Govind Rubber Limited vs Sebi

Govind Rubber Limited 418-422, "CREATIVE", Sitaram Milk Compound, N.M. Joshi Marg, Lower Parel, Mumbai - 400 011. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Dr. S.K. Jain, Practicing Company Secretary for the Appellant.

Mr. Tomu Francis, Advocate for the Respondent.

CORAM : Justice J.P. Devadhar, Presiding Officer Jog Singh, Member

Per : Jog Singh

1.

The Appellant has approached this Tribunal by way of this appeal

impugning order dated February 6, 2015 passed by the Learned Adjudicating

officer (AO) of Securities and Exchange Board of India (SEBI) imposing a

penalty of Rs. 2,00,000/- on the Appellant under the provisions of Section 15C

of the SEBI Act, 1992 for non redressal of investor grievances within the

prescribed time period under the SEBI Complaints Redress System (for short

'SCORES').

2. In the present case SEBI observed that Appellant Company had not

redressed two investor grievances pending against it out of which one 2

complaint has been pending for more than two years as per SEBI Complaints

Redress System (SCORES). Accordingly, SEBI appointed Ld. AO under

Section 15-J of the SEBI Act, 1992 read with Rule 3 of the SEBI (Procedure

for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules,

1995 to inquire into the alleged violations by the Appellant Company.

3. A Show Cause Notice dated July 30, 2013 was issued to the Appellant

in which it was alleged that said two investor grievances / complaints were

pending in SCORES out of which one complaint was pending for more than

two years. It was also mentioned that SEBI vide its letter dated January 22,

2013, had directed the Appellant to resolve the aforesaid two investor

grievances but the Appellant failed to do so. Further, the SCN refers to SEBI's

letter dated February 15, 2013 wherein the Appellant was directed to resolve

the aforesaid two investor grievances failing which SEBI may initiate

Regulatory Actions against the Appellant which includes debarring from

securities market and or / imposing penalty. It was also alleged in the SCN that

the Appellant did not activate the SCORES authentication.

4. An opportunity of hearing was granted to the Appellant on May 5, 2014

and after taking into consideration the written reply dated October 24, 2013

earlier submitted by the Appellant, the Ld. AO found the Appellant guilty of

not redressing the grievances of investors in question in time as required by

Section 15C of SEBI Act, 1992 and imposed a monetary penalty of Rs. 2 lac.

5. The case of the Appellant is that the two complaints in respect of

Ms. Monisha Jeet and Mr. Harjit Singh. Both the complaints had already been

resolved by the Appellant, therefore, there was not occasion for the SEBI to 3

pass the impugned order and impose penalty in question. It is argued that

Ms. Monisha Jeet was never shareholder of the Appellant Company.

6. The factual conspectus of the matter is that two investor complaints,

first of Ms. Monisha Jeet dated March 4, 2011 for 'non-receipt of shares duly

transferred' and, second, of Mr. Harjeet Singh dated June 19, 2007 for 'non

receipt of shares duly transferred', were pending against the Appellant.

We note that complaint in respect of Ms. Monisha Jeet was received by the

SEBI on March 16, 2011 and it was forwarded physically to the Appellant on

March 28, 2011. On April 17, 2012 Appellant Company was advised to obtain

SCORES authentication and redress the pending investor grievances. Thus, on

September 17, 2012 itself the Appellant Company obtained SCORES

authentication. The pending complaint was again forwarded through SCORES

to the Appellant Company on September 18, 2012 for necessary action and

submission of ATR. The Appellant Company filed an ATR on August 20,

2013 after redressing the grievance and enclosed a letter dated August 16, 2013

seeking clarification from the complainant as to whether the complaint was in

fact a shareholder of the Appellant Company. Thereafter, SEBI sent first

reminder on September 5, 2013. Case of the Respondent is that the Appellant

should have filed a final ATR after receipt of reminder even though the

complainant was not a shareholder of the Appellant Company. Regulatory

action was, therefore, initiated against the Appellant Company for

non-resolution of pending investor grievances. The impugned order dated

February 6, 2015 under Section 15C of SEBI Act was passed against the

Appellant Company imposing a monetary penalty of Rs. 2 lac. Subsequent to

the impugned order Appellant Company filed an ATR on May 14, 2015 saying

that the complainant was not replying to the queries raised. Appellant 4

Company sent one more reminder letter dated May 29, 2015 to the

complainant. From records, we note that the complainant, Ms. Monisha Jeet

had never been a shareholder of the Appellant Company. Therefore, such a

bogus complaint by an outsider / alien to the Appellant Company cannot form

the basis of punishment. A person not holding any shares in a company cannot

have a locus to seek redressal of non-existent grievances.

7. The second complaint in respect of Mr. Harjit Singh was received by

the SEBI on June 19, 2007 and it was forwarded to the Appellant Company on

June 23, 2007 in physical form. On April 17, 2012 Appellant was advised to

obtain SCORES authentication and redress the pending investor grievance.

Thus, on September 17, 2012 itself the Appellant obtained SCORES

authentication and the pending complaint was again forwarded through

SCORES to the Appellant Company on September 18, 2012 for necessary

action and submission of ATR. The Appellant Company filed an ATR on

August 7, 2013 and enclosed a copy of email dated August 6, 2013. Appellant

Company sent first reminder to the aforesaid mail on August 14, 2013. Once

again the case of the Respondent is that final ATR, after receipt of another

reminder by the Appellant Company was not filed and hence the Impugned

order was passed against Appellant.

