In the matter of

Munjal Investments                                              Appellant

Vs.

Securities & Exchange Board of India               Respondent

Appearance:

Mr. Sanjay Munjal                                              for Appellant

Ms Poonam A Bamba
Division Chief, SEBI

Ms Sonia Soni
Officer, SEBI                                                       for Respondent
 

This appeal under section 15T of the Securities & Exchange Board of India Act, 1992 (the SEBI Act) is directed against the Respondent�s order made on 2.2.2000 under regulation 29(3) of the Securities and Exchange Board of India (Stock Brokers and Sub Brokers) Regulations, 1992 (the Regulations) whereby the Appellant's certificate of registration (INB 050459626) granted by the Respondent, was cancelled.
 

The Appellant is a member of Delhi Stock Exchange (DSE) holding a registration certificate issued by the Respondent permitting to carry on the activities of a broker in the capital market. It has been stated in the impugned order that against the Appellant, the Respondent had received a complaint alleging non-payment of sale proceeds of shares worth Rs.2.2 lakhs, and also default in repayment of the interest/deposit amounting to Rs.94 lakhs collected from the public through one Fauzia Financial Services (FFS). On receipt of the said complaint, the Respondent advised its Northern Regional Office (NRO) to look into the complaint and report the facts. DSE, of which the Appellant is a member, was also advised to examine the complaint and furnish comments with particular reference to the violation of Rules, Regulations and Bye-laws of the exchange. On the basis of the feed back received from the NRO and DSE, the Respondent decided to make an enquiry under the Regulations, to ascertain the factual position, to their satisfaction. The enquiry officer appointed for the purpose concluded that the Appellant had collected deposits from the public violating the provisions of rule 8(I)(f) of the Securities Contracts (Regulation) Rules, 1957 read with article 25(I)(g) and 25(3)(f) of the Articles of Association of DSE, according to which a member was not to be engaged in the business of collection of deposits. He also concluded that the Appellant had closed down its office, denying access to the public from whom it had accepted deposit and defrauded them, attracting the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995. On the basis of the findings, the enquiry officer recommended cancellation of the certificate of Registration granted to the Appellant. Thereafter, the Respondent in terms of regulation 29(1) issued a show cause notice to the Appellant enclosing therewith a copy of the enquiry report, calling upon to show cause as to why the penalty as recommended by the enquiry officer should not be imposed on it. The notice sent through NRO could not be served on the Appellant as at the last known address given by it, the office was found locked. Therefore, the notice along with the enquiry report was affixed at that address and requisite service report was also prepared. Since the whereabouts of the Appellant was not available, the Respondent after taking into account the findings and recommendations of the enquiry officer, as also the written reply given by the Appellant during the course of enquiry and also the available facts and circumstances of the case, accepted the recommendations of the enquiry officer and ordered cancellation of the Appellant�s registration certificate issued under the SEBI Act.
 

Shri Sanjay Munjal, learned Representative of the Appellant submitted that the Appellant did not receive notice issued by the enquiry officer or copy of the impugned order as the same had been sent to the office at M-4 Kundan House, 16, Nehru Place, New Delhi, which had been closed down long ago. Even though DSE knew the new address of the Appellant at D-1074, New Friends Colony, New Delhi, they deliberately blacked out the information from the Respondent to harass the Appellant as it had filed a Writ Petition against DSE�s order declaring the Appellant a defaulter and that the High Court had stayed the matter for the time being. He further submitted that as soon as the Appellant came to know about the impugned order it had approached the officers of the Respondent for details. The Appellant was advised to file an appeal before this Tribunal against the order and till such time the Appellant was unaware of the remedy available by way of such an appeal. This has been cited as the reason for the delay in filing the appeal before the Tribunal and requested to condone the delay and proceed with the appeal.
 

Learned representative, referring to the findings in the impugned order submitted that since the enquiry was initiated on the basis of a complaint made by Lt. Col. M. A. Khan (Rtd.), Proprietor of Fauzia Financial Services Pvt. Ltd, vide his letter dated 21.07.1997 and that Shri Khan had subsequently withdrawn all his allegations vide letter dated 2.11.1997 no course of action subsisted to proceed with the enquiry and impose penalty against the Appellant. In support of this submission he referred to Shri Khan�s letter placed at Annexure-I to the appeal. Learned Representative denied the charge that the Appellant had accepted deposits from the public. According to him the money was received only as advance for purchase of shares and not by way of deposit.
 

In this context he relied on the version of Shri Khan in his letter dated 2.11.1997 at Annexure I. Shri Munjal also denied that the Appellant had issued any circular inviting deposits from the public. According to him the Respondent had gone by the version of DSE, without objectively examining the contents of Shri Khan�s letter. The learned Representative submitted that since DSE is facing a litigation filed by the Appellant against their move to declare it as defaulter and that the Court having stayed them from doing so, they are very much against the Appellant and hence under their pressure the Respondent had made the impugned order.
 

