Securities Appellate Tribunal
Smt. Shilpa Amit Kotia & Ors. vs Sebi on 2 July, 2019
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved on: 24.06.2019
Date of Decision : 02.07.2019
Appeal No. 282 of 2017
Sungold Capital Limited
House No. 7/13, Opp. White Tower,
Station Road, Nandod, Rajpipla,
Narmada - 393 145. ..... Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. J.J. Bhatt, Advocate with Ms. Rinku Valanju, Advocate
i/b R.V. Legal for the Appellant.
Mr. Vishal Kanade, Advocate with Mr. Jinay Padh, Advocate
i/b Dave & Girish & Co. for the Respondent.
WITH
Appeal No. 308 of 2017
1.Smt. Shilpa Amit Kotia 2/B, State Bank Staff Colony, Near Navrang School, Naranpura, Ahmedabad - 380 013.
2. Smt. Shwetha Dhaval Kotia 2/B, State Bank Staff Colony, Near Navrang School, Naranpura, Ahmedabad - 380 013.
3. Shri Ravi Rajiv Kotia A/73, Avani Complex, Near Naranpura Bus Stop, Naranpura, Ahmedabad - 380 013.
2
4. Smt. Seema Rajiv Kotia A/73, Avani Complex, Near Naranpura Bus Stop, Naranpura, ..... Appellants Ahmedabad - 380 013.
Versus Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. .... Respondent Mr. Amit Kotia, Authorized Representative for Appellants. Mr. Vishal Kanade, Advocate with Mr. Jinay Padh, Advocate i/b Dave & Girish & Co. for the Respondent. CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member Per : Justice Tarun Agarwala, Presiding Officer
1. The Adjudicating Officer ('AO' for short) of the Securities and Exchange Board of India ('SEBI' for short) by order dated July 19, 2017 for violation of Section 11C(3) read with Section 11(2)(i) of SEBI Act, 1992 has imposed a penalty under Section 15A(a) of the SEBI Act, 1992 against which two separate appeals have been filed and the same are being decided together.
2. SEBI while conducting investigation into the alleged irregularities in the trading in the scrip of Sungold Capital 3 Limited and into the possible violation of the SEBI laws and regulations required the appellants to furnish certain information. Insofar as the appellant in Appeal No. 282 of 2017 is concerned i.e. the Company, a summons dated December 9, 2014 was issued asking the Company to furnish the details regarding the relationship of the appellant with other entities, namely, appellants in Appeal No. 308 of 2017. In spite of receipt of summons no information was furnished by the appellant Company. Subsequently, additional information was sought vide e-mail dated January 14, 2015 which information was supplied by the appellant Company on January 19, 2015.
3. Insofar as the appellants in Appeal No. 308 of 2017 are concerned summons dated September 16, 2014, October 13, 2014, October 31, 2014, December 10, 2014 and January 1, 2015 were sent requiring the said appellants to furnish certain information with regard to their trading in the scrips of the Sungold Capital Limited.
4. The information sought was not provided by the said appellants. Since the information sought was not forthcoming, an AO was appointed and a show cause notice was issued directing the appellants to show cause as to why penalty 4 should not be imposed under Section 15A(a) of the SEBI Act, 1992 for contravention of the provisions of Section 11C (3) read with Section 11(2)(i) of the SEBI Act, 1992. In spite of receipt of the show cause notice no reply was given by any of the appellants though the appellant in Appeal No. 282 of 2017 attended the hearing in the proceedings before the AO.
5. The AO after considering the material available on record found that since the appellants failed to furnish the information which was required by the investigating authority the appellants have violated the provisions of Section 11C (3) of the SEBI Act, 1992. Accordingly, a penalty of ` 5 Lakh on the appellant Company in Appeal No. 282 of 2017 and a penalty of ` 2 Lakhs each on the appellants in Appeal No. 308 of 2017 was imposed.
6. We have heard Shri J. J. Bhatt, the learned counsel for the appellant in Appeal No. 282 of 2017, Shri Amit Kotia, Authorized Representative in Appeal No. 308 of 2017 and Shri Vishal Kanade, the learned counsel for the respondent.
7. Before us, the learned counsel for the appellant Company submitted that even though they had not furnished the information pursuant to the summons dated December 9, 2014 but the information sought as per e-mail dated January 5 14, 2015 was duly given. It was also submitted that the appellants had participated and co-operated in the proceedings before the AO and in the hearing dated February 17, 2016 and March 8, 2016 the Managing Director of the appellant Company furnished the requisite information as sought in the summons dated December 9, 2014. It was, thus, contended by the learned counsel for the appellant Company that since requisite information was furnished, even though belatedly, no penalty could have been imposed.
