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Order in the matter of Washington Software Limited

Mar 31, 2008
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Orders : Orders of AO

ADJUDICATION ORDER NO. - BS/AO- 11/2008

ORDER UNDER SECTION 15I OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF ADJUDICATION PROCEEDINGS AGAINST WASHINGTON SOFTWARE LIMITED.

  1. Pursuant to the investigation conducted by the Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) in respect of the dealings in the scrip of Washington Software Limited , SEBI vide order dated 3rd April, 2006 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 alleged to have been committed by Washington Software Limited (hereinafter referred to as the ‘noticee’) on account of its failure to furnish information to SEBI.
  2. It is alleged that the investigating authority of SEBI issued summons dated August 17, 2004, to the noticee requiring the noticee to furnish certain information regarding the allotment of shares of WSL. It is alleged that the noticee failed to comply with the said summons and failed to submit the information to the investigating authority.

    NOTICE AND REPLY

  3. A show cause notice in terms of the provisions of Rule 4(1) of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 was issued to the noticee on July 11, 2006 seeking reply of the noticee as to why an inquiry should not be held against it in respect of the violations alleged to have been committed by it.  
  4. It is noted that the noticee failed to reply to the show cause notice. However, considering the facts of the case, it was decided to conduct an inquiry in the matter and the noticee was advised to attend the inquiry on November 29, 2006.
  5. The noticee failed to attend the hearing on November 29, 2006. Subsequently the noticee was advised to attend the hearing scheduled on July 5th, 2007. It is noted that the noticee failed to attend the inquiry on the said date.  As the noticee failed to reply to the show cause notice despite being granted sufficient time and opportunities to do so, the inquiry is proceeded on the basis of the facts and material available on record.

    CONSIDERATION OF EVIDENCE AND FINDINGS

  6. The allegation against the noticee is that it failed to comply with the summons dated August 17, 2004, issued by investigating authority and in view of the same, it is liable to the penalty prescribed under Section 15 A (a) of the SEBI Act, 1992. In this regard it is pertinent to note that Section 11 C (3) of the SEBI Act empowers the investigating authority of SEBI to require any person associated with the securities market to furnish such information or to produce such records as may be required by the investigating authority. Further, Section 11 C (5) empowers the investigating authority to examine such persons. Timely submission of information is very important for concluding investigation proceedings and non co-operation by an entity can be detrimental to the interests of investors and securities market on account of any delay in the investigation.
  7. In this regard, the provisions of Section 15A(a) of SEBI Act provides the following:

“Penalty for failure to furnish information, return, etc.: If any person, who is required under this Act or any rules or regulations made thereunder, 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.”

      8.      It is noted that investigating authority issued summons dated August 17, 2004, to the noticee seeking the following information :

  1. Application forms in respect of re-issued shares.
  2. Application forms in respect of preferential allotment.
  3. Audited Accounts and annual report for the financial years 1999-00 & 2000-01.
  4. Bank accounts of the company where the application monies was/were deposited.
  5. Break-up on utilization of monies received in re-issue preferential allotment.
  6. M/s Vaishanavi Construction was given shares in lieu of property. Copy of the agreement between WSL and M/s Vaishanavi Constructions.
  7. Breakup of the friends and relatives holding shares.
  8. Copies of I.T return for the Assessment year 2000-01 & 2001-02.
  9. Copy of reminder dated 20.07.1999 to the shareholders for payment of Rs 7.50.
  10. Copy of Memorandum of Association and Articles of Association of the company.  

9.    The noticee was required to furnish the said details by 25th August, 2004. It is noted from the facts available on record that the said summons was duly received and acknowledged. However no reply was received from the noticee in the matter.  

10.    In view of the above details, it is concluded that the noticee failed to comply with the summons dated August 17, 2004. It is noted from the details stated in the preceding paragraphs that the Investigating authority was only seeking preliminary / basic details from the noticee such as preferential allotment. The investigating authority of SEBI sought certain details from the noticee and the noticee failed to provide these details. In view of the same, the failure on the part of the noticee to comply with the summons attract penalty under Section 15A (a) of the SEBI Act. 

11.  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;

  1.  
    1. the amount of disproportionate gain or unfair advantage wherever quantifiable, made as a result of the default
    2. the amount of loss caused to an investor or group of investors as a result of the default
    3.  the repetitive nature of the default  

 12.         It is not possible to quantify the gains made by the noticee or the loss caused to investors on account of the violation committed by the noticee. As it is seen from the facts available on records, the noticee failed to comply with the summons dated August 17, 2004 and only one summons is issued in this regard, hence the failure on the part of the noticee is not repetitive in nature.

ORDER

 13.         Considering the facts and circumstances of the case it is established that  Washington Software Limited failed to provide necessary information to the Investigating Authority of SEBI in response to the summons issued by it. However considering the fact that only one summons was issued, a lenient view is taken with regard to the penalty attracted in respect of the violation committed by the noticee. Considering the facts and circumstances of the case and the violation committed by the noticee, I impose a penalty of Rupees One Lakh (Rs. 1,00,000) on M/s Washington Software Limited in terms of the provisions of Section 15 A (a) of the SEBI Act, 1992 for failure to provide necessary information to SEBI. In the facts and circumstances of the case, I am of the view that the said penalty is commensurate with the violation committed by M/s Washington Software Limited.

 14.         The penalty shall be paid by way of demand draft drawn 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 shall be forwarded to Chief General Manager, Investigation Department (ID-7), Securities and Exchange Board of India, Plot No. C4-A, ‘G’ Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.  

 15.          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 M/s Washington Software Limited and also to Securities and Exchange Board of India.

 

 

PLACE: Mumbai

Biju. S

 DATE: March 31, 2008   

Adjudicating Officer