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4. A few facts, based on which the Adjudicating Officer has held the appellants guilty, deserve to be narrated.

NCJ International Ltd. (NCJ)

(i) The appellants were acting as Registrars to the company's public issue opened on 16-1-1995. They were also acting as Transfer Agents thereafter. According to the appellants, they had forwarded a Memorandum of Understanding dated 4-5-1995 to NCJ vide their letter of 19-6-1995, with a request to return the same duly signed. However, they could not produce the same or any tangible evidence to show the existence of a valid agreement between the parties. Their contention was that it could not have been possible for them to act as Registrar and Transfer Agents without the existence of an agreement and may not be viewed that the agreement with NCJ never existed. They had stated before the Adjudi- cating Officer that - 'we have been carrying the job of Transfer Agents of M/s. NCJ International Ltd. after public issue. We had prepared the agreement and sent it to the company many times for signature, but we have not received the same back'. In the light of the appellants' own admission that the agreement was not received back duly signed by NCJ, the Adjudicating Officer concluded that the appellants had failed to enter into a valid agreement with NCJ before taking up the assignment as Registrars and Transfer Agents.

9. Even though the Securities and Exchange Board of India (Registrars to and Issue and Share Transfer Agents) Rules, 1993 are applicable to Registrars and Share Transfer Agents, it cannot be said that the duties and functions of both these entities are one and the same. This is evident from the definitions of these two expressions provided in the Rules. The activities of Registrar to an Issue cover (i) collecting applications from investors in respect of an issue of securities (ii) keeping proper records of application and monies received from investors or paid to the seller of securities (iii) assisting the issuer in determining the basis of allotment, finalising the list of persons entitled to allotment and processing and despatching allotment letters, refund orders, certificates, etc. A Share Transfer Agent on the other hand is one who on behalf of any body corporate, maintains the records of holders of securities issued by such body corporate and deals with all matters connected with the transfer and redemption of its securities. It can be said that the activities of Registrar is basically related to issue of securities and matters incidental thereto and that of a Share Transfer Agent, relate to transfer, transmission, redemp- tion, etc. of securities after the allotment is completed. Regulations notified by SEBI permit entities to carry on the activities of both Regis- trars and Transfer Agents, subject to their fitness to carry on this 'two in one' activities. In such cases a combined certificate of registration is granted for carrying on the activities of Registrars and Transfer Agents. The 'two in one' entities are granted Category I certificate and those entites who carry on the either of these activities are given Category II certificate. The appellants were granted a Category I certificate with effect from 16-10-1993 and thereafter the certificate of registration was renewed for further periods. One of the conditions for grant/renewal of certificate of registration is that a Registrar/Transfer Agent shall enter into a valid agreement with the person for or on whose behalf they are acting and that the agreement should define the allocation of duties and responsibilities between him and such person. Apart from the rules and regulations, SEBI had issued certain operational guidelines/instructions in this regard alongwith two model agreements for the purpose. If a Category I certificate holder enters into an agreement with an issuer company clearly defining the allocation of duties between him and the company in respect of his role as Registrars and also as Transfer Agents, it cannot be said that the intermediary has contravened the provisions of Rule 4(1)(b); as such a combined agreement would be treated as sub- stantial compliance of the statutory requirement. The thrust is for a valid agreement with clear allocation of duties and responsibilities between the company and the Registrar or Transfer Agent or in that 'two in one' role recognised by SEBI. It is also evident that the agreement is required to be executed before taking up the assignment and should remain alive during the currency of that assignment. Normally the activities of Registrars are concluded once the issue related matters are over. But this is not the case with the Transfer Agents. Transfer/transmission of securities is an on going activity and as such the Transfer Agents' activities are of continuing nature. It has been clearly mentioned in the certificate of registration that the SEBI had granted the certificate of registration to the appellants as Registrars and Transfer Agents subject to the conditions in the rules and in accordance with the regulations to carry out the activities as specified therein. Therefore, compliance of the requirements under Rule 4(1)(b) is a requirement of the condition subject to which the certificate was granted and failure to do so would attract penal consequences.

10. The Adjudicating Officer in the impugned order has charged the appellants on two counts that (i) they had not entered into any valid agreement with 9 companies before taking up the assignment as Regis- trars and (ii) there was no valid agreement for discharging the functions of Transfer Agents for certain periods.

11. In this context it is pertinent to mention that in all the 9 cases, discussed in the order the appellants had acted as Registrars to public issues opened on a date prior to the date on which Section 15B was brought into force. It is true that failure to enter into and agreement in terms of Rule 4(1)(b) was an offence even at that time, but the penal consequences were restricted to suspension or cancellation of registration certificate as provided in Section 12(3) of the Act or prosecution under Section 24. Imposition of monetary penalty provided under Section 15B was not possible for an offence committed on a date prior to 25-1-1995 i.e., date on which the said section came into force. In view of this, the Adjudicating Officer invoking the provisions of Section 15B against the appellants for non-compliance of the requirements of Rule 4(1)(b) with reference to their appointment as Registrar, for the public issues opened earlier is not legally sustainable. It is noticed from the facts that all those public issues were made before the section was brought into force. Imposition of monetary penalty invoking Section 15B in these cases is not acceptable as the cause of action relates to a period when 15B was not in existence.

12. Coming to the contravention of Rule 4(1)(b) with reference to the appellants failure to enter into agreements for acting as Transfer Agents in the 8 cases (LSL has been absolved of this charge), it may be stated that the appellants have not seriously rebutted the material facts relied upon by the Adjudicating Officer. From the evidence discussed in the impugned order it is clear that the appellants had not produced the original or copy of the relevant agreement relating to their assignment as Transfer Agents, either for the whole period during which they rendered the service or for certain periods during the currency of such assignment as pointed out by the Adjudicating Officer. The argument that the appellants would not have taken up the assignment without executing an agreement deserve to be discarded. Further, the contention that the appellants had exchanged letters with their clients and these letters constituted valid agreement, per se is not acceptable. No doubt, a valid agreement can be constituted through exchange of letters. But if the law prescribes any particular requirement to be put in an agreement, the failure thereof would not recognise such a default agreement as an agreement in terms of the regime. In the present case Rule 4(1)(b) stipulates as to what should contain in the agreement. So an agreement not in conformity with those require- ments is not a proper agreement for the purpose. The appellants had not produced any evidence to show that the so called letters defined the allocation of duties and responsibilities of each party as required under Rule 4(1)(b). A letter by itself, without including the mandatory clause provided in the rule, cannot be considered to have constituted an agree- ment under the said rule.