Smt. Shilpa Amit Kotia & Ors. vs Sebi

Order Reserved on: 24.06.2019

Date of Decision : 02.07.2019

Appeal No. 282 of 2017

Sungold Capital Limited House No. 7/13, Opp. White Tower, Station Road, Nandod, Rajpipla, Narmada - 393 145. ..... 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. J.J. Bhatt, Advocate with Ms. Rinku Valanju, Advocate i/b R.V. Legal for the Appellant.

Mr. Vishal Kanade, Advocate with Mr. Jinay Padh, Advocate i/b Dave & Girish & Co. for the Respondent.

WITH Appeal No. 308 of 2017 1.

Smt. Shilpa Amit Kotia 2/B, State Bank Staff Colony, Near Navrang School, Naranpura, Ahmedabad - 380 013.

2. Smt. Shwetha Dhaval Kotia 2/B, State Bank Staff Colony, Near Navrang School, Naranpura, Ahmedabad - 380 013.

3. Shri Ravi Rajiv Kotia A/73, Avani Complex, Near Naranpura Bus Stop, Naranpura, Ahmedabad - 380 013.

2

4. Smt. Seema Rajiv Kotia A/73, Avani Complex, Near Naranpura Bus Stop, Naranpura, ..... Appellants Ahmedabad - 380 013.

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. Amit Kotia, Authorized Representative for Appellants.

Mr. Vishal Kanade, Advocate with Mr. Jinay Padh, Advocate i/b Dave & Girish & Co. for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer

1. The Adjudicating Officer ('AO' for short) of the

Securities and Exchange Board of India ('SEBI' for short) by

order dated July 19, 2017 for violation of Section 11C(3) read

with Section 11(2)(i) of SEBI Act, 1992 has imposed a

penalty under Section 15A(a) of the SEBI Act, 1992 against

which two separate appeals have been filed and the same are

being decided together.

2. SEBI while conducting investigation into the alleged

irregularities in the trading in the scrip of Sungold Capital 3

Limited and into the possible violation of the SEBI laws and

regulations required the appellants to furnish certain

information. Insofar as the appellant in Appeal No. 282 of

2017 is concerned i.e. the Company, a summons dated

December 9, 2014 was issued asking the Company to furnish

the details regarding the relationship of the appellant with

other entities, namely, appellants in Appeal No. 308 of 2017.

In spite of receipt of summons no information was furnished

by the appellant Company. Subsequently, additional

information was sought vide e-mail dated January 14, 2015

which information was supplied by the appellant Company on

January 19, 2015.

3. Insofar as the appellants in Appeal No. 308 of 2017 are

concerned summons dated September 16, 2014, October 13,

2014, October 31, 2014, December 10, 2014 and January 1,

2015 were sent requiring the said appellants to furnish certain

information with regard to their trading in the scrips of the

Sungold Capital Limited.

4. The information sought was not provided by the said

appellants. Since the information sought was not forthcoming,

an AO was appointed and a show cause notice was issued

directing the appellants to show cause as to why penalty 4

should not be imposed under Section 15A(a) of the SEBI Act,

1992 for contravention of the provisions of Section 11C (3)

read with Section 11(2)(i) of the SEBI Act, 1992. In spite of

receipt of the show cause notice no reply was given by any of

the appellants though the appellant in Appeal No. 282 of 2017

attended the hearing in the proceedings before the AO.

5. The AO after considering the material available on

record found that since the appellants failed to furnish the

information which was required by the investigating authority

the appellants have violated the provisions of Section 11C (3)

of the SEBI Act, 1992. Accordingly, a penalty of ` 5 Lakh on

the appellant Company in Appeal No. 282 of 2017 and a

penalty of ` 2 Lakhs each on the appellants in Appeal No. 308

of 2017 was imposed.

6. We have heard Shri J. J. Bhatt, the learned counsel for

the appellant in Appeal No. 282 of 2017, Shri Amit Kotia,

Authorized Representative in Appeal No. 308 of 2017 and

Shri Vishal Kanade, the learned counsel for the respondent.

7. Before us, the learned counsel for the appellant

Company submitted that even though they had not furnished

the information pursuant to the summons dated December 9,

2014 but the information sought as per e-mail dated January 5

14, 2015 was duly given. It was also submitted that the

appellants had participated and co-operated in the proceedings

before the AO and in the hearing dated February 17, 2016 and

March 8, 2016 the Managing Director of the appellant

Company furnished the requisite information as sought in the

summons dated December 9, 2014. It was, thus, contended by

the learned counsel for the appellant Company that since

requisite information was furnished, even though belatedly,

no penalty could have been imposed.

