Nikunj Babulal Choradiya vs Sebi

Date of Hearing : 21.03.2023 Date of Decision : 27.03.2023

Appeal No. 268 of 2023

Nikunj Babulal Choradiya 2, Adinath Nagar, Opp. Rita Park Society, Shahibaug, Ahemedabad - 380004 (Guj.) ... 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. S. H. Bohra, Advocate for the Appellant.

Mr. Abhiraj Arora, Advocate with Mr. Shourya Tanay, Ms. Misbah Dada, Mr. Deepanshu Agarwal, Advocates i/b ELP for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member

Per : Justice Tarun Agarwala, Presiding Officer

1.

The appellant has filed the present appeal questioning the

order of the Adjudicating Officer (hereinafter referred to as 'AO') of 2

Securities and Exchange Board of India (hereinafter referred to as

'SEBI') dated October 19, 2022 wherein a penalty of Rs. 10 lacs has

been imposed under Section 15A(a) of the Securities and Exchange

Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') for

not furnishing requisite information and not complying with the

summons so served upon him and thereby contravening Section

11C(3) and 11C(6) of the SEBI Act.

2. The appellant was appointed as the managing director of the

company known as Maars Software International Ltd. on February

13, 2008 and resigned on July 7, 2016.

3. Prior to his appointment, the company had issued 73,80,000

Global Depository Receipts (hereinafter referred to as 'GDR')

amounting of US$ 17.22 million on August 10, 2007. The entire

GDR was subscribed by one subscriber Vintage FZE pursuant to loan

agreement executed between Vintage and Euram Bank.

4. During the course of investigation into the issuance of the

GDR, summons were issued under Section 11C(3) and 11C(6) to the

managing director on January 12, 2012 and April 20, 2012 requiring

the appellant to furnish requisite information and documents

pertaining to the GDR issue. Further, summons dated March 28, 3

2012 and April 18, 2012 was issued to the managing director to

appear in person and submit the details sought in the summons.

5. In spite of the receipt of the summons, requisite information

was not supplied nor the managing director appeared before the

investigating authority. Accordingly, the present show cause notice

was issued and based on the material evidence on record, the AO

found that non-compliance of the summons was a serious matter

which could not be viewed lightly. Since non-supply has placed

impediment in the investigation, the appellant violated the provisions

of Section 11C(3) and 11C(6) and consequently, a penalty of Rs. 10

lacs was imposed upon the appellant under Section 15A(a) of the

SEBI Act.

6. We have heard Mr. S. H. Bohra, the learned counsel for the

appellant and Mr. Abhiraj Arora, the learned counsel with Mr.

Shourya Tanay, Ms. Misbah Dada, Mr. Deepanshu Agarwal, the

learned counsel for the respondent.

7. It was urged that the appellant was not the managing director

during the period when the GDR was issued and, therefore, the

appellant was not obliged to furnish the information. In our opinion,

this submission is patently erroneous. No doubt, the appellant was

not involved in the issuance of the GDR since he was not appointed 4

as the managing director at that period of time. However, when the

summons were issued in 2012, the appellant was the managing

director and was responsible for all the affairs and management of

the company. Consequently, the appellant, being the managing

director, was duly required to furnish the requisite information that

was sought by the investigating authority and was under an

obligation to also appear before the investigating authority when he

was summoned. Non-compliance of the summons is a serious matter

and cannot be viewed lightly.

8. In Asian Films Production and Distribution Ltd. vs. SEBI in

Appeal No. 203 of 2010 decided on January 19, 2011, this Tribunal

held as under :-

"Non-compliance with summons is, indeed, a serious matter and cannot be viewed lightly. The respondent Board is the market regulator and has to regulate the securities market and the law provides that every person associated with the market in any manner should cooperate in the matter of carrying out investigations. In the year 2002, the provisions of the Act were amended and penalty for non-compliance with summons was enhanced considerably to make it more deterrent. Market players who do not cooperate with the regulator in the matter of investigations commit a serious wrong which can have serious repercussions in the market. We do not know what would have come to light if the company had furnished the information sought from it."

5 9. The aforesaid decision is squarely applicable in the facts of the

present case.

10. It was urged that the appellant was never served with the

summons and that it was sent at the wrong address at Ahmedabad. In

this regard, we find that the summons were also sent at the registered

office of the company in the official capacity of the appellant as the

managing director of the company. This letter was duly served and

received and, therefore, it does not lie in the mouth of the appellant

to contend that he was not aware that the summons was issued by the

investigating authority.

11. In the light of the aforesaid, we are of the view that failure on

the part of the appellant to comply with the summons has hampered

the investigation. It was the responsibility of the appellant to provide

information that was sought through the summons and was obligated

to cooperate with the investigating authority which he did not do so.

Non-compliance of the summons is viewed seriously and

consequently, we are of the opinion that the appellant was liable for

the monetary penalty that was imposed by the AO. In view of the

aforesaid, we do not find any error in the impugned order.

12. The appeal fails and is dismissed.

6

13. This order will be digitally signed by the Private Secretary on

behalf of the bench and all concerned parties are directed to act on

the digitally signed copy of this order. Certified copy of this order is

also available from the Registry on payment of usual charges.

Justice Tarun Agarwala Presiding Officer

Ms. Meera Swarup Technical Member PRAMILA Digitally by PRAMILA signed 27.03.2023 TANAJI TANAJI MISAL Date: 2023.03.27 PTM MISAL 15:42:07 +05'30'