2014 (6) TMI 899 - AT - Companies Law

Penalty for violation of Section 15C & 15HB of SEBI Act, 1992 - Failed to redress investors grievances within the specified time - Sick company under rehabilitation process under the supervision of BIFR - Appellant s ground for poor financial health - Held that - It is the admitted position that appellant received various communications from SEBI including complaints to resolve the grievances of the investors but the appellant failed to do so for years together. It is only when impugned order dated March 3, 2014 is passed by the respondent imposing a penalty of ₹ 3 lac that the appellant has resolved investors complaints in question on April 16, 2014. It is noted that due procedure established by law has been followed by the learned adjudicating officer in conducting the inquiry against the appellant and in imposing the penalty in question. Various aspects, including the sickness of the company and its poor financial health, have already been taken into consideration by the learned adjudicating officer while imposing a token penalty of ₹ 3 lac. We, therefore, do not find any ground to interfere with the impugned order in the matter of imposition of penalty even on the ground of proportionality. - Decided against the appellant.

Summary

Issues Involved:
- Appeal against imposition of penalty under SEBI Act, 1992 for violation of Sections 15C and 15HB
- Challenge based on company being a sick company under Sick Industrial Companies Act, 1985
- Argument regarding poor financial health not considered in the impugned order
- Resolution of complaints after the imposition of penalty
- Legal infirmity in passing the impugned order
- Consideration of company's sickness and financial health in penalty imposition
- Provisions of Section 15C and 15HB of SEBI Act, 1992
- Adherence to due procedure in conducting the inquiry and imposing the penalty
- Grounds for interference with the impugned order

Analysis:

The appellant filed an appeal against an order imposing a penalty under the SEBI Act, 1992 for violating Sections 15C and 15HB. The appellant claimed to be a sick company under the Sick Industrial Companies Act, 1985 since 2005 and undergoing rehabilitation supervised by BIFR. It argued that its poor financial health was not considered in the impugned order. The respondent defended the order, emphasizing the importance of expeditious resolution of investors' grievances for market regulation. The appellant failed to address complaints, with one investor's grievance pending since 1996-97. The adjudication officer imposed a nominal penalty of Rs. 3 lac, considering the company's sickness and financial health.

The SEBI sent complaints to the appellant, which remained unaddressed despite repeated reminders. A show cause notice was issued, leading to the imposition of penalties under Sections 15HB and 15C. The appellant resolved the investors' complaints only after the penalty was imposed. The Tribunal found no legal infirmity in the order, noting the proper procedure followed by the adjudicating officer. The penalty was imposed in accordance with the law, considering the severity of the violation. The Tribunal dismissed the appeal, stating that no grounds existed for interference with the penalty imposed, even in terms of proportionality.

In conclusion, the Tribunal upheld the penalty imposed under the SEBI Act, 1992, emphasizing the importance of timely redressal of investors' grievances for market discipline. The appellant's argument regarding being a sick company and poor financial health was considered but did not warrant interference with the penalty. The decision highlighted the legal provisions of Sections 15C and 15HB of the SEBI Act, 1992, and affirmed the adherence to due procedure in the inquiry and penalty imposition.