IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

Appeal No.2/2005

 

Date of Decision

22.06.2006

 

 

Vatsa Corporations Ltd.,	Appellant
Versus
Securities & Exchange Board of India.	Respondents

 

None for the appellant.

 

Mr.Ravi Hegde, Advocate   for the Respondent

 

 CORAM

 

          Justice N. K. Sodhi, Presiding Officer

          C. Bhattacharya, Member

          R. N. Bhardwaj, Member

 

Per:   Justice N. K. Sodhi, Presiding Officer(Oral)

 

            This appeal filed under section 15T of the Securities & Exchange Board of India Act, 1992 (for short the Act) is directed against the order of the Adjudicating Officer dated September 9, 2004 holding the appellant company guilty of violating section 15C of the Act and imposing a penalty of Rs.1 crore for its failure to redress the grievances of the investors.  Section  15C of the Act provides for a penalty to be levied on a company which fails to redress the grievances of its investors.  In the instant case the allegation is that as many as 571 complaints were pending with the company for redressal and that the company had failed to redress the grievances of its shareholders.  543 complaints related to non receipt of share certificates by the investors and the remaining 21 complaints relate to non receipt of dividends  on the shares.  The  Securities & Exchange Board of India (for short the Board) addressed a communication dated 31/12/2002 to the company to redress the grievances of the investors.  The company submitted its reply dated 31/1/2003 informing the Board that the share certificates which are sought to be transferred by the so called shareholders are forged and did not tally with the records of the company and that the said shares had been forged/fabricated by its Registrar  and Share Transfer Agent M/s. SRG Infotech Ltd., and one Mr. Ashok Agarwal and some others.  The company further informed the Board that an FIR No.253 of 1999 dated 30^th November, 1999 had been lodged with the police and that the matter is pending investigation.  It is for this reason that the company also refused to pay dividend to those shareholders who were holding those bogus share certificates.  Notwithstanding the reply submitted by the company, the Board appointed an adjudicating officer to initiate proceedings for levy of penalty under section 15C of the Act.  A show cause notice was issued by the adjudicating officer to which the company again replied in the same terms informing him that the share certificates were forged and therefore, those could not be transferred and that no dividend could be paid on those shares.  On a consideration of the material that was collected by the adjudicating officer he came to the conclusion that the appellant company had failed to redress the grievances of its investors and has imposed a penalty of Rs. 1 crore on it.  Hence this appeal. 

          No one is present on behalf of the appellant.   Having   heard the learned counsel for the Board and after going through the impugned order we are clearly of the view that it cannot be sustained.  The shares which are alleged by the company to be forged are circulating in the market and on this ground the Bombay Stock Exchange (BSE) where the shares of the company are listed had suspended the trading by its resolution dated  June 8, 2000.  Feeling aggrieved by this resolution of the BSE, the company had filed appeal no.1 of 2005 before this Tribunal which came up for hearing today and we have upheld the order of BSE suspending the trading in the scrip on the ground that forged share certificates are circulating in the market.  It is not in dispute that the company had lodged FIR no.253 of 1999 dated 30^th November, 1999 with the Police and a case has been registered under sections 420, 467, 470, 406, 468 and 38 of IPC against M/s. SRG Infotech Ltd., Mr. Ashok Agarwal and others who are alleged to have forged the share certificates.  Since the company has lodged a report with the police alleging that the share certificates have been forged and on that ground the BSE had suspended the trading in the scrip of the company, we do not think that the adjudicating officer is justified in holding that the company had failed to redress the grievances of its investors.  How could the company be asked to transfer the shares which it believes are forged nor can it be required to pay dividend thereon to the so called shareholders.  If the forged share certificates as alleged by the company are being traded in the market, it would be justified in not transferring those shares and it would be equally justified in not paying dividend on those shares.  In this view of the matter it could not said that the company has failed to redress the grievances of its shareholders.

          For the reasons recorded above, the impugned order cannot be sustained.  The appeal is allowed and the order dated September 9, 2004 passed by the adjudicating officer set aside with no order as to costs.

 

Sd/-

Justice N. K. Sodhi
Presiding Officer

Sd/-

C. Bhattacharya
Member

Sd/-

R. N. Bhardwaj
Member

 

22/06/2006.

Smn/22/6