Order against Shri Om Prakash Agarwal

 

1. Vide order dated July 8, 2004, issued by Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’), I was appointed as the Adjudicating Officer under Rule 3 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 to enquire into and to adjudge under Sec.15-I of Securities and Exchange Board of India Act, 1992, the alleged violation of 11C of Securities and Exchange Board of India Act, 1992 against Shri Om Prakash Agarwal, having his address at 23A, N. S. Road, Kolkata- 700001. For the sake of convenience, the said Shri Om Prakash Agarwal will be referred hereinafter in this order as ‘the noticee’. The aforesaid appointment as Adjudicating Officer was communicated to me vide proceedings dated July 15, 2004.

 

1. As per the information provided to me by SEBI, SEBI conducted investigation in to the alleged price manipulation in the scrip of Globe Stock & Securities Ltd.  During the course of the said investigation, the investigating authority of SEBI issued summons dated October 16, 2002, May 5, 2003 and May 20, 2003 directing the noticee to furnish the information /documents specified in the annexures to the said summonses by October 24, 2002, May 13, 2003 and May 26, 2003 respectively. The investigating authority advised M/s. Ballabh Dass Daga, Member, Calcutta Stock Exchange to deliver the summonses to the noticee. Vide letter dated September 17, 2003, the said member confirmed that the aforesaid summonses were served on the noticee.
2. It was alleged that there was no compliance of the aforesaid summonses by the noticee.

 

1. I issued a notice May 20, 2005 to the noticee under Rule 4(1) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 calling upon the noticee to show cause as to why an inquiry should not be held against it and penalty be not imposed under Sec. 15A(a) of the Securities and Exchange Board of India Act, 1992. The said notice dated May 20, 2005 was sent to the noticee by registered post acknowledgment due. The said notice was returned undelivered by the postal authorities with an endorsement not known. Therefore, I requested the Eastern Regional Office of SEBI at Kolkata to serve the notice by way of affixture as provided under Rule 7 (c) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 or by way of hand delivery. Vide letter dated July 1, 2005, the Eastern Regional Office at Kolkata informed me that the aforesaid notice dated June 21, 2005 was  affixed on the premises of the noticee on June 29, 2005. A report on the said affixture duly signed by two witnesses was forwarded to me by the Eastern Regional Office of SEBI vide the aforesaid letter.

 

4.     Since there was no reply to the said notice by the noticee within 14 days, the time which was stipulated for the noticee to file its reply, I was of the opinion that an inquiry should be held against the noticee and accordingly I issued a notice of inquiry dated July 19, 2005 in terms of Rule 4(3) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 and  July 29, 2005 was fixed as the date of inquiry. The Eastern Regional Office of SEBI at Kolkata was requested to serve the said notice on the noticee by way of affixture in terms of Rule 7(c) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995. The Eastern Regional Office of SEBI vide its letter dated June 22, 2005 forwarded affixture report, duly witnessed by two witnesses with respect to the said notice. As per the said report, the notice of inquiry dated July 19, 2005 was affixed on the premises of the noticee on July 21, 2005. However, no representative of the noticee appeared before me on July 29, 2005 or on any subsequent date. In these circumstances, I was of the opinion that the noticee was intentionally evading the adjudication proceedings and therefore I decided to proceed with the inquiry based on the record available.

 

5.     Before deciding the issues which are required to be examined by me, the provisions of Securities and Exchange Board of India Act, 1992 with respect to the issuance of summons by the investigating authorities and the consequences of non- compliance are perused by me. Sec. 11C of Securities and Exchange Board of India Act, 1992, interalia provides that the Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to or produce such books, or registers, or other documents, or record before him or any persons authorized by it. Sec. 15A (a) of Securities and Exchange Board of India Act, 1992 provides for imposition of monetary penalty of one lakh rupees for each day during such failure continues or one crore rupees, whichever is less by the Adjudicating Officer in case any person, who is required under Securities and Exchange Board of India Act, 1992 or any rules or regulations made thereunder to furnish any document, return or report, fails to furnish the same.

