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 HAR SAI INVESTMENTS LTD.
1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) had conducted investigation into the unusual movement in the price of the scrip Jaiprakash Industries Limited (hereinafter referred to as JIL). During the course of the investigation, the investigating authority of SEBI recorded the statement of Shri Praveen Gupta, director of the Harsai Investment Ltd (hereinafter referred to as the noticee) on July 19, 2004 in connection with the dealings of the noticee in the securities of JIL. In the said statement, it was assured by the noticee that certain details sought by the Investigating Authority shall be submitted by the noticee by July 20, 2004. It is alleged that the noticee failed to provide the said information to SEBI.
2. In view of the alleged failure on the part of the noticee to furnish necessary information to SEBI, adjudication proceedings were initiated in terms of the provisions of Section 15I of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’). The alleged failure on the part of the noticee attracts the penalty prescribed under Section 15 A (a) of the SEBI Act, 1992.
NOTICE AND REPLY
3. A notice no. A&E/BS/46660/2005 dated August 11, 2005 was issued to the noticee 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 of the noticee as to why an inquiry should not be held against it in respect of the violations alleged to have been committed by it. In this regard, the noticee vide its letter dated August 24, 2005 replied to the notice and submitted that it had provided all the relevant information / documents to SEBI vide its letter dated July 20, 2004 which has been duly acknowledged by SEBI on July 22, 2004.
4. Considering the reply submitted by the noticee and considering the facts and circumstances of the case it was decided that an inquiry should be held in the matter and the noticee was advised to attend the hearing scheduled on September 26, 2005.
5. The noticee vide its letter dated September 22, 2005 requested to dispense with further proceedings and hearing in the matter in view of its written submissions. In the interest of justice, one more opportunity of hearing was granted to the noticee on December 20, 2005. Vide letter dated December 19, 2005, the noticee requested to reschedule the hearing to December 21, 2005. Shri Praveen Gupta, director of the noticee attended the hearing on December 21, 2005 and made the following submissions:
· We had appeared in person before the Investigation Officer during the investigation proceedings of JIL in Delhi on July 19, 2004 and during the proceedings we had committed to submit certain information.
· The information was submitted vide our letter dated July 20, 2004.
· In the meantime, SEBI in continuation to our disposition on July 19, 2004, asked information vide their letter dated July 26, 2004 which was also replied vide our letter dated August 4, 2004.
· We have cooperated in all the proceedings and have submitted all the desired information to the best of our ability.
· In view of the above we respectfully submit that we have not violated any of the provisions as stated in the show cause notice.
6. Subsequent to the hearing, the noticee forwarded copies of letter dated July 26, 2004 received from SEBI and the reply dated August 4, 2004 submitted by the noticee.
CONSIDERATION OF EVIDENCE AND FINDINGS
7. The allegation against the noticee is that it failed to provide information to the Investigating Authority of SEBI as per the statement of Shri Praveen Gupta, director of the noticee recorded on July 19, 2004 under Section 11C(5) of SEBI Act. Section 11C of the SEBI Act empowers the investigating authority to 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. Failure to provide information to SEBI attracts the penalty under Section 15A (a) of SEBI Act which provides for imposition of monetary penalty of one lakh rupees for each day during such failure continues or one crore rupees, whichever is less.
8. During the course of the investigation, the investigating Authority recorded the statement of Shri Praveen Gupta, director of Har Sai Investments Ltd in respect of its dealings in the securities of JIL. In response to the following question, Shri Gupta agreed to submit the information on July 20, 2004.
· Please state your MAPIN number.
· Please state whether there are any sister concerns that are operative in the capital market and that are registered with SEBI along with their registration numbers.
· Could you explain that whether it was your policy that time to disclose this information (your dealing with other brokers) to the brokers?
· Please confirm whether the payment and delivery of the transactions with Gagan Financial Resources Pvt. Ltd. was settled as per the norms prescribed for spot delivery and also submit the details thereof.
· Please confirm whether the payment and delivery of the transactions with RRB Securities Ltd. was settled as per the norms prescribed for spot delivery and also please submit the details thereof.
· Please furnish the complete details of Gagan Financial Resources Pvt. Ltd. such as the address, the names of the directors, copy of accounts for this period etc.
In response to the above information sought by the investigating authority, the noticee vide its letter dated July 20, 2004 submitted the following:
· The MAPIN number of Shri Praveen Gupta is A00326728.
· As no specific definition of sister concern is available in SEBI Act, we are submitting the details of the companies promoted by Shri H.C. Bhasin / sister concerns under the provisions of Companies Act, 1956 as Annexure ‘A’.
· As per our policy, we normally give all the information as desired by the brokers but in the normal course of business to give name of other brokers we were dealing was not feasible.
· The particulars of Gagan Financial Resources Pvt. Ltd. as available with us are as under - Office: 206, Caxton House, 2E, Jhandewalan Extension, New Delhi – 110 055, Director: Shri Sanjay Chaudhary
· Transactions with RRB Securities Ltd. were settled as per the prevailing norms.
