ORDER OF THE ADJUDICATING OFFICER UNDER SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 AGAINST M/S VIKAS WSP LTD. READ WITH SECTION 15C OF SEBI ACT, 1992.
I was appointed as Adjudicating Officer by SEBI vide order dated July 7, 2003, to inquire into and adjudge the alleged contravention of Section 15C of SEBI Act, 1992 by M/S VIKAS WSP LTD. (hereinafter referred to as the company), in the matter of non redressal of the grievances of the investors.
NOTICE AND REPLY
Accordingly, a show cause notice dated August 18, 2003, was issued to the company. The said show cause notice alleges that the company did not redress the grievances of investors when called upon to do so by SEBI vide its letter IGG/SR/8285/2003 dated April 29, 2003. Vide the said letter, SEBI informed the company that as on April 22, 2003, 205 complaints of the investors were still pending for redressal and called upon the company to redress these grievances within 30 days thereof.
Vide show cause notice cited, the details of these 205 complaints which have not been redressed by the company were forwarded with an advice to show cause as to why an inquiry should not be held against the company in terms of Rule 4 of SEBI(Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer)Rules, 1995 and why penalty should not be imposed under Section 15C of SEBI Act, 1992. The company submitted its reply vide letter dated August 26, 2003. Shri Mahesh K Poddar, GM (Operations) & CS appeared on September 26, 2003 and made the following submissions:
1. It was submitted that the company had resolved 132 complaints out of the 205 complaints referred to in SEBI’s notice and necessary payments to the shareholders for the dividend was made. The list of 132 complaints resolved along with proof was sent to SEBI through fax on 28.06.03 a copy of which was also sent to the Adjudicating Officer on 22.09.03.
2. As regards resolving the balance 73 complaints which were pending as on 27.08.03, it was informed that 69 out of them have since been resolved on 16.09.03 and the details of these complaints resolved were also sent to the Adjudicating Officer on 22.09.03.
3. It was submitted that in view of the above, all the 205 complaints referred to in the SEBI’s show cause notice except the 4 cases have been resolved. The learned Representative submitted a file containing the details of interim dividend paid to each of the shareholder together with copies of the demand draft, postal receipts etc. in support of his claim that 201 complaints out of 205 sent by SEBI have been resolved.
4. It was further submitted that the unresolved 4 cases were as per Sr.No.4,39,45 and 47 of SEBI’s letter dated 29.04.03 which was enclosed to the show cause notice dated 18.8.03.
a. It was submitted that out of the 4 unresolved complaints in 2 cases, the shareholders were required to submit indemnity bond in view of the dividend warrant already issued and 1 case related to share transfer which was taken up with the RTA.
b. In the case of Col. G S Dhodi at Sr. no. 47, the learned Representative submitted that there is no specific grievance of the shareholder. He has made certain general observations about the company, it is not a case of the shareholder not receiving dividend or non receipt of shares after transfer or any other grievance pertaining to shareholding. It is, therefore, contended that this complaint should not be taken as unresolved complaint of investor.
c. The learned Representative submitted that the rest of the 3 complaints referred to above would be resolved within a period of 1 month.
5. It was submitted that from September 2000 to May 2003 – almost two and half years passed in the family dispute. Both the former directors kept on registering police cases one after another that consumed almost entire time in attending the police investigations. This was the main reason for not attending to the share-holder complaints on time.
APPRECIATION OF EVIDENCE AND FINDINGS
Vide letter IGG/SR/8285/2003 dated April 29, 2003, SEBI has informed the company that it was yet to resolve 205 complaints of its investors as on April 22, 2003 and called upon it to resolve these grievances within 30 days thereof. Details of the said complaints were also forwarded vide the aforesaid letter. As can be seen from the details of the complaints, most of the complaints are type 2 A complaints i.e. non receipt of dividend on shares.
