ADJUDICATION ORDER UNDER RULE 5 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF ADJUDICATION PROCEEDINGS AGAINST SHRI HIREN RATHOD FOR FAILURE TO FURNISH INFORMATION TO SEBI AND TO COMPLY WITH THE SUMMONS ISSUED BY SEBI.
1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) vide order dated October 14, 2004, appointed the undersigned as the Adjudicating Officer to inquire into and adjudge under Section 15I of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’), the violation of Section 15A of the SEBI Act alleged to have been committed by Shri Hiren Rathod (hereinafter referred to as Shri Rathod) by not complying with the summons issued by SEBI seeking information regarding his dealings in the scrip of Sword & Shield Pharma Ltd. (hereinafter referred to as SSPL). It is noted that SEBI issued summons dated August 9, 2004 requiring Shri Rathod to submit certain information in respect of his dealings in the scrip of SSPL. It is alleged that Shri Rathod did not submit the information sought by SEBI. Further, Shri Rathod did not appear before the Investigating Authority as required by SEBI vide summons dated August 9, 2004. In view of the alleged non compliance of summons issued by SEBI, Adjudication Proceedings were initiated against Shri Rathod.
NOTICE AND REPLY
2. A notice no. A&E/BS/33256/2005 dated February 9, 2005 was issued to Shri Rathod in terms of Rule 4 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as the “Rules”) seeking reply on the violation alleged to have been committed by him.
3. In response to the said notice, Shri Rathod vide his letter dated February 15, 2005 submitted that he sent a letter in response to the summons dated August 9, 2004 and informed that he was just an employee of Shri Pravin Raiyani. Further, he has not dealt in the scrip of SSPL, also he did not have bank account or demat transaction. Further, Shri Pravin Raiyani had attended the summons on behalf of Shri Rathod
4. Subsequently Shri Rathod was granted an opportunity of hearing on March 16, 2005.
5. Shri Pravin Raiyani, authorized representative of Shri Rathod appeared for personal hearing on March 16, 2005 and submitted the following:
a) Shri Rathod was an employee of Shri Pravin Raiyani during the period for which information was sought.
b) Shri Rathod had replied to each and every letter from SEBI. Summons dated August 9, 2004 was also replied vide letter dated August 11, 2004 and submitted at SEBI office on August 16, 2004 by Shri Pravin Raiyani.
c) It is submitted that Shri Pravin Raiyani had asked SEBI officer whether presence of Shri Rathod is required and he was told that Shri Rathod will be intimated whenever required.
d) Subsequently, details were submitted vide letter dated February 6, 2005.
e) It is submitted that Shri Rathod had no intention of hiding any fact by not complying with the summons, but it happened merely because of ignorance.
f) In view of the above it is requested that the above violation may be waived and no action may be initiated against Shri Rathod in the matter.
CONSIDERATION OF EVIDENCE AND FINDINGS
6. The allegation against Shri Rathod is that he failed to comply with the summons issued by SEBI. It is noted that SEBI issued summons dated August 9, 2004 requiring Shri Rathod to submit the information sought by the Investigating Authority in connection with the investigations initiated by SEBI in the scrip of SSPL.
7. In this regard it is noted that Shri Rathod claims to have replied to the summons vide letter dated August 11, 2004 which was handed over at SEBI on August 16, 2004.
8. It is further noted that Shri Rathod has not personally appeared before the investigating authority which Shri Rathod had stated was due to his ignorance and he had no intention of hiding the facts from SEBI.
9. In this regard it is pertinent to note that the summons dated August 9, 2004 was issued to Shri Rathod requiring information pertaining to his dealings in the scrip of SSPL and also requiring his presence before the investigating authority on August 17, 2004 at 11:00 AM.
10. Shri Rathod in response to the summons, vide his letter dated August 11, 2004 had stated that he had not dealt with the shares of SSPL. Further vide the said letter Shri Rathod had stated that his employer Shri Pravin Raiyani shall appear before the investigating authority.
11. In view of the said contentions raised by Shri Rathod and also taking into account the fact that only one summons was by SEBI to Shri Rathod, it can not be concluded that Shri Rathod willfully withheld the information from SEBI.
12. In this regard Section 15A(a) of the SEBI Act reads as under.
15A. Penalty for failure to furnish information, return, etc. : If any person, who is required under this Act or any rules or regulations made thereunder,
(a) “to furnish any document, return or report to the Board, fails to furnish the same, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less”
13. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of the Rules require that while adjudging the quantum of penalty, the adjudicating officer shall have due regard to the following factors namely;
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
c) the repetitive nature of the default
14. However, considering the facts of the case as stated above, it is noted that as Shri Rathod vide his letter dated August 11, 2004 replied to the summons and also considering the fact that subsequently, no further letter or summons was issued by SEBI to Shri Rathod, it is felt that the failure to appear before the investigating authority as required in the summons dated August 9, 2004 was not willful disobedience and hence does not warrant imposition of penalty.
ORDER
15. As per the provisions of section 15 A (a), failure of a person to submit the information shall invite the penalty prescribed under the said provisions. However, considering the facts and circumstances of the case, I am of the view that the failure on the part of Shri Hiren Rathod to comply with the summons issued by SEBI does not warrant imposition of penalty. Hence no penalty is imposed on Shri Hiren Rathod in respect of his failure to comply with the summons issued by SEBI.
16. In terms of the provisions 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 Shri Hiren Rathod and to SEBI.
PLACE: MUMBAI BIJU. S
March 31, 2005 ADJUDICATING OFFICER