ADJ/UN/8/2003-04
ORDER OF ADJUDICATION PROCEEDINGS UNDER SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 AGAINST HERALD EQUITIES PRIVATE LIMITED IN THE MATTER OF INVESTIGATIONS IN THE CASE OF DSQ SOFTWARE LIMITED
Under Rule 3 of SEBI (Procedure for Holding Enquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, Chairman, SEBI, vide his Order dated April 2, 2003 read with Order dated July 24, 2003, appointed the undersigned as Adjudicating Officer in place of Shri Ananta Barua to enquire into and adjudge alleged violation of Section 15 A of the SEBI Act, 1992 by Herald Equities Private Limited (Herald). The proceedings were initiated for alleged violation of failure to comply with following letters/summons issued by SEBI for production of documents/ submission of information relating to their dealings in the shares of DSQ Software Ltd. by Herald:
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Letter No./ Date of summons/ letters
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Letter/summons for personal appearance/production of documents
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Letter No. IES/ID2/RKK/KR/30189 dated June 6, 2001
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To furnish information
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IES/ID2/RKK/SP/41059/2001dt. 28/11/2001 with summons
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For production of documents by 05/12/01
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IES/ID2/RKK/SP/DSQ/817/2002 dated January 14, 2002 with summons
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For production of documents by 21/01/02.
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Summons dated January 28, 2002
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For production of documents by 01/02/02
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IES/ID2/RKK/SP/4131/2002 dated March 11, 2002 with summons
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For production of documents by 18/03/02
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IES/ID2/RKK/SP/8258/2002 dated May 13, 2002 with summons
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For production of documents by 17/05/02
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IES/ID2/RKK/SP/4131/2002 dated July 25, 2002
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For production of documents by 29.07.02
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Show cause notice dated June 03, 2003 under adjudication proceedings was issued by Shri Ananta Barua at 7/10 Botawala Building, 1st Floor, Horniman Circle, Mumbai - 400001. Since the service thereof could not be ascertained, another show cause notice No.ADJ/UN/8/22106/2003 dated November 24, 2003 was sent at the same address and also at 16, India Exchange Place, 1st Floor, Room No.11 & 12, Calcutta – 700 001, another address as appearing in some of the summons by speed post and also through the Calcutta Stock Exchange as it was noted that Herald is a member of that exchange.
The notice was acknowledged vide their letter dated 10th December 2003 stating that they had provided all details vide their letter dated 29.07.2002 except for the transaction details of DSQ Software Ltd. for the period October 1, 1999 to March 31, 2000 due to some software problem, followed by another letter of December 30, 2003 giving such details as compiled from hard copies. Thereafter an opportunity of hearing was granted. After seeking an adjournment which was granted, Shri Aditya H Bhansali duly authorized representative of Herald appeared before the adjudicating officer on 20th January, 2005 and his statement was recorded. He also submitted the written submissions of Herald vide their letter dated January 19, 2005 and copy of letter dated 29.07.02 of Woodstock Securities Pvt. Ltd. stated be a group company of Herald.
Appreciation of evidence and findings
In all, there were 2 letters and 5 summonses issued seeking information/ production of documents. Compliance to the summons is given below:
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Summons
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Status
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IES/ID2/RKK/SP/41059/2001dt. 28/11/2001 with summons
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Hulda has submitted that vide their letter dated 28th January 2002, they had submitted the requisite information for the period from 1st April 2000 to 31st March 2001. They have further stated that details for the period January 1, 1999 to 31st March 2000 could not be provided due to Y2K software problem, which was also the reason for the delay in submitting the details.
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IES/ID2/RKK/SP/DSQ/817/2002 dated January 14, 2002 with summons
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Summons dated January 28, 2002
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It is apparent that Hulda’s reply dated 28th January, 2002 has crossed this summons which is in continuation of/ a reminder to the earlier summons.
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Summons
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Status
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IES/ID2/RKK/SP/4131/2002 dated March 11, 2002 with summons
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Herald has submitted that details for the period January 1, 1999 to 31st March 2000 could not be provided due to continuance of Y2K software problem.
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IES/ID2/RKK/SP/8258/2002 dated May 13, 2002 with summons
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IES/ID2/RKK/SP/4131/2002 dated July 25, 2002
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From written submissions, documents produced and statement of authorized person, it transpires that Shri Suresh Jajoo appeared in person before the investigating officer on 8/7/2002 on behalf of five companies including that of Herald and his statement was recorded. The letter of SEBI dated 25/7/2002 issued thereafter called for details partly pertaining to Herald and partly pertaining to Woodstock Securities Private Ltd. (Woodstock) and others. A combined reply dated 29/7/2002 was sent by Woodstock since Shri Jajoo was a Director in both the companies.
Hulda has stated that out of the details called for by SEBI vide this summons, only query relating to transaction details in DSQ Software by Herald for the period October 1999 to March 2000 pertained to Herald, which was duly replied stating that they have software problem as already explained and are not able to retrieve the data for the year 1999-2000.
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Replying to a question by the adjudicating officer as to whether they have received any communication from SEBI calling for information subsequent to their letter of July, 2002, Herald submitted that as per records available, they have received the adjudicating officer’s letter dated 24th November 2003 subsequent to their reply which was promptly replied to.
From the above, it would be difficult to hold that Herald has defaulted in responding to the summons since they have submitted the information called for except for transaction details in DSQ Software by Herald for the period October 1999 to March 2000 which they have submitted could not be provided due to Y2K software problem.
Conclusions
From the foregoing, it is seen that Herald has substantially complied with summons issued for production of documents/ details and if part of the details have not been provided, it is apparently due to Y2K problem. There is no intention manifest to withhold supply of information or document. In view of the above, no case is made out for levy of penalty under Section 15 A against Herald Equities Private Limited.
Herald has also raised certain points relating to scope of section 11 (3) and maintainability of action u/s15A for non compliance to summons issued by the investigating officer u/s 11 (3) of the SEBI Act. Since I am discharging Herald on merits, I do not consider it necessary to go into these submissions.
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Bombay
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Usha Narayanan
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11th February, 2005
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Adjudicating Officer
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