     
  19. 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 (ID1), Securities and Exchange Board of India, Plot No. C4-A, ‘G’ Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.

     
  20. 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 Mangiram Sharma and also to Securities and Exchange Board of India.

 

 PLACE: Mumbai Biju. S

DATE: December 28, 2007  Adjudicating Officer