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Order against Smt. Aloo Burjor Reporter

Nov 18, 2004
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Orders : Orders of AO

ORDER UNDER RULE 5 OF THE 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 SMT. ALOO BURJOR REPORTER FOR THE VIOLATION OF REGULATION 6(3) AND 8(2) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997.

 

  1. I was appointed as the Adjudicating Officer by the Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) vide Order dated September 30, 2004 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 Regulation 6 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as ‘Takeover Regulations’) committed by Smt. Aloo Burjor Reporter for the year 1997 and Regulation 8 of the Takeover Regulations for the years 1997, 1998, 1999, 2000,2001,2002 and 2003 on account of failure to make necessary disclosures with regard to the shareholding in the company Kerry Jost Engineering Ltd(hereinafter referred to as ‘KJEL’).

    2.  

    NOTICE AND REPLY

     

  2. A notice no. A&E/BS/23036/2004 dated October 09, 2004 was issued to Smt. Aloo Burjor Reporter 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 her reply on the alleged contravention of Regulation 6 of the Takeover Regulations for the year 1997 and Regulation 8 of the Takeover Regulations for the years 1997, 1998, 1999, 2000,2001,2002 and 2003.

    3.  

  3. Smt. Aloo Burjor Reporter vide letter dated October 30, 2004 replied to the notice. In the said reply, Smt. Aloo Burjor Reporter submitted that KJEL is a company incorporated in 1987 and she is one of the promoters of KJEL. KJEL has not been doing well and its manufacturing operations have been completely suspended since December 1999 due to lack of orders and non availability of working capital. KJEL was in deep financial crisis and was struggling to exist.

    4.  

  4. Smt. Aloo Burjor Reporter further submitted that as a result of the above, KJEL could not employ professionals who would be able to guide KJEL regarding compliance to be made by KJEL. The resources of KJEL  were all the time spent on solving the crisis management and obtaining small job orders. The manufacturing operations have been suspended since 1999 and KJEL was surviving on job orders with marginal annual gross revenues of not more than Rs.96 lakhs. Hence, KJEL could not concentrate on informing the promoter group to submit the necessary data under the Takeover Regulations. However, upon hearing from the Bombay Stock Exchange in November 2002, KJEL immediately submitted all the details required under Regulations on 15/11/2002. Further, there has been no change in the promoters holding till 2002 when an inter-se acquisition of shares amongst promoters took place.

    5.  

  5. Smt. Aloo Burjor Reporter requested SEBI to condone the non filing of information under Regulation 8(1) and 8(2) as the said information has been subsequently  filed by KJEL with the Bombay Stock Exchange. Smt. Aloo Burjor Reporter further submitted that she had not made any gain / profit because of non submission of information and assured that such instances would not be repeated in future.

    6.  

  6. After considering the above reply submitted by Smt. Aloo Burjor Reporter, an opportunity of hearing was granted to her on November 17, 2004. Shri P.S. Shastry, Vice President, Karvy Investor Services Ltd and Shri C.B. Sagvekar attended the personal hearing on November 17, 2004 as the representatives of Smt. Aloo Burjor Reporter and made the following submissions:

    7.  

    ·        Non communication of the shareholding by Smt. Aloo Burjor Reporter to the target company is technical in nature. As the target company was not doing well at all, it could not do any business except some job orders since 1997 onwards. The company therefore could not afford the benefit of professional services (being not required to appoint company secretary) for complying with the requirements under the takeover code.

    ·        Since 1999, there has been no change in the shareholding in the promoters group until 2002 when there was one inter-se transaction and since then, the shareholding remained unchanged till date. The target company on receiving a communication from BSE, submitted all the data relating to all the years in 2002.

    ·        It was an inadvertent oversight and unawareness on the part of the promoters which led to the non compliance. There was no intention to mislead and the persons have not made any gains out of such non compliance.

    ·        The shares of the company were hardly traded on the BSE since 1997. Hence the investors were also not put to any loss due to this technical non compliance.

    In light of the above, Smt. Aloo Burjor Reporter requested SEBI to condone the non compliance.

