ORDER
UNDER RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING OFFICER) RULES, 1995 READ WITH REGULATION 53A of SEBI (DEPOSITORIES AND PARTICIPANTS) REGULATIONS, 1996 AND SECTION 15HB OF THE SEBI ACT, 1992.
AGAINST
M/s PANASONIC AVC NETWORK INDIA CO. LIMITED
BACKGROUND:
1. I was appointed as the Adjudicating Officer by the Chairman, SEBI, vide order dated September 30, 2004 to enquire into and adjudge the alleged contravention of Regulation 53A of the SEBI (Depositories and Participants) Regulations, 1996 (for brevity’s sake referred to as the Regulations) read with Section 15HB of the SEBI Act, 1992 (hereinafter referred to as the Act) by M/s Panasonic AVC Network India Co. Limited (hereinafter referred to as PAVC) and formerly known as Matsushita Television and Audio India Ltd, in the matter of their failure to appoint a common share agency for handling share registry work both for the dematerialised and physical securities.
SHOW CAUSE NOTICE/ REPLY/ PERSONAL HEARING:
2. In view of the above, adjudicating proceedings were initiated in the first instance against PAVC by the issuance of a show cause notice dated January 12, 2004 in terms of Rule 4 of the SEBI (Procedure for holding enquiry and imposing penalty by the Adjudicating Officer) Rules, 1995 (Rules) where under PAVC was asked to show cause as to why enquiry proceedings should not be held against them for the alleged violation of the provisions of Regulation 53A of the Regulations and as to why penalty should not be imposed upon them under section 15HB of the Act. PAVC was advised to make their submissions, if any, along with supporting documents that they wished to rely upon, within 14 days from the date of the receipt of the notice. However PAVC failed to respond to the said notice and also failed to provide any explanation for their failure to reply to the said notice.
3. In view of the above, a notice of hearing dated November 29, in terms of Rule 5(1) of the Rules, 2004 was sent to PAVC and vide the said notice, PAVC was advised to attend the hearing proceedings to be held on December 30, 2004 and submit the documentary proof if any, in support of their contentions.
4. On the said date, Mr Ravi Bajaj, Head-Finance, Accounts & Company Secretary, PAVC appeared before me and made the following submissions and also submitted certain documents in support of the said contentions. a. The name of their company had been changed from Matsushita Television and Audio India Ltd. to M/s Panasonic AVC Network India Co. Ltd. The certificate for the name change issued by the RoC in this regard was enclosed b. PAVC had already complied with the provisions of Regulation 53A of the Regulations by appointing M/s Skyline Financial Services Pvt. Ltd and all share registry work was being handled at a single point. The copy of the letter dated December 24, 2004 issued by the said Registrars stating that they had been appointed as an RTA by PAVC with effect from April 01, 1997 and that they continued to be the RTA till date, the copy of the Memorandum of Understanding dated April 01, 2002 whereunder they were once again appointed as RTA till March 31, 2005, were enclosed as proof. c. PAVC had also established connectivity with both the depositories. Copy of the tri-partite agreements entered into with NSDL on April 05, 2000 was enclosed. d. They had also entered into a tri-partite agreement with CDSL on February 25, 2000., a copy of which would be produced within a week e. As on December 30, 2004, about 55% of the shares of PAVC continued to remain in the physical mode. These shares are predominantly the shares of the promoter company i.e., Matsushita Electric Industrial Company Ltd., Japan. Subsequently a copy of the tri-partite agreement entered into with CDSL on February 25, 2000 was sent under cover of leter dated January 3, 2005. On the basis of the above, it was requested that the present proceedings be dropped.
CONSIDERATION OF ISSUES:
5. I have taken into consideration, the facts and circumstances of the case, the material available on record, as also the relevant regulatory provisions.
6. Regulation 53A of the Regulations which came into force on September 02, 2003 reads as under:
“All matters relating to the transfer of securities, maintenance of records of holders of securities, handling of physical securities and establishing connectivity with the depositories shall be handled and maintained at a single point i.e. either in-house by the issuer or by a Share Transfer Agent registered with the Board.”
7. In view of the above, it is imperative for all issuer companies to appoint a common agency to handle the share registry work relating to both the physical and demat shares of the company either in house or through a SEBI registered RTA.
8. The object of the appointment of the common share agency as is evident from the SEBI Circular No. D&CC/FITTC/CIR-15/2002 dated December 27, 2002, which required all issuer companies to appoint a common agency for handling all share registry work is to avoid: a) any delay in dematerialization, and b) Non-reconciliation of the share holding due to lack of proper co-ordination among the concerned agencies or departments, which was adversely affecting the interest of the investors.
9. Thus the provisions of Regulation 53A of the Regulations would be applicable only to that company whose shares have been dematerialized or to those companies whose shares are both in the physical and demat mode.
10. In such a case, before the admission of any security into the depository system, it would be necessary for the issuer company to establish electronic connectivity with both the depositories either directly or through a Registrar and Transfer Agent (RTA).
11. Regulation 53A of the Regulations in this regard is thus an important investor protection measure introduced by SEBI.
12. I have also perused the circular issued by SEBI bearing no.FITTC/DC/ Policy-Cir-01/2001 dated August 03, 2001 which advises all companies to establish connectivity with both the depositories on or before September 30, 2001 so as to facilitate compulsory trading in rolling settlement effective from January 2, 2002. In terms therein all stock exchanges have been advised to submit a compliance report to SEBI by October 15, 2001.
13. Subsequently SEBI circular no.D&CC/FITTC/ Cir-05/2001 dated December 26, 2001 has brought out the list of all the scrips that have established connectivity with the depositories. In terms of the said circular, the shares of the companies which have not established connectivity with the both depositories as on October 31, 2001 are to be traded on the ‘Trade for Trade’ settlement mode and not on the normal rolling settlement.
14. Thus on date, there are companies that have not yet dematerialized their shares and instead have continued to retain their shares in a physical mode and the transfers, maintenance of record of the holders of securities and handling of the said physical securities in such cases is continued to be done in-house or through share transfer agent.
15. From the facts earlier mentioned, it is noted that PAVC had appointed a common agency, M/s Skyline Financial Services Pvt. Ltd on April 01, 1997 to handle the share registry work relating to both the physical and demat shares and had also established connectivity with both the depositories in the year 2000 itself to enable the shareholders to dematerialize their shares. The same is also evident from the information available in the websites of both the depositories (NSDL & CDSL) as has been verified by me.
16. Since PAVC had established connectivity with the depositories to facilitate dematerialization of their shares and has entered into tri-partite agreements with both NSDL and CDSL and have also appointed a common share agency, well before Regulation 53A of the Regulations came into effect, PAVC cannot be held liable for non compliance of Regulation 53A of the Regulations.
17. Hence on a judicious exercise of the discretion conferred upon me, bearing in mind the facts brought out above, and after analysing all the material available on record, I am of the considered opinion that the imposition of any penalty in the present matter is not necessitated.
ORDER: 18. Accordingly, in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, the proceedings initiated against M/s. Panasonic AVC Network India Co. Limited are hereby dropped.
PLACE: MUMBAI G. BABITA RAYUDUDATE: JANUARY 3, 2005 ADJUDICATING OFFICER
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