M/S. Delight Handicrafts Palace ... vs Sebi

Date of Decision : 30.7.2015

Appeal No. 255 of 2015

M/s. Delight Handicrafts Palace Limited Vill. & PO Tilathi, District Mirzapur, Uttar Pradesh 231001. ...... Appellant

Versus

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

Mr. Vikas Mishra, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Pulkit Sukhramani, Advocate for the Respondent.

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

Per: Justice J.P. Devadhar

1.

Appellant is aggrieved by the adjudication order dated 27.2.2015. By

that order, the Adjudicating Officer of Securities and Exchange Board of India

(SEBI for short) has imposed a penalty of Rs.3 lac on the appellant under

section 15C of the Securities and Exchange Board of India Act, 1992 (SEBI

Act, 1992 for short).

2. Relevant facts are that by a circular dated 3rd June, 2011 SEBI called

upon all the listed companies to obtain SEBI Complaints Redress System

(SCORES) authentication viz. user ID and password within the time

stipulated therein and redress the investor grievances. As the appellant failed 2

to obtain the SCORES authentication within the time stipulated in the circular

dated 3rd June, 2011, a letter was sent to the appellant on 25th April, 2012

calling upon the appellant to redress the investor grievances by obtaining the

SCORES authentication within the time stipulated therein. Since the appellant

failed to obtain the SCORES authentication and redress the investor

grievances, show cause notice was issued to the appellant on 19th July, 2013

calling upon the appellant to show cause as to why inquiry should not be held

and penal action be taken against the appellant for violating the provisions of

SEBI Act. It is not in dispute that after receiving the show cause notice, the

appellant obtained the SCORES authentication on 18th February, 2015 and

redressed the investor grievances.

3. In view of the fact that the appellant has failed to comply with SEBI

circular dated 3rd June, 2011 as well as SEBI letter dated 25th April, 2012 by

the impugned order it is held that the appellant is guilty of violating the

provisions of SEBI Act and accordingly penalty of Rs. 3 lac is imposed on the

appellant under section 15C of SEBI Act. Challenging the aforesaid order

present appeal is filed.

4. Counsel for the appellant while admitting that there is failure to

comply with the SEBI directions within the stipulated time, submitted before

us that at the material time appellant was a dormant company for more than

seven years and the company could not comply with the requirements of law

firstly on account of its poor financial position and secondly it was virtually

impossible for the appellant to hire a Company Secretary in a remote village

of U.P. where the appellant company is situated. Counsel for the appellant

further submitted that several litigation initiated against the company also

contributed for the delay in complying with SEBI direction. Counsel for

appellant further submitted that there was no loss caused to the investors on 3

account of the failure to comply with the directions of SEBI and therefore

lenient view be taken and the penalty of Rs.3 lac imposed against the

appellant be set aside.

5. We see no merit in the above contentions. Appellant company being a

listed company was bound and liable to comply with the direction given by

SEBI within the stipulated time. It was obligatory on part of the appellant to

redress the investor grievances within the stipulated time after obtaining

SCORES authentication as per the circular issued by SEBI. Inspite of SEBI

circular dated 3.6.2011 and inspite of the letter addressed by SEBI on

25.4.2012 in that behalf, appellant failed to do the needful. It is only when a

show cause notice was issued for initiating adjudication proceedings and

imposition of penalty the appellant took steps and obtained SCROES

authentication on 18.2.2015 and redressed the investor grievances. Various

reasons given by the appellant for not complying with the directions of SEBI

within the stipulated time and the fact that the investor grievances have been

redressed after the issuance of the show cause notice, do no obliterate the

violations of SEBI Act committed prior to issuance of the show cause notice.

Similarly, fact that no investor loss is caused on account of failure to comply

with the SEBI direction cannot be a ground to escape penalty for disobey the

directions of SEBI.

6. As per section 15C of SEBI Act penalty for failure to redress the

investor grievance within the time stipulated by SEBI is not less than one lac

of rupees and it may extend to one lac rupees for each day during which such

failure continues subject to a maximum of one crore rupees. In the present

case penalty at the rate of Rs. one lac per day from the date of SEBI circular

dated June 3, 2011 till compliance in February, 2015 would be more than a

crore of rupees. However, the Adjudicating Officer after considering all 4

mitigating factors has imposed a penalty of Rs.3 lac which cannot be said to

be unreasonable or harsh.

7. For all the aforesaid reasons we see no reason to interfere with the

impugned order. Accordingly, the appeal is dismissed with no order as to

costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

30.7.2015 Prepared and compared by RHN