Jaisukh Dealers Ltd. vs Sebi

2. Sabita Jajodia 21 Hemanta Basu Sarani, 2nd Floor, Room No.230, Kolkata, West Bengal, India - 700 007. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, C-4A, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. ...Respondent

Ms. Rinku Valanju, Advocate with Mr. Pratham Masurekar and Mr. Aditya Shah, Advocates i/b. R.V. Legal for the Appellant.

Ms. Nidhi Singh, Advocate with Ms. Kinjal Bhatt and Ms. Drashti Jani, Advocates i/b. Vidhii Partners for the Respondent.

With Misc. Application No.588 of 2020 And 2

Misc. Application No.589 of 2020 And Appeal No.31 of 2021

Jaisukh Dealers Ltd., Centre Point, 21, Hemanta Basu Sarani, 2nd Floor, Room No.230, Kolkata, West Bengal, India - 700 001. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, C-4A, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. ...Respondent

Ms. Rinku Valanju, Advocate with Mr. Pratham Masurekar and Mr. Aditya Shah, Advocates i/b. R.V. Legal for the Appellant.

Ms. Nidhi Singh, Advocate with Ms. Kinjal Bhatt and Ms. Drashti Jani, Advocates i/b. Vidhii Partners for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer

Misc. Application nos.587 of 2020 and 589 of 2020

For the reasons stated in the application, the delay in

filing the appeals are condoned.

Both the Misc. Applications are allowed. 3

Misc. Application no.586 of 2020 and Appeal no.30 of 2021 and Misc. Application no.588 of 2020 and Appeal no.31 of 2021.

1. Two appeals have been preferred against the order

dated 23rd September, 2020 passed by the Adjudicating

Officer ('AO' for short) imposing a penalty of Rs.3

lakhs on one promoter, Rs.1 lakh on another promoter

and Rs.5 lakh on the Company for violation of

Regulation 13(4A) and 13(5) of the Securities and

Exchange Board of India (Prohibition of Insider

Trading) Regulations, 1992 (hereinafter referred to as

'PIT Regulations, 1992') and Regulation 7(2)(a) of the

Securities and Exchange Board of India (Prohibition of

Insider Trading) Regulations, 2015 (hereinafter

referred to as 'PIT Regulations, 2015') and Regulation

13(5) of the PIT Regulations, 1992 read with

Regulation 12 of the PIT Regulations, 2015. The

penalty has been imposed for not making the 4

disclosure as required under the aforesaid provisions

within the stipulated period.

2. Securities and Exchange Board of India (hereinafter

referred to as 'SEBI') conducted an investigation in the

scrip of Jaisukh Dealers Ltd. for the period from 11th

February, 2014 to 5th July, 2016 and on an analysis of

the disclosure data obtained from the BSE Ltd. it was

observed that certain transactions of the appellant were

not disclosed or were disclosed belatedly under the

relevant PIT Regulations. Accordingly, after six years

from the date of the impugned transactions of one of

the promoter Ms. Anita Jajodia a show cause notice

dated 21st January, 2020 was issued to show cause why

an inquiry should not be held and penalty should not be

imposed under section 15A(b) of the Securities and

Exchange Board of India Act, 1992 (hereinafter

referred to as 'SEBI Act').

3. The allegation is that one of the promoters

purchased 65,000 shares on 11th February, 2014 in two 5

transactions which apparently were not disclosed

within the stipulated period. On 27th March, 2014 the

said appellant Ms. Anita Jajodia sold shares and again

failed to make necessary disclosures. The second

promoter Ms. Sabita Jajodia sold shares on 29th

October, 2015 and failed to make the necessary

disclosures. In so far as the Company is concerned

there was a delayed disclosure to the BSE Ltd with

regard to the transactions made by the promoters Anita

and Sabita. The disclosure was required to be made

within two days but the Company made the disclosure

belatedly.

4. Admittedly, there is no disclosure made by the

promoters and the Company made belated disclosures.

