ORDER OF THE ADJUDICATING OFFICER UNDER SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 AGAINST M/S ADITYA INTERNATIONAL LTD FOR THE VIOLATION OF REGULATION 53A of SEBI(DEPOSITORIES AND PARTICIPANTS) REGULATIONS, 1996 READ WITH SECTON 15HB OF SEBI ACT, 1992.
I was appointed as Adjudicating Officer by SEBI vide order dated 8th December, 2003, to inquire into and adjudge the alleged contravention of Regulation 53A of SEBI (DP) Regulations, 1996, by M/S ADITYA INTERNATIONAL LTD (hereinafter referred to as the company), in the matter of appointment of common share registrar for handling share registry work both for demat and physical securities.
Accordingly, a show cause notice dated December 30, 2003, was issued to the company. After receiving the reply dated 19.01.2004, an opportunity of personal hearing was granted.
NOTICE AND REPLY
The show cause notice dated 30.12.2003 alleges that the company did not appoint a common share transfer agent in the matters relating to transfer of securities, maintenance of records of holders of securities, handling of physical securities and establishing connectivity with the Depositories at a single point as
required under Regulation 53A of SEBI (Depositories and Participants) Regulations, 1996.
Shri Aditya Agarwal, Vice President of M/s. Aditya International Ltd, appeared and made the following submissions :
1) It was submitted that the company had appointed M/s. Sharex India Pvt Ltd located at Mumbai as common RTA both for physical and demat shares vide MOU dated 16.01.04 (copy placed on record). Hence, the company is having a common registrar.
2) Further, Sharex India Pvt Ltd. was already there as RTA for handling their securities in demat form. With the agreement dated 16.01.2004, the task of handling the maters relating to transfer of securities, maintenance of records etc. in physical form was also entrusted to them.
A letter dated 16.01.2004 by Sharex addressed to the BSE bearing the seal of BSE was furnished. Attached with the said letter was the MOU dated 16.01.2004 between the company and the RTA.
It was further submitted that there was delay in complying with the regulatory requirement which was not intentional and as the company had complied with the requirement of Regulation 53A, the company had pleaded that the delay may be condoned and a lenient view may be taken against the company.
APPRECIATION OF EVIDENCE AND FINDINGS
Regulation 53A of SEBI(DP) Regulations, 1996 came into force with effect from 02.09.2003 and reads as under :
“All matters relating to transfer of securities, maintenance of records of holders of securities, handling of physical securities and establishing connectivity with the depositories shall be handled and maintained at a single point i.e. either in-house by the issuer or by a Share Transfer Agent registered with the Board.”
The object of the appointment of common share agency as can be seen from SEBI Circular No. SEBI Circular No. D&CC/FITTC/CIR-15/2002 dated December 27, 2002, was to avoid :
a) delay in dematerialization
b) non-reconciliation of share holding due to lack of proper co-ordination among the concerned agencies or departments, which is adversely affecting the interest of the investors.
Hence, it was directed to appoint common agency either in-house or through SEBI registered RTA for share registry work relating to physical and demat shares of the company.
It was submitted that Sharex was the RTA for shares in demat form prior to the entering into agreement dated 16.01.2004 and after the agreement dated 16.01.2004 Sharex is RTA both for physical and demat securities.
From the letter dated 16.01.2004 of the RTA, it is clear that it is a common agency for both demat and physical securities and maintenance of records of holders of securities, handling of physical securities and establishing connectivity with the depositories is handled and maintained at a single point.
A letter dated 05.11.04 was filed by Sharex Dynamic India Pvt Ltd stating that the company has appointed them as RTA for handling their physical and demat securities with effect from 16.01.04.
The said Regulation came into force with effect from 02.09.2003. There is a delay of four months in complying with the same by the company which is not disputed. It was submitted that the delay was not malafide and as the Regulation was recently introduced, the delay may not be viewed seriously. Since the company has complied with the said Regulation though belatedly, it is not a fit case to impose penalty.
ORDER
Having regard to the factors contained in Section 15J of SEBI Act, 1992, facts and circumstances of the case, the submissions made and the fact that the company had since complied with the Regulation by appointing a common share transfer agent for both physical and demat securities, the marginal delay in this regard is not viewed seriously and hence no penalty is imposed on M/s Aditya International Ltd under Section 15HB of SEBI Act, 1992 read with Regulation 53A of SEBI (DP) Regulations, 1996.
| Date: NOVEMBER 10, 2004 |
S V Krishna Mohan |
| Place: Mumbai |
Adjudicating Officer |