IN THE SECURITIES APPELLATE TRIBUNAL MUMBAI

 

 

 Appeal No.16 of 2007

 

 

Jog Engineering Ltd.		……	Appellant
Versus
1. Adjudicating Officer  Securities & Exchange Board of India 2. Securities & Exchange Board of India		……	Respondents

 

 

Shri Madhav V. Jog, Chairman-cum-Managing Director for the appellant

 

Dr. Poornima Advani, Advocate alongwith Ms. Sejal Shah, Advocate for the respondents

 

 

Coram:

 

 Justice N.K. Sodhi, Presiding Officer

 R. N. Bhardwaj, Member

 

 

Per: Justice N.K. Sodhi, Presiding Officer (Oral)

 

 Challenge in this appeal is to the order dated September 18, 2006 passed by the adjudicating officer imposing a penalty of Rs.1 lac on the appellant for violating Regulation 53A of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 (for short the Regulations). Regulation 53A prescribes the manner in which the share registry work of a company is to be handled. It provides that all the matters relating to transfer of securities, maintenance of records of holders of securities, handling of physical securities and establishing connectivity with the  depositories  shall  be  handled  and  maintained  at a single point i.e. either in-house by the issuer or by a share transfer agent registered with the Securities and Exchange Board of India (for short “the Board”). The appellant is a public company registered under the Companies Act, 1956 and it appears that its shares are held both in the physical form as well as in the demat form (electronic form). On the basis of the past experience the Board felt that when securities of a company are held both in the physical and electronic form, the share registry work must in all cases be handled at a single point either by the company itself or by the registered share transfer agent. The Board in its wisdom found that if it is not so done, it could enable a market participant to indulge in malpractices like manipulation etc. It is with this object in view that Regulation 53A was introduced with effect from 2.9.2003. In the case before us, the appellant has its securities in physical form as well as in electronic form and it is admitted by the chairman-cum-managing director who appears in person that the share registry work is being handled at two different points. The shares in the physical form are handled by the company secretary i.e. in-house whereas the shares in the electronic form are handled by M/s. Sharepro Services (India) Private Limited which is a registered agency with the respondent Board. It is, thus, clear that the share registry work of the appellant is not being handled at a single point. The violation of Regulation 53A is, thus, admitted. This being so, the penalty must follow as held by the Supreme Court in Chairman, SEBI vs. Shriram Mutual Fund AIR 2006 SC 2287.

 What is contended by the chairman-cum-managing director of the company is that the financial position of the appellant is in doldrums and therefore the adjudicating officer was not justified in levying a penalty of Rs.1 lac. According to the appellant, a lesser penalty should have been levied keeping in view the facts and circumstances of the present case. We do not think so. The adjudicating officer has examined the financial condition of the appellant and has also taken note of factors referred to in section 15J of the Securities and Exchange Board of India Act, 1992 before passing the impugned order. A copy of the Director’s report of the appellant company is on the record and when we peruse the same it is clear that the directors therein have painted a rosy picture of the appellant and they have opined that the company is likely to come out of the red in June 2006. We are in the year 2007. Moreover, the maximum penalty that could be levied under section 15HB is Rs.1 crore and the adjudicating officer has levied a sum of Rs. 1 lac only. We do not think that the penalty is exorbitant. Having regard to the facts and circumstances of the case we find no ground to interfere even with the quantum of penalty imposed by the adjudicating officer.

 In the result, the appeal fails and the same is dismissed with no order as to costs.

 

 

9.2.2007

RRN