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2016 (9) TMI 868 - AT - Companies LawFailure to obtain SEBI Complaints Redress System (SCORES) authentication within the stipulated time - delay in redressal of the investor grievances - Held that - As per SEBI circular dated June 03. 2011 it was obligatory on the part of the appellant to obtain SCORES authentication, however, the appellant failed to obtain SCORES authentication. Even after issuance of the reminder circular dated August 13, 2012, the appellant failed to obtain the SCORES authentication. It is only when by circular dated April 17, 2013 SEBI threatened with action if SCORES authentication was not obtained within 30 days, appellant by its letter dated May 16, 2013 applied for SCORES authentication which was submitted to SEBI on May 17, 2013. Thus, inspite of the SEBI circular dated April 17, 2013, instead of obtaining SCORES authentication within 30 days, appellant applied for SCORES authentication on the last day of obtaining SCORES authentication set out in the circular dated April 17, 2013. In these circumstances, the decision of AO that the appellant failed to obtain SCORES authentication within the stipulated time cannot be faulted. As regards the delay in redressal of the investor grievances, it is not in dispute that the show cause notice dated March 26, 2014 referred to two investor grievances and the said grievances have been redressed by the appellant belatedly on September 26, 2014. It is also not in dispute that on receiving the SCORES authentication on September 26/29, 2014 it was noticed by the appellant that there were six more investor grievances and the appellant has redressed those grievances on November 20, 2014. From the aforesaid facts, it is evident that there was As regards the delay in redressal of the investor grievances, it is not in dispute that the show cause notice dated March 26, 2014 referred to two investor grievances and the said grievances have been redressed by the appellant belatedly on September 26, 2014. It is also not in dispute that on receiving the SCORES authentication on September 26/29, 2014 it was noticed by the appellant that there were six more investor grievances and the appellant has redressed those grievances on November 20, 2014. From the aforesaid facts, it is evident that there was delay in redressing the investor grievances. Section 15C of the SEBI Act provides that if any listed company fails to comply with the directions issued by the Board within the stipulated time and fails to redress the investor grievances within the time specified by the Board, then such company shall be liable to a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees. In the present case, investor grievances noticed by the appellant in the show cause notice dated March 26, 2014 were redressed by the appellant belatedly on September 26, 2014. Similarly, six investor grievances noticed by the appellant on obtaining SCORES authentication on September 26/29, 2014 were redressed by the appellant belatedly on November 20, 2014. Penalty calculated at the rate of Rs. 1 lakh per day for the period during which the failure continued, would in the facts of present case exceed Rs. 1 crore. However, after taking into consideration all mitigating factors the AO has imposed penalty of Rs. 4 lakh which cannot be said to be harsh or excessive. If the grievances of the investors were basically relating to non-receipt of dividend, then having responded to the two complainants on September 26, 2014, which were also relating to the dividend, the appellant could very well have given the same reply to the remaining six investors. However, admittedly the appellant responded to the six investors belatedly on November 20, 2014. In these circumstances, no fault can be found with the quantum of penalty imposed against the appellant.
Issues:
1. Imposition of penalty under Section 15C of the SEBI Act for failure to obtain SCORES authentication and respond to investor complaints within stipulated time. 2. Compliance with SEBI circulars dated June 03, 2011, August 13, 2012, and April 17, 2013 regarding SCORES authentication. 3. Delay in redressing investor grievances and penalty calculation under Section 15C of the SEBI Act. Issue 1: Imposition of Penalty under Section 15C of the SEBI Act The appellant was aggrieved by an order imposing a penalty of Rs. 4 lakh under Section 15C of the SEBI Act for failing to obtain SCORES authentication and respond to investor complaints within the specified time. The appellant argued that they had applied for SCORES user ID within 30 days of the circular dated April 17, 2013. However, the tribunal found no merit in the appellant's contentions and upheld the penalty imposed by SEBI. Issue 2: Compliance with SEBI Circulars The appellant failed to obtain SCORES authentication despite SEBI circulars issued on June 03, 2011, and August 13, 2012. Only after a circular dated April 17, 2013 threatened action did the appellant apply for authentication on the last day of the stipulated period. The tribunal agreed with SEBI that the appellant did not comply with the directives within the required timeframe, leading to the imposition of the penalty. Issue 3: Delay in Redressing Investor Grievances The appellant delayed redressing investor grievances, which included non-receipt of dividends. Despite the appellant's argument that no dividends were declared, the tribunal noted a delay in responding to investor complaints. Section 15C of the SEBI Act mandates penalties for failure to redress grievances within the specified time. The tribunal found the penalty of Rs. 4 lakh imposed by SEBI to be justified, considering the delay in addressing investor concerns and the potential penalty amount exceeding Rs. 1 crore based on the Act's provisions. In conclusion, the tribunal dismissed the appeal, upholding the penalty imposed by SEBI under Section 15C of the SEBI Act.
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