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 AMRADEEP INDUSTRIES 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 Electronic Data Information Filing And Retrieval Website (EDIFAR web site); www.sebiedifar.nic.in by the companies mandated by SEBI, from time to time.
2. In this regard, M/s Amradeep Industries Limited (for brevity’s sake, hereinafter referred to as AIL) was one of such companies, required to upload the required 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 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. In reply to the said notice, AIL vide their letter dated July 22, 2004 submitted that they had send the EDIFAR Registration Form to the Stock Exchange, Mumbai, and were awaiting the user id and password to upload the specified financial statement /documents. They further requested for help to enable them to obtain the necessary id and password so as to comply with Clause 51 of the listing agreement. Subsequently a notice of hearing dated August 12, 2004 was sent to AIL 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 20, 2004. The date of the hearing which was subsequently rescheduled to December 9, 2004 was intimated to AIL vide letter dated November 9, 2004. However nobody appeared on behalf of AIL for the said hearing.
7. 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 February 9, 2005 was sent to AIL in terms of Rule 5(1) of the Rules advising them to attend the personal hearing scheduled on March 2, 2005. Once again although the said notice was acknowledged by AIL, they neither attended the said proceedings nor did they send an explanation for their failure to attend the said proceedings.
8. As observed above, AIL were granted sufficient opportunities to appear before me and present their case. Despite the same, they failed to avail the said opportunities.
CONSIDERATION OF ISSUES:
9. In the absence to any representation from AIL, the matter is proceeded with on the basis of the facts and circumstances of the case, the material available on record as also the relevant regulatory provisions.
10. 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 EDIFAR thus provides 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. Consequently the investors have access to have information not only on the company and its management but also to the information as regards its functioning. Under clause 51 of the Listing Agreement, the specified company is required to upload the following financial statements/documents with effect from quarter ended September 2002 on 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
11. 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.
12. As AIL was found to have failed to comply with the above requirements, a notice to that effect was served upon them.
13. However on the basis of the facts on record, and the submissions made by AIL, it appears that they were not able to upload the specified financial statement /documents on the EDIFAR as they were not issued the user id and password by the Stock Exchange, Mumbai, despite sending the necessary form seeking registration on the EDIFAR. However no documents have been submitted by them evidencing the application made to the Stock Exchange, Mumbai for registration on the EDIFAR or for the password. No details have been provided by them as regards the status in this regard till date or whether they had indeed reminded the stock exchange regularly for the said password to enable them to upload the required information on the EDIFAR. Mere submissions that the EDIFAR Registration form was submitted to the exchange cannot absolve AIL from their responsibility to comply with clause 51 of the listing agreement i.e. uploading information under EDIFAR. Accordingly in the absence of any proof of compliance regarding uploading of information relating to the Corporate governance report and annual report of the company as well as the quarterly, half yearly statements of the company and the shareholding pattern of the company, it would be reasonable to infer that the AIL has not complied with all the formalities pertaining to EDIFAR.
14. In any case, to obtain the relevant information in this regard, I have gone through the EDIFAR website and have noted that AIL’s name appears on the EDIFAR website but the required information has not been uploaded. AIL was required to upload the information from the quarter ended September 2002. As they failed to upload the information on the EDIFAR till date, there is already a delay of more than two and half years in uploading the information on the EDIFAR.
15. Moreover, except for a single instance, AIL did not address the other notices issued by me or express their inability to attend the hearing proceedings. Despite receiving the said notices, they kept themselves away from the hearing proceedings.
16. It is thus established that there has been non-compliance of Clause 51 of the Listing Agreement by AIL due to their failure to upload information on the EDIFAR website, resulting in the contravention of 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."
17. 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.
18. 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.
19. It is not clear as to whether AIL enjoyed any gain or unfair advantage as a result of the default. However it cannot be denied that the said default would have certainly caused a certain amount of disadvantage to their shareholders and the investor class as a whole. Moreover, the default is continuing till date. Hence 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 facts and circumstances of the present case as well as after analysing all the material available on record, the rationale behind the requirement of uploading the information on EDIFAR as well as the absence of any response by AIL to a regulatory directive, I am inclined to hold that although the penalty need not be imposed in terms of the quantum provided in Section 15A of the Act, the imposition of a token penalty is very much necessitated..
PENALTY:
20. In view of the failure on the part of AIL to upload the required information on the EDIFAR website and their non-compliance of Clause 51 of the Listing Agreement resulting in the contravention of Regulation 17(3) of the SEBI (Central Listing Authority) Regulations, 2003, having regard to the factors contained in Section 15J of SEBI Act, 1992 and the facts and circumstances of the case, 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, and in the interest of justice, equity and good conscience, I think it appropriate to levy a penalty of Rs. 25,000/-(Rupees Twenty five thousand only) on M/s Amradeep Industries Ltd.
21. The penalty amount shall be paid through a cross demand draft drawn in favour of “SEBI- Penalties remittable to the Government of India’ and payable at Mumbai which may be sent to Shri.S.V.Muralidhar Rao, General Manager, Securities and Exchange Board of India, Mittal Court, B Wing, 224 Nariman Point, Mumbai – 400021.
PLACE: MUMBAI G. BABITA RAYUDU
DATE: MARCH 22, 2005 ADJUDICATING OFFICER