8. In this regard, Mr. Tomu Francis, learned counsel for the Respondent

has brought to our notice Circular dated November 25, 2009 by which SEBI

made it clear that an issuer company could seek refund of the deposit of 1% of

the issue amount initially deposited by the said company with the stock

exchange in respect of the securities offered to the public and/or to the holders

of the existing securities of company, inter-alia, on the condition that a No

Objection Certificate (NOC) would be issued to the issuer company by SEBI 5

only on being satisfied that the company had submitted monthly Action Taken

Report (ATR) on complaints forwarded by SEBI to the company arising from

the issue. A proforma had also been prescribed in the form of Annexure - C,

annexed to the Circular dated November 25, 2011. One of the conditions in

Table III of the said Annexure - C was regarding two subsequent reminders to

be sent with a gap of one month between the two dispatches to the complainant

and the steps taken by a company towards resolution of the complaint were to

be conveyed to SEBI through another ATR. It appears that the requirement of

two reminders was particularly made applicable in cases where additional

documents / information were required to be obtained by the company before

finally redressing the grievances / complaints. This requirement of two

reminders envisaged in Annexure - C (Table III) has been rescinded with vide

paragraph 5 of subsequent Circular dated June 3, 2011 issued by SEBI. The

result is that the requirement of two reminders has been dispensed with.

Paragraphs of SEBI Circular dated November 25, 2009 and June 3, 2011 are

reproduced hereinbelow for the sake of convenience:-

"OIAE/Cir-1/2009 November 25, 2009

Sub : Issue of No Objection Certificate for release of 1% of issue amount

As per the Listing Agreement with the Stock Exchanges, the issuer company deposits 1% of the issue amount of the securities offered to the public and/or to the holders of the existing securities of the company, as the case may be, with the designated stock exchange. This amount was being released to issuer companies after obtaining a No Objection Certificate (NOC) from SEBI in accordance with the SEBI (Disclosure and Investor Protection) Guidelines, 2000. Since these Guidelines have now been rescinded, the NOC will be issued henceforth in accordance with this Circular.

2. .............................

3. SEBI shall issue the NOC after satisfying itself that the complaints arising from the issue received by SEBI against 6

the Company have been resolved to its satisfaction, the Company has been submitting monthly Action Taken Reports on the complaints forwarded by SEBI to the company as per the proforma specified in Annexure - C, and the fees due to intermediaries associated with the issue process including ASBA Banks have been paid.

4. .............................

5. .............................

Yours faithfully,

G.P. Garg

Annexure - C (to SEBI circular OIAE/Cir-1/2009 dated November 25, 2009)

ACTION TAKEN REPORT - PROFORMA FOR SENDING RESPONSES TO SEBI FOR INVESTOR GRIEVANCES

(i) .....................

(ii) .....................

Table I: Instrument details ................................

Table II: Despatch details of Securities / payment instrument ..................................

Table III: Documents/Information sought from the complainant:

1) Copy of letter sent to the investor seeking documents / information.

2) Two subsequent reminders are required to be sent with a gap of one month between despatches.

3) Details of correspondences to complainant:

a) Mode of dispatch b) Despatch No. c) Date of dispatch

For all types of complaints, the action taken should be intimated to the complainant.

7 Circular dated June 3, 2011

" CIR/OIAE/2/2011 June 3, 2011"

Sub: Processing of investor complaints against listed companies in SEBI Complaints Redress System (SCORES)

1. SEBI has commenced processing of investor complaints in a centralized web based complaints redress system 'SCORES'. The salient features of this system are:

• Centralised database of all complaints. • Online movement of complaints to the concerned listed companies, • Online upload of Action Taken Report (ATRs) by the concerned companies, and • Online viewing by investors of actions taken on the complaint and its current status.

2. All complaints pertaining to companies will be electronically sent through SCORES at http://scores.gov.in/Admin. The companies are required to view the complaints pending against them and submit ATRs alongwith supporting documents electronically in SCORES. Failure on the part of the company to update the ATR in SCORES will be treated as non redressal of investor complaints by the company.

Submission of physical ATR will not be accepted for complaints lodged in SCORES. For complaints forwarded to companies on or before 20/05/2011, physical ATRs should be submitted.

3. ........................

4. ........................

5. This Circular supercedes the Circular No. OIAE/Cir-1/2009 dated November 25, 2009 so far as it relates to Annexure-C to the said Circular wherein the companies had to submit physical ATRs on the complaints forwarded by SEBI to them."

6 to 8 .......................

Yours faithfully,

G.P. Garg Chief General Manager Office of Investor Assistance and Education 8

9. Circular dated June 3, 2011 simply advises listed companies to follow

SCORES in respect of complaints received after 20.05.2011 and ATR in

respect of complaints which might have been received by the complainants

prior thereto required to be submitted to SEBI in physical form. The Ld. AO

has missed an important aspect while passing the impugned order that

requirement of double reminder and two ATRs mentioned in the Circular dated

November 25, 2009 has since been superseded by Circular dated June 3, 2011.

10. In this view of the matter, the impugned order is hereby quashed and set

aside and the appeal, thus, stands allowed with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

16.10.2015 Prepared and compared by:

msb