BEFORE THE SECURITIES APPELLATE TRIBUNAL, MUMBAI
Appeal No.84/05
Date of Hearing : 5.5.05
Date of Decision : 25.5.05
In the matter of:
Appellant : M/s Neocure Therapeutics Ltd., Hyderabad.
Respondents: 1. A. Sunil Kumar, Adjudicating Officer, SEBI, Chennai.
2. Securities and Exchange Board of India, Mumbai.
Appellant by : Shri V.B. Raju, Advocate
Respondent by : Shri Vivek Menon, Advocate
Coram:
Justice Kumar Rajaratnam, Presiding Officer
Per: Justice Kumar Rajaratnam, Presiding Officer
The appeal is taken up for final disposal with consent of both parties.
2. The appeal is against the order dated 26.10.04 of Adjudicating Officer appointed by SEBI, the operating part of which is stated as under:
“7.4 Taking into account the above facts and circumstances of the case, the findings as recorded above, and taking into account the factors as contained in Section 15 J of the said act, I am of the view that a penalty of Rs.2,00,000/- (Rupees two lakh only) shall be commensurate, for non-compliance with Clause 51 of the Listing Agreement in violation of regulation 17(3) of the Securities and Exchange Board of India (Central Listing Authority) Regulations, 2003.
I hereby, impose a penalty of Rs.2,00,000/- on the company for the aforesaid violation, in terms of section 15 A(b) of the Securities and Exchange Board of India Act, 1992. The company i.e. M/s Neocure Therapeutics Ltd., shall pay this amount of penalty of Rs.2,00,000/- (Rupees two lakh only) by way of Demand Draft drawn in favour of ‘SEBI - Penalties Remittable to Government of India’ payable at Mumbai to be sent to The Deputy General Manager, Division of Issues & Listing, Corporation Finance Dept., SEBI, Mittal Court, Nariman Point, Mumbai 400 021, immediately on receipt of this Order.”
3. Aggrieved by the above order dated 26.10.2004 of the Adjudicating Officer, the appellant has filed this appeal.
4. The brief facts of the case are that the appellant-company was incorporated in the year 1987 having its registered office at G-4/B, SEIE, Kattedan, Hyderabad -77, and mainly incorporated for the purpose of carrying on the business of pharmaceutical products and formulations.
5. The appellant-company went for public issues and its shares were listed in National Stock Exchange of India Ltd., Mumbai Stock Exchange and Hyderabad Stock Exchange.
6. The appellant-company submitted that it had faced a steep competition in pharmaceutical products and formulations and started incurring losses and could not withstand in the competitive market. The appellant stated that due to the factors beyond its control, it faced financial crunch and activities of the company came to a standstill. The appellant-company till its closure was regular in compliance requirements of SEBI Regulations.
7. By circular No.SMD/POLICY/CIR-13/02 dated June 20, 2002 as amended by SMD/POLICY/CIR-17/02 dated July 3, 2002, SEBI has added clause No.51 EDIFAR (Electronic Data Information Filling and Retrieval) in the Listing Agreement. This has been implemented by SEBI in stages. The appellant has been included in the list (at Sl. No.296) for the EDIFAR filing with effect from quarter ending December 31, 2002.
8. The appellant failed to comply with the above requirement relating to EDIFAR filing and hence the respondent issued show cause notice to the appellant vide letter dated 4.7.2003 asking the appellant to show cause as to why adjudication proceedings should not be initiated against the company for the said non-compliance.
9. The company failed to reply to the show cause notice as well as the reminders and hence the Adjudicating Officer proceeded with and decided the matter ex parte in accordance with the said Rules.
10. Clause 51 of the Listing Agreement reads as under:
EDIFAR FILING
“(1) The company agrees that it shall file the following information, statements and reports on the Electronic Data Information filing and Retrieval (EDIFAR) website maintained by National Informatics Center (NIC), on-line, in such manner and format and within such time as may be specified by SEBI.
Ø Full version of annual report including the balance sheet, profit and loss account, director’s report and auditor’s report; cash flow statements; half yearly financial statements quarterly financial statements.
Ø Corporate governance report.
Ø Shareholding pattern statement
Ø Statement of action taken against the company by any regulatory agency.
Ø Such other statement, information or report as may be specified by SEBI from time in this regard.
Provided that the requirement of this clause shall be in addition to and not in derogation from the requirements of other clauses of this listing agreement, which may require filing of any statements, reports and information in the physical or other form with the exchange
2.2 Regulation 17(3) of the said Regulations:
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 or Section 15HB of the Act, to be imposed in accordance with the procedure prescribed under Chapter VI A of the Act.
2.3. Penalty for failure to furnish information, return, etc. under Section 15A(b) of the Act
If any person, who is required under this Act or any rules or regulations made thereunder –
b) to file any return or furnish any information, books or other documents within the time specified therefore in the regulations, fails to file return or furnish the same within the time specified therefore in the regulations, 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.”
11. The appellant stated that the Stock Exchange, Mumbai, by its letter dated December 20, 2002 had directed the appellant to apply with particulars for registration for allotting Log-in ID and password to enable the appellant company to file the statement on the EDIFAR website.
12. National Stock Exchange of India Ltd. also asked the appellant to send the registration form by their letter dated January 8, 2003.
13. The appellant forwarded the information by its letter dated 29.1.2003 for EDIFAR registration and has also furnished the copy of proof of PAN, proof of year of inception and latest annual report by courier.
14. The appellant-company had submitted that it had closed its manufacturing activities and watch and ward staff were looking after and protecting the properties of the company and hence the notices issued by the Adjudicating Officer were not received by the appellant.
15. The appellant submitted that the notices issued by the respondent might had been acknowledged apparently by the security persons, who had not brought them to the notice of the management of the appellant-company. Therefore, the appellant pleaded that non-appearance of the appellant-company before the Adjudicating Officer is neither intentional nor wanton but for the peculiarity of the circumstances.
16. In similar circumstances, for a violation of the Listing Agreement, the Adjudicating Officer has given a warning. The operative order of SEBI, under similar circumstances, dated March 18, 2005 reads as under:
“Having regard to the factors contained in Section 15J of SEBI Act, 1992 and the facts and circumstances of the case, I 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, am of the considered opinion that no penalty needs to be imposed upon M/s Aditya International Limited for the delayed compliance of regulation 17(3) of the SEBI (Central Listing Authority) Regulations, 2003 read with Clause 51 of the Listing However, it is hoped that the company would be more careful in future in compliance with the regulatory requirements.”
Italics by Court
17. Taking into account the facts and circumstances of the case, I uphold the impugned order passed by the respondent as the appellant is required to comply with all the requirements of the Regulator, the respondent.
18. However, as the functioning of the company is stated to be at a standstill because of steep competition in the market and as the company is incurring loss and is almost closed, I am inclined to reduce the penalty of Rs.2,00,000/- imposed by the respondent to Rs.10,000/- to be paid within four weeks of receipt of this order. The impugned order stands modified to the extent mentioned above.
19. No order as to costs.
Sd/-
Justice Kumar Rajaratnam
Presiding Officer
Place: Mumbai
Date: 25th May 2005
Avm