IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

Appeal No.71/2006

 

Date of Decision

19.05.2006

 

In the matter of:

 

Mr. Vikas Bengani	Appellant – Represented by Dr. S. K. Jain, Practicing Company Secretary
Versus
Securities and Exchange Board of India	Respondent – Represented by Mr. Kumar Desai, Advocate

 

Coram:

 

          Justice N. K. Sodhi, Presiding Officer

          R. N. Bhardwaj, Member

 

Per: Justice N. K. Sodhi, Presiding Officer(Oral)

            This appeal is directed against the order dated December 30, 2005 passed by the adjudicating officer holding the appellant guilty of violating the provisions of section 11 C (3) of the Securities and Exchange Board of India Act, 1992 (for short the Act) and imposing a penalty of Rs.2 lacs on him for not furnishing the information sought from him during the course of investigations.

          The Securities and Exchange Board of India (for short the Board) ordered investigations under section 11C of the Act into the alleged price manipulation in the scrip of Brijlaxmi Leasing and Finance Ltd. (hereinafter called the Company).  During the course of the investigations it transpired that the appellant had traded in the scrips of the Company and, therefore, the investigating officer thought it necessary to call upon him to furnish information regarding the details of his trading during the period from January 1, 2002 to June, 2002.  He was required to furnish, amongst others,  the details of his demat account and the bank statements.  Two letters dated April 8, 2004 and May 26, 2004 were sent to him calling upon him to furnish the aforesaid information.  Even though these letters had been received by the appellant, there was no response from his side.  The investigating officer then issued summons on 18/1/2005, 18/3/2005 and again on 12/4/2005 all of which were delivered through registered post but the appellant did not respond.  Since the appellant did not comply with the summons, the Board ordered an enquiry against him under the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995.  Notice was issued to him to show cause why an enquiry should not be held against him and penalty be not imposed under Section 15A(a) of the Act.  This notice was sent by registered post acknowledgement due and it was duly delivered on September 16, 2005.  The appellant did not respond.  In view of the non co-operative attitude of the appellant, the adjudicating officer had no option but to proceed ex-parte against him and on the basis of the material on the record including the reports received from the postal authorities he came to the conclusion that the appellant intentionally evaded the summons issued to him and did not co-operate with the Board in furnishing the requisite information sought from him under Section 11 C(3) of the Act.  The appellant was accordingly held guilty of violating Section 11 C (3)  of the Act and a penalty of Rs.2 lacs has been slapped on him under section 15A(a) of the Act.  Hence this appeal.

          We have heard the representative of the appellant and the learned counsel for the respondent and find no ground to interfere with the impugned order.  Section 11 C(3) of the Act provides that an investigating authority may require any intermediary or any person associated with the securities market to furnish such information or produce such books or registers or documents or record as he may consider necessary if the furnishing of such information or production of such books or registers or other documents is relevant for the purpose of its investigation.   If the person who is required to furnish such information fails to do so, he shall be liable to a penalty of Rs.1 lac for each day during which such failure continues or    Rs.1 crore whichever is less.    In the instant case, the Board has ample material on the record including the reports of the postal authorities indicating that the appellant was evading the summons and did not cooperate with the investigations from the beginning.  He failed to furnish the information sought from him and the adjudicating officer was, therefore, right in holding that the appellant was guilty of violating the provisions of section 11 C (3) of the Act.  The learned representative of the appellant during the course of arguments pleaded that mercy be shown to his client as he is now willing to extend full co-operation to the Board.  We cannot accept this plea because the adjudicating officer has already taken a lenient view in the matter.  We cannot lose sight of the fact that the Parliament in its wisdom amended the Act in the year 2002 and  enhanced the penalties.  The penalty for violating the provisions of Section 11 C (3) was enhanced to Rs.1 lac for each day during which such failure continues subject to a maximum of     Rs.1 crore.  This  being the position, we cannot reduce the penalty in regard to which the adjudicating officer has already shown sufficient leniency.  It should be understood that the Board as a regulator of the securities market and a protector of the interests of the investors cannot perform its functions if persons associated with the securities market or any intermediary does not co-operate with it and produce timely information which is sought from him during the course of investigations.  Timely information has to be furnished particularly when the Board is investigating into the price manipulation of scrip of a company.   Failure to do so could result in the mischief being done which the Board may be wanting to prevent or the interest of the investors may suffer or the securities market may get polluted.  It is for this reason that the Parliament substantially enhanced the penalties for various violations.  In this background, the violation of Section 11 C (3)  has to be viewed seriously. 

          In the result,  the appeal fails and the same  stands dismissed with no order as to costs.

 

sd/-

Justice N.K. Sodhi
Presiding Officer

sd/-

C.Bhattacharya
Member

sd/-

R.N.Bhardwaj
Member

 

19^th May, 2006.

Smn/19/5