IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 111/2005
|
Date of Hearing
|
21.11.2005
|
|
Date of Decision
|
29.11.2005
|
In the matter of:
|
Horizon Battery Technologies
|
Appellant – Represented by
|
|
Ltd.
|
Mr. Virendra Bhatt, PCS
|
|
Versus
|
|
|
Securities & Exchange Board
|
Respondent –Represented by
|
|
of India
|
Mr. Mihir Mody, Advocate
|
Coram:
Justice Kumar Rajaratnam, Presiding Officer
C. Bhattacharya, Member
Per: Justice Kumar Rajaratnam, Presiding Officer
1. Appeal is taken up with consent of parties.
2. The appeal is against the impugned order dated 16.2.2005 of the adjudicating officer of SEBI. The relevant portion of the reads as follows:
“In view of the fact that M/s. Horizon Battery Technologies Limited. have not complied with the provisions of Regulation 53A of the SEBI (Depositories and Participants) Regulations, 1996 by failing to appoint a common share agency for their demat and physical shares, I in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, and in the interest of justice, equity and good conscience, think it appropriate to levy a penalty of Rs.75,000/- (Rupees seventy five thousand only) on M/s. Horizon Battery Technologies Limited.”
3. Being aggrieved by the above impugned order the appellant has filed this appeal. The facts of the case is that the Adjudicating Officer was appointed to enquire into and adjudge the alleged contravention of Regulation 53A of the SEBI (Depositories and Participants) Regulations, 1996 (‘said Regulations’) read with Section 15HB of the SEBI Act, 1992 by the appellant in the matter of their failure to appoint a common share agency for handling share registry work both for the dematerialized and physical securities.
4. A show cause notice was issued on January 5, 2004 by the respondent in terms of Rule 4 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules 1995 wherein the appellant was asked to show cause as to why the enquiry proceedings should not be held against them for alleged violations of the provisions of Regulation 53A of the Regulations and as to why penalty should not be imposed upon them under Section 15HB of the Act. According to the respondent the appellant failed to respond to the show cause or provide any explanation for their failure to reply to the notice. Another notice dated 9/8/2004 was issued to the appellant, which was also not replied to.
5. Another notice of hearing dated November 3, 2004 was issued by the respondent to the appellant and the appellant was advised to attend the hearing proceedings held on December 1, 2004 and submit the documentary proof, if any, in support of their contentions. The appellant was advised that in case they failed to appear for the said proceedings the matter would be proceeded with on the basis of material available on record. However, this notice was returned undelivered.
6. The respondent granted another opportunity to the appellant vide their notice dated November 29, 2004 asking the appellant to appear before the Adjudicating Officer on December 9, 2004 and also submit documentary proof, if any. The appellant did not respond to the notice.
7. Regulation 53A of the Regulations, which came into force on September 2, 2003 reads as under:
“All matters relating to the 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.”
8. According to the respondent the object of appointing a common share agency is to avoid (a) any delay in dematerialization; and (b) non-reconciliation of the share holding due to lack of proper coordination among the concerned agencies or departments, which was adversely affecting the interest of the investors.
9. As regards the merits of the case, it appears that, they had indeed entered into a tripartite agreement with CDSL and M/s Intime Spectrum Registry Limited on October 7, 2002. Even NSDL have also confirmed that the appellant had entered into a tripartite agreement with them and M/s Intime Spectrum Registry Limited on April 30, 2002. The same is also evident from the information available in the websites of both the depositories (NSDL & CDSL). Thus the appellant appears to have dematerialized their shares through the appointment of M/s Intime Spectrum Registry which aspect was confirmed by them upon being contacted. As such, M/s Intime Spectrum Registry Limited have clarified that as on date they were only the electronic connectivity provider for the appellant and the details about the present RTA dealing with the transfer of the physical shares of the company was not known to them.
10. An affidavit dated 26.9.2005 has been filed with the Tribunal, in which it has been mentioned that they have now complied with the requirement of provisions of Regulation 53A by appointing a common share agency.
11. We have perused the affidavit submitted by the appellant, which indicates that the appellant has complied with the requirement of the provisions of Regulation 53A. SEBI, by its order dated 18th March, 2005 against Aditya International Ltd. has given a warning with respect to non-filing of specific financial statement on the EDIFAR website. The order of SEBI dated 18.3.2005 reads as follows:
“Having regard to the factors contained in Section 15J of SEBI Act, 1992 and the facts and circumstances of the case, I in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, am of the considered opinion that no penalty needs to be imposed upon M/s. Aditya International Limited for the delayed compliance of regulation 17(3) of the SEBI (Central Listing Authority) Regulations, 2003 read with Clause 51 of the Listing. However, it is hoped that the company would be more careful in future in compliance with the regulatory requirements.”
12. SEBI, under similar circumstances has dropped the proceedings against the parties. In the case of Bharat Electronics Ltd. dated 16.2.2005 the proceedings were dropped. The relevant portion of the order is extracted below:
“Since BEL had already established connectivity with both the depositories by the year 2000 itself to enable the shareholders to dematerialize their shares and in this regard had also entered into tri-partite agreements with both NSDL and CDSL and have also appointed a common share agency, there has been compliance by them of the provisions of Regulation 53A of the Regulations.
ORDER:
23. Having regard to the factors contained in Section 15J of the SEBI Act as also bearing in mind the facts detailed above on a judicious exercise of the discretion conferred upon me, I am of the considered opinion that the imposition of any penalty in the present matter is not necessitated.
24. Accordingly, in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, the proceedings initiated against M/s. Bharat Electronics Limited are hereby dropped.”
13. In the case of Sunstar Lubricants Ltd., SEBI by order dated 18.3.2005, has not been imposed a penalty. The order reads as follows:
“Taking into consideration, the fact that Regulation 53A of the Regulations which requires all listed companies to engage a common share agency for the purposes envisaged therein cannot be made applicable to the facts of the case on record, in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, I think it appropriate to dispose of the present case initiated against M/s Sunstar Lubricants Ltd without imposing any penalty upon the said entity.”
14. The reason apparently was that it takes some time for companies to comply with Regulation 53A of the SEBI (DP) Regulations, 1996 and now it has been brought under one roof it would be appropriate to consider the facts as stated under Section 15J of the Act before imposing a penalty. Section 15J deals with factors to be taken into account while imposing penalty. The factors are (a) the amount of disproportionate gain, (b) loss caused to the investors, and (c) repetitive nature of the default. It is common ground that there has been no disproportionate gain, no loss to the investors and this alleged violation has occurred for the first time and has also been rectified since then.
15. However, the appellant ought to have presented their case before the Adjudicating Officer when opportunities were given to them. Taking all the facts and circumstances of the case and also Section 15J into account we uphold the impugned order. However, the fact that the appellant has already complied with the requirements of Regulation 53A, taking into consideration of the earlier order passed by SEBI, we reduce the penalty to Rs. 25,000/-. The impugned order is modified accordingly.
16. It was submitted by the representative for the appellant that by interim order dated 17.8.2005, the appellants have already deposited a sum of Rs. 25,000/- . This amount may be appropriated as penalty by the appellant.
17. The appeal is disposed of accordingly. No order as to costs.
C. Bhattacharya
Member
|
Justice Kumar Rajaratnam
Presiding Officer
|
Place: Mumbai
Date:29.11.2005
//SR110528