REWARD TO INFORMANT UNDER RECOVERY PROCEEDINGS

[Mr. M. GOVINDARAJAN]

Informant

Informant is an individual who voluntarily furnishes Original Information to the Board. Original Information is an information about the asset of a defaulter whose name is published on the SEBI website where his liability is certified as ‘Difficult to Recover’ dues, i.e.-

• not known to the Board from any other source, except where the Informant is the original source of the information;
• is sufficiently specific and credible to identify and attach the asset of such defaulter.

Difficult to recover

The outstanding dues which could not be recovered despite all possible efforts and such dues were certified as ‘Difficult to Recover’ on any one of the following parameters:

• In case the defaulter is an individual -

• defaulter is alive but has no attachable assets;
• defaulter is not traceable;
• defaulter has become insolvent; or
• defaulter has died leaving behind no assets.

• In case the defaulter is a company / body corporate / firm–

• An Indian entity- which is defunct and whose directors (if such directors are also defaulters along with company jointly or severally) have no attachable assets;
• A foreign entity-

• which has no presence/ place of business/ management in India;
• who has no representative in India;
• who has no attachable assets in India.

Guidelines

Securities and Exchange Board of India (‘SEBI’ for short) issued guidelines for the grant of reward to the informant who provides credible information about the assets of the defaulter under recovery proceedings.

Information Reward Committee

For the purposes of these guidelines SEBI shall constitute an Information Reward Committee. This Committee shall consists of the following officers-

• Chief General Manager of Recovery and Refund Department;
• The concerned Recovery Officer having jurisdiction in the matter;
• Another Recovery Officer nominated by the Chief General Manager of Recovery and Refund Department;
• Deputy General Manager or higher officer of the office of the Investor Assistance and Education nominated by the Chief General Manager in charge of Investor Protection and Education Fund.

Eligibility

A person shall be considered as an informant eligible for reward if he furnishes original information in relation to the assets of the defaulters for the dues which are certified as ‘difficult to recover’. The information should be provided with the supporting documents. The information shall be specific and actionable.

Procedure

The guidelines give the following steps in granting reward to the informant-

• Submission of information;
• Examination of information;
• Undertaking by the informant;
• Determining the Reward.

Submission of information

The informant shall submit the information in Form A along with a statement/declaration in Form B. The same shall be submitted to the Nodal Officer in a sealed envelope superscribing ‘Information for grant of reward under Recovery Proceedings’ or to the designated email id.

Examination of information

The Nodal Officer, on receipt of the information from the informant, shall verify the details provided by the informant. If the details are complete in all aspects the Nodal Officer shall enter all the details in a register kept for this purpose. If the details are not complete the Nodal Officer may advise the informant to furnish the complete details as specified within one week. The informant is to give all details as required by the Nodal Officer. When the complete details are received the Nodal Officer shall enter the same in the register. The Nodal Officer shall forward all the information with the documents to the Recovery Officer having the jurisdiction within one week from the date of receipt of complete details from the informant.

The Recovery Officer, on receipt of the information from the Nodal Officer, shall further examine the details to decide the nature of actionable information. The informant shall furnish further details, if required by the Recovery Officer within the time as advised. The Original information along with the documents shall be kept in safe custody by such Officer as required by the Recovery Officer.

The informant shall be required to appear before the Nodal Officer or Recovery Officer. The informant shall be required to sign Form A and Form B to verify the identity of the informant and veracity of the information provided by him. If the informant does not appear or refuses to appear before the concerned Officer, the reward will not be given to him.

Undertaking by the informant

The following written undertaking shall be taken from the informant which forms part of Form B-

• That he is aware that the information or documents furnished by him does not ipso facto confer on him the right to any reward and that he shall be bound by the decision of the competent authority of the Board in this regard;
• That he is aware that the extent of reward depends on the precision of the information and usefulness of the documents furnished by him;
• That he shall provide further documents / information or render assistance, if any, as and when required;
• That the reward would pertain only to the dues recovered/realized which are directly attributable to the information supplied by him;
• That the provisions of section 182 of the Indian Penal Code, 1860 have been read by him or explained to him and he is aware that if the information furnished by him is false and is intended to cause harm / injury to any other person directly or indirectly, then, he would be liable to prosecution;
• That he accepts that the Board is under no obligation to enter into any correspondence regarding the details of any dues realized as a result of his information; and
• That he accepts that the payment of reward is ex-gratia at the discretion of the authority competent to grant rewards and he has no right to challenge the correctness of the decision in any court of law.

Determining the Reward

Any proposal / recommendation and approval for Interim reward may be made only if the asset regarding which information was furnished is found to be unencumbered and reserve price of the same is fixed after attachment. Any proposal / recommendation and approval for Final reward may be made after recovery of dues has been completed with respect to the asset for which information was received.

The Information Reward Committee shall give its reports to the competent authority in the following-

• eligibility of informant for reward;
• determination of amount of reward payable to informant.

The Information Reward Committee considered the following for determining the award-

• The accuracy of the information given by the informant;
• The extent and nature of the assistance rendered by the informant;
• The risk and trouble undertaken and the expense incurred by the informant in securing and furnishing the information / documents;
• The quantum of work involved in utilizing the information; and
• The quantum of dues recovered which is directly attributable to the information and documents supplied by the informant.

Reward shall not be granted if-

• The informant is a Government servant who furnishes information or evidence obtained by him in the course of his normal duties as a Government Servant.
• The informant is required by law to disclose the information; or
• The informant has access to the information on the basis of a contract with the Board; or
• Information has already been provided by any other informant.

The Executive Director in-charge of the Recovery and Refund Department who is the Competent Authority to grant the reward shall pass the order based on the recommendation made by the Informant Reward Committee. The reward shall be paid from the Investor Protection and Education Fund.

The reward shall be in the nature of ex-gratia. It shall be granted at the discretion of the competent authority to grant reward. The reward shall not be assigned any other person by the informant. However the same may be paid to the legal heirs or nominees at the event of his death before payment of reward.

Reward amount

The reward will be given in two stages - one is interim and the other is the final. The interim reward shall not exceed 2.5% of the reserve price of the asset or Rs. 5 lakhs whichever is less. Final award shall not exceed 10% of the dues recovered or Rs. 20 lakhs whichever is less or such higher amount as approved by the Board.

Confidence

The information and the identity provided by the informant or the reward paid to him shall be held in confidence.

Challenging the decision

The informant has no right to challenge the correctness of the decision before the Court of law if he accepts the reward as ex-gratia at the discretion of the competent authority to grant rewards.

Maintenance of records

The Nodal Officer shall maintain record for each informant, the details of information furnished by him, reliability and usefulness of the information furnished, reward, if any, paid to the information in the past etc. The Nodal Office shall also keep registers for entering the rejections or approval of information, amount of reward etc. All sorts of communications made to the informant shall also be found place in the records.