Order against M/s ABC Enterprises in the matter of Globe Stock & Securities Ltd

1. I was appointed as the Adjudicating Officer under Rule 3 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 to enquire into and to adjudge under Sec.15-I of Securities and Exchange Board of India Act, 1992 for the alleged violation of 15A read with Sec.11 C (3) of Securities and Exchange Board of India Act, 1992 against ABC Enterprises having its address at 9/2, Lal Bazar Street, Kolkata – 700 001.
    
2. The aforesaid appointment of me as the Adjudicating Officer was communicated to me vide proceedings dated July 15, 2004.
    
3. As per the information provided to me by SEBI, summons dated October 16, 2002 was issued to ABC Enterprises by the Investigating Authority of SEBI calling upon ABC Enterprises to produce certain documents mentioned in the Annexure to the said summons on October 24, 2002. Since there was no response, a fresh summons dated February 20, 2003 was issued by the Investigating Authority which was to be complied with on February 25, 2003.  However, it was alleged that there was no compliance to the said summons.  From an unauthenticated photocopy of letter dated September 17, 2003 issued by M/s. Ballabh Dass Daga, member, The Calcutta Stock Exchange Association Ltd. a copy of which was made available to me, it appears that the aforesaid summons were served on ABC Enterprises. 
    
4. In view of the above, I issued a notice dated December 14, 2004 to ABC Enterprises under Rule 4 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 calling upon it to show cause as to why an inquiry should not be held against it and penalty be not imposed under Sec. 15A (a) of Securities and Exchange Board of India Act, 1992. The said notice dated December 14, 2004 was sent to ABC Enterprises by Registered Post with Acknowledgment Due. Since there was no reply to the said notice, I was of the opinion that an inquiry should be held in the matter and therefore a notice of inquiry in terms of Rule 4(3) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 was issued. The said notice dated January 17, 2005 was issued by me fixing January 27, 2005 as the date of inquiry. Since the said notice of inquiry which was sent by speed post acknowledgment due was returned undelivered, I requested the Eastern Regional Office of SEBI at Kolkata to serve in terms of Rule 7 (c) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 the aforesaid notice which was reissued by me on February 7, 2005. Vide letter dated February 11, 2005, Eastern Regional Office of SEBI informed the undersigned that the aforesaid M/s. Ballabh Dass Daga was requested to serve the show cause notice on ABC Enterprises. M/s. Ballabh Dass Daga, vide its letter dated February 11, 2005 apparently forwarded the aforesaid show cause notice to ABC Enterprises.    However, since there was no reply to the aforesaid notice from ABC Enterprises, I reissued the notice of inquiry on March 2, 2005. fixing March 18, 2005 (at 2:00 PM) as the date of inquiry.  The said notice was sent to Eastern Regional Office of SEBI with a request to serve the same on ABC Enterprises. The said notice of inquiry was served on ABC Enterprises on March 7, 2005 by way of affixture and a report in terms of Rule 7(c) was forwarded to me by Shri B.N. Sahoo, Assistant General Manager, SEBI, Kolkata. 
    
5. However, on March 18, 2005 neither any representative/ lawyer of  appeared before me nor any reply was received by me from ABC Enterprises. In these circumstances, I was left with no option but to proceed with the inquiry against ABC Enterprises as I was of the opinion that ABC Enterprises was willfully neglecting to appear before me or to reply to the show cause notice.
    
6. Sec. 11 C of Securities and Exchange Board of India Act, 1992, interalia provides that the Investigating Authority may 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. Vide the aforesaid summons, the Investigating Authority directed ABC Enterprises to produce all the documents relating to its investments in Globe Stocks & Securities Ltd. Sec. 15A (a) of Securities and Exchange Board of India Act, 1992 provides for imposition of monetary penalty by the Adjudicating Officer in case of any person, who is required under Securities and Exchange Board of India Act, 1992 or any rules or regulations made thereunder to furnish any document, return or report, fails to furnish the same, he shall be liable to a penalty of Rs. One lakh for each day during such failure continues or Rs. one crore, whichever is less. The charge of SEBI leveled against ABC Enterprises was that it failed to comply with various summons issued by the Investigating Authority as mentioned above. In the instant case, I gave sufficient opportunity to M/s. ABC Enterprises to defend the aforesaid charges of non furnishing of information directed to be produced by the Investigating Authority. However, M/s. ABC Enterprises neither issued any reply to the notice issued by me nor appeared before me for inquiry/ personal hearing. In these circumstances, I assume that M/s. ABC Enterprises has no grounds to defend the charges leveled against it by SEBI. Therefore, I conclude that the charges of non furnishing the documents to SEBI in response to summons issued by Investigating Authority are established with respect to M/s. ABC Enterprises. 
    
7.  Since the failure of producing the documents before the Investigating Authority of SEBI by M/s. ABC Enterprises is established, the quantum of penalty has to be decided by me.
    
8.  As I mentioned above, Section 15A (a) of Securities and Exchange Board of India Act, 1992 prescribes a penalty of Rs. One lakh for each day during which the failure to furnish any documents etc. to SEBI continues or Rs. One crore whichever is less.
    
9. To determine the quantum of penalty under Section 15A (a), I  considered the following factors as provided in the section 15J of Securities and Exchange Board of India Act, 1992 viz.(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 and; (c) the repetitive nature of the default. 
    
10. As regards the disproportionate gain or unfair advantage there are no quantifiable figures available on record with respect to the default of M/s. ABC Enterprises. There are also no figures or data on record to quantify the amount of loss caused to an investor or group of investors as a result of the default. However, the violation committed by M/s. ABC Enterprises was repetitive in nature as it failed to furnish the required information to the Investigating Authority of SEBI, even though summons were issued to it on two occasions.

 ORDER

1. Therefore in exercise of the powers conferred under section 15-1(2) read with Sec. 11C (3), Sec. 15 A(a) of the Securities and Exchange Board of India Act, 1992 and Rule 5 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of Rs. 30,000/- (Rupees Thirty thousand only) on M/s. ABC Enterprises. M/s. ABC Enterprises shall pay the said amount of penalty by way of demand draft 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 should be forwarded to Shri Jayanta Jash, Deputy General Manager, Securities and Exchange Board of India, Eastern Regional Office, 3^rd Floor, L&T Chambers, 16 Camac Street, Kolkata – 700 017. .
   
   
2. 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 M/s. ABC Enterprises and also to Securities and Exchange Board of India.

Date: March 31, 2005                             A. Chandra Sekhar Rao

Place: Mumbai                                         Adjudicating Officer