Securities Appellate Tribunal
Amrik Singh vs Sebi on 5 April, 2010
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No.30 of 2010
Date of decision: 5.4.2010
Amrik Singh
EH-58, Ladowali Road,
Jalandhar City,
Jalandhar. ..... Appellant
Versus
Securities and Exchange Board of India
C4-A, 'G' Block, Bandra Kurla Complex,
Bandra (E), Mumbai. ......Respondent
Mr. Sajeve Deora, Chartered Accountant for the Appellant.
Mr. Advait Sethna, Advocate for the Respondent.
CORAM : Justice N.K. Sodhi, Presiding Officer
Samar Ray, Member
Per : Justice N.K. Sodhi, Presiding Officer (Oral)
One Amrik Singh is the appellant before us. He has been found to be one of the
promoters of M/s. Krishna Engineering Works Ltd. (for short the company). It is alleged
that the appellant transferred 23,500 shares of the appellant in off market transactions on
December 27, 2004 to one Sunil Kumar who in turn sold the shares in the market. This,
by itself, cannot be a charge. It is further alleged that the appellant transferred his shares
in off market transactions after the company had made misleading corporate
announcements and published misleading financial results for the quarter ending
December 31, 2004. As a result of this, the appellant is alleged to have violated
Regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of
Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.
Another charge leveled against the appellant is that he failed to respond to the summons
issued to him by the investigating officer during the course of the investigations which
were carried out by the Securities and Exchange Board of India in the scrip of the
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company. Having found the appellant guilty in regard to both these charges, the
adjudicating officer by his order dated December 14, 2009 imposed a monetary penalty
of Rs.2 lacs for violating the regulations and another sum of Rs. 2 lacs for not complying
with the summons issued during the course of the investigations. In all, a total of Rs. 4
lacs penalty has been imposed. It is against this order that the present appeal has been
filed.
2. We have heard the authorised representative of the appellant and the learned
counsel for the respondent Board. The first charge, in our opinion, must fail. The
allegation in this regard made in the show cause notice and the findings recorded in the
impugned order, even if taken on their face value, do not establish the charge against the
appellant. According to the findings in the impugned order, the appellant transferred the
aforesaid shares on December 27, 2004. According to the Board, he transferred these
shares because the company had earlier made misleading corporate announcements and
had also announced the misleading financial results for the quarter ending December 31,
2004. So far as the misleading corporate announcements are concerned, no details have
been furnished either in the show cause notice nor has any been referred to in the
impugned order to show as to what those misleading announcements were. The learned
counsel for the respondent Board placed before us the copy of the show cause notice that
was issued to the appellant alongwith Annexure 2 thereto. The annexure only refers to
the announcements that were made by the company which reads as under:
Scrip code : 522173 Company Name : Krishna Engineering Works Ltd
Date Begin : 01 Oct 04 Date End:31 Dec 04
Expenditure Includes
(Increase)/Decrease in Stock in Trade Rs. (14.964) million
Consumption of Raw Materials Rs.77 808 million
Staff Cost Rs.1.508 million
Other Expenditure Rs.39.587 million
EPS is Basic and Diluted
Status of Investor Complaints for the quarter ended December 31, 2004
Complaints Pending at the beginning of the quarter Nil
Complaints Received during the quarter Nil
Complaints disposed off during the quarter Nil
Complaints unresolved at the end of the quarter Nil
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1.The above results have been taken on record by the Board of Directors in their meeting held on January 08, 2005.
2. Krishna Engineering Works Ltd. (KEWL), a NSE traded Company, has informed its shareholders vide Notice dated December 28, 2004 that it has appointed M/s. Milcon Consultancy Services Ltd. - ISO 9001-2000 Company. A Joint Venture of ICICI, IDBI, IFCI State Level Corporation like SICOM, MIDC, MSSIDC & Banks for their services with regard to the restructuring of debts of the Company.
3. A surging boom in the automobile industry has rendered the turnaround in KEWL's profitability during the quarter ended December 31, 2004 with excellent financial performance.
4. KEWL has a huge order book position from overseas and is existing domestic .......................... Ashok Leyland Ltd. (Rs.401.70 Million). Tata Motors Ltd. (Rs.349.90) million. Ministry of Defense (Rs.70.10 million) Overseas orders from Italy (Rs.11.20 million), and France (Rs.21.40 million).
5. KEWL has India's best integrated Casting, Forging and Sophisticated machining plant for manufacturing of automobile component under one roof and now KEWL expect solid spirit in the automobile sector and expect a turnover of Rs.1500.00 million by the year ending 2006. Gurbachan Juneja Managing Director
3. It is true that the appellant did not file any reply to the show cause notice but that does not lead us to infer that the aforesaid announcements made were misleading or inaccurate. The adjudicating officer has not said a word in the impugned order as to which part of the statement made by the company was misleading. He has only described the statement as misleading and held the appellant guilty which is not permissible. Admittedly, the shares were off loaded by the appellant on December 27, 2004 and the financial results of the company for the quarter ending December 31, 2004 could not have been published prior to January 1, 2005. The learned counsel for the respondent Board has pointed out from the record that the financial results of the company for the relevant quarter were published on January 11, 2005. This being the factual position, how can it be said that the appellant off loaded the shares after the financial results for the quarter had been published. The charge in the show cause notice and the findings recorded in the impugned order deserve to be set aside on this short ground and also for the reason that no details have been pointed out as to how and in what manner were the announcements made by the company misleading or inaccurate. Before we conclude on this issue, we may notice another interesting feature of this charge. Adjudication proceedings have been initiated against the company as well and the charge levelled 4 against it is that it had failed to make the necessary disclosures under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 and the listing agreement. There is no charge levelled against the company that it made any misleading corporate announcements or that it had published misleading financial results for the quarter ending December 31, 2004. We wonder how such a charge could be leveled when proceedings were initiated against the appellant who is said to be a director/promoter of the company which fact is being disputed by his authorised representative.
4. This brings us to the second charge leveled against the appellant. According to the charge, he failed to respond to the summons issued to him during the course of the investigations. This fact is admitted by the authorised representative of the appellant. This being so, the appellant must be held guilty under section 11 C (6) of the Securities and Exchange Board of India Act, 1992. This is, indeed, a serious violation and non cooperation hampers the investigations which are required to be carried out by the market regulator.
In the result, we set aside the findings recorded by the adjudicating officer on the first charge and while upholding the findings on the second charge, we reduce the penalty imposed on the appellant to Rs.2 lacs. The appeal is disposed off and the impugned order stands modified accordingly. No costs.
Sd/-
Justice N.K.Sodhi Presiding Officer Sd/-
Samar Ray Member 5.4.2010 Prepared and compared by RHN