In the matter of

Punjab & Sind Bank                                             Appellant

Vs.

Securities and Exchange Board of India            Respondent

Present

Shri Rakesh Priya

Shri Iqbal Singh Bhatia
Sr. Managers, Merchant Banking Divn
Punjab & Sind Bank                                           for the appellant

Ms Poonam Bamba
Division Chief, SEBI                                            for the respondent
 

This appeal is directed against the order dated November 16, 1998 made by the Adjudicating officer, imposing Rs. 25, 000/- as penalty against Punjab & Sind Bank, the appellant herein.
 

The Appellant, a public sector bank is holding a certificate of registration granted by the Securities and Exchange Board of India, to act as Banker to an Issue. Since the registration was valid for three years, on its expiry in 1998 the Appellant sought renewal of the same by submitting requisite application with details. However, from the particulars furnished, the Respondent felt that the Appellant had not fulfilled the requirements of the condition attached to the certificate mandating compliance of the statutory requirement of entering into an agreement with the issuer companies detailing specific particulars as provided for in the regulations. The matter was therefore referred for enquiry and adjudication . The Adjudicating officer after enquiry, adjudged the Appellant guilty of the charge and imposed Rs. 25, 000/- as penalty.
 

Penalty amount of Rs. 25, 000/- has been deposited with the Tribunal as required under Rule 9 of the Securities Appellate Tribunal (Procedure Rules) 1995. The Respondent has filed detailed reply in the matter. Oral submissions have also been made by the representatives of both the parties. Their rival contentions are briefly discussed below.
 

According to the Appellant the requirement of regulation 14 of the Securities and Exchange Board of India (Bankers to an Issue) Regulations, 1994 and rule 4(a) of the Securities and Exchange Board of India (Bankers to an Issue) Rules, 1994 have been followed by entering into detailed agreement with issuer companies. Attention of the Tribunal was drawn to the standard specimen consent letters, specimen agreement with IDBI, instructions to collection branches from the Bank and also a copy of the letter from the Issue Registrar to the Appellant in the case of HB Mutual Fund�s public issue to prove compliance of the said regulation / rule. The Appellant submitted that in each and every public issue, to which the appellant was banker, proper documentation had been made and there were no complaints against it at any point of time from any body including the issuer company. According to the Appellant the rules and regulations are not mandatory but only guiding principles to promote and implement the spirit of the Act. The appellant further contended that the penalty has been imposed by the Adjudicating officer in an arbitrary manner without following the factors provided in section 15J of the Act.
 

The respondent contended that the appellant had not fulfilled the condition subject to which the registration was granted. Compliance of the requirements of rule 4(a) and regulation 14 is mandatory. Referring to the documentary evidence relied upon by the appellant, it was pointed out that the consent letters, instructions etc. were not agreements and the instructions from the issuer registrar.
 

The Appellant�s contention that the rules and regulations are not mandatory, but only principles for guidance for the implementation of the Act is erroneous. The SEBI (Bankers to an Issue) Rules, 1994 and SEBI (Bankers to an Issue) Regulations, 1994 were made by the Central Government and SEBI respectively in exercise of the rule / regulation making power specifically conferred on them by the Act. Section 29 and 30 of the Act are very clear in this regard. Non compliance of these rules and regulations has been made penal offences. These rules and regulations are subordinate legislation. It is well settled that an intra vires subordinate legislation, validly made, has the same force of law as the statute itself. The respondent�s contention that exchange of letters does not bring into existence any agreement is also erroneous. It is well settled law that an agreement can be spelt out from correspondence exchanged between the parties, if from the correspondence it clearly emerges that the parties were ad idem to the terms. Supreme Court had in one of its recent judgements reiterated this legal position (Rickmers Verwaltung GM BH Vs Indian Oil Corporation (AIR 1999 SC 504). Since regulation 14 read with rule 4(a) insists certain particulars to be included in the agreement and if those particulars are wanting in those letters exchanged it can be said that there was no proper agreement in terms of the regulation. The submission that through exchange of letters no agreement can be brought into existence as putforth by the respondent is not correct.
 

Adjudicating Officer has dealt with public issues made by 3 companies and the non compliance of the regulation by the Appellant in those three cases. In the case of public issue made by IDBI, to which the appellant was acting as Issue Banker, the Adjudicating Officer has observed that :

"From the specimen copy of MOU between the Bank and IDBI regarding the public issue of IDBI Bonds, it is seen that Clause 3 of the Schedule I and Clause 5 of Schedule I, respectively dealt with the requirement of daily reports by the bank of collection figures t the Registar and final certificate by the bank of collections to the Registrar. Schedule III refers to list of the collection branches which are to be circulated."

For the reasons stated above, it is felt that matter requires examination of relevant specific documents relating to each public issue and not specimen letters / agreements etc. The Adjudicating officer should record specific findings in each case, which was subjected to enquiry and adjudication, instead of leaving the conclusion to be drawn by others. For the reasons discussed above, it is felt that the matter requires further enquiry. I am, therefore, of the view that the matter is fit for remand. Accordingly, I set aside the impugned order and remand the matter to the Adjudicating officer for de nova adjudication.
 

The appeal is allowed by way of demand.