ORDER OF THE ADJUDICATING OFFICER UNDER SECTION 15- I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF PURBASHA MARKETING PVT.LTD.
ADJ.ORDER No: ACR/ 90 OF 2005
1. Vide order dated July 8, 2004, issued by Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’), I was appointed as the Adjudicating Officer under Rule 3 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 to enquire into and to adjudge under Sec.15-I of Securities and Exchange Board of India Act, 1992, the alleged violation of 11C of Securities and Exchange Board of India Act, 1992 against Purbasha Marketing Pvt. Ltd. having its address at 3/4, Ram Lal Mukerjee Lane, Kolkata – 700 106. For the sake of convenience, the said Purbasha Marketing Pvt. Ltd., will be referred hereinafter in this order as ‘the noticee’.
2. As per the information provided to me by SEBI, SEBI conducted investigation in to the alleged price manipulation in the scrip of Globe Stock & Securities Ltd., During the course of the said investigation, the investigating authority of SEBI issued summonses dated September 30, 2002, October 22, 2002 and February 20, 2003 directing the noticee to furnish the information/ documents specified in the annexures to the said summonses. As per the unauthenticated photocopies of documents made available to me by SEBI, the aforesaid summonses dated September 30, 2002, October 22, 2002 and February 20, 2003 directing to furnish the information on October 09, 2002, October 28, 2002 and February 26, 2003 respectively, were delivered through M/s. S. B. Butra & Co., Member, Calcutta Stock Exchange. However, I noticed from an unauthenticated photocopy of acknowledgement issued by the noticee that the summons dated February 20, 2003 was received by the noticee on February 27, 2003, i.e., after the due date for compliance of the summons.
3. It was alleged that there was no compliance of the aforesaid summonses by the noticee.
4. In view of the above, I issued a notice dated December 14, 2004 to the noticee under Rule 4(1) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 calling upon the noticee to show cause as to why an inquiry should not be held against it and penalty be not imposed under Sec. 15A (a) of Securities and Exchange Board of India Act, 1992. The said notice dated December 14, 2004 was sent to the noticee by registered post acknowledgment due. However, the said notice was returned undelivered with an endorsement ‘not found / not known’ by the postal authorities. Therefore, a fresh notice dated January 10, 2005 was issued to the noticee. Neither the acknowledgement card nor the envelope containing the notice dated January 10, 2005 returned undelivered. Therefore, I presumed that the same was delivered to the noticee.
5. Since there was no reply to the said notice by the noticee within 14 days, the time which was stipulated by me for the noticee to file its reply, I was of the opinion that an inquiry should be held in the matter and accordingly a notice of inquiry in terms of Rule 4(3) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, dated February 25, 2005 was issued by me. The said notice was sent by speed post- acknowledgement due and the same was returned undelivered by the postal authorities with an endorsement ‘not known’. Subsequently, on July 12, 2005 a fresh notice of inquiry was issued to the noticee fixing July 26, 2005 as the date of inquiry. Along with the said notice copy of show cause notice dated January 10, 2005 was also enclosed. It was advised that the authorised representative / lawyer of the noticee may appear for the inquiry at my office on the above date. The Eastern Regional Office of SEBI at Kolkata was requested to serve the notice on the noticee. The Eastern Regional Office of SEBI vide letter dated July 14, 2005 informed me that the notice was affixed on July 14, 2005 at the last known address confirmed by M/s PDC Securities Pvt. Ltd. As per the said letter, the address at which the notice of inquiry was pasted was 4, Adi Banstalla Lane, Kolkata- 700 007. A report on the said affixture duly signed by two witnesses was forwarded to me by the Eastern Regional Office of SEBI vide the aforesaid letter dated July 14, 2005.
6. However, no representative of the noticee appeared before me on July 26, 2005 or on any subsequent date. In these circumstances, I was of the opinion that the noticee was intentionally evading the adjudication proceedings and therefore I decided to proceed with the inquiry based on the record available.
