IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
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Date of Hearing
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02/05/2005
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Date of Decision
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09/05/2005
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Appeal No: 142 of 2004
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Appellant – Represented by:
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Mahavir Investments
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Mr. Sanjay Mehta, Advocate
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Versus
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Securities & Exchange Board of India
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Respondent- Represented by
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Mr. Ravi Hegde, Advocate
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CORAM
Justice Kumar Rajaratnam, Presiding Officer
1. The appeal was taken up for final disposal with the consent of parties.
2. The appeal is against the order dated 29/06/2004 passed by the Adjudicating Officer Mr. D. Ravikumar, imposing a penalty of Rs, 2,00,000/- on the appellants for violation of Section 11C(2) of the SEBI Act, 1992. Section 11C(2) obliges all concerned to cooperate fully with the investigations conducted by the Securities and Exchange Board of India.
3. The respondent was conducting an investigation into the price manipulation of shares of MOH Limited and the appellant was found to have traded substantially in this scrip. The appellant was therefore called for investigation and one Virag Gandhi, husband of the proprietor appellant, Mahavir Investment, appeared before the investigating authority. His statement was recorded and during the recording of the statement, in response to a question, he had stated that he would send a copy of scrip wise / client wise souda register within one week. This was not sent by him and the matter was referred to the Adjudicating Officer for imposition of penalty. It seems that the appellant remained absent during the adjudication proceedings and the impugned order came to be passed ex-parte. Being aggrieved, the appellant has filed the present appeal.
4. The appellant argued during the hearing that he was neither a broker nor a sub-broker and was therefore not required to maintain the souda register or any other documents of this nature. The appellant therefore prepared a statement of transactions done by him in the scrip of MOH Limited and submitted it to M/s. M.S. Consultancy, sub-broker of M/s. Acme Shares & Stocks Pvt. Ltd., requesting them to forward the necessary information to the respondent SEBI for further necessary action. Similarly when the show cause notice for adjudication was received by him he forwarded a copy thereof to M/s. M.S. Consultancy who assured him that since the statement of transactions had already been forwarded to SEBI nothing further was required to be done. Lastly the appellant have argued that they are conducting their business in a small town of Kambhat in Gujarat where legal advice of the right quality is not available for responding to such complicated issues and that lenient view be taken of any inadvertent violation of any laws or regulation by him.
5. The learned counsel for SEBI argued that the appellant failed to fully cooperate with the investigating authority and had also remained absent before the Adjudicating Officer, who had in any case, taken a lenient view and imposed a nominal penalty of Rs. 2,00,000/- whereas the penalty could have been as high as Rs. 1 crore.
6. I have carefully gone into the facts of the case and the arguments of the learned counsel on both sides. It cannot be denied that even though what was known to the appellant has been conveyed to the respondent SEBI in the recorded statement of the husband of the proprietor of the appellant firm, the appellant’s cooperation with the investigation fell short of the requirements of Section 11C(2) of the SEBI Act, 1992. However, in the overall facts and circumstances narrated by the appellant, I am of the view that a lenient view needs to be taken regarding the quantum of punishment. Accordingly the impugned order is upheld, but the quantum of penalty is hereby reduced from Rs. 2,00,000/- to Rs. 25,000/-.
7. No order as to costs.
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(Justice Kumar Rajaratnam)
Presiding Officer
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Place: Mumbai
Date : 09/05/2005
*/as
It is submitted that a sum of Rs. 25,000/- has been deposited with the respondent pursuant to the interim order dated 31/08/2004. That amount shall be treated as penalty.
(Justice Kumar Rajaratnam)
Presiding Officer