Jog Singh, Member (Oral)
The present appeal has been preferred by the appellant against the impugned order dated March 30, 2014 imposing a penalty of Rs.2 for violation of the provisions of Section 15C of the SEBI Act, 1992 and Rs.1 lac under Section 15HB of the Said Act. The appellant is a company incorporated under the provisions of Companies Act, 1956 and its shares are listed on Bombay Stock Exchange and Ahmadabad Stock Exchange Ltd. Its registered office is in Gandhi Nagar, Gujarat.
2. The appellant challenges the impugned order mainly on the ground that it is sick company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985 since 2005 and it is under rehabilitation process under the supervision of Board for Industrial and Financial Reconstruction (BIFR). The appellant also contends that its poor financial health has not been taken into consideration by the respondent while passing the impugned order. It is also submitted by the learned counsel for the appellant that the complaints have now since been resolved on April 16, 2014. Therefore, the impugned order deserves to be set aside. On the contrary, Shri Kumar Desai with Mr. Tomu Francis, learned counsel for the respondent has argued the matter at length and defended the impugned order by arguing that expeditious disposal of investors grievances is an important facet of the SEBIs over all task of regulating the capital market. Shri Desai submits that an effective and modern investors redressal grievances system has been conceived by the regulator and is being implemented effectively to ensure that investors grievances do not remain pending for a long. In the present case, the appellant has admittedly not bothered to answer complaints atleast one of the investors, namely, Mr. K.L. Chawla since the year 1996-97. This is not conducive to the growth of a disciplined and well regulated capital market. Moreover, the learned adjudication officer has himself taken a lenient view by imposing a nominal consolidated penalty of Rs.3 lac on the appellant for violating the mandate of law.
3. We have heard both the learned counsel for the parties and perused the pleadings and records carefully. It is noted that SEBI sent a complaint of one Ms. Asha Singh Lal on May 7, 2008 to the appellant which was duly received by it. The complaint was kept unattended despite SEBIs repeated request and advices by letters dated October 11, 2011, November 22, 2011, March 5, 2012, May 9, 2012, May 24, 2013 and April 30, 2012 and nothing was done by the appellant to redress the complaint in question. In the meanwhile, another complaint dated July 3, 2013 was filed by Mr. K. L. Chawla, a shareholder of the appellant company, for non-receipt of any communication from company since 1996-97.
4. On failure of the appellant to redress the grievances of the investors in question despite repeated reminders by SEBI, a show cause notice dated January 7, 2014 was issued by SEBI to the appellant and after holding enquiry as per law established under the SEBI (Procedure for Holding Inquiries and Imposing penalties by Adjudicating Officer) Rules, 1995, imposed a penalty of Rs.1 lac and Rs.2 lac respectively for violation of provisions of Sections 15HB and 15C of the SEBI Act, 1992. 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 Rs.3 lac that the appellant has resolved investors complaints in question on April 16, 2014.
5. In view of this factual position, we do not find any legal infirmity in passing the impugned order by the respondent. 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 Rs.3 lac. The law prescribes a severe penalty of Rs.1 lac per day for violation which may go up to Rs.1 crore for non-redressal of investors grievances. In this connection, Section 15C of SEBI Act, 1992 provides that the SEBI Act enjoins upon SEBI to levy penalty on listed company which has failed to redress investors grievances within the specified time prescribed by the Board whereas Section 15HB of the said Act lays down that where no penalty is prescribed for contravention of any of the provisions of the SEBI Act, 1992 or the rules or regulations made or directions issued by the SEBI shall be liable to a penalty which may extend to Rs.1 crore where no separate penalty is prescribed by the law. 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.
In view of the abovesaid discussion of law and fact, the appeal being bereft of merit, is hereby dismissed with no order as to costs.