ORDER
UNDER RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING OFFICER) RULES, 1995 READ WITH SECTION 15HB
OF
THE SEBI ACT, 1992
AGAINST
M/s. ADITYA INTERNATIONAL LIMITED
1. The Securities and Exchange Board of India (for brevity’s sake hereinafter referred to as the SEBI) had vide its circular no. SMD/Policy/Cir-13/02 dated June 20, 2002, directed the inclusion of Clause 51 in the Listing Agreement by all the stock exchanges, which stipulated the online filing of specified financial statements / documents on the EDIFAR web site, www.sebiedifar.nic.in by the companies mandated by SEBI, from time to time.
2. In this regard, M/s Aditya International Limited (for brevity’s sake, hereinafter referred to as AIL) was one of such companies, required to upload the above documents with effect from the quarter ending September 2002 as stipulated vide the circular specified above.
However, it was observed that AIL which is listed on the BSE and NSE had failed to comply with the following requirements:-
(i) Register under the EDIFAR for uploading the financial statements / documents
(ii) Upload the un-audited quarterly financial statements for the quarter ended September 2002, quarter ended December 2002 and quarter ended March 2003.
(iii) Upload the annual report inclusive of the corporate governance report, balance sheet, profit and loss statement and the cash flow statement.
(iv) Upload the shareholding pattern statement for the quarter ended September 2002, quarter ended December 2002 and quarter ended March 2003.
3. In view of the same, SEBI vide its letter dated July 4, 2003 called upon AIL to show cause as why adjudication proceedings should not be initiated against them for the alleged violation of the SEBI circular resulting in the contravention of Regulation 17(3) of the SEBI (Central Listing Authority) Regulations, 2003 (hereinafter referred to as CLA regulations) and also make their submissions, if any, along with supporting documents that they wished to rely upon, within 15 days from the date of the receipt of the letter.
4. In the absence of any response from AIL to the said letter, Shri S.V Krishnamohan was appointed as the Adjudicating Officer by the Chairman, SEBI, vide order dated April 2, 2004 to enquire into and adjudge the alleged contravention by AIL of Regulation 17(3) of the CLA Regulations read with Section 15A(a) of the SEBI Act, 1992 (hereinafter referred to as the Act).
5. Thereafter a show cause notice dated July 12, 2004 was issued to AIL in terms of Rule 4 of the SEBI (Procedure for holding enquiry and imposing penalty by the Adjudicating Officer) Rules, 1995 (Rules) where under AIL was asked to show cause as to why proceedings should not be initiated against them for the alleged violation of the provisions of Regulation 17(3) of the CLA Regulations and as to why penalty should not be imposed upon them under section 15A(b) of the Act. AIL was advised to make their submissions, if any, along with supporting documents that they wished to rely upon, within 14 days from the date of the receipt of the notice.
6. Despite acknowledging the said notice, as AIL had not responded to the same, a notice of hearing dated August 12, 2004 was sent to them in terms of Rule 5(1) of the Rules, and vide the said notice, AIL was advised to attend the hearing proceedings to be held on September 21, 2004.
7. In the meantime, AIL vide their reply dated August 25, 2004 stated that they had vide their letter dated July 19, 2004, (copy of the same was enclosed as proof) earlier informed SEBI that they were not been in a position to upload the required information on the EDIFAR as they had not received the password from the exchange for uploading the said information. It was submitted that as they had now received the password, all the required information from September 2002 till June 2004 had been duly uploaded. In view of the said submissions, AIL sought confirmation of the hearing scheduled for September 21, 2004. However the postponement of the said hearing was intimated to AIL vide letter dated September 15, 2004.
8. In the interim period, I was appointed as the Adjudicating Officer vide the order of the Chairman, SEBI dated September 30, 2004. Keeping in mind the principles of natural justice, a notice of hearing dated November 9, 2004 was sent to AIL in terms of Rule 5(1) of the Rules advising them to attend the personal hearing scheduled on December 9, 2004.
9. On the scheduled date of hearing, Shri A R Agarwal, Vice President of AIL appeared before me and stated that AIL had initially applied for the password on November 2002 but upon not receiving it, they had once again applied for the same on April 2004. Shri Agarwal drew my attention to a letter dated July 19, 2004 earlier sent by them to the then adjudicating officer (which is not on record) in which the said facts had been highlighted. Shri Agarwal reiterated that as undertaken by them, upon receiving the said password, they had duly uploaded all the information related to the company from Sep’2002 till Jun’2004 and had informed SEBI of the same vide their letter dated August 25, 2004. On the said basis, Shri Agarwal requested that though there was a delayed compliance on their part, the same may be condoned. Shri Agarwal further undertook to submit the documentary proof of AIL having made an application to EDIFAR as also for the password as well as proof of uploading of information on the EDIFAR site in due compliance with Regulation 17(3) of the CLA Regulations on the next date of hearing that was scheduled on December 16, 2004.