8. On this issue, we find that admittedly the information

sought by summons dated December 9, 2014 was eventually

supplied after more than one and half years on February 17,

2016 in adjudication proceedings. Prior to that such

information was not supplied. Section 11C(3) of the SEBI

Act, 1992 provides as under:-

"Section 11C:- Investigation

(3) The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to, or produce such books, or registers, or other documents, or record before him or any person authorised by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books, or registers, or other documents, or record is relevant or necessary for the purposes of its investigation."

6 9. The purpose of the aforesaid provision is that

information is required to be furnished to the investigating

authority. If information is not furnished, it would hamper the

investigation which was precisely being done in the instant

case. The alleged irregularities in the trading in the scrips of

the appellant Company could not be investigated on account

of non-furnishing of the information. Such non-furnishing of

the information hampered the investigation and, therefore,

penalty becomes leviable.

10. However, we find that it is not a case where it could be

said that there was total non co-operation on the part of the

appellant Company. Admittedly, most of the information was

submitted though the information as per summons dated

December 9, 2014 was furnished only at the stage of hearing

in the adjudicating proceedings. Thus, even though

information was provided by the appellant Company

belatedly, we also find that even after the issuance of the

show cause notice in the adjudication proceedings no reply

was filed and therefore the violation of the alleged provisions

stood admitted by the appellant Company.

11. Thus, we are of the opinion that imposition of penalty is

justified. However, in the circumstances since eventually the 7

information was supplied during the pendency of the

adjudication proceedings coupled with the fact that the

Managing Director of the Company had appeared and co-

operated in the proceedings the penalty of ` 5 Lakhs appears

to be on the higher side. We, accordingly, reduce the quantum

of penalty from ` 5 Lakhs to ` 2 Lakhs.

12. Insofar as the appellants in Appeal No. 308 of 2017 are

concerned the contention is that only Appellant No. 4

Smt. Seema Rajiv Kotia received summons dated September

16, 2014 and the said summons were never received by the

other appellants. Further, summons dated October 13, 2014

was received by all the appellants but other summons were

never received.

13. Be that as it may. We find that the appellants in Appeal

No. 308 of 2017 are inter connected and are homogenous

group by itself in one way or the other. Once the summons

has been duly received by one, the same is sufficient service

and is deemed to be served by necessary implication insofar

as the remaining appellants are concerned. Further, the fact

remains that all the appellants had knowledge of the

information that was being sought by the respondent. The said

appellants neither supplied the requisite information to the 8

investigating authorities nor filed any reply to the show cause

notice issued by the AO. Thus, the contention that they were

not served with the summons cannot be believed.

14. It has also been stated that they had engaged the services

of an Advocate to whom they had given the requisite

information and who was instructed to file the reply. It was

urged that the said Advocate failed to file the reply and

subsequently the appellants found that their Advocate had

died. It was, thus, contended that the appellants had no

intention of not providing any information to the respondent

and the non-furnishing of the information was on account of

the death of their Advocate.

15. The contention of the appellant appears to be an

afterthought. The appellants did not respond to the summons

and only sought further time to provide necessary information

which they failed to do so. However, the factum of the death

of the Advocate has not been denied by the respondent before

us. Thus, a benefit of doubt is given to the appellants. Since

Section 11C(3) of the SEBI Act, 1992 has been violated and

the information sought has not been furnished a penalty has

been imposed. However, in the given circumstances, the 9

penalty of ` 2 Lakhs each payable by the appellants is

reduced to ` 1 Lakh each.

16. In the result, both the appeals are partly allowed. The

impugned order insofar as the violation of Section 11C(3) of

the SEBI Act, 1992 is concerned is affirmed. However, the

quantum of penalty is reduced. In the case of the appellant

Company in Appeal No. 282 of 2017 the penalty of ` 5 Lakhs

is reduced to ` 2 Lakhs and, in the case of the appellants in

Appeal No. 308 of 2017, the penalty of ` 2 Lakhs each is

reduced to ` 1 Lakh each. The aforesaid penalty shall be paid

by the appellants to the respondent within four weeks from

today. In the circumstances, there shall be no order on costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member 02.07.2019 Prepared and compared by:msb