2013 (12) TMI 818 - AT - Companies Law

Penalty u/s 15A(a) of SEBI Act,1992 - Violation of sections 11C(2) and 11C(3) of the SEBI Act Failure to furnish records while investigation - Dissolution without winding up of SFPL ordered Held that - There was no lacuna in upholding the investigation and the adjudication proceedings by the Respondent - The summons issued by the competent authority of the Respondent have to be complied with otherwise the system will suffer - In order to conduct a thorough investigation and in order to ascertain the exact role played by the various entities including the ten dummy companies and their shareholders, vide summons, detailed information was sought from SFPL by the investigating authority. Despite duly receiving summons SFPL failed to submit complete detailed information as required vide summons, thereby violating the aforesaid charges - oral and written submissions made by the Appellant, the Adjudicating Officer came to the conclusion that the Appellant was guilty of violating the provisions of Sections 11C(2) and 11C(3) of the SEBI Act - Penalty for partial non-compliance issued by the Investigating Officer is on a higher side Thus, Penalty reduced it to Rupees Two Lakh Decided partly in favour of Appellant.

Summary

Issues:
1. Imposition of monetary penalty by SEBI on the Appellant for violating SEBI Act provisions.
2. Compliance with summons by the Appellant during the investigation.
3. Adjudication of penalty amount by the Appellate Tribunal.

Analysis:
Issue 1:
The Appellate Tribunal addressed the challenge to the SEBI order imposing a monetary penalty on the Appellant for violating Sections 11C(2) & 11C(3) of the SEBI Act. The investigation stemmed from findings related to manipulation in share prices and FCCB issuance. SEBI initiated an inquiry into shareholding concentration and price manipulation by a group of entities. The Appellant, a company dealing in shares and securities, was found guilty of violating SEBI Act provisions after a show-cause notice and subsequent adjudication. The Adjudicating Officer imposed a penalty of Rs. 5,00,000/-, leading to the appeal.

Issue 2:
Regarding the compliance with summons during the investigation, the Appellant argued that it had responded to the Investigating Officer's summons on multiple occasions, demonstrating cooperation. However, the Respondent contended that the compliance was lacking and half-hearted, leading to the penalty imposition. The Adjudicating Officer found the Appellant at fault for partial non-compliance, justifying the penalty amount.

Issue 3:
The Appellate Tribunal, after hearing both parties and reviewing the records, upheld the investigation and adjudication proceedings by SEBI. It emphasized the importance of complying with summons to maintain the integrity of the system. While affirming the penalty, the Tribunal exercised discretion to reduce it from Rs. 5,00,000/- to Rs. 2,00,000/- considering the circumstances. The Tribunal ordered the Appellant to deposit the modified penalty amount within two months from the date of the order, ultimately dismissing the appeal with the modified penalty amount.