Order agianst Shri Jay Shah

ORDER UNDER SECTION 15- I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE ADJUDICATION PROCEEDINGS AGAINST SHRI .JAY SHAH.

1. The Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’), vide its order dated December 7, 2004, initiated adjudication proceedings against Shri. Jay Shah (hereinafter referred to as the noticee) for his failure to furnish information to the investigating authority of SEBI thereby violating the provisions of Section 11C of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act). On conclusion of the adjudication proceedings, the Adjudicating Officer vide his order dated October 18, 2005 imposed a penalty of Rupees Ten Lakhs on Shri. Jay Shah. In the Appeal (Appeal No 5 of 2006) filed by the noticee challenging the order passed by the adjudicating officer, the Honourable Securities Appellate Tribunal, vide order dated March 16, 2006 directed that the adjudicating officer shall decide the matter afresh after affording an opportunity of hearing to the noticee. In terms of the directions passed by the Honourable Tribunal, fresh adjudication proceedings were initiated against the noticee. I have been appointed as the adjudicating officer to inquire into the violation alleged to have been committed by the noticee.

 

2.  The issue for consideration in the matter is whether the noticee failed to provide the information required by the investigating authority and whether the failure if any, attracts monetary penalty in terms of Section 15 A(a) of the SEBI Act. Facts of the case as available on record show that SEBI conducted investigation into the alleged price manipulation in the scrip of the company Shalibhadra Infosec Ltd. 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. During the course of the said investigation, prima facie, it appeared to the investigating authority that the noticee had executed substantial trades in the scrip of the company. In view of the same, the investigating authority of SEBI issued summons dated June 24, 2003 requiring the noticee to appear before it on June 30, 2003. Further, the investigating authority also required the noticee to furnish certain information and documents mentioned in the said summons.

 

3.  It is alleged that the noticee failed to submit the information sought by the investigating authority. In view of the same, the investigating authority of SEBI issued another summons on January 14, 2004 requiring the noticee to appear before the investigating authority January 30, 2004 and also to furnish the information sought in the annexure to said summons. As the noticee failed to comply with the said summons, the investigating authority issued one more summons on March 12, 2004 requiring the noticee to furnish the necessary information and also to be present before the authority on March 22, 2004. It is alleged that the noticee failed to comply with the summons and in view of the same, adjudication proceedings were initiated against the noticee.

  

4. As directed by the Honourable Tribunal, the noticee was granted a hearing in the matter. Shri. Keyoor Bakshi the authorised representative of the noticee attended the hearing on April 28, 2006 and submitted that the noticee had shifted his residence and hence did not receive any summons issued by the investigating authority. The noticee further submitted that he did not receive the show cause notice issued in the adjudication proceedings. It is noted that the summons and the show cause notice were sent to the address of the noticee at 1134, Girdharlal No Khancho, Lalabhai’s Pole , Mandvi’s Pole, Manek Chowk Ahmedabad 380001. The said notices were not returned undelivered. However it appears that proof of service of the same on the noticee is not available.   

 

5. It is pertinent to note that the noticee challenged the order passed by the adjudicating officer on the ground that he did not receive the summons issued by SEBI . It is also pertinent to note that Honourable Tribunal while directing that the matter needs to be considered afresh , also directed that the appellant shall be furnished with the details of the information the Board wants from him. The Honourable Tribunal also directed that the noticee shall be given ten days time to furnish the information. As directed by the Honourable Tribunal, the noticee was furnished with the details of the information sought by the investigating authority vide the summons issued to him. In this regard, the noticee vide his letter dated May 4, 2006 submitted the information such as personal details, trading details, bank details and the information pertaining to his depository participant accounts.

 

 

6. It is contended by the noticee that the failure to furnish information to the investigating authority may not be treated as a default on his part as he did not receive the said summons and notices. It is noted from the records that with regard to the show cause notice issued in the adjudication proceedings, the same was sent by registered post and proof of service of the same is available on record. However it is contended by the noticee that he had shifted his residence and it appears that the said notice was accepted by someone staying at the said address. In view of the facts and circumstances of the case the said contention of the noticee is accepted.

 

7. As directed by the Honourable Tribunal, the noticee vide his letter dated May 4, 2006 submitted the details of the information sought in the said summons/ notices issued by the investigating authority. Considering the same and also considering the fact that no proof of service of the summons on the noticee is available on record, in the facts and circumstances of the present case, it cannot be concluded that the noticee failed to provide the information to the investigating authority. In view of the same, considering the facts and circumstances of the case, the evidence available on record, and also considering the fact that as directed by the Honourable Securities Appellate Tribunal, the noticee submitted the information to the investigating authority, it cannot be concluded that the noticee failed to provide the information as required in terms of the provisions of Section 11 C of the SEBI Act. In view of the same, I am of the view that monetary penalty in terms of Section 15A(a) of the SEBI Act is not warranted in the matter and hence no penalty is imposed on Shri. Jay Shah.

 

8.  In terms 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 the noticee and also to the Securities and Exchange Board of India.