Order in the matter of ICES Software and its Directors

WTM/RKA/OIAE/ 51 /2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: RAJEEV KUMAR AGARWAL, WHOLE TIME MEMBER ORDER UNDER SECTIONS 11 AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN THE MATTER OF ICES SOFTWARE LIMITED AND ITS DIRECTORS

1. ICES Software Limited (hereinafter referred to as ‘the Company’) is a company incorporated under the Companies Act, 1956, having its registered office at 3rd Floor, Pushkar Chambers, Prof. Manek Rao Road, Dandia Bazar, Vadodara, Gujarat - 390 001. Its shares are listed on Ahmedabad Stock Exchange Limited (ASE), Bombay Stock Exchange Limited (BSE), Delhi Stock Exchange Limited (DSE), Vadodara Stock Exchange Limited (VSE). Trading in its shares is suspended at BSE and DSE. 2. SEBI received several complaints against the Company from the investors. As on September 24, 2008, a total of fifty seven (57) investor complaints were pending unresolved by the Company. The complaints were for the period from 1997 to 2008. The investors' complaints were forwarded to the Company for redressal and periodic reminders were also sent to it for resolving the complaints. However, the Company failed to resolve the grievances of the complainants/investors despite receipt of the complaints. Therefore, vide letter dated September 25, 2008, SEBI advised the Company to resolve those fifty seven investor complaints within thirty days from the date of receipt of the said letter and to submit a status report.

Since the Company failed to submit the status report within the stipulated period a reminder letter dated November 21, 2008 was sent to the Company advising it to resolve the complaints and to submit the status report within seven days. 3. Since no response was received from the Company despite service of aforesaid letter and reminder on it, vide letter dated December 19, 2008, SEBI again advised the Company to resolve all the 57 investors' complaints. The Company, vide its letter dated December 24, 2008, sent a report claiming that it has resolved certain investor grievances and it was in the process of compiling data for remaining complaints. Since this report was not satisfactory, SEBI vide letter February 13, 2009 informed the deficiencies observed in the report to the Company and enclosed the list of investors' grievances that were not treated resolved/closed. SEBI also advised the Company to submit the required information and to submit the Action Taken Report (ATR) with respect to the resolution of all pending investors' grievances. Despite receipt of the said letter, the Company failed to redress the pending investor grievances and to submit the ATR.

4. By the letter dated September 25, 2008 and subsequent reminder letters SEBI had advised the Company about consequences of failure to redress investors' grievances by it. It was prima facie observed that the Company has failed to redress investors 'grievances despite receipt of repeated instructions from SEBI. SEBI, therefore, issued a show cause notice (SCN) dated November 6, 2009 calling upon the Company to show cause as to why it should not be restrained from accessing the securities market and be prohibited from dealing in securities under section 11B and 11(4)(b) of the SEBI Act till all pending investor grievances are resolved. Similar SCNs dated November 10, 2009 were issued to the directors of the Company namely, Mr. Sachin Pawar, Mr. Divyanshu Vaishnav, Ms. Minaxi Vaishnav, and Mr. Dahagama Sharma also. 5. The Company, vide letters dated November 23, 2009 and November 30, 2009, submitted ATRs claiming redressal of 16 and 9 investors' complaints, respectively. Since these ATRs were incomplete, SEBI, vide letter dated January 21, 2010 advised the Company to submit a complete ATR with necessary supporting documents.

The said letter was duly served upon the Company; however, it failed to submit any response to the same. 6. Ms. Minaxi Vaishnav vide letter dated November 24, 2009 submitted that she was not the director of the Company since January 7, 2005 and was not connected in any way with the Company or its affairs. She submitted that she is not aware of the subject matter. However, she did not submit any supporting evidence in respect of such submissions despite opportunity being given by SEBI to do so. However, SEBI obtained a copy of the Annual Return filed by the Company as on December 31, 2005, from the Registrar of Companies (RoC), Gujarat and noted that Ms. Minaxi Vaishnav had ceased to be a director of the Company from January 7, 2005. No response to SCN was received from other directors. 7. An opportunity of personal hearing was granted to the Company and its directors, Mr. Dahagama Sharma, Mr. Sachin Pawar and Mr. Divyanshu Vaishnav (noticee directors) on August 5, 2010. While the notice intimating date of hearing was served upon the Company, it was returned undelivered at last known addresses of the noticee directors.

