IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

          Appeal No.154/2004

         

          Date of decision: November 13, 2006

 

 

M’Belle International Pvt.Ltd.

 

 

Appellant

 

Versus

 

 

 

 

Securities and Exchange Board of India      ……                

 

 

 

Respondent

 

 

 

None   for the appellant.

 

Mr. Ravi Hegde, Advocate  along with Ms. Sejal Shah, Advocate for the   respondent

 

 

CORAM

 

          Justice N. K. Sodhi, Presiding Officer

          C. Bhattacharya, Member

         

Per:   Justice N. K. Sodhi, Presiding Officer (Oral)

 

 

            This appeal under section 15T of the Securities and Exchange Board of India Act, 1992 (for short the Act) is directed against the order dated June 30, 2004 passed by the adjudicating officer imposing a penalty of Rs.1 crore on the appellant under section 15A(a) of the Act for its failure to furnish the material information asked for by the Securities and Exchange Board of India  (hereinafter called the Board) during the course of investigations.

2.       The Board received multiple complaints from the shareholders of Roofit Industries Limited (for short the company) alleging that the entire shares of the company were directly or indirectly held by the management.  The Board also noticed that the price of the shares of the company suddenly increased from Rs.127/- to Rs.268/- and the volume traded had also increased from 2100 shares to 1,13,400 shares in a short period from October 6, 1999 to December  3, 1999.  The Board ordered investigations into the shareholding pattern of the company with a view to find out whether there was any price manipulation in the scrip.  During the course of the investigations it issued summons to the appellant on July 23, 2002 for producing certain documents and supplying information mentioned therein.  The appellant was called upon to furnish the names and addresses of its promoters and directors during the last 3 financial years and also the complete details of its shareholding pattern and the number of shares held by each shareholder as on March 2000 and March 2001.  It was also required to furnish the names and addresses of its group/associated entities.  The appellant was further  required to furnish the details of settlement-wise/broker-wise trades executed in the scrip of the company for the period between March 2000 to March 2001.  A copy of the demat account and those of its associated entities from March 2000 to March 2001 were also required to be supplied along with the statement of account of all bank accounts for the aforesaid period highlighting the payments made or received regarding the trades in the scrip of the company.  The Board also required the appellant to furnish the details of any loan given to the company or any loan taken therefrom and whether its promoters/directors were directly or indirectly related to the promoters/directors of the company.  On receipt of the summons, the appellant as per its letter dated 26th July, 2002 sought extension of time upto August 20, 2002 to furnish the required information.  The appellant did not furnish the requisite information within the extended period and, therefore, the Board issued another summons on September 5, 2002 requiring the appellant to furnish the information by September 16, 2002.  In the meantime the  appellant addressed a letter dated August 28, 2002 seeking extension of time till September 30, 2002.   The information was not supplied even till this date.  The appellant addressed another communication dated 27th September, 2002 requesting for further grant of time by one month on the ground that it had not been able to compile the information.  It is not in dispute that the appellant did not furnish the information and, therefore, the Board initiated adjudication proceedings under Chapter VI–A  of the Act.  An adjudicating officer was appointed who issued a notice dated 1.9.2003 to the appellant calling upon it to show cause why penalty in terms of section 15A be not imposed for not furnishing the material information asked for by the Board during the course of the investigation.  The show cause notice sent by Registered Post on the last known address of the appellant as furnished by it was returned undelivered.  Subsequently, a copy of the notice was faxed to the appellant on 1st April, 2004 at the number provided in its letterhead and proof of transmission was obtained.  The appellant did not respond to the notice.  The appellant was then given an opportunity of personal hearing to appear before the adjudicating officer and that notice was also  received back undelivered.  A second notice for personal hearing was faxed on 12.5.2004 requiring the appellant to appear before the adjudicating officer on 19.5.2004 but no one appeared in the adjudication proceedings.  The adjudicating officer was left with no option but to proceed ex parte against the appellant.  On the basis of the material available on the record the adjudicating officer came to the conclusion that the appellant did not comply with the summons nor did it furnish the requisite information called for by the Board during the course of the investigation.  Accordingly, by his order dated June 30, 2004 he imposed a penalty of Rs.1 crore under section 15A(a) of the Act.  Hence this appeal.

3.       The appeal has remained pending since the year 2004 and was being adjourned from time to time.  When it came up for hearing on 25.7.2006 no one appeared on behalf of the appellant and the case was adjourned to September 25, 2006 for final hearing.  This adjournment was granted to enable the appellant to put in appearance and argue the case.  On 25th September, 2006 the Tribunal was busy with another case and this appeal could not be taken up for hearing.  The counsel for the appellant was present and in his presence the case was adjourned for today for final disposal.  Today, no one has appeared on behalf of the appellant and, therefore, we are disposing of the appeal after hearing the learned counsel for the Board and after perusing the record.

4.       It is clear from the facts stated hereinabove that the appellant had been served with summons to furnish material information to the Board during the course of the investigations in the scrip of the company.  As already noticed earlier the allegations were that the management of the company itself was holding directly/indirectly its shares and were trading therein.  The price of the scrip had also risen sharply during the span of a short period and the volumes too had increased manifold.  The Board wanted to investigate and find out whether there was any manipulation in the price of the scrip and if so by whom.  The appellant had been trading in the scrip of the company and, therefore, the Board wanted it to supply the required information.  Summons were received and time was sought for producing the material information but the appellant failed to do so.  Several opportunities were granted but the appellant did not furnish the information.  The adjudicating officer was, therefore, right in holding that the appellant had withheld the material information which could have shown as to whether there was  any price manipulation in the scrip of the company or not.  The appellant by not furnishing the information had hindered the investigations and was, therefore, liable to the imposition of penalty in terms of section 15A(a) of the Act.  The appellant had been seeking time for furnishing the information on the ground that it was finalizing its accounts and that there was shortage of staff.  The information sought for did not require enormous manpower or a long time to compile the records for which repeated extensions of time was sought.  It is, thus clear that the appellant had stalled the investigations ordered by the Board.  As already noticed, the information was required by the Board to find out whether there was any price manipulation in the scrip of the company.

5.       Section 15A of the Act provides that any person, who is required under the 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 Rs.1 lac  for each day during which such failure continues or one crore rupees, whichever is less.  The information was required to be furnished upto September 30, 2003 and, thereafter, there was a continuing default on the part of the appellant for which it was liable to pay a penalty to the extent of one lac rupees for each day.  The adjudicating officer, in our view, was justified in imposing a penalty of Rs.1 crore in the circumstances of the case and we find no ground to interfere with the impugned order.

          In the result, the appeal fails and the same stands dismissed with no order as to costs.

 

Sd/-

Justice N. K. Sodhi

Presiding Officer

 

Sd/-

C. Bhattacharya

                                                Member

Smn/