In the light of this admitted facts, the AO found that

there was violation of the PIT Regulations, 1992 and

PIT Regulations, 1995 and, accordingly, imposed a

sum of Rs.3 lakhs for the three alleged violations by

the promoter Anita, Rs.1 lakh for the one violation by 6

the promoter Sabita and Rs.5 lakh upon the Company

for delayed disclosure on 9 occasions.

5. We have heard Ms. Rinku Valanju, Advocate

assisted by Mr. Pratham Masurekar and Mr. Aditya

Shah, Advocates for the Appellant and Ms. Nidhi

Singh, Advocate assisted by Ms. Kinjal Bhatt and Ms.

Drashti Jani, Advocates for the Respondent.

6. The contention of the learned counsel for the

appellant is, that there is an undue delay on the part of

the respondent in initiating the proceedings. Even

though the promoters failed to make the disclosure the

same was reflected in the quarterly report filed by the

Company and, in any case, the Company had made

delayed disclosure on the stock exchange platform.

Therefore, it was urged that the fact that there was a

delay in the disclosure or failure to make disclosure

was a known fact to the stock exchange and, thus,

failure on the part of the respondent to initiate

proceedings within a reasonable period was fatal as in 7

the meantime much water has flown and valuable

rights have accrued. Not only this, initiating

proceeding after six years causes prejudice. The

matter has reached finality and such old and stale

issues should not be raised for the sake of penalising an

error made several years ago.

7. In this regard, the learned counsel for the respondent

submitted that pursuant to the investigation being made

in the scrip of the Company the alleged violation was

discovered after analysing the data retrieved from BSE.

It was therefore contended that there was no undue

delay in initiating the proceedings.

8. Having heard the learned counsel for the parties, we

are of the opinion that there has been an undue delay

on the part of the respondent in initiating proceedings.

The alleged violation was known to the stock exchange

and nothing was brought to the notice of the

respondent by the stock exchange about the alleged

violation. No steps were initiated by the stock 8

exchange to book the appellants. The mere fact that

during investigation these discrepancies came to light

does not entitle the respondent to initiate separate

proceedings for the alleged violations.

9. Considering the aforesaid, we are of the opinion that

in the instant case this undue delay causes prejudice as

in the meanwhile vital rights have accrued upon the

appellants. The appellants have a right to arrange their

affairs and keep their house in order in whatever

fashion. It does not permit the respondent to upset the

apple cart by issuing the show cause notice for an

alleged violation made six years ago.

10. Considering the aforesaid, we feel that it is not a fit

case where the proceedings can be quashed for this

undue delay especially when the alleged violation is

admitted by the appellants. We are of the opinion that

in the peculiar facts of the present case undue delay is

a mitigating factor which has to be considered while

imposing a penalty under section 15J of the SEBI Act. 9

11. The minimum penalty prescribed under section

15A(b) of the SEBI Act is Rs.1 lakh. Considering the

aforesaid and the inordinate delay in issuing the show

cause notice and in the peculiar facts and

circumstances of the case a penalty of Rs.1 lakh each

on the appellants would be just and proper.

12. We accordingly while affirming the impugned

order reduce the penalty directing each of the appellant

to pay a sum of Rs.1 lakh to the respondent within four

weeks from today. The appeals are partly allowed.

Misc. Application nos.586 and 588 of 2020 are also

accordingly disposed of. In the circumstances of the

case, parties shall bear their own costs.

13. The present matter was heard through video

conference due to Covid-19 pandemic. At this stage it

is not possible to sign a copy of this order nor a

certified copy of this order could be issued by the

registry. In these circumstances, this order will be

digitally signed by the Private Secretary on behalf of 10

the bench and all concerned parties are directed to act

on the digitally signed copy of this order. Parties will

act on production of a digitally signed copy sent by fax

and/or email.

Justice Tarun Agarwala Digitally signed by RAJALAKS RAJALAKSHMI H Presiding Officer NAIR HMI H NAIR Date: 2021.01.24 19:55:51 +05'30'

Dr. C.K.G. Nair Member

Justice M.T. Joshi Judicial Member

00.1.2021 RHN