 

6.     It was alleged by SEBI that the noticee failed to comply with the summonses dated October 16, 2002, May 5, 2003 and May 20, 2003 issued by the investigating authority as mentioned above.

 

7.      There was no representation from the side of the noticee to answer the charges leveled against him. From an unauthenticated photocopy of report dated September 17, 2003  issued by the aforesaid M/s. Ballabh Das Daga which was made available to me by SEBI, I noticed that the summons dated May 5, 2003 and May 20, 2003 was received by the noticee. However, there is no evidence available on record to prove that the summons dated October 16, 2002 was  served on the noticee. As the confirmation dated September 17, 2003  provided by the aforesaid broker states that the date of appearance before the investigating authority was August 24, 2002 instead of October 24, 2002. Therefore, it is not clear from the said letter whether the summons dated October 16, 2002 directing it to furnish the information by October 24, 2002 was served on the noticee.  

 

8.      In view of the above, I find that non-compliance with the summons dated May 5, 2003 and May 20, 2003 issued by the investigating authority of SEBI by the noticee is established. Since there is no record available to prove that the noticee was in receipt of the summonses dated October 16, 2002, I am inclined to give a benefit of doubt in favour of the noticee as to the allegation that it failed to comply with the said summons.

 

9.     Since the failure to furnish the information / documents to the investigating authority of SEBI by the noticee is established, the quantum of penalty has to be determined by me.

 

10. As I mentioned above, Section 15A (a) of Securities and Exchange Board of India Act, 1992 prescribes a penalty of one lakh rupees for each day during which the failure to furnish any documents etc. to SEBI continues or one crore rupees whichever is less.

 

11. To determine the quantum of penalty under Section 15A (a), I considered the following factors as provided in section 15J of Securities and Exchange Board of India Act, 1992 viz.(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 and; (c) the repetitive nature of the default.

 

12. As regards the disproportionate gain or unfair advantage there are no quantifiable figures available on record with respect to the default of the noticee. There are also no figures or data on record to quantify the amount of loss caused to an investor or group of investors as a result of the default. Though it was alleged that summonses were issued to the noticee on three occasions, documentary evidence is available only with respect to the service of only two summonses i.e. dated May 5, 2003 and May 20, 2003. Therefore, I conclude that repetitive nature of the default is established.

 

13. While determining the quantum of penalty, I have also taken into consideration various recent decisions of the Hon’ble Securities Appellate Tribunal. In the matter of Mayfair Paper & Board Pvt. Ltd. v. SEBI (Appeal No.95 of 2004) the penalty of Rs.75,00,000 imposed by the Adjudicating Officer in a case facts of which are similar to the instant case was reduced to Rs.15,000 by the Hon’ble Securities Appellate Tribunal. In the said matter, the Hon’ble Securities Appellate Tribunal also observed that the provision for enhanced penalties in the year 2002 does not mean that SEBI should impose sky high penalties. I have also referred to various recent decisions of the Hon’ble Securities Appellate Tribunal with respect to the penalties imposed by adjudicating officers in cases similar to the instant one.

 

ORDER

 

14.  Therefore in exercise of the powers conferred under section 15-1(2) read with Sec. 11C, Sec. 15 A(a) of the Securities and Exchange Board of India Act, 1992 and Rule 5 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of Rs.30,000/- (Rupees thirty thousand only) on Shri Om Prakash Agarwal. In my view, the above penalty commensurates with the default of the noticee, in the facts and circumstances of the case.

 

15.  The noticee shall pay the amount of penalty imposed with respect to each of them by way of demand draft 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 should be forwarded to Shri Jayanta Jash, Deputy General Manager, Securities and Exchange Board of India, L&T Chambers, 3^rd Floor, 16 Camac Street, Kolkata – 700 017.

 

16.  In terms of Rule 6 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, copies of this order is sent to the noticee and also to Securities and Exchange Board of India.

 

Date: July 29, 2005                                     A. Chandra Sekhar Rao

Place: Mumbai                                                                            Adjudicating Officer