ADJUDICATION ORDER UNDER 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 SHRI.HARVINDER KUMAR BAGAI FOR NON COMPLIANCE OF SUMMONS ISSUED BY SEBI.
1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) vide order dated October 12, 2004 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 alleged violation of Section 15A of the SEBI Act committed by Shri Harvinder Kumar Bagai by not complying with the summons issued by SEBI seeking information regarding his dealings in the scrip of Media Video Limited (hereinafter referred to as ‘MVL’). It is noted that SEBI issued summons dated February 6, 2004 requiring to Shri Harvinder Kumar Bagai to submit certain information in respect of his dealings in the scrip of MVL. It is alleged that subsequently summons were issued to Shri Harvinder Kumar Bagai by the Investigating Authority of SEBI on March1, July 23, August 24, and September 17 2004, seeking the required information and also requiring him to produce the documents relating to his investment in MVL. It is alleged that Shri Harvinder Kumar Bagai did not submit the information sought by SEBI. Further, Shri Harvinder Kumar Bagai did not appear before the Investigating Authority as required by SEBI vide letter dated September 17, 2004. In view of the alleged non compliance of summons issued by SEBI, Adjudication Proceedings were initiated against Shri Harvinder Kumar Bagai
NOTICE AND REPLY
2. A notice no. A&E/BS/24203/2004 dated October 25, 2004 was issued to Shri Harvinder Kumar Bagai 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 on the violation alleged to have been committed by him.
3. The said notice sent on October 25, 2004 was returned unclaimed. Subsequently the notice was served on Shri H.K. Bagai by way of hand delivery. It is noted that no reply has been submitted by Shri. Bagai in respect of the notice issued in the adjudication proceedings. Subsequently Shri. H.K Bagai was granted an opportunity of hearing on February 28, 2005. However Shri.. Bagai did not attend the hearing scheduled on February 28, 2005. As Shri Bagai failed to reply to the notice issued to him, and also failed to attend the hearing granted in the adjudication proceedings, the inquiry is proceeded with on the basis of the material available on record.
CONSIDERATION OF EVIDENCE AND FINDINGS
4. The allegation against Shri Bagai is that he failed to comply with the summons issued by SEBI. It is noted that SEBI issued summons dated February 6, 2004 requiring to Shri Harvinder Kumar Bagai to submit the information sought by the Investigating Authority in connection with the investigations initiated by SEBI in the scrip of MVL. It is alleged that subsequently summons were issued to Shri Harvinder Kumar Bagai on March1, July 23, August 24, and September 17 2004, seeking the required information by the Investigating Authority. In this regard it is noted that Shri. Bagai vide his letters dated August 9, August 21, August 24 and September 1, 2004 sought time to submit the required information to SEBI. It is also noted that Shri. Bagai appeared before the investigating authority on August 16, 2004. However Shri. Bagai sought time upto August 23, 2004 to submit the details sought by SEBI. Subsequently the wife of Shri Bagai vide letter dated September 25, 2004 sought further extension of time for a period of 15 days to submit the required information. However it is noted that no further communication has been received from Shri. Bagai in respect of the information sought by SEBI.
5. From the above it is noted that Shri. Bagai failed to submit the information and documents mentioned in the summons issued by SEBI. Further, it is pertinent to note that Shri Bagai did not reply to the show cause notice issued to him in the adjudication proceedings despite being given sufficient time to do so. Further Shri. Bagai also failed to avail the opportunity of personal hearing granted to him in the adjudication proceedings. In view of the same on the basis of the material evidence available on record, it is found that Shri Harvinder Kumar Bagai did not comply with the summons issued by SEBI requiring him to furnish the documents and information mentioned in the summons. In this regard Section 15A(a) of the SEBI Act reads as under.
15A. Penalty for failure to furnish information, return, etc.
If any person, who is required under this Act or any rules or regulations made thereunder,
(a) “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”
6. In view of the fact that Shri Bagai failed to furnish the information sought by SEBI he is liable to the penalty prescribed under Section 15 A(a) of the SEBI Act. 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;
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
7. In this regard, it may be noted that the Investigating Authority repeatedly required Shri Bagai to produce all the documents relating to his dealings in MVL along with the details given in the annexure. Shri Bagai was given adequate opportunity and reasonable time to respond to the summons and furnish the information. The said information was required during the course of the investigation conducted by SEBI in respect of the speculative transactions in the scrip of MVL. It was noted during the course of the investigation that Shri Bagai had traded substantially in the scrip of MVL. It is in view of the said finding in the investigation that SEBI sought from Shri Bagai the details of his dealings in the said scrip. Taking into account the sensitivity of the securities market, early conclusion of investigation is a very important objective. Hence it is seen that the information sought from Shri Bagai was important in view of the investigation conducted by SEBI. It is also pertinent to note that in the statement given to the Investigating Authority on August 16, 2004 Shri Bagai stated that he shall submit the required information by August 23, 2004. Shri. Bagai also stated that he shall appear before the Investigating Authority on the said date. However Shri. Bagai failed to furnish the said information and also failed to appear before the Investigating Authority on the said date. Hence failure to appear before the Investigating Authority of SEBI and to furnish documents and information sought by SEBI necessarily attract the penalty prescribed under Section 15 A(a) of the SEBI Act.
8. Further, no reply has been submitted by Shri. Bagai in the adjudication proceedings in respect of his failure to comply with the summons issued by SEBI. Failure to submit the required information to SEBI has to be viewed seriously as the same would delay the investigation proceedings and hence might delay the corrective steps to be taken to prevent loss to the investors. As stated earlier, early conclusion of investigation proceedings is an important objective as the same would ensure protection of the interests of the investors. Hence the violation committed by Shri. H.K. Bagai have to be viewed seriously.
9. ORDER
As Shri. Harvinder Kumar Bagai failed to furnish the information and documents sought by SEBI and also failed to comply with the summons issued by SEBI requiring his presence before the Investigating Authority, he is liable to the penalty prescribed under Section 15 A(a) of the SEBI Act, 1992. In view of the same, in terms of the provisions of Section 15A(a) of the SEBI Act and Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of Rs.1,00,000/- (Rupees one lakh only) on Shri Harvinder Kumar Bagai.
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 Shri P.K.Bindlish General Manager, Investigation Department, Securities and Exchange Board of India, Mittal Court B Wing, Mumbai-400 021.
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. Harvinder Kumar Bagai and to SEBI.
S. Biju
Adjudicating & Enquiry Officer
Date: February 28, 2005
Place: Mumbai