Securities Appellate Tribunal
Milan Mahendra Securities Pvt. Ltd. vs The Securities And Exchange Board Of ... on 15 April, 2005
Equivalent citations: [2005]63SCL439(SAT)
JUDGMENT
Kumar Rajaratnam, J. (Presiding Officer)
1. Appeals are taken up for final disposal with consent of parties.
2. The appellant in these appeals challenges the order passed by the respondent wherein the respondent has imposed a penalty of Rs. 1,00,000/- in Appeal No. 406 of 2004 and Rs. 1,00,000/- in appeal 405 of 2004. Since both the appeals raise common questions of law, a common order is passed by consent of parties.
3. Appeal No. 406 of 2004 deals with the appellant's failure to appear on summons and violating section 11(2)(i) of the SEBI (here inafter referred to as "the Act") read with section 15HB of the Act. The appellant is a stock broker. It was asked to appear before the respondent with information concerned with investigation into the dealings of shares of M/s. SSI Ltd. and Silverline Technologies Ltd. for the period from October 1999 to June 2000.
4. By the said summons dated 19th of March 2003, the appellant was asked to give details of the trading scrips of Silverline Technoligies Ltd. and SSI Ltd. and appear in person. Mr. Sanjay Mehta, the representative of the appellant, it appears, appeared before the respondent on 8th of April 2003. The appellant further gave a letter giving all the details asked in the summons dated 19th of April 2003(marked before me as Exhibit 'C'). The appellant further gave all the trading log details of the two companies on 8th of April 2003 (market as Exhibit 'D').
5. One year after, i.e. on 7th of April 2004, show cause notice was issued to the appellant and ultimately by the said impugned order in Appeal 406 of 2004 a penalty of Rs. 1,00,000/- was imposed by the respondent. This is under challenge before me.
6. The gamut of the charge is that the appellant was asked to appear on 8th of April 2003 before the respondent.
7. With respect to the next allegation against the appellant for not furnishing details as required by the respondent, the appellant has been proceeded against in Appeal 405 of 2004, which would be dealt with immediately after dealing with Appeal No. 406 of 2004.
8. For non-appearance of the appellant on 8th of April 2003, the impugned order imposes a penalty of Rs. 1,00,000/-. However, on a careful perusal of the impugned order, I find the reasoning that the appellant did not appear on the 8th of April 2003, is rather curious. Paragraph 5.4 of the impugned order reads as follows:
"The notice has stated in his reply dated 19.5.04 that its authorized representative Mr. Sanjay Mehta did appear before the investigating officer and submitted the details under the cover of letter dated April 8, 03 which was received by SEBI on April 9, 03. The summons dated 19.3.03 was issued for appearance on 8.4.03 for the purpose of answering all questions in relation to the said investigation. The explanation of the notice cannot be accepted as it is not clear how a letter dated April 8th can be received on April 9, 2003 when the notice is claiming that its representative had submitted it when he appeared before the investigating officer on the date mentioned in the summons for appearance on April 8, 2003. The notice has also failed to explain whether he appeared before the investigating officer on 8.4.04 and in case he did, why his statement on deposition was not recorded. Thus I find that the notice has failed to appear on April 8, 2003 before the Investigating Officer."
9. A careful perusal of the impugned order and the materials placed before the Tribunal indicates that the appellant appeared before the respondent on 8.4.2003. There is no categorical finding that the appellant did not appear on 8.4.2003. All that the impugned order states is, on this aspect of the matter, as follows:
"The noticee has also failed to explain whether he appeared before the investigating officer on 8.4.04 and in case he did, why his statement on deposition was not recorded. Thus I find that the notice has failed to appear on April 8, 2003 before the Investigating Officer."
The Tribunal is not able to understand what the Adjudicating Officer means by the above words. The stand of the appellant is very clear that it appeared before the respondent on 8th and gave all the information on the 9th of April 2003. In the absence of a categorical finding that the appellant failed to appear on 9th as required, I have no hesitation in setting aside the impugned order in Appeal No. 406 of 2004. Accordingly, the impugned order in appeal No. 406 of 2004 dated 24.8.2004 is set aside and the amount deposited with the respondent pursuant to the interim order dated 12th of April 2005 shall be refunded to the appellant as expeditiously as possible.
10. Coming to appeal No. 405 of 2004, the allegation against the appellant was that it did not produce all the details, which were in its possession with respect to the dealings in the shares of SSI Ltd. and Silverline Technologies Ltd. for the period from October 1999 to June 2000. The case of the appellant was that the appellant was unable to collect and collate the required information with respect to the first summons dated 4th of October 2002. Second summons was issued on 30th of October 2002 asking the same information (Exhibit 'C'). The appellant contended that all the information that was required by the respondent was already furnished by two letters dated 1st of November 2002 (marked as Exhibits D-1 and D-2).
11. It is not in dispute from the impugned order that the appellant was directed to furnish information with respect to the two companies mentioned above by 15th of November 2002 to the respondent. This is set out at paragraph 5.3 of the impugned order. The relevant portion of the impugned order at paragraph 5.5 reads as follows:
"In reply to the Show Cause Notice dated April 28, 2004, the notices has stated vide its letter dated 19.5.04 that it has submitted the data in connection to the summons and enclosed copy of letter dated November 1, 2002. The acknowledgement on the said copy of letter shows that the same was received on 15.11.2002. It is observed that the notice has submitted incomplete details vide their letter dated November 1, 2002 and also failed to furnish details on the date mentioned in the summons dated 30.10.2002. Thus, the notice has failed to furnish the required information. The receipt of timely information helps in completion of investigation expeditiously. Delay in giving such information hampers the completion of investigation and also delays the enforcement action."
It appears from a careful perusal of paragraphs 5.3 and 5.5 that the respondent admits the information was received before the cut off date of 15.11.2002. Paragraph 5.5 makes this clear. However the question that remains to be answered is whether the information was complete or incomplete. Mr. Satpute, the learned senior counsel for the respondent, submitted that the information that was furnished by the appellant was incomplete and that delayed the investigation against the two companies. It is not clear from the impugned order what information was required. Be that as it may, the appellant, being a broker, ought to have been more careful in furnishing all the information that is required by the respondent. If he does not do so, the appellant would be subject to penalty u/s 15A of the Act. However, taking into account the facts and circumstances of the case and also taking into account that no material has been placed in the impugned order as to what information is required, it would be appropriate to take a lenient view of the matter. Section 15J clearly states the conditions to be taken into account before a penalty is imposed. All the conditions mentioned in section 15J, such as:
(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
(b) the amount of loss caused to an investor or group of investors as a result of the default;
(c) the repetitive nature of the default have not been considered by the respondent while passing the impugned order.
12. I have also perused the two letters dated 1st of November 2002 (marked as Exhibits D-1 and D-2), which clearly indicate that all information with respect to the two companies have been furnished by the appellant. It is not at all clear what further information was required by the respondent. The impugned order makes no reference to this aspect of the matter.
13. In that view of the matter, I impose a penalty of Rs. 10,000/- on the appellant in Appeal No. 405 of 2004.
14. The impugned order is modified accordingly. It is submitted that the appellant had already deposited the amount.
15. Consequently, Appeal No. 406 is allowed and the impugned order is set aside.
16. Appeal No. 405 is dismissed and the penalty imposed is modified to Rs. 10,000/-, which has already been deposited with the respondent.
17. Both the appeals are disposed of accordingly.
18. No order as to costs in both the appeals.