Kitex Garments Ltd. vs Sebi

DATE : 21.05.2019

Appeal No. 437 of 2018 Kitex Garments Ltd. P. B. No. 5, Kizhakkambalam, Kochi, Kerala - 683562. ... 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

Mr. Vinay Chauhan, Advocate with Mr. K. C. Jacob, Advocate i/b Corporate Law Chambers India for the Appellant. Mr. Kaushal Parsekar, Advocate i/b Legasis Partners for the Respondent.

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

Per : Justice M. T. Joshi, Judicial Member (Oral)

1.

Aggrieved by the order of the Adjudicating Officer of the

respondent SEBI imposing a penalty of Rs. 1 lac under Section 15HB

and Rs. 10 lac under Section 15C of the Securities and Exchange

Board of India Act, 1992, the present appeal is preferred. 2

2. The record would show that the complaint of one

Mr. Madhubhai Patwa, shareholder of the appellant, was registered

on the online platform of the SEBI Complaints Redressal System

(SCORES) on July 25, 2015. As per the SEBI circular dated

December 18, 2014 the complaint is required to be redressed within

30 days and Action Taken Reports (ATRs) alongwith supported

documents, if any, were to be electronically uploaded in SCORES.

The appellant, however, failed to comply with the same and,

therefore, a show cause notice was issued to the appellant. Till the

date of issuing of the impugned order on August 31, 2018, the

complaint remained to be redressed. Therefore, penalties on two

count i.e. one failure to upload ATRs and second non-redressal of the

complaint were imposed.

3. The facts would show that the complainant was due holder of

3500 shares of the appellant. Thereafter, he purchased 1000 shares

from one Mr. Jaisukhlal D. Mehta and 200 shares from Pankaj

Jariwalla. All these transfers were duly endorsed by the appellant.

It, however, appears that the appellant failed to make the necessary

corrections in the register of the shareholders. Subsequently, the

appellant decided to split the shares in the year 2006 of the face value

of Rs. 10/- in the ratio of 1:10. The appellant instead of dispatching 3

the split shares to the complainant dispatched the same to the earlier

owners i.e. Mr. Mehta and Mr. Jariwalla respectively.

4. In the circumstances, the complaint was uploaded on the

SCORES by the complainant on July 28, 2015. Since the complaint

remained unresolved the proceedings as detailed supra was taken.

5. The appellant submitted before respondent SEBI that all these

transactions took place on March 29, 2006 and now upon receipt of

the complaint they were contemplating legal proceedings against Mr.

Mehta and Mr. Jariwalla. It was found that these persons have

already transferred the post-split shares.

6. The learned adjudicating officer found that the lapse on the part

of the appellant in updating its register of members has caused loss to

the complainant. The complaint was not resolved till the date of the

passing of the order on August 31, 2018. Therefore, the penalty was

imposed.

7. The learned counsel for the appellant submitted before us that

the incident has occurred long back in the year 2006 and complaint

was made in 2015. Since the post-split shares certificates though

wrongly were issued to the earlier owners, as they had already

transferred to other entities the matter became complicated. The

appellant was contemplating legal proceedings. In the matter no 4

immediate action could be taken. In view of the above facts, he

further submitted that after passing of the impugned order in August

2018, the grievance of the complainant was resolved and 12000

shares plus 4800 bonus shares were transferred to the demat account

of the complainant. In the above circumstances, the appellant prayed

that the complaint has now been resolved and, therefore, the penalty

should be quashed.

8. The learned counsel for SEBI opposed the submissions. He

submits that the complainant was 81 years old senior citizen. The

appellant failed to redress the grievance of the complainant even after

the decision in the impugned order though the complaint was

received in the year 2015. He submits that subsequent redressal, if

any, would only show that the appellant could have redressed the

grievance earlier.

9. Having heard both sides, in our view, the appeal deserves to be

dismissed. It cannot be gainsaid that the fault of the appellant in

updating register of the shareholders maintained by it had led to the

loss to the complainant. Though one was not aware as to whether

any complaint was made by the complainant to the appellant in this

regard, the complaint was made by the complainant on SCORES

platform on July 28, 2015. The show cause notice was sent by the

respondent SEBI to the appellant on August 6, 2015. After hearing 5

the appellant the impugned order came to be passed on August 31,

2018. Till the said date the grievance was not redressed. The

learned counsel for the appellant submits that the grievance was

redressed during the period of passing of the order. Be that as it may.

We find that the order of the adjudicating officer does not suffer from

any infirmity, hence, the following order:-

10. For the reasons stated aforesaid, the appeal lacks merit and is

dismissed.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 21.05.2019 Prepared & Compared by PTM