Top Telemedia Ltd.& Anr. vs Sebi

Order Reserved on: 19.03.2018

Date of Decision : 06.04.2018

Appeal No. 378 of 2016

1.

Top Telemedia Ltd.

Registered Address: B-1/304, Brahama Memories, Bhosle Nagar, Pune.

Administrative Office: Level 3 NeoVikram, New Link Road, Andheri (West), Mumbai - 400 058.

2. Mr. Indrajit Vaghela Lakhaji A/202, Asavari Flat, Opp. Karnavati Club, Nr. Satyagraha Chavni, Satellite Road, Ahmedabad - 380 015. ..... Appellants

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. P.N. Modi, Senior Advocate with Mr. Neville Lashkari, Mr. Deepak Dhane and Mr. Ramesh Gogawat, Advocates i/b Joby Mathew & Associates for Appellants.

Mr. Gaurav Joshi, Senior Advocate with Mr. Sonam Sethia, Advocate i/b Juris Corp for the Respondent.

With Appeal No. 379 of 2016 Deep Kumar Trivedi 7th Floor, Rustomjee, 7 JVPD Building, 10th Road, JVPD Scheme, Vile-Parle (West), Mumbai - 400 049. ..... 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 2

Mr. Deepak Dhane, Advocate with Mr. Ramesh Gogawat, Advocate i/b Joby Mathew & Associates for Appellants.

Mr. Gaurav Joshi, Senior Advocate with Mr. Sonam Sethia, Advocate i/b Juris Corp for the Respondent.

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

Per : Dr. C.K.G. Nair

1. These two appeals are filed challenging the order of the Adjudicating

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

for short) dated June 6, 2016. By the said order penalty has been imposed on

the appellants for failure to redress investor grievances despite even a

direction from the Whole Time Member ('WTM' for short) of SEBI by his

order dated August 10, 2012.

2. In Appeal No. 378 of 2016, the Appellant No. 1, Top Telemedia Ltd.

('the company' for short) is a company incorporated on January 1, 1995 and

listed on October 3, 2000. Appellant No. 2 Mr. Indrajit Vaghela Lakhaji is

the Whole Time Director of the company. In Appeal No. 379 of 2016 the

appellant Mr. Deep Kumar Trivedi was the Managing Director of the

company during part of the relevant period. Since the impugned order is the

same and basic facts are common, by consent of the parties, both the appeals

are heard together and disposed off by this common decision.

3. On April 21, 2011 SEBI forwarded certain investor complaints filed

against the company instructing the company to redress the complaints and

submit Action Taken Report (ATR) to SEBI. Since the letter dated April 21,

2011 could not be served upon the appellant SEBI issued a public notice on

July 20, 2011 on its website advising the appellant company to resolve the 3

investor grievances. On February 23, 2012 SEBI issued a Show Cause

Notice (SCN) to the appellants asking why action should not be taken

against it for not resolving the investor grievances. Since the SCN could not

be served SEBI issued a public notice in newspapers on March 1, 2012

including granting a personal appearance to the company / Directors. On

April 10, 2012 a personal hearing was granted to the appellant who

submitted that six investor grievances were pending and time was granted

by SEBI upto May 10, 2012 to resolve these grievances and submit ATR.

On April 16, 2012 the appellant informed SEBI about non-receipt of notices

in the proceedings since the registered office of the appellant company was

shifted and a qualified Company Secretary was not in position. On August

10, 2012 WTM of SEBI passed an order stating that investor grievances are

pending against the appellant company and therefore the appellants were

restrained from accessing the securities market directly or indirectly till the

investor grievances are redressed. On November 9, 2015 SCN was issued by

the AO of SEBI which was reportedly not received by the appellants. On

June 6, 2016 impugned order was passed by AO of SEBI, which the

appellants came to know on June 30, 2016 from one of their erstwhile

directors. This order of AO is impugned in both these appeals.

4. Learned Senior Counsel Shri P.N. Modi appearing on behalf of the

appellants in Appeal No. 378 of 2016 extensively argued that they were not

in receipt of the SCN issued by the AO dated November 9, 2015. Though

the SCN was sent to various addresses and the right address - A/202

Asawari Towers, Satellite, Ahmedabad - 380015 was also given amongst

the addresses on the covering page of the SCN, the SCN was admittedly

never sent to this address. This is despite the fact that in the order of the

WTM of SEBI dated August 10, 2012, which the AO of SEBI proposes to 4

reinforce, it is specifically stated that the above mentioned address is the

right address. Since the company (appellant no. 1) is non-functional for a

long time and reported change in registered address has been noted in the

WTM's order. The letterhead through which the appellant has been writing

to SEBI also indicated the above stated address. In spite of these and despite

the WTM noticing the correct address of the appellant company in his order

itself the SCN from the AO was sent to various other addresses but not to

the correct address. Even the e-mail in which the AO has stated to have sent

the SCN is also wrong as the correct e-mail was indicted in the letterhead of

the appellant company through which letters were issued to SEBI on March

2, 2012 which was noted by the WTM in his order (supra). As far as

affixing the SCN it should have been done in the last known address as per

SEBI's own rules but despite that SEBI proceeded with by relying on the

wrong addresses. Therefore, despite having and knowing the correct address

the AO deliberately proceeded against the appellants by not serving the

SCN and passing an ex parte order imposing a huge penalty on the

appellants. Accordingly, the impugned order has been issued ex parte

without giving an opportunity of hearing to the appellant. Such an approach

by the AO of SEBI violated the procedure for service of notices and orders

as specified in SEBI (Procedure for Holding Inquiry and Imposing Penalties

by Adjudicating Officer) Rules, 1995. Learned Senior Counsel for the

appellant in Appeal No. 378 of 2016 also relied on the order of this

Appellate Tribunal in the case of the appellant company in another appeal

Top Telemedia Ltd. vs. Securities and Exchange Board of India, Appeal No.

