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ORDER UNDER RULE 5 OF 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 BAJRANGLAL KANDOI FOR NON COMPLIANCE OF SUMMONS ISSUED BY SEBI.
1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) vide order dated August 05, 2003 appointed Shri S.V. Krishna Mohan as the Adjudicating Officer to inquire into and adjudge under Section 15 I of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’), the alleged violation of Section 15A(a) of the SEBI Act committed by Shri Bajranglal Kandoi by not complying with the summons issued by SEBI seeking information regarding his dealings in the scrip of Superstar Leafin Limited (hereinafter referred to as ‘SSL’). It is noted that SEBI issued a summons dated September 27, 2002 requiring Shri Bajranglal Kandoi to appear before the Investigating Authority on October 11, 2002 in connection with the investigations initiated by SEBI in the case of SSL. It is alleged that subsequently, summons were issued to Shri Kandoi on October 23, 2002 and February 18, 2003 seeking his attendance before the Investigating Authority and also requiring him to produce the documents relating to his investment in SSL. It is alleged that Shri Kandoi did not appear before the Investigating Authority. Further, Shri Kandoi did not submit the information sought by the Investigation Authority. In view of the alleged non compliance of summons issued by SEBI, Adjudication Proceedings were initiated against Shri Kandoi.
NOTICE AND REPLY
2. A notice no. A&E/443/2003 dated October 01, 2003 was issued to Shri Kandoi 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 on the alleged violation committed by Shri Kandoi.
3. As the notice could not be served on Shri Kandoi, the said notice was affixed at the address of Shri Kandoi in terms of Rule 7 ( C ) of the Rules. It is noted that no reply has been submitted by Shri Kandoi in respect of the notice issued by the Adjudicating Officer. Subsequently I was appointed as the Adjudicating Officer vide SEBI’s Order dated September 30, 2004. Though it was noted that Shri. Kandoi has not replied to the notice issued to him, in the interest of justice it was felt that an opportunity of hearing may be granted to Shri. Kandoi. Hence Shri Kandoi was advised to attend the personal hearing scheduled on October 27, 2004. Shri Kandoi did not attend the hearing scheduled on October 27, 2004. However, Shri Kandoi was granted one more opportunity of hearing and was advised to attend the hearing on November 10, 2004. It is noted that Shri Kandoi failed to attend the hearing on November 10, 2004. As Shri Kandoi did not appear for the personal hearing despite two opportunities granted to him, and further as Shri Kandoi had not replied to the notice issued to him, the inquiry is proceeded with in the absence of Shri Kandoi.
CONSIDERATION OF EVIDENCE AND FINDINGS
4. The allegation against Shri Kandoi is that he failed to comply with the summons issued by SEBI. It is noted that SEBI issued the summons dated September 27, 2002 requiring Shri Bajranglal Kandoi to appear before the Investigating Authority on October 11, 2002 in connection with the investigations initiated by SEBI in the scrip of SSL. Vide the said summons, Shri Kandoi was also required to produce the documents pertaining to his investment in SSL. As the said summons was returned undelivered, SEBI issued another summons dated October 23, 2002 to Shri Kandoi through his broker Shri Dinesh Kumar Bubna, Member, Calcutta Stock Exchange requiring Shri Kandoi to appear before the Investigating Authority on October 30, 2002. Further, Shri Kandoi was also required to produce all the documents relating to his investments in SSL along with the details as mentioned in the annexure to the summons. As the said summons could not be delivered, SEBI issued one more summons on February 18, 2003 requiring Shri Kandoi to appear before the Investigating Authority on February 24, 2003 and it is noted that Shri Kandoi refused to accept the said summons. As Shri Kandoi refused to accept the summons, the said summons were affixed on the premises of Shri Kandoi.
5. It is noted that Shri Kandoi neither appeared before the Investigating Authority nor submitted the information and documents mentioned in the summons. Further it is noted that Shri Kandoi refused to accept the summons dated February 18, 2003 issued to him. Further, it is pertinent to note that Shri Kandoi did not reply to the show cause notice issued to him in the Adjudication Proceedings and also did not avail the opportunity of personal hearing granted to him. In view of the same it is found that Shri Kandoi did not comply with the summons issued by SEBI requiring him to appear before the Investigating Authority and to furnish the documents and information mentioned in the summons. In this regard Section 15A(a) of the SEBI Act reads as under.
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,
(a) “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”
6. In view of the fact that Shr Kandoi did not appear before the Investigating Authority and also failed to furnish the information sought by SEBI he is liable for the penalty prescribed under Section 15 A(a) of the SEBI Act. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of the Rules require that while adjudging the quantum of penalty, the Adjudicating Officer shall have due regard to the following factors namely;
a) the amount of disproportionate gain or unfair advantage wherever quantifiable, made as a result of the default
b) the amount of loss caused to an investor or group of investors as a result of the default
c) the repetitive nature of the default
7. In this regard, it may be noted that the Investigating Authority repeatedly required Shri Kandoi to produce all the documents relating to his investments in SSL along with the details given in the annexure. Shri Kandoi was given adequate opportunity and reasonable time to respond to the summons and furnish the information available with him. The said information was required during the course of the investigation conducted by SEBI in respect of the speculative transactions in the scrip of SSL at the Calcutta Stock Exchange. It was also noted during the course of the investigation that Shri Kandoi holds 1,61,500 shares representing 5.38% of the paid up capital of SSL. It was noted that Shri Kandoi had executed certain transactions through broker Shri Dinesh Kumar Bubna, Member, CSE. It is in view of the said finding in the investigation that SEBI sought the details of the dealings from Shri Kandoi. Taking into account the sensitivity of the securities market, early conclusion of investigation is a very important objective. Hence it is seen that the information sought from Shri Kandoi was important in view of the investigation conducted by SEBI. Hence failure to appear before the Investigating Authority and furnish documents and information sought by SEBI necessarily attract the penalty prescribed under Section 15 A(a) of the SEBI Act.
8. ORDER
As Shri Bajranglal Kandoi did not comply with the summons issued by SEBI requiring his presence before the Investigating Authority and also failed to furnish the information sought by SEBI, he is liable to the penalty prescribed under Section 15 A(a) of the SEBI Act, 1992. In view of the same in terms of the provisions of Section 15A(a) of the SEBI Act and Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of Rs.50,000/- (Rupees Fifty Thousand only) on Shri Bajranglal Kandoi.
The penalty shall be paid by way of Demand Draft / Pay Order drawn in favour of “SEBI – Penalties Remittable to Government of India” payable at Mumbai and the same shall be sent to Shri Jayanta Jash, Deputy General Manager, Securities and Exchange Board of India, L & T Chambers, 3rd Floor, 16, Camac Street, Kolkata – 700 017.
S. Biju
Adjudicating & Enquiry Officer
Date: November 30, 2004
Place: Mumbai
Cc: 1) Shri Bajranglal Kandoi
2) Securities and Exchange Board of India