Order against M/s. Choudhury Udyog 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 M/s. Choudhury Udyog, having its address at C/o. Shri Raj Kumar Banka, 29A, Weston Street, Room # 7B, Kolkata – 700 013. 
   
    
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 May 5, 2003 was issued to M/s. Choudhury Udyog by the Investigating Authority of SEBI calling upon M/s. Choudhury Udyog to produce certain documents mentioned in the Annexure to the said summons on May 13, 2003 and also to be present in person. Since there was no response, a fresh summons dated May 20, 2003 was issued by the Investigating Authority which were to be complied with on May 26, 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 Das Daga, Member, The Calcutta Stock Exchange, I noticed that the aforesaid summons were served on M/s. Choudhury Udyog.
   
    
4. In view of the above, I issued a notice dated December 14, 2004 to M/s. Choudhury Udyog 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 of Securities and Exchange Board of India Act, 1992. The said notice dated December 14, 2004 was sent to M/s. Choudhury Udyog by Registered Post with Acknowledgment Due. However, the said notice was returned undelivered by the postal authorities.  Hence, I requested the Eastern Regional Office of SEBI at Kolkata to serve the aforesaid notice which was reissued by me on January 10, 2005 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. Accordingly, service by way of hand delivery was carried out by the officials of SBEI, Kolkata on January 15, 2005 and a copy of the aforesaid notice duly acknowledged was forwarded to me.  However, since there was no reply to the aforesaid  notice by M/s. Choudhury Udyog, I was of the opinion that an inquiry should be held in the matter and accordingly a notice of inquiry dated February 25, 2005 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 to M/s. Choudhury Udyog fixing March 18, 2005 (at 2:30 PM) as the date of inquiry.  The said notice which was sent by speed post acknowledgement due was returned undelivered. Therefore, I requested the Eastern Regional Office of SEBI to serve the reissued notice of inquiry dated March 7, 2005 on M/s. Choudhury Udyog. As per the acknowledgement forwarded to me by the Eastern Regional Office of SEBI, the said notice of inquiry was served on M/s. Choudhury Udyog on March 14, 2005. As per the said notice of inquiry, M/s. Choudhury Udyog  was advised to appear for the inquiry at the Eastern Regional Office of SEBI at Kolkata before me on March 18, 2005 at 12:00 noon. 
   
    
5. However, on March 18, 2005 neither any representative/ lawyer of M/s. Choudhury Udyog  appeared before me nor any reply was received by me from M/s. Choudhury Udyog. In these circumstances, I was left with no option but to proceed with the inquiry against M/s. Choudhury Udyog as I was of the opinion that M/s. Choudhury Udyog 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 M/s. Choudhury Udyog  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 M/s. Choudhury Udyog  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. Choudhury Udyog  to defend the aforesaid charges of non furnishing of information directed to be produced by the Investigating Authority. However, M/s. Choudhury Udyog  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. Choudhury Udyog  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. Choudhury Udyog . 
   
    
7.  Since the failure of producing the documents before the Investigating Authority of SEBI by M/s. Choudhury Udyog  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. Choudhury Udyog. 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. Choudhury Udyog  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
     
11. 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. Choudhury Udyog . M/s. Choudhury Udyog 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. .
    
    
12. 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. Choudhury Udyog and also to Securities and Exchange Board of India.

Date: March 31, 2005                                           A. Chandra Sekhar Rao

Place: Mumbai                                                        Adjudicating Officer