ADJUDICATION 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 AMRUT SECURITIES LTD. FOR FAILURE TO FURNISH INFORMATION AND COMPLY WITH THE SUMMONS ISSUED BY SEBI
1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) vide order dated October 14, 2004 appointed the undersigned as the Adjudicating Officer to inquire into and adjudge under Section 15I of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’), the violation of Section 15A of the SEBI Act alleged to have been committed by Amrut Securities Ltd. (hereinafter referred to as ASL) on account of its failure to furnish information to SEBI in respect of its dealings in the scrip of Sword & Shield Pharma Ltd. (hereinafter referred to as SSPL). It is noted that SEBI issued summons dated August 9, 2004 requiring ASL to submit certain information in respect of its dealings in the scrip of SSPL. It is alleged that ASL did not submit the information sought by SEBI. Further, ASL did not appear before the Investigating Authority as required by SEBI vide summons dated August 9, 2004. In view of the alleged non compliance of summons issued by SEBI, Adjudication Proceedings were initiated against ASL.
NOTICE AND REPLY
2. A notice no. A&E/BS/33262/2005 dated February 9, 2005 was issued to ASL 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 on the violation alleged to have been committed by it.
3. In response to the said notice, ASL vide its reply dated February 25, 2005 requested SEBI to provide it a list of documents which is further required for enquiry proceedings. ASL vide the above letter submitted that it is ready to provide the required details and willing to appear for personal hearing.
4. On perusal of the said reply submitted by ASL an opportunity of hearing was granted to it on March 15, 2005.
5. Shri Anil Gandhi, director of ASL appeared for personal hearing on March 15, 2005 and submitted the following:
a) ASL was waiting for time fixed by SEBI in response to its letter dated August 17, 2004. Vide the above mentioned letter ASL has requested to grant it 7 days time extension for personal appearance before the investigation officer, since its director was out of station. However, no summons/ letter was received subsequently.
b) ASL had submitted all the required details prior to the issue of summons on May 25, 2004 to SKSE Securities Ltd. from whom it received a query regarding details of its dealings in SSPL. A copy of the above mentioned letter was submitted on March 15, 2005.
CONSIDERATION OF EVIDENCE AND FINDINGS
6. The allegation against ASL is that it failed to comply with the summons issued by SEBI. It is noted that SEBI issued summons dated August 9, 2004 requiring ASL to submit the information sought by the Investigating Authority in connection with the investigations initiated by SEBI in the scrip of SSPL.
7. In this regard it is noted that ASL vide its letter dated August 17, 2004 requested SEBI to grant it an extension of 7 days time for personal appearance before the investigation officer, since its director was out of station.
8. It is further noted that ASL has submitted all the required details on May 25, 2004 to SKSE Securities Ltd. from whom it received a detailed enquiry for SSPL.
9. From the above it appears that ASL had no such intention of willfully withholding the information sought by the investigating authority, as it had provided the details on the said matter to SKSE Securities Ltd (main broker of ASL). Further it is noted that ASL had sought 7 days time to appear before the investigating authority in response to the summons received from SEBI. As submitted by ASL, no summons/ letters were received subsequent to its request.
10. In view of the facts of the case, it appears that the non compliance of the summons by ASL was on account of the fact that in response to its letter dated August 17, 2004 seeking extension of time for personal appearance before the investigating authority, it did not receive any reply from SEBI.
11. In this regard Section 15A(a) of the SEBI Act reads as under.
15A. Penalty for failure to furnish information, return, etc. : If any person, who is required under this Act or any rules or regulations made thereunder,
(a) “to furnish any document, return or report to the Board, fails to furnish the same, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less”
12. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of the Rules require that while adjudging the quantum of penalty, the adjudicating officer shall have due regard to the following factors namely;
a) the amount of disproportionate gain or unfair advantage wherever quantifiable, made as a result of the default
b) the amount of loss caused to an investor or group of investors as a result of the default
c) the repetitive nature of the default
ORDER
13. As per the provisions of section 15 A (a), failure of a person to submit the information shall invite the penalty prescribed under the said provisions. However, considering the fact that in response to the summons issued by SEBI, Amrut Securities Ltd. sought 7 days time to appear before the investigating authority and further considering the fact that no reply was received from SEBI in response to its request, it is felt that Amrut Securities Ltd. had not willfully withheld any information from SEBI and hence the failure on the part of Amrut Securities Ltd. to comply with the summons issued by SEBI does not warrant imposition of penalty. Hence no penalty is imposed on Amrut Securities Ltd. for its failure to comply with the summons issued by SEBI.
14. 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 Amrut Securities Ltd. and to SEBI.
PLACE: MUMBAI BIJU. S
March 31, 2005 ADJUDICATING OFFICER