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 SHRI PRAFUL PATEL .
1. Pursuant to the investigation conducted by the Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) into the dealings in the scrip of Sword and Shield Pharma Ltd., I was appointed as the Adjudicating Officer by SEBI to inquire into and adjudge under Section 15I of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act, 1992’), the violation alleged to have been committed by Shri Praful Patel (hereinafter referred to as the noticee) on account of his failure to furnish to SEBI, information regarding his dealings in the scrip of Sword and Shield Pharma Ltd. (hereinafter referred to as SSPL).
2. It is alleged that the investigating Authority of SEBI issued summons dated August 9, 2004 to the noticee requiring the noticee to appear before it and also to furnish details regarding his dealings in the shares of SSPL. It is alleged that the noticee failed to comply with the said summons and also failed to submit necessary information to the investigating authority.
NOTICE AND REPLY
3. A show cause notice A&E/BS/33251/2005 dated February 9, 2005 was issued to the noticee 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 of the noticee as to why an inquiry should not be held against him in respect of the violations alleged to have been committed by him.
4. It is noted that the noticee did not reply to the show cause notice. In the interest of justice, it was decided to conduct an inquiry in the matter and he noticee was advised to attend the hearing on June 14, 2005. It is noted that the hearing notice sent by registered post has been returned undelivered.
5. As the noticee failed to reply to the show cause notice despite being granted sufficient time and opportunity, the inquiry is proceeded with taking into account the facts and material available on record.
CONSIDERATION OF EVIDENCE AND FINDINGS
6. The allegation against the noticee is that he failed to comply with the summons dated August 9, 2004 issued by investigating authority and in view of the same, he is liable to the penalty prescribed under Section 15 A (a) of the SEBI Act, 1992. In this regard it is pertinent to note that Section 11C (3) of the SEBI Act empowers the investigating authority of SEBI to require any person associated with the securities market to furnish such information or to produce such records as may be required by the investigating authority. Further, Section 11 C (5) empowers the investigating authority to examine such persons. Timely submission of information is very important for concluding investigation proceedings and non cooperation by an entity can be detrimental to the interests of investors and securities market on account of any delay in the investigation.
7. In this regard, the provisions of Section 15A(a) of SEBI Act provides the following:
Penalty for failure to furnish information, return, etc.: If any person, who is required under this Act or any rules or regulations made thereunder, 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.
8. During the course of the investigation, prima-facie it appeared to the investing authority that the noticee had dealt in the shares of SSPL during the relevant period. In view of the same the investigating authority issued summons dated August 9, 2004 to the noticee informing him that his attendance was required in connection with the investigation instituted by SEBI in the case of SSPL. The noticee was advised to appear in person before the investigating authority on August 19, 2004.
9. On perusal of the records, it is noted that no proof of delivery of the said summons is available on record. In the absence of proof of service of notice, the same cannot be deemed to have been served on the noticee. The Honorable Securities Appellate Tribunal in the matter Appeal No.5 of 2006 Jay Shah Vs. SEBI held that proof of service of summons have to be necessarily taken into account while deciding questions of failure to comply with summons. The observations of the Honourable Tribunal is taken into account for necessary guidance.
10. In the present case as no proof of service of summons is available on record, in the facts and circumstances of the case it cannot be concluded that the noticee failed to comply with the summons issued by the investigating authority. In this regard, it is also pertinent to note that the hearing notice in the present adjudication proceedings has been returned undelivered. As no reply has been received from the entity, and further, considering the fact that no proof of service of the summons on the noticee is available on record and also considering the fact that only one summons was issued to the noticee, on the basis of the facts and circumstances of the case and the evidence available on record, it cannot be concluded that the noticee failed to comply with the summons issued by the investigating authority. As the violation committed by Shri. Praful Patel is not established, no penalty is imposed on Shri. Praful Patel in terms of the provisions of Section 15 A(a) of the SEBI Act.
11. In terms of the provisions of Rule 6 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995, copies of this order are sent to Shri Praful Patel and to the Securities and Exchange Board of India.
| Place: Mumbai |
Biju. S |
| September 27, 2006 |
Adjudicating Officer
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