9. On perusal of the queries raised by the SEBI and the replies submitted by the noticee, it is pertinent to note that though the noticee had submitted that its transactions with RRB Securities were settled as per the prevailing norms, it did not specify the details of the said transactions.
10. Subsequently, the investigating authority vide its letter dated July 26, 2004 informed the noticee that payment and delivery details of its transactions with Gagan Financial Resources Pvt. Ltd. (GAGAN) entered into on July 30, 1999 and August 7, 1999 and payment and delivery details of its transactions with RRB Securities Ltd. (RRB) entered into on August 9, 1999, are not submitted by the noticee as assured by it in the proceedings dated July 19, 2005. The investigating authority called upon the noticee to submit the said information by July 28, 2004. In response to the same, the noticee vide its letter dated August 4, 2004 informed that it had sold / delivered 500,000 equity shares of JIL to GAGAN vide its bill dated July 30, 1999 in physical form ( copy of the bill enclosed) . GAGAN issued to the noticee a cheque number 334893 dated July 31, 1999 drawn on Citi Bank N.A., New Delhi towards its consideration. However, a dispute arose with GAGAN as it alleged that the delivery was defective and the noticee deputed its staff to check the discrepancy but could not satisfy GAGAN. The noticee purchased back the shares from GAGAN on August 7, 1999 and returned back their cheque. The noticee further submitted that it purchased 300,000 shares of JIL from RRB on August 9, 1999. The delivery was received in physical form. The noticee was maintaining running account with RRB and the payment was adjusted in the account.
11. It is pertinent to note that the said information was required to be submitted by July 28, 2004. The noticee submitted the information vide its letter dated August 4, 2004 and it appears that the said letter was received by SEBI on August 9, 2004. As stated before, earlier the noticee vide its letter dated July 20, 2004 had submitted that its transactions with RRB Securities were settled as per the prevailing norms, it did not specify the details of the said transactions. The said details were submitted only vide its subsequent letter dated August 4, 2004. Though the said information was required to be furnished by July 28, 2004 it is seen that the noticee submitted the same vide its letter dated August 4, 2004 which appears to have been received by the investigating authority on August 9, 2004. Hence apparently it is seen that there has been a delay of 12 days in submitting the information. In this context it is pertinent to note that the noticee in its letter dated August 4, 2004 had expressed regret in the delay in furnishing the information. The noticee had stated that as the information sought was old, time was required to furnish the same. In this regard it is noted that the veracity of the information submitted by the noticee is not in question. Further it is also noted that the investigating authority did not require any other information in response to the letter dated August 4, 2004 submitted by the noticee.
12. As stated before, there has been a delay of 12 days in submitting the information to the investigating authority. Any delay in submission of information to the investigating authority shall entail delay in conclusion of the investigation. Hence such delay may prevent the investigating authority in gathering vital information and data. Though the noticee had submitted that the delay occurred as the matter was old,, in the facts and circumstances of the case, it should have informed the investigating authority that it requires more time to furnish the necessary information. As stated before, vide letter dated July 26, 2004 the investigating authority required the noticee to furnish the details by July 28, 2004. The said letter was faxed to the noticee and it appears that the noticee received the letter on the same day. The information was forwarded to SEBI only on August 4, 2006. Hence few days delay on the part of the noticee in furnishing the information is observed on the basis of the evidence available on record.
13. Section 15 J of the SEBI Act lays down the factors to be taken into account while imposing monetary penalty. In this regard, it is noted that no quantifiable figures are available to assess the disproportionate gain or unfair advantage made as a result of the default. Further, the amount of loss caused to an investor or group of investors also cannot be quantified on the basis of available facts and data Further with regard to the repetitive nature of the default it is seen that as the investigating authority has not issued any other letter or notice, in response to the letter dated August 4, 2004 submitted by the noticee, the default cannot be regarded as repetitive in nature. In Appeal No:36/2004 (Padmini Technologies Limited Vs SEBI and Appeal No:37/2004 (Vivek Nagpal Vs SEBI) the Honourable Securities Appellate Tribunal observed that though the time to respond to the summons was not sufficient, the same cannot be considered as a good and sufficient reason for non compliance on the part of the appellant in the absence of any written request for change of dates.
14. In the present case, the noticee was required to submit the details within two days time. Though the time granted to respond to the notice was short, it is seen that the noticee has not made any request for extension of time. In its letter dated August 4, 2004 while forwarding the information, the noticee expressed regret for the delay in submission of the information. The observations of the Honourable Tribunal in the matters cited above, with regard to granting sufficient time in responding to notices is taken into account. Considering the submissions made by the noticee and also considering the fact that the investigating authority has not issued any other letter requiring further information from the noticee, I am of the view that in the facts and circumstances of the case, the delay in submission of information does not warrant imposition of monetary penalty in terms of the provisions of Section 15 A(a) of the SEBI Act 1992.
15. 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 Harsai Investments Ltd and to the Securities and Exchange Board of India.
| Place: Mumbai |
Biju. S
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| July 21, 2006 |
Adjudicating Officer
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