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 LALIT BHASIN FOR FAILURE TO FURNISH INFORMATION AND TO COMPLY WITH THE SUMMONS ISSUED BY SEBI.
1. Vide order dated December 14, 2004 issued by the Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) I was appointed 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 Shri Lalit Bhasin (hereinafter referred to as the noticee) by not complying with the summons issued by SEBI seeking information regarding his dealings in the scrip of Jagsonpal Pharmaceuticals Limited (hereinafter referred to as JPL).
2. It is alleged that pursuant to the investigation initiated by SEBI in respect of the trading in the scrip of JPL, SEBI issued letters dated June 7, 2004 and July 2, 2004, requiring the noticee to submit information in respect of his dealings in the scrip of JPL and also to personally appear before the Investigating Authority of SEBI. It is alleged that the noticee did not submit the information sought by SEBI. Further, the noticee did not appear before the Investigating Authority as required by SEBI in the said summonses. In view of the alleged non compliance of summons issued by SEBI, Adjudication Proceedings were initiated against the noticee.
NOTICE AND REPLY
3. A notice no. A&E/BS/37587/2005 dated April 4, 2005 was issued to the noticee 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 of the noticee as to why an inquiry should not be held against him in respect of the violations alleged to have been committed by him.
4. In this regard, the noticee vide his letter dated April 25, 2005 replied to the notice and submitted the following:
· Vide my letter dated June 19, 2004 in response to the summons issued by SEBI, I have stated that I have not dealt with or bought or sold any share in the said scrip during last five years. It also appeared to me that the said summons might not be relating to me and therefore requested SEBI to withdraw the same in the case if the said summons do not relate to me.
· SEBI vide its letter dated July 2, 2004 summoned, afresh requiring my presence before the Investigating Authority on July 14, 2004 stating that my presence is required as I was holding the post of Directorship in some of the HB Group entities (namely HB Securities Limited, HB Stockholdings Limited, Harsai Investments Limited, RRB Securities Limited etc.) which dealt in the aforesaid scrip during the period.
· On receipt of fresh summons, I had checked from all the companies mentioned in SEBI's letter and accordingly, made my submissions vide letter dated July 9, 2004 that all the above said companies are separate legal entities and I am one of the directors in the said companies. It is further submitted that all the above companies have forwarded all the required information desired by SEBI and were reportedly co-operating with the SEBI in the matter. It was also stated that HB Securities has also forwarded all the desired information and Shri Praveen Gupta, Whole Time Director of the said company had appeared before the SEBI in the said matter.
· Vide the said letter I also requested SEBI that in case my appearance would still be required, an opportunity may kindly be provided to me any time after July 26, 2004 at Delhi.
· It is denied that I failed to produce the documents and provide the information in the matter.
5. Considering the reply submitted by the noticee and considering the facts and circumstances of the case it was decided that an inquiry should be held and the noticee was advised to attend the hearing scheduled on May 25,2005.
6. Shri. Vinay Shukla authorised representative of the noticee attended the hearing on May 25, 2005 and made the following submissions.
· With regard to letters dated June 19, 2004, July 9, 2004 and April 25, 2005 it may be noted that we have always replied, cooperated and provided necessary information to SEBI.
· We submit that there is no failure on our part to provide any document, return or report to the SEBI. It is also submitted that all the information was provided by the relevant company to the SEBI as and when asked for and the said communication was also made to the SEBI on vide our letter dated July 9, 2004 and April 25, 2005.
CONSIDERATION OF EVIDENCE AND FINDINGS
7. The allegation against the noticee is that he failed to comply with the summons issued by SEBI requiring his presence before the Investigating Authority of SEBI. In this regard, the provisions of Section 15A(a) of SEBI Act provides the following:
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,“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 SEBI issued summons dated June 7, 2004 and July 2, 2004, requiring the noticee to submit certain information in respect of his dealings in the scrip of JPL and also to personally appear before the investigating authority of SEBI. In this regard it is noted that the summons dated June 7, 2004 was sent to the residence address of the noticee. In this regard the noticee vide his letter dated June 19, 2004 stated that he had not dealt with or bought or sold any share in the scrip of JPL during last five years. It was also submitted by the noticee that said summon might not be relating to him and therefore the noticee requested SEBI to withdraw the same in the case if the said summon do not relate to him.
9. In this regard it is noted that subsequently the Investigating Authority of SEBI vide letter dated July 2, 2004 had stated that the presence of the noticee is required as he was holding the post of Directorship in some of the HB Group entities (namely HB Securities Limited, HB Stockholdings Limited, Harsai Investments Limited, RRB Securities Limited etc.) which dealt in the aforesaid scrip during the period.It is further noted that the noticee was required to appear before the Investigating Authority on July 14, 2004. With regard to the said summons the noticee vide his letter dated July 9, 2004 replied that the relevant information has been forwarded to SEBI by the respective companies. With regard to the personal appearance the noticee had stated that if his presence is required, an opportunity may be provided to him any time after July 26, 2004 at Delhi.
10. It is pertinent to note that the noticee had stated that if his presence before the Investigating Authority is required, then he may be provided an opportunity after July 26 at Delhi. Though the noticee has replied to the letters, sent to him by the Investigating Authority of SEBI, it can be inferred from the conduct of the noticee that he had not extended full cooperation to the Investigating Authority. However, as the first summons/ letter did not state that the information is required as the noticee is a director of the HB Group entities, and further the said summons, is sent to the residence of the noticee, without mentioning any specific details required from the noticee, it cannot be concluded that the noticee failed to provide information to SEBI. It is pertinent to note that vide his letter dated June 19, 2004 the noticee stated that he had not dealt with or bought or sold any share in the scrip of JPL during last five years. Further the noticee submitted that said summon might not be relating to him and requested SEBI to withdraw the same in the case if the said summons does not pertain to him.
11. On perusal of the second letter issued by the Investigating Authority of SEBI on July 2, 2004, it is noted that the same had stated that the presence of the noticee is required as he was holding the post of Directorship in some of the HB Group entities which dealt in the scrip of JPL. Further a new summons was issued to the noticee requiring his presence before the Investigating Authority on July 14, 2004. In response to the same, the noticee stated that due to personal inconvenience he may not be in a position to appear before the Investigating Authority on July 14, 2004. In this regard, it is pertinent to note that the noticee requested for an opportunity to appear before the Investigating Authority any time after July 26, 2004 at Delhi. Though a more cooperative attitude is expected from the noticee, considering the submissions of the noticee, and also taking into account the facts and circumstances of the case, it cannot be concluded that the failure on the part of the entity to appear before the investigating authority was willful noncompliance with the summons issued by SEBI. In view of the facts and circumstances of the case, I am of the view that the failure on the part of Shri. Lait Bhasin to appear before the Investigating Authority of SEBI, do not warrant imposition of penalty under Section 15 A(a) of the SEBI Act and accordingly no penalty is imposed on Shri. Lalit Bhasin.
12. 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. Lalit Bhasin and to SEBI.
PLACE: MUMBAI BIJU. S
May 31, 2005 ADJUDICATING OFFICER