ADJUDICATION ORDER UNDER RULE 5 OF THE SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF ADJUDICATION PROCEEDINGS AGAINST ICES SOFTWARE LIMITED.
- I was appointed as Adjudicating Officer by SEBI vide order dated November 28, 2004, to inquire into and adjudge the alleged contravention of Section 15C of SEBI Act, 1992 by ICES Software Limited (hereinafter referred to as the company), for its failure in redressing the grievances of the investors.
NOTICE AND REPLY
2. A show cause notice dated December 7, 2004 was issued to the company in terms of provisions of Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995. In the show cause notice it was stated that the company did not redress the grievances of investors when called upon to do so by SEBI vide its letter OIAE/SK/19648/2004 dated September 2, 2004. Vide the said letter, SEBI informed the company that as on July 30, 2004, 98 complaints of the investors were pending for more than six months for redressal and called upon the company to resolve the complaints.
3. As the company is alleged to have failed to redress the complaints of the investors, adjudication proceedings were initiated against it vide SEBI’s order dated November 28, 2004. Vide show cause notice cited, in view of the 98 unresolved complaints, the company was asked to show cause as to why an inquiry should not be held against the company in terms of Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 and why penalty should not be imposed on it under Section 15C of SEBI Act, 1992.
4. The company submitted its reply vide letter dated December 20, 2004 made the following submissions:
· The Company has been taking best efforts to redress the grievances of the investors within the stipulated period of time. In respect of the 98 unresolved complaints as on 30th July 2004, 25 complaints have already been redressed after the subjected period of 30th July 2004 and for which a detailed report has been lodged with SEBI vide the company’s letter dated 24.11.2004.
· In respect of the 16 complaints out of the aforesaid pending complaints necessary communication to the effect of redressing the complaints have already been dispatched.
· In connection with the 57 balance complaints, the company has verified in detail with their respective records but the details of the same could not be traced and as a result of which the company could not redress the complaints. However the company sincerely inclined to avail the copies of the letters and complaints addressed to SEBI.
· The company requested SEBI not to take any action or impose penalty against the company.
5. Upon consideration of the submissions of the company, it was felt that an opportunity of hearing may be granted to the company and accordingly the company was advised to attend the hearing scheduled on January 18, 2005. However as per the request of the company the hearing was adjourned to January 28, 2005. Shri. Suhas Ganpule company secretary attended the hearing on January 28, 2005 as the authorised representative of the company and made the following submissions.
· As per the company’s letter dated December 20, 2004 the number of pending complaints are 57. Further with regard to the pending complaints the same could not be redressed as copies of the complaints were not available. Subsequently on December 27, 2004 the company applied for copies of the complaints from SEBI and received copies of the same.
· All necessary measures are being taken to resolve the remaining 57 complaints and the company shall submit a report on the status of the complaints latest be February 7, 2005.
CONSIDERATION OF EVIDENCE AND FINDINGS
6. It is noted that vide letter OIAE/SK/18983/2004 dated August 26, 2004, SEBI had informed the company that 98 investors complaints are pending against the company for more than six months as on July 30, 2004 and called upon the company to resolve these grievances. In this regard the company vide, its letter dated September 18, 2004 sought 15 days time to resolve all the pending complaints.
7. Subsequently, in response to the show cause notice issued in the adjudication proceedings, the company vide, its letter dated December 20 2004 stated that it had resolved 25 complaints and also taken necessary steps for resolving 16 complaints. With regard to the remaining 57 complaints the company submitted that the same could not be resolved as copies of the complaints are not available with them.
8. Subsequently in the personal hearing granted to the company, the company submitted that they had received the copies of the complaints from SEBI and shall take necessary steps for resolving the remaining 57 complaints. It is further noted from the company’s letter dated February 4, 2005 that the company is awaiting copies of 26 complaints from SEBI. With regard to the other complaints necessary measures have been taken by the company to resolve the same. In this regard it is noted that earlier the list of the pending complaints were forwarded to the company on 17.1.2004, 15.4.2004 and 6.7.2004. In view of the same, it is clear that the details of the complaints were available with the company. Further, the company in the personal hearing also sated that they had collected the details of the complaints from SEBI. In view of the same the company’s contention that the details of the complaints are not available with them is incorrect. Further, it is pertinent to note that the company had not taken the measures for redressing the grievances of the investors as required by SEBI vide letter dated September 2, 2004. It is noted that the company has taken measures to redress the grievances of investors only when the adjudication proceedings were initiated against the company in terms of the provisions of Section 15 C of the SEBI Act. Hence it is concluded that the company failed to redress the grievances of the investors as required by SEBI vide letter dated September 2, 2004. In this regard the provisions of section 15 C of the SEBI Act reads as under
“If any listed company or any person who is registered as an intermediary after having been called by the Board in writing, to redress the grievances of investors, fails to redress such grievances within the time specified by the Board, such company or intermediary 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.”
9. In this regard, the provisions of Section 15J of the SEBI Act, 1992 and Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 require that while adjudging the quantum of penalty, the adjudicating officer shall have due regard to the following factors namely:
1. The amount of disproportionate gain or unfair advantage wherever quantifiable, made as a result of default
2. The amount of loss caused to an investor or group of investors as a result of the default
3. The repetitive nature of default
10. In this regard it is noted that no data is available to assess the amount of disproportionate gain or unfair advantage made as a result of default or the amount of loss caused to the investors as a result of the default. However the fact remains that the company failed to redress the grievances of the investors and the default on the part of the company caused loss to the investors.
11. The failure on the part of the company to redress the grievances of the investors has to be viewed seriously and in view of the facts of the case attracts the penalty under Section 15 C of the SEBI Act. However taking into account the fact that the company has initiated measures for redressing the grievances of the investors, a lenient view is taken with regard to the quantum of penalty attracted in respect of the contravention of Section 15 C by the company.
ORDER
12. For the failure on the part of ICES Software Ltd. to redress the grievances of the investors, in exercise of the powers conferred under Section15 I and Section 15 C of the SEBI Act, 1992, read with Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995, I , hereby impose a penalty of Rupees Fifty Thousand (Rs.50,000) on ICES Software Limited.
13. The penalty shall be paid by way of demand draft drawn in favour of “SEBI – Penalties Remittable to Government of India” payable at Mumbai within 45 days of receipt of this order. The said demand draft shall be forwarded to Deputy General Manager, Office of Investor Assistance and Education, Securities and Exchange Board of India, Exchange Plaza, NSE Building, 4th Floor, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051
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 ICES Software Limited and to SEBI.
PLACE: Mumbai Biju. S
DATE : March 31, 2005 Adjudicating Officer