IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

Appeal No. 147  of 2005

 

Date of Decision

22.6.2006

 

 

Jyotiben M. Patel	……	Appellant
Versus
Securities & Exchange Board of India	……	Respondent

 

Present :  Mr.  J.J. Bhatt, Advocate for the appellant

                  Mr. Ganapathi Subramanian, representative for the respondent        

 

Coram:

          Justice N.K. Sodhi, Presiding Officer

            C. Bhattacharya, Member

            R. N. Bhardwaj, Member

Per:  Justice N.K. Sodhi, Presiding Officer

 

            This appeal is directed against the order dated August 25, 2005 passed by the adjudicating officer holding the appellant guilty of violating the provisions of Section 11C(3) of the Securities and Exchange Board of India Act, 1992 (for short the Act) and imposing a penalty of Rs. 50,000/- under Section 15A(a) of the Act.  The facts giving rise to this appeal lie in a narrow compass and these may first be noticed.

   2.            The Securities and Exchange Board of India (for short the Board) noticed in the year 2001 large rise in trading volumes and price of the scrip of Sword & Shield Pharma Ltd. (hereinafter called the Company) and ordered investigations under Section 11C of the Act.  During the course of the investigations it appeared to the investigating authority that the appellant had traded substantially in the scrip of the Company and therefore it issued summons to her on June 11, 2004 requiring her to supply the information as per the enclosed annexure to the summons by June 18, 2004.  This information was required in regard to the transactions carried out by her in the scrip of the Company.  Since the appellant was not found at the given address the summons were returned undelivered with the remarks that the entity had shifted to some new address.  Be that as it may, a copy of the summons along with the annexure were then sent to her broker with a direction to deliver the same to her under intimation to the Board.  Fresh summons were issued to her on June 25, 2004 requiring her to appear in person before the investigating officer on July 15, 2004 at 11 a.m.  Simultaneously, a copy of the summons was also sent to her broker with a direction to deliver the same to the appellant.  The appellant did not appear before the investigating officer and instead by her letter dated 14.7.2004 requested the investigating officer to grant more time as she was being treated for typhoid.  She was then sent another summons on July 16, 2004 requiring her to submit all the information called for by 23.7.2004 along with medical certificate certifying her treatment for typhoid. She was also advised to appear in person before the investigating authority on 4.8.2004 at 11a.m.  She furnished the information by her letter dated 22.7.2004 which was received in the office of the Board on 6.8.2004.  She also appeared in person before the investigating officer on 4.8.2004 on which date he recorded the following proceedings:

“Pursuant to the captioned subject, Smt. Jyotiben Maheshkumar Patel was summoned to appear in person before the Investigating Authority.  She had traded a gross quantity of 5816264 shares which amount to 20.52% of the total trading done in SSPL during the period of investigation.

Jyotiben appeared in SEBI office today as per the summons.  However, she refused to divulge any details commenting that she had not herself dealt in SSPL and that her name was used by her husband Shri Mahesh Kumar Patel aka Shri Mayur Patel to trade in SSPL.  She did not even tell about the whereabouts of her husband.

She totally non-cooperated in the investigations proceedings as she had earlier not submitted any information called for by SEBI and now she refused to divulge any details today.”

 

   3.            The information she furnished had not reached the Board when she appeared before the investigating officer and that information reached only on 6.8.2004 and it appears that the same was not adequate.  Since she had refused to cooperate with the investigating officer when she appeared before him on 4.8.2004, the investigating officer concluded that there was non-compliance of the summons issued by the Board and that adjudication proceedings be initiated against her.  Accordingly, a notice was issued to the appellant in terms of Rule 4 of the Securities and Exchange Board of India (Procedure for Holding Enquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 (hereinafter called the Rules)  calling upon her to show cause why an enquiry should not be held against her for violating the provisions of Section 11C(3) of the Act.  She did not file any reply to the said notice and she was advised to attend the hearing on 14.6.2005.  She did not appear on the said date and instead sent a letter dated 13.6.2005 requesting that the hearing may be postponed to another date.  Her request was acceded and one more opportunity of hearing was granted to her.  She was then required to appear on 30.6.2005 but she failed to appear on that date also.  The adjudicating officer was left with no choice but to proceed ex-parte against her.  Having regard to the material that was collected during the course of the investigations, the adjudicating officer concluded that she had wilfully failed to furnish the requisite information and that she did not cooperate with the investigation and violated Section 11C(3) and accordingly imposed a penalty of Rs. 50,000/- under Section 15A(a) of the Act.  Hence this appeal.

   4.            We have heard the learned counsel for the parties and find no merit in the appeal.  Section 11C(3) of the Act provides that the investigating authority may require any intermediary or any person associated with securities market to furnish such information or produce such books or registers or documents or record before him as he may consider necessary if the furnishing of such information or production of such books or registers or documents or record is relevant or necessary for the purpose of its investigation.  If a person who is required to furnish such information fails or refuses to furnish the same then under Section 15A(a) of the Act he shall be liable to a penalty of Rs. 1 lakh for each day during which such failure continues or Rs. 1 crore whichever is less.  In the instant case, there is no gainsaying the fact that the Board had ordered investigations in the trading of the scrip of the Company and during the course of those investigations it transpired that the appellant had traded substantially in the scrip.  She was issued summons to appear on different dates but she failed to comply with the summons.  Necessary information pertaining to the trading in the scrips of the Company was required and even though she furnished the information the same was not adequate.  Moreover the information that she furnished reached the Board on 6.8.2004 and when she appeared in person before the investigating officer on 4.8.2004 she refused to cooperate with the investigation.  She was confronted with the fact that she had traded in 58,16,264 shares of the Company which came to 20.52% of the total trading.  She refused to divulge any details stating that she had not herself traded in the scrip of the Company and that her name had been used by her husband.   She refused to disclose even the whereabouts of her husband.  It is thus clear that she did not cooperate with the investigation and failed to furnish the information sought from her.  It is true that she sent a reply to the annexure attached to the summons but the information supplied therein was not sufficient and the investigating officer wanted further clarifications and information from her which she refused to divulge.  Not only this, she also did not participate in the enquiry when the adjudicating officer was appointed under the Rules.  We are, therefore, satisfied that the appellant had been non-cooperative with the investigation right from the beginning and failed to divulge necessary information to the Board.  It has to be understood that in the very nature of things the Board as a Regulator cannot function and protect the interest of the investors and the integrity of the market if the information sought for is not submitted in time.  Timely submission of information is very important in concluding the investigations and non-cooperation by any intermediary or any other person connected with the securities market can be detrimental to the interest of investors and the securities market.  The violation of Section 11C(3) has, therefore, to be viewed seriously.  The appellant has committed this serious violation and the adjudicating officer has already taken a lenient view by imposing a penalty of Rs. 50,000/-.  We do not think that this order warrants any interference.

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

 

Sd/-

Justice N. K. Sodhi
Presiding Officer

Sd/-

C. Bhattacharya
Member

Sd/-

R. N. Bhardwaj
Member