Mfl India Ltd. (Formerly Known As My Fair ... vs Sebi

Date of Decision: 24.08.2016

Appeal No. 493 of 2015

MFL India Ltd. (Formerly known as My Fair Lady Ltd.) C4/28, Acharya Niketan, Mayur Vihar, Phase I, Delhi- 110 091 ...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

Ms. Rinku Valanju, Advocate for the Appellant.

Mr. Aditya Chitale, Advocate with Mr. Tomu Francis, Advocate for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member Dr. C.K.G. Nair, Member

Per: Justice J.P. Devadhar (Oral)

1.

Appellant is aggrieved by the order passed by Adjudicating Officer

("AO" for short) of Securities and Exchange Board of India ("SEBI" for

short) on September 30, 2014. By the said order penalty of ` 4 lakh is

imposed on the appellant under Section 15C of the Securities and

Exchange Board of India Act, 1992 ("SEBI Act" for short).

2. In the impugned order it is held that the appellant had failed to

obtain SEBI Complaints Redress System (SCORES) authentication

within the stipulated time inspite of the circular issued by SEBI on June

03. 2011, August 13, 2012 and April 17, 2013. It is further held in the 2

impugned order that the appellant had failed to respond to the complaints

filed by the investors within the reasonable time and, accordingly for the

aforesaid violations, penalty of `4 lakh is imposed under Section 15C of

the SEBI Act.

3. Ms. Rinku Valanju, learned counsel for the appellant submitted

that although by circular dated June 03, 2011 and August 13, 2012 SEBI

had called upon the listed companies to obtain SCORES authentication,

SEBI by its circular dated April 17, 2013 had called upon the listed

companies (including the appellant) to obtain the SCORES user ID and

password within 30 days from April 17, 2013. In the present case,

appellant by a letter dated May 16, 2013 had applied for SCORES user

ID, i.e. within 30 days from April 17, 2013. Hence the AO of SEBI was

not justified in holding that the appellant had failed to comply with the

directions of SEBI within the stipulated time.

4. As regards the delay in redressing the investor grievances, counsel

for the appellant submitted that in the show cause notice dated March 26,

2014 only two investor grievances were referred to which were redressed

by the appellant on September 26, 2014. On receiving the SCORES ID

on September 26/29, 2014 it was noticed that there were six more

investor grievances which were also redressed by the appellant on

November 20, 2014. Counsel for the appellant further submitted that the

investor grievances were basically relating to non-receipt of dividend.

Since the appellant-company had not declared any dividend during the

relevant years, the question of the investor's not receiving the dividend 3

did not arise at all. In these circumstances, it is submitted that the AO of

SEBI ought not to have imposed any penalty on the appellant. In any

event, it is submitted that the penalty of ` 4 lakh imposed on the

appellant is excessive and exorbitant and deserves to be reduced to the

extent as this Tribunal deems fit and proper.

5. We see no merit in the above contentions.

6. As rightly contended by Mr. Aditya Chitale, learned counsel

appearing on behalf of SEBI, as per SEBI circular dated June 03. 2011 it

was obligatory on the part of the appellant to obtain SCORES

authentication, however, the appellant failed to obtain SCORES

authentication. Even after issuance of the reminder circular dated August

13, 2012, the appellant failed to obtain the SCORES authentication. It is

only when by circular dated April 17, 2013 SEBI threatened with action

if SCORES authentication was not obtained within 30 days, appellant by

its letter dated May 16, 2013 applied for SCORES authentication which

was submitted to SEBI on May 17, 2013. Thus, inspite of the SEBI

circular dated April 17, 2013, instead of obtaining SCORES

authentication within 30 days, appellant applied for SCORES

authentication on the last day of obtaining SCORES authentication set

out in the circular dated April 17, 2013. In these circumstances, the

decision of AO that the appellant failed to obtain SCORES authentication

within the stipulated time cannot be faulted.

4

7. As regards the delay in redressal of the investor grievances, it is

not in dispute that the show cause notice dated March 26, 2014 referred

to two investor grievances and the said grievances have been redressed

by the appellant belatedly on September 26, 2014. It is also not in

dispute that on receiving the SCORES authentication on September

26/29, 2014 it was noticed by the appellant that there were six more

investor grievances and the appellant has redressed those grievances on

November 20, 2014. From the aforesaid facts, it is evident that there was

delay in redressing the investor grievances.

8. Section 15C of the SEBI Act provides that if any listed company

fails to comply with the directions issued by the Board within the

stipulated time and fails to redress the investor grievances within the time

specified by the Board, then such company shall be liable to a penalty

which shall not be less than one lakh rupees but which may extend to one

lakh rupees for each day during which such failure continues subject to a

maximum of one crore rupees. In the present case, investor grievances

noticed by the appellant in the show cause notice dated March 26, 2014

were redressed by the appellant belatedly on September 26, 2014.

Similarly, six investor grievances noticed by the appellant on obtaining

SCORES authentication on September 26/29, 2014 were redressed by the

appellant belatedly on November 20, 2014. Penalty calculated at the rate

of ` 1 lakh per day for the period during which the failure continued,

would in the facts of present case exceed ` 1 crore. However, after

taking into consideration all mitigating factors the AO has imposed

penalty of ` 4 lakh which cannot be said to be harsh or excessive. If the 5

grievances of the investors were basically relating to non-receipt of

dividend, then having responded to the two complainants on September

26, 2014, which were also relating to the dividend, the appellant could

very well have given the same reply to the remaining six investors.

However, admittedly the appellant responded to the six investors

belatedly on November 20, 2014. In these circumstances, no fault can

be found with the quantum of penalty imposed against the appellant.

9. For all the aforesaid reasons, the appeal is dismissed with no order

as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member 24.08.2016 Prepared & Compared By: PK