The nomenclature of Type I to Type V includes the following types of complaints:-
Type I: non receipt of
A. Refund order/ Allotment Advice
B. Cancelled stock invest
C. Allotment advice against encashed stock invest
D. Refund order sent for revalidation
E. Refund order after furnishing the required details like application number, bank serial number etc
F. Duplicate refund order in lieu of original refund order printed in wrong name/ beneficiary and returned to the company for correction
G. Duplicate refund order in lieu of original refund order printed for wrong amount and returned to the company for correction
H. Duplicate refund order in lieu of original refund order printed with wrong bank details and returned to the company for correction
I. Copy of encashed instruments in misappropriated cases
J. Balance amount against short refund made by the company due to some error
K. Duplicate refund order against an undertaking/ duly executed indemnity bond sent to the company
Type II : Non receipt of
A Dividend on shares
Type III : Non receipt of
A Share certificate in exchange of allotment letter
B Share certificate after transfer
C Share transfer after transmission
D Share certificates after conversion
E Share certificates after endorsement
F Share certificates after consolidation
G Share certificates after splitting
H Bonus shares
I Share certificate against duly executed indemnity bond sent to the company
Type IV : Non receipt of
A. Interest on Debentures
B. Redemption amount of debentures
C. Debenture certificate in exchange of allotment letters
D. Debenture certificate after transfer
E. Debenture certificates after transmission
F. Debenture certificate after endorsement
G. Debenture certificate after consolidation
H. Debenture certificate after splitting
I. Debenture certificates against duly executed indemnity bond sent to co.
J. Interest on delayed payment of interest on debentures
K. Interest on delayed payment of redemption amount of debentures
Type V
B Non receipt of letter of offer for Rights
D Non receipt of Interest on delayed payment of refund orders.
Taking into account the reply of the company and other material available on record, it is seen that the company could get the details of the 205 complaints as per SEBI letter IGG/SR/8285/2003 dated April 29, 2003. As per the requirements of the letter IGG/SR/8285/2003 dated April 29, 2003, all the complaints should have been resolved by May 29, 2003. However, the complaints were resolved with delay as under:
1. 132 complaints were resolved on June 28, 2003.
2. 69 complaints were resolved on September 16, 2003.
3. 4 complaints were unresolved as on the date of hearing .
The company has submitted a detailed list of 201 complaints resolved as directed in the adjudication proceedings.
Section 15C of SEBI Act, 1992 reads as under :-
“If any listing company or any person who is registered as an intermediary ,after having been called by the Board in writing, to redress the grievances of investors, fails to redress such grievances within the time specified by the Board, such company or intermediary 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.”
Considering that the company had resolved all the pending grievances except 4 complaints of the investors although belatedly and the mitigating factors that caused the delay in resolving the grievances, it would not be fair, just and proper to impose a severe penalty.
However, it may also be noted that due to dispute between the two directors and the relevant criminal cases against each other, there was abnormal delay in attending to the shareholder grievances. Extent of delay in resolving the complaints can be referred from the following table:
|
S/N
|
Year of complaint
|
Number of complaints
|
|
1.
|
2001
|
39
|
|
2.
|
2002
|
159
|
|
3.
|
2003
|
3
|
|
|
Total
|
205
|
Besides, there was one complaint which was pending since 1999 and 3 complaints since 2000. These complaints were resolved after issuing show-cause notice to the company with the following delay:
1. 132 complaints were resolved on June 28, 2003.
2. 69 complaints were resolved on September 16, 2003.
3. 4 complaints were unresolved as on the date of hearing .
ORDER
Considering that the company has resolved all the pending grievances of the investors (except 4 complaints) although belatedly and the mitigating factors that caused the delay in resolving the grievances and the factors contained under Section 15J of SEBI Act, 1992, a penalty of Rs.1,00,000/- (Rupees one lakh only) in terms of Section 15C of SEBI Act, 1992, is imposed on M/S VIKAS WSP LTD.
The penalty amount shall be paid through a crossed demand draft drawn in favour of “SEBI – Penalties Remittable to Government of India” and payable at Mumbai, may be sent to Shri Sujit Prasad, Deputy General Manager, Securities and Exchange Board of India, Exchange Plaza, IVth Floor, Bandra Kurla Complex, Bandra E, Mumbai 4000 51.
| Date: NOVEMBER 1, 2004 |
V Krishna Mohan |
| Place: Mumbai |
Adjudicating Officer |