8. On this issue, we find that admittedly the information sought by summons dated December 9, 2014 was eventually supplied after more than one and half years on February 17, 2016 in adjudication proceedings. Prior to that such information was not supplied. Section 11C(3) of the SEBI Act, 1992 provides as under:-
"Section 11C:- Investigation (3) The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to, or produce such books, or registers, or other documents, or record before him or any person authorised by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books, or registers, or other documents, or record is relevant or necessary for the purposes of its investigation."6
9. The purpose of the aforesaid provision is that information is required to be furnished to the investigating authority. If information is not furnished, it would hamper the investigation which was precisely being done in the instant case. The alleged irregularities in the trading in the scrips of the appellant Company could not be investigated on account of non-furnishing of the information. Such non-furnishing of the information hampered the investigation and, therefore, penalty becomes leviable.
10. However, we find that it is not a case where it could be said that there was total non co-operation on the part of the appellant Company. Admittedly, most of the information was submitted though the information as per summons dated December 9, 2014 was furnished only at the stage of hearing in the adjudicating proceedings. Thus, even though information was provided by the appellant Company belatedly, we also find that even after the issuance of the show cause notice in the adjudication proceedings no reply was filed and therefore the violation of the alleged provisions stood admitted by the appellant Company.
11. Thus, we are of the opinion that imposition of penalty is justified. However, in the circumstances since eventually the 7 information was supplied during the pendency of the adjudication proceedings coupled with the fact that the Managing Director of the Company had appeared and co- operated in the proceedings the penalty of ` 5 Lakhs appears to be on the higher side. We, accordingly, reduce the quantum of penalty from ` 5 Lakhs to ` 2 Lakhs.
12. Insofar as the appellants in Appeal No. 308 of 2017 are concerned the contention is that only Appellant No. 4 Smt. Seema Rajiv Kotia received summons dated September 16, 2014 and the said summons were never received by the other appellants. Further, summons dated October 13, 2014 was received by all the appellants but other summons were never received.
13. Be that as it may. We find that the appellants in Appeal No. 308 of 2017 are inter connected and are homogenous group by itself in one way or the other. Once the summons has been duly received by one, the same is sufficient service and is deemed to be served by necessary implication insofar as the remaining appellants are concerned. Further, the fact remains that all the appellants had knowledge of the information that was being sought by the respondent. The said appellants neither supplied the requisite information to the 8 investigating authorities nor filed any reply to the show cause notice issued by the AO. Thus, the contention that they were not served with the summons cannot be believed.
14. It has also been stated that they had engaged the services of an Advocate to whom they had given the requisite information and who was instructed to file the reply. It was urged that the said Advocate failed to file the reply and subsequently the appellants found that their Advocate had died. It was, thus, contended that the appellants had no intention of not providing any information to the respondent and the non-furnishing of the information was on account of the death of their Advocate.
15. The contention of the appellant appears to be an afterthought. The appellants did not respond to the summons and only sought further time to provide necessary information which they failed to do so. However, the factum of the death of the Advocate has not been denied by the respondent before us. Thus, a benefit of doubt is given to the appellants. Since Section 11C(3) of the SEBI Act, 1992 has been violated and the information sought has not been furnished a penalty has been imposed. However, in the given circumstances, the 9 penalty of ` 2 Lakhs each payable by the appellants is reduced to ` 1 Lakh each.
16. In the result, both the appeals are partly allowed. The impugned order insofar as the violation of Section 11C(3) of the SEBI Act, 1992 is concerned is affirmed. However, the quantum of penalty is reduced. In the case of the appellant Company in Appeal No. 282 of 2017 the penalty of ` 5 Lakhs is reduced to ` 2 Lakhs and, in the case of the appellants in Appeal No. 308 of 2017, the penalty of ` 2 Lakhs each is reduced to ` 1 Lakh each. The aforesaid penalty shall be paid by the appellants to the respondent within four weeks from today. In the circumstances, there shall be no order on costs.
Sd/-
Justice Tarun Agarwala Presiding Officer Sd/-
Dr. C.K.G. Nair Member Sd/-
Justice M.T. Joshi Judicial Member 02.07.2019 Prepared and compared by:msb