Therefore, the SCN and notice of hearing were published on June 13, 2010 in various newspapers. Vide letter dated July 9, 2010, Mr. Dahagama Sharma denied and refuted his association with the Company as its director and inter alia submitted that - "1.I am not a director of the Company and have never given my consent to act as director in this public limited Company. 2. You may call for the consent given by me to the Company, from the Company and you can find out the truthfulness about my submissions. 3. Please further note that at present I am working as a Executive Director with Aryaman

Financial Services Limited, a Registered Category I Merchant Banker........" 8. The other two directors did not respond to SCN. Neither the Company nor the noticee directors appeared for personal hearing on August 5, 2010. After seeking adjournments of the personal hearing scheduled on various occasions, the Company appeared for the personal hearing on January 19, 2011 when it was given three months time for redressal of all pending investors' grievances. Next date of personal hearing in the matter was fixed on May 4, 2011 and the same was communicated to the Company and the noticee directors. However, the Company sought adjournment on the ground that its Compliance Officer had met with an accident and was advised to take bed-rest till June 15, 2011. 9. Since the present proceedings could not be concluded by my predecessor on account of repeated adjournments as a stated above, another opportunity of personal hearing was granted to the Company and its aforesaid noticee directors before me on March 15, 2012. On the said date, the Company was represented by Mr. R. C. Bhatt, the Compliance Officer of the Company.

The authorized representative of the Company requested for one month time for resolving all pending investors' grievances by the Company. While granting time as requested, the Company was directed to redress all pending investors' complaints and submit ATR by April 15, 2012 failing which appropriate directions as contemplated in the SCN and public notice dated June 13, 2010 shall be issued without any further opportunity. On this date of hearing, there was no representation from the noticee directors. Vide letter dated March 19, 2012 SEBI communicated the instructions/directions given to the Company for redressal of investors' grievances and submission of ATR, etc. 10. As on the date of hearing 38 complaints out of the 57 Complaints (that were subject matter of SCN) were pending. The break-up of categories of these 38 complaints is given in following Table:- Table- Category of Pending Complaints Category of Complaints Number of Complaints Refund Order/ Allotment of shares 2 Non- Receipt of Dividend 1 Non- Receipt of Share Certificate after transfer/ 35 transmission/ issue of duplicate shares/ share split Total 38 11. The Company vide letter dated March 27, 2012 submitted that - (a) With respect to 25 pending except the name and address of complainants there are no details available either with the Company or with SEBI.

Most of these complaints are more than 5 years old ranging from 1997 to 2006. Further, in the past 5 years, the Company has sent 3 reminders to those complainants requesting them to submit complete details of their complaints to enable the Company to resolve the same. (b) While enclosing a specimen copy of letter in that respect and copies of postal receipts of dispatch of the letters to 25 complainants the Company submitted that it had sent letters to all those 25 complainants through Registered Post/ AIR Registered Letter asking for further details. In the event of receipt of such details, it would resolve the complaints accordingly. It would issue another reminder for the rest of complainants who have not responded. (c) In the mean time, it is in process of resolving rest of the complaints. 12. Vide letter dated April 10, 2012, the Company submitted an additional ATR. The Company had enclosed proof of dispatch of certain communication to 6 additional complainants and photo-copies of the 4 envelopes that were returned undelivered from 4 complainants out of above mentioned 25 complaints.

The Company also stated it would send another reminder to the complainants who did not respond to above mentioned letters. 13. In view of the above SEBI, thought fit to conduct a complaint validating exercise, where the complainants were requested to send copies of their complaints, if the same were unresolved. I note that, SEBI has received one response from a complainant and the same was redressed by the company on being informed about the same. I note from the report generated from SCORE that as on October 10, 2012 all the 57 complaints listed in the SCN have been redressed. Though the Company had resolved all pending investors' complaints that were the cause of the SCNs, there is a considerable delay in redressal of the complaints. However, considering the fact that Adjudicating Officer vide order dated March 09, 2012 has imposed a penalty of `30,000/-on the Company adjudging non-redressal of the same grievances/complains which are subject matter of the present proceedings, I do not consider the present case a fit one to issue any directions as contemplated in the SCNs. 14. I, therefore, hereby dispose of the show cause notice dated November 06, 2009 issued against the Company, ICES Software Industries Ltd and the show cause notices dated November 10, 2009 issued to its directors Mr. Sachin Pawar, Mr. Divyanshu Vaishnav and Mr. Dahagama Sharma, accordingly.

Date: November 9th, 2012 RAJEEV KUMAR AGARWAL Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA