SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
Under Section 15-I (1) of SEBI Act, 1992 read with Rule 5(1) of SEBI (Procedure for holding inquiry and imposing penalties by adjudicating officer) Rules, 1995 in the matter of M/s Advik Labs Ltd.
1.0. Securities and Exchange Board of India (“SEBI” / “Board”) had vide circular no. SMD/Policy/Cir-13/02 dated June 20, 2002, directed the inclusion of Clause 51 in the Listing Agreement by the stock exchanges, requiring the companies specified from time to time to upload various financial statements / documents on the EDIFAR web site, www.sebiedifar.nic.in setup by SEBI in association with National Informatics Centre (NIC).
2.0. In this regard, M/s Advik Laboratories Ltd. (hereinafter referred to as “the company”) was required to upload the above documents with effect from quarter ending December 2002 as stipulated vide SEBI circular no. SMD/Policy/Cir- 27 /02 dated December 20, 2002.
3.0. It was observed that the company had failed to register under EDIFAR for uploading the financial statements / documents as also failed to upload the following documents :
(i) annual report inclusive of the balance sheet, profit and loss statement, director’s report and auditor’s report for the financial year 2002-03,
(ii) cash flow statement for the financial year 2002-2003,
(iii) shareholding pattern statement as on December 31, 2002 and March 31, 2003,
(iv) Corporate Governance report,
(v) quarterly financial statements for the quarters ending December 31, 2002 and March 31, 2003 and;
(vi) statement of actions taken against the company by any regulatory agency during the period upto March 31, 2003.
4.0. SEBI issued a notice to the company vide ref. no. SMD/POLICY/EDIFAR/12963/2003 dated July 4, 2003 requiring it to show cause why adjudication proceedings should not be initiated against it for violation of Regulation 18(3) of the SEBI (Central Listing Authority) Regulations, 2003 (hereinafter referred to as CLA regulations) {Regulation 17(3) of the newly notified CLA Regulations}. However, no response was received from the company.
5.0. Subsequently, the undersigned was appointed as the Adjudicating Officer by SEBI vide order dated April 2, 2004 to inquire into and adjudge under Section 15A (b) of SEBI Act, 1992 for non-compliance of Clause 51 of the Listing Agreement and violation of Regulation 17(3) of CLA Regulations.
6.0. In view of the above, a show cause notice vide ref. no. NRMO/EIF/2004/2/20018 dated May 21, 2004 was issued to the company for violation of Regulation 17(3) of CLA Regulations. The company was required to make its submissions in reply to the show cause notice within 15 days.
7.0. The company, vide its letter Ref. no. ALL/SEBI-LISTING/NOTICE/03-04/598 dated May 22, 2004 (received on May 27, 2004) submitted its reply to the show cause notice.
7.1 In its reply the company stated that it was aware of Clause 51 of the Listing Agreement but was not aware of inclusion of its name in the list of companies required to comply with Clause 51 of the Listing Agreement. It also stated that it had not received the show cause notice issued earlier by SEBI.
7.2 The company further mentioned that it came to know of the EDIFAR compliances in April 2004 when it received a show cause notice from The Stock Exchange, Mumbai (BSE) regarding non-compliance with Clause 51 of the Listing Agreement. Subsequently, the company filed the EDIFAR registration form dated 23/04/2004 to BSE for generation of User ID and password.
8.0 Information was also called from BSE in the matter. BSE in its reply ref. no. CRD/SEBI/2004/88 dated July 7, 2004 stated that the company was informed about the inclusion of its name for registration under EDIFAR vide BSE circular no. CRD/GEN/2002/11 dated December 28, 2002.
9.0 From the information received from Delhi Stock Exchange (DSE), it was observed that DSE, vide its letter ref. no. DSE/EDIFAR/2002/12/7584 dated 27/12/2002, had informed the company regarding the insertion of Clause 51 in the Listing Agreement relating to EDIFAR and the consequent obligations of the company.
10.0 The company was called for a personal hearing on September 16, 2004. Shri Dhananjay Shukla, Company Secretary of M/s Advik Labs Ltd. appeared for the hearing but sought an adjournment in order to verify the facts of the case. Another opportunity was given to the company on September 28, 2004 when Shri V K Jain, MD of the company attended the hearing.
10.1 In his statement, Shri V K Jain submitted that the company was listed on BSE and DSE and they had generally received all circulars from BSE. However, they were not aware of the EDIFAR compliances applicable to the company till a show cause notice was received from BSE in April 2004. Shri Jain stated that the company has subsequently complied with all the formalities pertaining to EDIFAR.
11.0 FINDINGS
11.1 I find that for the period from January 6, 2003 to September 25, 2003, the trading in the shares of the company has been irregular. The average trading volumes on BSE during the period were 1100 shares (a high of 30,468 shares and a low of 10 shares). The price during the period fluctuated between a high of Rs.39 and a low of Rs. 10.0). During the period from September 26, 2003 to September 1, 2004, there was a increase in the average daily volumes to about 4,40,000 shares. The price of the shares also fluctuated between Rs. 13 and Rs. 32.00 during the period. Thus there has been a growing investor interest in the shares of the company.
11.2 The company has in its reply stated that it was aware of the inclusion of Clause 51 in the Listing Agreement. The said clause requires the companies to file various financial statements / documents under EDIFAR. In view of the above, the company could have verified whether its name has been included in the list of companies required to comply with the above mentioned Clause 51.
11.3 The contention of the company that while it has been receiving all circulars from BSE on a regular basis but it did not receive the said circular regarding its obligations under EDIFAR is not acceptable. If the company was receiving all the circulars, how it did not receive only this circular? It appears that the company did not exercise due care in ensuring receipt of all circulars from the exchanges and their compliance.
11.4 EDIFAR has been set up in order to provide an additional means to disseminate information to investors besides the filings made with the Exchanges, ROC and publication in newspapers. The company has not submitted any documents to prove that information has been disclosed to the investors on a regular basis and that regular filings have been made with the Stock Exchanges / ROC and whether the results have been published regularly in the newspapers. In view of the growing investor interest in the shares of the company, regular dissemination of information such as financial results, adherence to corporate governance norms etc. becomes even more important.
11.5 I thus find that the company, M/s Advik Laboratories Ltd. did not act responsibly in ensuring compliance of the SEBI circular relating to EDIFAR registration and uploading of documents and has violated Regulation 17(3) of CLA Regulations.
12.0 ORDER
Having regard to the facts and circumstances of the case and submissions, factors contained in section 15J of the SEBI Act, 1992, I am of the considered view that it is just, fair and proper to impose a penalty of Rs. 2,00,000/- (Rupees Two lacs only) on M/s Advik Laboratories Ltd. in this matter.
I hereby impose a penalty of Rs. 2,00,000/- on M/s Advik Laboratories Ltd. under section 15I read with section 15A (b) of SEBI Act, 1992. It shall pay this penalty by way of demand draft / pay order in favour of ‘Securities and Exchange Board of India’ payable at Mumbai within 45 days of receipt of this order. The said demand draft shall be sent to ‘The Deputy General Manager, Division of Issues and Listing, Corporate Finance Department, Securities and Exchange Board of India, Mittal Court, B-Wing, 224, Nariman Point, Mumbai.-400 021’.
| Date: December 30, 2004 |
Piyoosh Gupta |
| Place: Mumbai |
Adjudicating Officer |