10. On the said date, Shri Agarwal submitted the documents evidencing the application made to the Stock Exchange, Mumbai for registration on the EDIFAR as also for the password on April 10, 2004 and November 08, 2002 respectively as well as proof of compliance regarding uploading of information relating to the Corporate governance report and annual report of the company and the particulars of appointment of the Director and Manager and changes among them, if any as well as the quarterly, half yearly statements of the company and the shareholding pattern of the company. On the basis of the above, Shri Agarwal stated that the AIL had substantially complied with all the formalities pertaining to EDIFAR.
CONSIDERATION OF ISSUES:
11. I have noted that Clause 51 in the Listing Agreement requires the companies, mandated by the exchange, from time to time, to file various financial statements / documents under EDIFAR. The essence of EDIFAR is providing the investors, an additional manner of disseminating information besides the normal information derived from the filings made by a company with the Exchanges, ROC and through publications in newspapers. Under clause 51 of the Listing Agreement, such a company is required to upload the following financial statements/documents with effect from quarter ended September 2002 in the EDIFAR website.
Financial Statements comprising of Balance Sheet, Profit and Loss Account and full version of annual report, half yearly financial statements including cash flow statements and quarterly financial statements
Corporate Governance report
Shareholding pattern statement
Action taken against the company by any regulatory agency
As the information required to be uploaded on the EDIFAR site facilitates the availability of financial and other information relevant to a company in an electronic mode, which is easily available to the public for inspection / review by alternate means, and there is a growing investor interest and awareness in the securities market, the regular dissemination of information such as financial results, adherence to corporate governance norms etc. becomes even more important
As AIL was found to have failed to comply with the above requirements, a notice to that effect was served upon them.
12. However on the basis of the facts submitted by AIL, it is observed that AIL had indeed downloaded the registration form and forwarded the duly filled in signed EDIFAR Registration form along with the required documents to the Stock Exchange, Mumbai, on April 10, 2003 itself along with the required documents to the Stock Exchange, Mumbai, i.e. much prior to receiving the letter dated July 4, 2003 from SEBI. Furthermore, from the submissions made by Shri Agarwal and the documents submitted in support of the same, it appears that AIL had been advised by the Stock Exchange, Mumbai that the login ID and password would be forwarded to the company in due course. However as the same was not forwarded in a timely manner to AIL by the said exchange, the information could not be duly uploaded on time.
13. Thus I find that there has been a delay on the part of AIL in complying with the SEBI circular relating to the EDIFAR registration and uploading of documents resulting in a belated compliance with Regulation 17(3) of the CLA Regulations, which reads as under:
“If a company or other body corporate, mutual fund or collective investment scheme fails to comply with these regulations, the listing conditions or the listing agreement or neglects to furnish any information or documents, which are required to be furnished to the Board, to the Authority or to an exchange as per these Regulations, the listing conditions or the listing agreement, it shall be liable to penalty as specified in Section 15A of the Act, to be imposed in accordance with the procedure prescribed under Chapter VI A of the Act."
14. To levy the appropriate penalty on AIL in this regard, Section 15A (b) of the Act is to be invoked which prescribes the penalty upto Rs.1 lakh for each day for each day during which the failure continues or Rs 1 crore which ever is less.
15. To determine the quantum of penalty, I have considered the following factors as provided in the section 15J of the Act, which also find mention in Rule 5(2) of the SEBI (Procedure for holding enquiry and imposing penalty by the Adjudicating Officer) Rules, 1995, i.e., the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; the amount of loss caused to an investor or group of investors as a result of the default and the repetitive nature of the default.
16. As regards the disproportionate gain or unfair advantage, there are no quantifiable figures available on record with respect to the default on the part of AIL. However as the delay in uploading financial and other information on the EDIFAR site does not appear to have benefited AIL in any way or prejudicially affect the interest of any shareholder / investor or the public at large, on a judicious exercise of the discretion conferred upon me, bearing in mind the factors enumerated above as well as after taking into consideration the fact that the delay in uploading the information on the EDIFAR website and thereby complying with complying with the requirement specified in Clause 51 of the Listing Agreement appears to have been on account of the delay in the allotment of the login ID and password, by the Stock Exchange, Mumbai to AIL which upon receiving the required password from the exchange, duly uploaded the said information, I am inclined to hold that the default on the part of AIL may not be viewed seriously.
ORDER
17. Having regard to the factors contained in Section 15J of SEBI Act, 1992 and the facts and circumstances of the case, I in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, am of the considered opinion that no penalty needs to be imposed upon M/s Aditya International Limited for the delayed compliance of Regulation 17(3) of the SEBI (Central Listing Authority) Regulations, 2003 read with Clause 51 of the Listing However, it is hoped that the company would be more careful in future in compliance with the regulatory requirements.
PLACE: MUMBAI G. BABITA RAYUDU
DATE: MARCH 18, 2005 ADJUDICATING OFFICER