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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.� Prabhu Steel Industries Ltd., ����������������������� ���� 2. Ganga Ram Aggarwal, Prabhu Steel Industries
Ltd.,������������� ��������� Respondent� :�� Adjudicating Officer, Securities and
Exchange Board of ����������� ��������������� ����������������������� Appellants
by����� :�
Shri Ravikumar ����������������������� Respondent
by�� �:� Shri Ravi Hegde,
Advocate Coram: ����������� �Justice Kumar Rajaratnam,
Presiding Officer ����������� ����������� 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 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.� ����������������������������������� 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/-. ����������������������� 11.������ No
order as to costs. ����������������������������������������������������������������������� Sd/- ����������������������� ����������� ����������� Justice Kumar Rajaratnam ����������������������������������������������������������� �Presiding Officer ����������������������������������������������������������������������������������� Place: Mumbai Date:� Avm |