BEFORE THE SECURITIES APPELLATE TRIBUNAL, MUMBAI

 

Appeal No.370 & 372/2004

 

��� ������������������������������������������������������������������� Date of Hearing:25.4.2004

����������������������������������������������������������������������� Date of Decision :26.4.2004

 

In the matter of:

 

Appellants�� :�� 1.Krishna Kumar Aggarwal, Director,

Prabhu Steel Industries Ltd., Nagpur(Appeal 370/04)�������

����������������������� ���� 2. Ganga Ram Aggarwal, Prabhu Steel Industries Ltd.,������������� ��������� Nagpur(Appeal 372/04)��������

 

Respondent :�� Adjudicating Officer, Securities and Exchange Board of

����������� ��������������� India, Mumbai.

 

����������������������� Appellants by����� :Shri Ravikumar Varanasi, Advocate

����������������������� Respondent by�� :Shri Ravi Hegde, Advocate

 

Coram:

����������� Justice Kumar Rajaratnam, Presiding Officer

�����������

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Per:Justice Kumar Rajaratnam, Presiding Officer

 

 

����������� Since common questions of law arise in these appeals, common order is passed by consent of parties.

 

2.�������� The appellant in Appeal No.370/04 being aggrieved with the order of the respondent dated 30.7.2004 , has preferred the appeal.By the impugned order, the appellant was directed to pay a penalty of Rs.1,25,000/- for delayed submission of information sought for by SEBI in connection with the affairs of Prabhu Steel Industries Ltd. (hereinafter referred to as �the company�).The appellant in Appeal No.370/04 is a Director of the company.

 

3.�������� Investigating Officer of SEBI by letter dated 3.9.2002 required the appellant to submit details of trading in the scrip of the company.The allegation was that there was a delay of 25 days in submitting the documents.

 

4.�������� There can be no doubt that when summons is issued to any person for the purpose of asking that person to submit information with regard to any dealings that may relate to securities market, that person who has received the summons is bound to submit the information within the stipulated time.�� It is equally true that if the information has been submitted to the Investigating Officer before show cause notice is issued, then it is a waste of time to commence adjudication proceedings and to hold an enquiry under the provisions of rule 4 of SEBI (Procedure for Holding Enquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 and to determine whether there was any violation of section 15A of the SEBI Act.

 

5.�������� In this case, admittedly, all information was furnished on or before 3.3.2003 and the show cause notice was issued on 27.1.2004.No action of the respondent should result in a long-winded enquiry and if it can be rapped up with a stern warning, that would, in my view, have met the ends of justice.At paragraph 5.17, the impugned order recognizes this difficulty of wastage of time of the Adjudicating Officer.Paragraph 5.17 of the impugned order reads as follows:

�5.17��� I have duly considered the said factors enumerated u/s

15J of SEBI Act and under Rule 5(2) of (Procedure for�� Holding Inquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995.

 

It is difficult to give a finding as to the amount of disproportionate gain and unfair advantage noticee got by delaying the submission of the documents to Investigating Authority.It can only be stated that by doing so they could effectively stall the investigation proceedings for a period of 25 days (from 07-02-03 to 03-03-2003).

 

I also find it difficult to give a finding as to the quantum of loss caused to any investor or investor group.However, when a regulatory action was effectively stalled for a period of 25 days and when an investigation to find out the market misdemeanor, if any, cannot be completed within time, it is theoretically possible to hold in general terms that a loss is caused to the investors at large.

 

Applying the criteria laid down by the Tribunal in the above cases and also the statutory criteria mentioned in Section 15 J, I find that there is nothing on record to show that the non-submission of information was with any ulterior motive.I further find that Shri Aggarwal had in fact submitted the information as required by the Investigation Officer, with 25 days delay.Though the noticee stated that their financial situation is bad, no evidence was brought on record to prove it.�

 

 

 

6.�������� A clear reading of this portion of the Impugned Order would indicate that there was no ulterior motive on the part of the appellant to cause the delay of 25 days in furnishing the information.

 

7.�������� It was submitted by the counsel for the appellant that the show cause notice was issued after 10 months and the impugned order was passed on 30.7.2004, i.e. after six months from the date of issue of show cause notice.

 

8.�������� 26 page order has been passed in an open and shut case when it is admitted that there was a delay of 25 days in furnishing information.I consider it a sheer waste of time when the appellant has clearly pleaded that there was financial and personal difficulties in furnishing the information and the matter could have been disposed of with a reasoned short order.It is possible that the Investigation Officer also could have condoned the delay and accepted the information, rather than take the route of recommending adjudication proceedings.It is important that the respondent focuses itself on serious violations so that more time is spent on economic offences, which erode the securities market.

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9.�������� It is vehemently submitted by the counsel for the appellant that he was present at all times but the information was not available within the stipulated time on account of the impecuniosity of the company and the labour problems.Since the appellant has come forward with such a plea, it would not be in the interest of justice to impose a penalty of Rs.1,25,000/- for a short delay of 25 days.

 

 

10.������ It is also brought to our notice that the appellant in Appeal No.372/04, who is the Chairman and Managing Director of the company, has also been prosecuted for the same reasons in a separate adjudication proceedings on identical grounds and imposed a penalty of Rs.6,60,000/-by order dated 27.7.04.

 

11.������ For the reasons stated above, the penalty in each case is reduced to Rs.20,000/-.Accordingly, the order in Appeal No.370/04 is modified to the extent that the penalty shall be Rs.20,000/-.The order in Appeal No.372/04 is modified to the extent that the penalty shall be Rs.20,000/-.

 

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11.������ No order as to costs.

 

 

����������������������������������������������������������������������� Sd/-

����������������������� ����������� ����������� Justice Kumar Rajaratnam

����������������������������������������������������������� Presiding Officer

�����������������������������������������������������������������������������������

 

 

Place: Mumbai

Date:26th April 2005

 

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