     

    CONSIDERATION OF EVIDENCE AND FINDINGS:

     

  7. I have taken into consideration the facts and circumstances of the case, the reply of Smt. Aloo Burjor Reporter and the submissions made during the personal hearing. It is noted that Smt. Aloo Burjor Reporter was holding 3810 (1.91%) shares in KJEL. Further, Smt. Aloo Burjor Reporter is also stated to be one of the promoters of KJEL. In this regard, Regulation 6(3) of the Takeover Regulations provides that the promoter or any person having control over a company shall within two months of notification of the Regulations disclose the number and percentage of shares or voting rights held by him and by persons acting in concert with him in that company to the company.

    8.  

  8. Further, Regulation 8(2) provides that a promoter or every person having control over a company shall, within 21 days from the financial year ending March 31 as well as the record date of the company for the purposes of the declaration of dividend, disclose the number and percentage of shares or voting rights held by him and by persons acting in concert with him, in that company to the company.

    9.  

  9. It is noted that Smt. Aloo Burjor Reporter in the written reply dated October 30, 2004, in response to the show cause notice issued in the adjudication proceedings as well as during the course of the personal hearing admitted contravention of the provisions of Regulation 6(3) of the Takeover Regulations for the year 1997 and Regulation 8(2) of the Takeover Regulations for the years 1997, 1998 1999, 2000, 2001, 2002 and 2003. In this regard, Section 15A(b) of the SEBI Act provides that if any person who is required under the Act, Rules or Regulations made thereunder to file any return or furnish any information, books or other documents within the time specified in the regulations, fails to file return or furnish the same within the specified time, he shall be liable to a penalty not exceeding five thousand rupees for everyday during which such failure continues. It is noted that the said provision has been amended with effect from October 28, 2002 and the penalty has been enhanced to Rupees one lakh per each day during which the failure continues or Rupees one crore whichever is less.

    10.  

  10. Smt. Aloo Burjor Reporter admitted the violation of the provisions of Regulations 6(3) and Regulation 8(2) of the Takeover Regulations. As stated above, violation of the provisions of Regulation 6(3) and Regulation 8(2) of the Takeover Regulations attract the penalty prescribed under Section 15A(b) of the SEBI Act.

    11.  

  11. 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 take into account the following factors namely,

    12. 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

     

  12. In this regard, it is noted that Regulation 6 (3) and 8(2) of the Takeover Regulations require the promoter or the person having control over a company to make necessary disclosures regarding their holdings to the company. Any violation of said requirement can not be termed as technical violation as the very objective of said provisions is to provide for transparency and dissemination of information to the company. As the information is made available to the investors through the Stock Exchanges, such information help the investors to take well informed investment decisions.  Non compliance of the said provisions deprives the company and the investors of valuable information. Hence, the violation of the said provisions attracts the penalty prescribed under Section 15A(b) of the SEBI Act. However, taking into account the fact, that there has been no change in the holding of Smt. Aloo Burjor Reporter during the period the provisions of Regulations 6(3) and 8(2) were not complied with and it appears that no disproportionate gain or unfair advantage resulted on account of the default, a lenient view is taken with regard to the quantum of penalty.  

    13.  

    ORDER

     

  13. In view of the violation of Regulation 6(3) for the year 1997 and Regulation 8(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 for the years 1997, 1998, 1999, 2000,2001,2002 and 2003 committed by Smt. Aloo Burjor Reporter, I hereby impose a penalty of Rs.50,000/- (Rupees Fifty Thousand only) under Section 15A(b) of the SEBI Act on Smt. Aloo Burjor Reporter.

    14.  

  14. 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 S.V. Muralidhar Rao, General Manager, Securities and Exchange Board of India, Mittal Court, ‘B’ Wing, 224, Nariman Point, Mumbai – 400 021.

  

Cc:  1) Smt. Aloo Burjor Reporter

2) Securities and Exchange Board of India

 

Date:  NOVEMBER 18, 2004

S. Biju
Place: Mumbai Adjudicating & Enquiry Officer