7. Before deciding the issues which required to be examined by me, the provisions of Securities and Exchange Board of India Act, 1992 with respect to the issuance of summons by the investigating authorities and the consequences of non- compliance are perused by me. Sec. 11C of Securities and Exchange Board of India Act, 1992, interalia provides that the Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to or produce such books, or registers, or other documents, or record before him or any persons authorized by it. Sec. 15A (a) of Securities and Exchange Board of India Act, 1992 provides for imposition of monetary penalty of one lakh rupees for each day during such failure continues or one crore rupees, whichever is less by the Adjudicating Officer in case any person, who is required under Securities and Exchange Board of India Act, 1992 or any rules or regulations made thereunder to furnish any document, return or report, fails to furnish the same.
8. It was alleged by SEBI that the noticee failed to comply with the summonses dated September 30, 2002, October 22, 2002 and February 20, 2003 issued by the investigating authority as mentioned above.
9. There was no representation from the side of the noticee to answer the charges leveled against him. From an unauthenticated photocopies of documents made available to me by SEBI, I noticed that all the abovesaid summonses were received by the noticee. However, it was noticed by me that the summons dated February 20, 2003 was received by the noticee on February 27, 2003, i.e., after the due date for compliance. Therefore, I am inclined to give a benefit of doubt to the noticee as far as the compliance of the summonses dated February 20, 2003.
10. During the adjudication proceedings, despite affording all opportunities, the noticee failed to either issue a reply to the show cause notice or to appear for the inquiry / hearing.
11. In view of the above, I find that non-compliance with the summonses dated September 30, 2002 and October 22, 2002 issued by the investigating authority of SEBI by the noticee is established.
12. Since the failure to furnish the information / documents to the investigating authority of SEBI by the noticee is established, the quantum of penalty has to be determined by me.
13. As I mentioned above, Section 15A (a) of Securities and Exchange Board of India Act, 1992 prescribes a penalty of one lakh rupees for each day during which the failure to furnish any documents etc. to SEBI continues or one crore rupees whichever is less.
14. To determine the quantum of penalty under Section 15A (a), I considered the following factors as provided in section 15J of Securities and Exchange Board of India Act, 1992 viz.(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 and; (c) the repetitive nature of the default.
15. As regards the disproportionate gain or unfair advantage there are no quantifiable figures available on record with respect to the default of the noticee. There are also no figures or data on record to quantify the amount of loss caused to an investor or group of investors as a result of the default. The noticee failed to comply with the summonses issued by the investigating authority on two occasions. Therefore, I conclude that repetitive nature of the default is established.
16. While determining the quantum of penalty, I have also taken into consideration various recent decisions of the Hon’ble Securities Appellate Tribunal. In the matter of Mayfair Paper & Board Pvt. Ltd. v. SEBI (Appeal No.95 of 2004) the penalty of Rs.75,00,000 imposed by the Adjudicating Officer in a case facts of which are similar to the instant case was reduced to Rs.15,000 by the Hon’ble Securities Appellate Tribunal. In the said matter, the Hon’ble Securities Appellate Tribunal also observed that the provision for enhanced penalties in the year 2002 does not mean that SEBI should impose sky high penalties. I have also referred to various recent decisions of the Hon’ble Securities Appellate Tribunal with respect to the penalties imposed by adjudicating officers in cases similar to the instant one.
ORDER
17. Therefore in exercise of the powers conferred under section 15-1(2) read with Sec. 11C, Sec. 15 A(a) of the Securities and Exchange Board of India Act, 1992 and Rule 5 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of Rs. 30,000/- (Rupees thirty thousand only) on Purbasha Marketing Pvt. Ltd. In my view, the above penalty is proportionate with the default of the noticee, in the facts and circumstances of the case.
18. The noticee shall pay the amount of penalty imposed with respect to each of them by way of demand drafts in favour of “SEBI- Penalties Remittable to Government of India”, payable at Mumbai within 45 days of receipt of this order. The said demand drafts should be forwarded to Shri Jayanta Jash, Deputy General Manager, Securities and Exchange Board of India, L&T Chambers, 3rd Floor, 16, Camac Street, Kolkata – 700 017.
19. In terms of Rule 6 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, copies of this order is sent to the noticee and also to Securities and Exchange Board of India.
Date: September 8, 2005 A. Chandra Sekhar Rao
Place: Mumbai Adjudicating Officer