Order against M/s. N.K. Traders 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. N.K. Traders, having its address at 20, Banaras Road, Howrah, Kolkata – 711 106. 
    
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 September 30, 2002 was issued to M/s. N.K. Traders by the Investigating Authority of SEBI calling upon M/s. N.K. Traders to produce certain documents mentioned in the Annexure to the said summons on October 8, 2002 and also to be present in person. Since there was no response, a fresh summons dated October 22, 2002 was issued by the Investigating Authority which was to be complied with on October 28, 2003.  Since there was no response to the said summons, another summons dated February 28, 2003 was issued to M/s. N.K. Traders 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 summons dated October 22, 2002 made available to me, it appears that the said summons was received by M/s. N.K. Traders. From an unauthenticated photocopy of SEBI letter dated February 21, 2003, it appears that M/s. N.M. Lohia & Co. Member, The Calcutta Stock Exchange, was requested to serve the summons on M/s. N.K. Traders. However, from the records furnished to me, I found that there was no documentary evidence to prove that the summons dated September 30, 2002 and February 20, 2003 were served on M/s. N.K. Traders. 
    
4. In view of the above, I issued a notice dated December 14, 2004 to M/s. M/s. N.K. Traders 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. N.K. Traders 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 affixture was carried out by the officials of SBEI, Kolkata on January 13, 2005 and a report to this effect was forwarded to me.  However, since there was no reply to the aforesaid  notice from M/s. N.K. Traders, 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. N.K. Traders fixing March 17, 2005 (at 10:30 AM) as the date of inquiry.  The said notice 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 14, 2005 on M/s. N.K. Traders. The said notice of inquiry was served on M/s. N.K. Traders on March 16, 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. As per the said notice of inquiry, M/s. N.K. Traders was advised to appear for the inquiry at the office of the undersigned at Mumbai on March 23, 2005 at 11:00 AM. 
    
5. However, on March 23, 2005 neither any representative/ lawyer of M/s. N.K. Traders  appeared before me nor any reply was received by me from M/s. N.K. Traders. In these circumstances, I was left with no option but to proceed with the inquiry against M/s. N.K. Traders as I was of the opinion that M/s. N.K. Traders 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. N.K. Traders  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. N.K. Traders  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. N.K. Traders  to defend the aforesaid charges of non furnishing of information directed to be produced by the Investigating Authority. However, M/s. N.K. Traders 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. N.K. Traders 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. N.K. Traders .
    
7.  Since the failure of producing the documents before the Investigating Authority of SEBI by M/s. N.K. Traders 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. N.K. Traders. 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. N.K. Traders 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 three 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. N.K. Traders. M/s. N.K. Traders 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. N.K. Traders and also to Securities and Exchange Board of India.

Date: March 31, 2005                                  A. Chandra Sekhar Rao

Place: Mumbai                                               Adjudicating Officer