ORDER
ORDER UNDER RULE 5(1) OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF M/S. KARISHMA FLORICULTURE LTD., AGAINST SHRI S. N. BANSAL, CHAIRMAN AND MANAGING DIRECTOR
1.0 The undersigned has been appointed as the Adjudicating Officer by the Securities and Exchange Board of India in terms of an order dated 08.12.04 to enquire into and adjudge under Section 15-I of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘the said Act’) the alleged contravention of 15A (a) of the said Act by Shri S N Bansal, Chairman and Managing Director, Karishma Floriculture Ltd., by failure to furnish information asked for and by failure to comply with summons issued by SEBI.
2.0. Before I proceed to deal with the case, it would be pertinent to make a reference to the relevant provisions of the said Act. Section 15A (a) of the said Act reads as under:
“If any person, who is required under this Act or any rules or regulations made thereunder, to furnish any document, return or report to the Board, fails to furnish the same, he shall be liable to a penalty of 1 lac rupees for each day during which such failure continues or 1 crore rupees, whichever is less.”
3.0. Brief Facts
Pursuant to Chairman SEBI’s order dated 12.09.02, investigations were conducted by SEBI into the alleged price manipulation in the scrip of Karishma Floriculture Ltd. and into the possible violation of the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 and SEBI (Stock Broker and Sub Brokers) Regulations, 1992.
SEBI investigations revealed that Shri S N Bansal was actively trading on the stock from the date of its listing at DSE and made heavy purchases.
During the investigations Shri S N Bansal was asked by SEBI to provide certain details including names, residential addresses of transferors, number of shares and distinctive numbers of shares lodged for transfer during the period 01.04.95 to 31.03.97, list of top 50 shareholders with their addresses and numbers of shares held in Karishma Floriculture Ltd. as well as the shareholding of promoters of the company and their associates on various dates. However, despite summons dated 07.02.03 issued by SEBI Investigating Officer to Shri S N Bansal and various reminders, he failed to comply with the same on one pretext or another.
The entire chronology of facts pertaining to the violation of Section 15-A (a) is as under:
SEBI had asked the details as aforesaid vide its letter dated 07.02.03. Extra time was sought for furnishing the said information vide their letter dated 10.02.03 which was given by SEBI. By letter dated 17.02.03 of SEBI, Shri S N Bansal was required to submit the information by 27.02.03. On non-receipt thereof, he was given the final opportunity to submit the requisite information latest by 19.05.03. Subsequently vide letter dated 15.05.03, SEBI was informed by one Nivedita, on behalf of the company that Shri S N Bansal was not attending office on account of medical exigencies at home. Date of hearing fixed for 19.05.03 was also sought to be adjourned to some date after first week of July, 2003. Vide letter dated May 27, 2003 SEBI again granted him time till June 11, 2003 and he was informed that no further request for extension shall be entertained.
In the said letter it was also mentioned that in case of failure to furnish the information, SEBI shall proceed with the matter ex-parte and that SEBI may also take suitable action for non-compliance of summons under the provisions of Section Section 11C (6) and Section 15 A of the SEBI Act, 1992. However, no information has been received by SEBI till date.
From the aforesaid conduct and sequence of events, it appeared that Shri S. N. Bansal was intentionally trying to avoid the furnishing of information and personal appearance, in violation of Section 15-A of the SEBI Act, 1992.
4.0. Show Cause Notice:
After being so appointed as the Adjudicating Officer, as per the procedure laid down in the Rules a notice in accordance with Rule 4 of the Rules was sent to Shri S N Bansal vide letter no. Adj/40/RRB/2004-NRO/22744 dated February 8, 2005 to show cause, within 14 days as to why an enquiry should not be held against him for the alleged violation of Section 15A(a) of the said Act for failure to furnish information asked for and failure to comply with summons issued by SEBI. The said notice provided the details of the provisions of law and the violations alleged to have been committed by him, also calling upon him to explain why the penalty for the abovesaid violations as prescribed in Section 15A(a) of the said Act should not be imposed upon him.
The show cause notice was sent by registered post at Regd. Office of the company at S-68, 2nd Floor, Greater Kailash-I, New Delhi – 110 048 and also at his residential address at 521, Sainik Farms, Near Saket, New Delhi – 110019. However, the notice came back undelivered from both the addresses with the remarks ‘left’.
Enquiries were made at both the addresses. The landlady of premises at S-68, 2nd Floor, Greater Kailash-I, New Delhi – 110 048 informed that the company in the name of Karishma Floriculture Ltd. was owned by Shri S N Bansal and it existed at that address till Oct.-Nov., 2004. It was further informed that Shri S N Bansal had shifted to some other place in Delhi and that she was not aware of the new address or any contact number of Shri S N Bansal. Enquiries at 521, Sainik Farms, New Delhi revealed that the said premises were sold to one Shri Jhunjhunwala by Shri S.N. Bansal sometime in Oct.-Nov., 2004 and that Shri S N Bansal was not residing at that place now. Upon further inquiry about the present whereabouts of Shri S N Bansal, it appeared that no one was aware of his latest address or contact number.
Consequently, substituted service as permitted under Rule 7 (c) of the said Rules was done at both the above addresses by affixing the copy of the show cause notice. The said affixation report has been witnessed by two persons namely Shri Shiv Prasad Sharma, s/o Shri Deo Prasad Sharma, r/o B-1/7, Safdarjang Enclave, New Delhi – 110 029 and Shri Raj Kumar s/o Shri Khairati Ram, 75/2, Railway Colony, Kishan Ganj, New Delhi – 110 007.
However, no response whatsoever has been received from Shri S N Bansal till date.
5.0. Findings
In the above circumstances, I am of the view that Shri S N Bansal has violated the provisions of Section 15A (a) of the SEBI Act. I am of the view that the non-submission of information to the investigating authority was done deliberately to scuttle the investigation relating to the price manipulation of the shares of his company M/s. Karishma Floriculture Ltd. and violation of provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995. For the protection of the investors in the securities market, it is of utmost importance that an investigation relating to any suspicious transaction is taken to a final conclusion and all entities involved in the same are unmasked and punished severely to protect the integrity of the market.
Keeping in view the factors as listed in Section 15 J of the said Act and Rule 5(2) of the Rules and the facts and circumstances of the case, I am satisfied that a penalty of Rs.1,00,000/- shall be commensurate in the case.
6.0 I hereby impose a penalty of Rs.1,00,000/- on Shri S N Bansal. He shall pay this amount of penalty by way of demand draft in favour of SEBI - Penalty remittable to Government of India payable at Mumbai within 45 days of the passing of the order which shall be served on Shri S N Bansal through affixation. The said demand draft shall be sent to General Manager, Investigation Department, Securities and Exchange Board of India, Rajendra Bhawan, Rajendra Place, New Delhi – 110008.
(RAJ RANI BHALLA)
(ADJUDICATING OFFICER)
DATE: 18.07.05
PLACE: NEW DELHI