Port Shipping Company Ltd. vs Sebi

Port Shipping Company Ltd. PAN (AACCM1795K) 21, Strand Road, Kolkata - 700 001. ..... 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. Mukesh Chaturvedi, Practicing Company Secretary for the Appellant. Mr. Kumar Desai, Advocate with Mr. Pulkit Sukhramani, Advocate i/b The Law Point for the Respondent.

CORAM : Justice J. P. Devadhar, Presiding Officer

Per : Justice J. P. Devadhar (Oral)

1.

Counsel on both sides state that the present appeal may be heard

and disposed of at the stage of admission, on the basis of facts set out in the

memo of appeal. Accordingly, by consent, the appeal is taken up for

hearing at the stage of admission.

2. The appellant is aggrieved by the adjudication order of Securities

and Exchange Board of India ('SEBI' for short) dated December 2, 2014

whereby penalty of ` 1,50,000/- is imposed on the appellant under Section

15HB of the SEBI Act for violating the directions given by SEBI. 2

3. Relevant facts are that by circular dated April 17, 2013 SEBI called

upon all the listed companies to obtain SEBI Complain Redressel System

(SCORES) authentication within the time stipulated in that circular. As the

appellant company failed to obtain the SCORES authentication within the

time stipulated in the circular dated April 17, 2013, SEBI issued notice to

the appellant on December 2, 2013 advising the company to submit the

requisite information regarding SCORES authentication by December 18,

2013, failing which it was stated that penalty would be imposed under

Section 15HB of SEBI Act.

4. Inspite of receipt of the said notice dated December 2, 2013 the

appellant company failed and neglected to obtain SCORES authentication.

It is only when SEBI issued show cause notice on May 27, 2014 calling

upon the company to show as to why adjudication proceedings should not

be initiated against it and why penalty should not be imposed on the

appellant company, the appellant company obtained SCORES

authentication on June 3, 2014.

5. From the aforesaid facts, it is clear that inspite of specific notice

issued by SEBI, the appellant failed and neglected to comply with the

direction of the SEBI for more than six months. In such a case penalty is

imposable under Section 15HB of the SEBI Act.

6. Counsel for the appellant fairly stated that there is delay in

complying with the direction given by SEBI and in view of decisions of

this Tribunal in Appeal No. 386 of 2014 (M/s. Vidarbha Inudstries Ltd.

vs. SEBI) decided on December 1, 2014 and Appeal No. 379 of 2014

(Rakan Steels Ltd. vs. SEBI) decided on April 4, 2015, penalty would be

imposable under Section 15HB of the SEBI Act. However, counsel for the

appellant submits that in the present case, monetary penalty of ` 1,50,000/- 3

imposed against the appellant deserves to be deleted / reduced for the

following reasons :-

a. There is no operating income of the company for more than four

years and the company has incurred loss of ` 1,30,478/- during

the financial year 2013-2014.

b. There is no permanent employee on the Roll of the company and

the affairs of the company are somehow managed by a part time

employee. As such the appellant could not take User ID and

password within stipulated time inadvertently. There was no

malafide intention or intention to cause any harm to any

stakeholders by the appellant company.

c. No Investor grievance was pending at the time when circular

dated April 17, 2013 was issued and even thereafter no investor

complaint is filed which could be redressed.

d. Non obtainment of SCORES authentication is an innocuous lapse

that occurred out of inadvertence and did not prejudice the

interest of any person and this lapse on the part of the company is

not repetitive in nature.

e. The shares of the company are not traded for last six years.

7. There is no merit in the above contentions.

8. As held by this Tribunal in case of M/s. Vidarbha Industries Ltd.

(supra) and Rakan Steels (supra) where a listed company fails to obtain

SCORES authentication within the time stipulated by SEBI, then it

amounts to violating the directions of SEBI and in such a case penalty is

imposable under Section 15HB of SEBI Act.

4

9. Argument advanced by the counsel for the appellant that the penalty

of ` 1,50,000/- imposed is excessive, cannot be accepted, because in the

present case, inspite of the appellant failing to comply with SEBI circular,

specific notice was issued to the appellant by SEBI on December 2, 2013

calling upon the appellant to submit the requisite information regarding

SCORES authentication by December 18, 2013. However, the appellant

once again failed and neglected to comply with the notice dated December

2, 2013. It is only when show cause notice was issued for initiating

adjudication proceedings and imposition of penalty, the appellant took steps

and obtained SCORES authentication on June 3, 2014.

10. Failing to comply with the directions of SEBI contained in the

circular dated April 17, 2013 and thereafter failing to comply with the

directions contained in the letter dated December 2, 2013 amounts to

repeatedly violating the directions given by SEBI. From the due date of

compliance (18.12.2013) as stipulated in letter dated December 2, 2013, till

the date of actual compliance on June 3, 2014, the delay would be more

than six months. Under Section 15HB, penalty imposable for non

compliance of SEBI direction is not less than one lakh rupees but may

extend to one crore rupees. In the present case, after considering all

mitigating factors the adjudicating officer of SEBI has imposed penalty of

` 1,50,000/- as against penalty of ` 1 crore imposable under Section 15HB

of SEBI Act which cannot be said to be excessive or unreasonable.

11. Argument of the appellant that there was no operating income, no

permanent employee, no pending investor grievance, no prejudice caused to

any investor and that the shares of the appellant company were not traded

for more than six years, cannot be a ground to disobey the directions given

by SEBI. Obligation to obtain SCORES authentication was not dependent 5

on there being operating income or pending investor grievance or trading of

shares on the stock exchanges. Admittedly, the appellant company

continues to be a listed company and, therefore, it was obligatory on part of

appellant company to obtain SCORES authentication within the time

stipulated by SEBI. However, the appellant has consistently failed and

neglected to comply with the directions of SEBI and it is only when SEBI

initiated penalty proceedings, the appellant chose to comply with the

directions of SEBI. Therefore, in the facts of the present case appellant

deserved higher penalty.

12. However, after taking all the factors set out by the appellant as

mitigating factors, the adjudicating officer of SEBI has imposed nominal

penalty of ` 1,50,000/- as against the imposable penalty of ` 1 crore. In

such a case, it cannot be said that the penalty imposed is excessive or

unreasonable.

13. For all the aforesaid reasons no fault can be found with the decision

of SEBI impugned herein.

14. The appeal is, accordingly, dismissed with no order as to costs.

Sd/-

Justice J. P. Devadhar Presiding Officer

29.04.2015 Prepared & Compared by PTM