Shri Sanjay Munjal, submitted that the enquiry officer sent the notice to the Appellant on 22.7.1998 which was replied on 17.8.1998. The enquiry officer had asked the Appellant to be present for personal hearing on 31.8.1998. Since it was not possible to be present on the scheduled date, the Appellant sought adjournment of the hearing by 3 weeks. Thereafter there was no communication from the Respondent/enquiry officer and the Appellant came to know about the cancellation of the certificate of registration from the newspapers. He submitted that the notice stated to have been sent on 6.12.1999 as mentioned in the order had not reached the Appellant and there was some thing amiss in the matter to justify the re-opening of the case on 4.10.1999 after the enquiry officer did not pursue the matter based on the Appellants letter dated 17.8.1998. He attributed the Respondent�s action to pressure from DSE. Further he submitted that since the Appellant having been suspended from trading since 1996 and totally destroyed financially by DSE, it was not possible for it to maintain an office at Nehru Place, New Delhi. He submitted that the Appellant would have furnished all the information to the Respondent, had it received the notices calling for the same. He submitted that since the order has been made exparte the Appellant, without giving adequate opportunity to defend the same need be quashed.
 

Ms. Poonam A Bamba, learned Representative of the Respondent submitted that the appeal need be rejected summarily, as the long delay of 110 days beyond the stipulated time of 45 days provided in section 15T for filing appeal, has not been properly explained. She submitted that since the Appellant had not given any cogent reason explaining the cause of delay and in view of the untenable submission that the Appellant was unaware of the legal requirement of filing appeal, the prayer for condonation of the delay need be discarded. She submitted that the Appellant had deliberately delayed filing of the appeal to its advantage in the pending Writ petition filed against DSE and this fact has been suppressed.
 

Ms Bamba narrated the facts leading to the enquiry, and submitted that the fact that Shri Khan had withdrawn his complaint against the Appellant does not in any way prevent the Respondent making an enquiry under the statutory powers vested in them. A complaint at times serves only as a spark plug to ignite the process of enquiry and once the enquiry is initiated, the facts are independently verified and only after fully satisfying that the allegations are true, orders are issued. It is not that the enquiry co-terminates with the withdrawal of a complaint, based on which it was initiated.
 

Denying the allegation that the Respondent had acted under pressure from DSE, she submitted that the Respondent is an independent entity created by a statute of parliament and not a subordinate institution of DSE to be amenable to their pressure. On the contrary DSE is under the regulatory regime of the Respondent and not vice versa.
 

She denied the Appellant�s contention that the impugned order was made exparte the Appellant, without following the rules of natural justice. She submitted that the Appellant was informed of the personal hearing scheduled on 31.8.1998 and the Appellant sought adjournment vide letter dated 28.8.1998. Surprisingly even the letter dated 28.8.1998 shows the address at Kundan House, Nehru Place, New Delhi though the Appellant claims to have shifted from that place long ago. In any case vide letter dated 17.8.1998, a copy of which is found annexed to the appeal, the Appellant had answered the show cause notice. The Appellant in that letter did not ask for any personal hearing. The enquiry officer had formed his views taking into consideration all the relevant factors including the Appellant's reply to the show cause notice. Further an enquiry completes only when the Board/Chairman passes final order therein. So there was no question of dropping the enquiry and reopening the same as alleged. Since the show cause notice dated17.8.1999 sent by registered post to the last known address was returned undelivered, the notice was served at the given address through substituted service and even thereafter there was no response from the Appellant and the matter was proceeded exparte by the enquiry officer on 15.9.99. On receipt of the recommendations from the enquiry officer, again a show cause notice dated 6.12.1999 was served at the Appellant�s last known address by affixing the same on the door, as nobody was available to receive the notice, and the premises were found locked. The Appellant was required to furnish his reply to the said show cause notice within 21 days and since it failed to do so, impugned order was made on 2.2.2000, based on the facts and circumstances of the case as available before the concerned authority.
 

She submitted that there was overwhelming evidence to show that the Appellant had invited deposits at an exorbitant rate of interest, from the public by issuing brochures, that post dated cheques were issued towards repayment of deposits to the depositors. Since those cheques were bounced the aggrieved persons had approached Consumer Court for redressal. In support of this version she cited the facts stated in the Respondent�s reply to the appeal and also the material annexed thereto. She re-iterated that the Appellant had violated the terms and conditions subject to which certificate of registration was granted and thereby deserved to be penalised. In that context only the certificate of registration was cancelled following the procedure prescribed under the Regulations.
 

I have considered the written and oral submissions made by the parties as also the documents relied on by them, as made available to the Tribunal.
 

The Respondent had established the fact that the impugned order was delivered at Smt. Swaran Munjal �s residence at D-3, Saket, New Delhi on 15.2.2000 through the official courier of DSE and the copy of the POD has also been produced in this regard. Smt. Swaran Munjal is a partner of the Appellant firm. The Appellant had admitted that it came to know about the order canceling registration certificate from the news papers, but was unaware of the legal position that the SEBI Act provided for an appeal against the said order to the Tribunal, till the officers in the Respondent�s office in Mumbai explained the legal provision.
 

In terms of section 15T, any person aggrieved by an order of the Board or the adjudicating officer, may prefer an appeal to the Securities Appellate Tribunal within a period of 45 days from the date of receipt of the order. However, the Tribunal has been empowered to entertain an appeal after the expiry of the said period of 45 days, if it is satisfied that there was sufficient cause for not filing it within that period.
 

It is seen that the impugned order of the Board is dated 2.2.2000. As per the submission made by the Respondent supported with written statement from DSE with the POD from their official courier "Day Night Courier Service" the impugned order addressed to the Appellant broker vide letter No.SMD/DBA-1/Enq/AM/2059 /2000 dated 8.2.2000 was delivered at Smt.Swaran Munjal�s house on 15.2.2000. Since the Appellant was not responding to the notice issued to the address as given by it and the Appellant could not be traced, the course of action to serve the notice at the residence of Mrs. Swaran Munjal cannot be said to be in any way inadequate or improper for the purpose. In terms of the admission made by the Appellant, it had shifted from the earlier address at Kundan House, Nehru Place and no address was left with the Respondent. In fact as per regulation 17(2), which is applicable to the Appellant also, every broker is required to intimate the Board (Respondent) the place where the books of accounts, records and documents are maintained. The Appellant should have complied with this requirement in case it had shifted from the address at Kundan House to else where. It is not expected of from a stockbroker to vanish from its address without reporting the change of address to all concerned including the Respondent. Since the order was delivered on 15.2.2000, the appeal was required to be filed by 31.3.2000. Against the said outer limit the appeal was filed on 20.7.2000 i.e. after a long delay of 110 days. The Appellant had stated that it came to know of the order from the newspapers. But the Appellant has filed a copy of the order with a copy of the forwarding letter No. SMD / DBAI / Enq / AM / 2059 / 2000 dated February 8, 2000 addressed to "Mrs. Swaran Munjal, member Delhi Stock Exchange- SEBI Reg.No.INB 050459626" along with the appeal memorandum. The Appellant has not mentioned the exact date on which the order was received by it. In fact this letter with the order, obviously should be the one delivered through the official courier referred to by DSE, and relied on by the Respondent. Surprisingly the Appellant has not mentioned even the date of news paper from which it is stated to have known about the impugned order, or the date on which it contacted the Respondents� officers as claimed or even the date on which actually the copy of the order was received or the source of the receipt of the order. During the course of oral submission, to a pointed question from the Tribunal, in the context of the learned Representative�s submission that the Appellant did not receive a copy of the order, as to from whom it got the order copy which was found annexed to the appeal, the tribunal was told that it was procured from DSE. This submission is hardly convincing as the Appellant itself had alleged that DSE was hostile and they were putting pressure on the Respondent to harass the Appellant.
 

I am convinced that the Appellant was evasive and keen to suppress the facts to mislead the Tribunal to get the delay condoned. The Appellant did not make any serious attempt to explain the cause of long delay of 110 days involved in filing the appeal. The learned Representative had submitted that till the Appellant was advised by the enquiry officer and the officers of the Respondent, it was unaware of the statutory provision for challenging the order by way of an appeal before the Tribunal. In this context, it is to be noted that the Appellant is a broker who had obtained a certificate of registration from the Respondent. It was carrying on the activities of a broker subject to the provisions of the Act and rules and regulations applicable to brokers. The Appellant had participated in the enquiry proceedings under the regulations. In its pleadings also certain regulations have been cited. In these circumstances it is unbelievable that the Appellant was unaware of the appeal remedy provided in the Regulation itself. It is difficult to accept the Appellants contention that it had to be educated by the officers of the Respondent to file an appeal before the Tribunal for redressal of its grievance arising out of the Respondent�s order. The ignorance of the statutory provision innocently projected is only an alibi.
 

I am not at all convinced by the submission made by the Appellant explaining the background of filing the appeal involving a delay of 110 days. The rules of limitation are meant to see that parties do not resort to dialatory tactics but seek their remedy promptly. In this case the Tribunal cannot come to the aid of the Appellant, as the Appellant has not putforth any convincing cause to justify condonation of the delay. On the contrary, the Appellant's conduct has been found unhelpful to its own cause. In the absence of any reasonable explanation from the Appellant on the reason for the belated filing of the appeal beyond the time prescribed under section 15T (3) of the Act, to my satisfaction, I cannot condone the delay and proceed with the appeal.
 

Since the appeal is barred by limitation it falls. Therefore, I do not consider it necessary to examine the merits or demerits of the appeal, as advanced by the parties.
 

For the reasons stated above the appeal is dismissed.