IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

 Appeal No.360/2004

Date of Hearing	14.07.2005
Date of Decision	22.07.2005

 

In the matter of:

 

Latin Manharlal  Securities Ltd.,	Appellant – Represented by Mr. Vicky Singh & Mr. S. H. Merchant, Mr. Mohandas,  Advocates
Versus
Securities & Exchange Board of India	Respondent – Represented by Ms. Deepa Kuruvilla, Advocate.

 

Coram:

         

          C. Bhattacharya, Member

          R. N. Bhardwaj, Member

 

Per:    C. Bhattacharya, Member

 

1.       Appeal is taken up for final disposal with the consent of both parties.

 

2.       Heard the counsels from both the sides.  The fact of the case is that in connection with certain investigations instituted by Securities and Exchange Board of India (SEBI) into the dealing in the shares of M/s. Silverline Technologies Ltd., for the period October, 1999 to June, 2000, SEBI had come to the conclusion that attendance of M/s. Latin Manharlal Securities Ltd., (appellants) was required for examination.  Accordingly, a summons was issued on 19^th March, 2003 asking the appellants to appear before the Investigating Officer on April 04, 2003 at 10.30 a.m.  Annexure ‘A’ attached to the summons listed  certain details and particulars which  were required by SEBI in connection with the dealings in the scrip of Silverline Technologies Ltd.,  The appellants were also required  to furnish more or less the same particulars in respect of the dealings in the scrip of Silverline Technologies Ltd., on behalf of their clients viz. Classic Credit.  It was clearly mentioned in a footnote attached to the summons that the said details were to be submitted along with soft copy of the same. 

 

3.       By their letter dated April 2, 2003 the appellants submitted that the concerned director of the appellant firm who was able to answer the questions in relation to the aforesaid investigation was out of station and they therefore, requested for grant of time and a fresh date in the third week of April, 2003.  This letter was delivered to and received by SEBI on 3/4/2003 i.e. one day before the appointed date for appearance in response to the summons.  SEBI did not respond to this letter ever. However, on April 7, 2004 i.e. after a lapse of more than one year SEBI issued a show cause notice alleging that the appellants failed to appear in person before the investigating authority.   The appellants were therefore, alleged to have violated Section 15A read with section 15HB of the SEBI Act, 1992.  The show cause notice was duly replied to by the appellants.  The adjudicating officer did not find the reply  of the appellant to the show cause notice satisfactory and therefore, passed an order imposing a  penalty of Rs.2,00,000/- on the appellants.  Being aggrieved the appellant has filed this appeal. 

 

 4.  The adjudicating officer came to the conclusion that “the noticee had adopted a very intransigent stand in the matter of furnishing information or to appear before the investigating officer without any reasonable cause of justification”.  The facts of the case however, do not tend to support this conclusion.  The appellants were served with summons for personal appearance for providing information in connection with an ongoing investigation involved in the dealings in the scrip of Silverline Technologies Ltd.,   The  appellants had requested by their letter to allow them to appear before the investigating officer on a date during the  third week of April, 2003. This letter dated 22^nd April, 2003 was received by SEBI on 3^rd April , 2003 i.e. one day before date  for appearance as per  the summons.  SEBI has not responded to that letter at all.  If the respondents could wait for more than a year for issuance of a show cause notice to the appellants it is not clear why the examination of the appellant and the information collected from them could not be conducted after 2 weeks.  In the impugned order the adjudicating officer himself mentions that the investigation was mainly directed against Ketan Parekh Group of entities and not the noticee. However, his conclusion that the noticee was deliberately withholding the information with some ulterior motive does not flow from the given set of facts of this case.  On the other hand it was open to the investigating officer whose office had already received the request for postponement of the date, to fix a fresh date after a couple of weeks and get all the information collected which would ultimately help the main investigation.  We find it strange that, that opportunity has not been utilized.

 

5.       We do find any merit in the adjudication proceedings and/or the penalty imposed.  The impugned order of SEBI is, therefore,  set aside.  In  this  connection we  were  orally  informed during the hearing of this case that the investigation against  Ketan Parekh group of companies is still going on . If it is so, and if SEBI finds that the information called for from the appellants for which summons was issued on 19^th March, 2003 is still useful, they are free to call for those information from the appellants or issue fresh summons for personal appearance of the appellants for providing clarifications.

 

6.                By an Interlocutory order dated 2/12/2004 of this Tribunal, the appellant was directed to deposit a sum of Rs.50,000/- with the respondent and on such deposit, the respondent was directed not to take coercive steps against the appellant.   In view of the present order setting aside the impugned order,  the respondent shall refund the said amount within four weeks from the date of receipt of this order.

 

7.       No order as to costs.        

                                               

Sd/-   R. N.  Bhardwaj Member	Sd/-   C. Bhattacharya Member

Mumbai,

22nd July, 2005.