156 of 2006 decided on 11.09.2007 which dealt with the issue of SCNs etc.

returned without being served and still the AO of SEBI proceeding with

imposing monetary penalty and therefore quashed and set aside that

impugned order.

5

5. As far as merit of the appeal is concerned, it was further submitted by

the Learned Senior Counsel that, despite being an inactive company with

effect from February 14, 2003 (and subsequently delisted on September 9,

2017) it has been the endeavour of the appellants to redress the grievances

of the investors. Accordingly all the investor grievances have been redressed

before issue of the impugned order. There was some delay in redressing

some of the investor grievances because of the limitations imposed by the

circumstances of an inactive company with no proper office facilities, staff

etc.

6. Learned Counsel Shri Deepak Dhane appearing on behalf of the

appellant in Appeal No. 379 of 2016 submitted that the appellant herein was

not a Director of the company when the SCN was issued. He resigned from

the company much before the issue of SCN i.e. on July 1, 2013 which was

accepted by the company on July 31, 2013 in its board meeting. Minutes of

the meeting is on record. Further, his vacancy was filled in by another

nomination filed before the Registrar of Companies (RoC) which is also on

record. Since the appellant herein was not any way connected with the

company when the SCN was issued on November 9, 2015, he is not

responsible for any violation relating to non-redressal of investor grievances

of the company.

7. Learned Senior Counsel for the respondent SEBI Shri Gaurav Joshi

submitted that every company is mandated to have a registered office and in

case of any change in the registered address it should be duly informed to

the Stock Exchanges / Registrar of Companies (RoC). In the instant matter

the information given by the company regarding change in registered

address itself was contradicted by evidence. However, in any case, the SCN 6

was issued in both the registered addresses in Ahmedabad and in Pune,

before change and after change as informed by the company. Accordingly,

service of documents has been done as per the provisions of Section 51 and

Section 146 of the Companies Act, 1956 (with pari materia provisions in

Sections 20 and 12 respectively of the Companies Act, 2013) which

stipulate that the documents must be served in the registered office of the

company. Learned Senior Counsel for the respondent SEBI also relied on

the Judgment of the Apex Court in the matter of M/s Madan and Co. vs

Wazir Jaivir Chand [(1989) 1 Supreme Court Cases 264] in respect of

servicing of SCN etc. He also submitted that reliance on the WTM order

dated August 10, 2012 is misplaced since the WTM only noted another

address he noticed on the letterhead of the company.

8. We have heard the arguments of both the parties and perused the

records before us. We note that the letterhead of the company at page 48 of

the appeal paper book (letter dated March 12, 2012) gives two addresses i.e.

(1) 701, Anand Mangal - III, Rajnagar Club Lane, Ambawadi, Ahmedabad

- 380 006, (2) postal address - A-202, Asavari Towers, B/h Fun Republic,

Satellite, Ahmedabad - 380 015. However, in the letters dated April 16,

2012 and May 9, 2012 on the letterhead of the appellant company produced

in the reply filed by SEBI before us only 701, Anand Mangal - III, Rajnagar

Club Lane, Ambawadi, Ahmedabad - 380 006 is given. Therefore, the

company was apparently using different letterheads with different addresses.

We also note that AO of SEBI has sent SCN in both the registered addresses

as per records which are as per mandate under the Companies Act. Even the

information relating to change in registered address from Ahmedabad to

Pune given by the company is found to be unreliable as service of SCN

could not be effected there also. Given the conflicting information relating

to the address given by the appellant the argument that SEBI failed to serve 7

the SCN following due procedure is devoid of any merit. Rather it is clear

that the appellants are taking undue advantage of no service of SCN etc.

when records regarding the addresses of the company relating to its

registered addresses or as given in the letterheads turn out to be unreliable.

The reliance placed by Learned Senior Counsel for the appellant in Appeal

No. 378 of 2016 in the order of this Appellate Tribunal (supra) is

distinguishable as in that matter it is evidenced that the SCNs issued in the

registered office of the company was returned and when the representative

of the company approached SEBI personally for getting copies of the

notices the same was not furnished by SEBI.

9. Fact that appellant in Appeal No. 379 of 2016 had resigned on July 1,

2013 which was accepted by the board of directors of the company on July

31, 2013 does not absolve him from the obligation of discharging the

investor grievances pending upto the date of his resignation / acceptance

because he was the Managing Director of the company entrusted with the

task of day-to-day affairs of the company. Moreover, he has been with the

company as a Director from July 23, 2006; pending investor grievances had

been highlighted by SEBI itself to the company on April 21, 2011 when

SEBI forwarded these complaints to the company. Subsequently, on August

10, 2012 the WTM of SEBI issued an order directing the company and its

Directors to redress these investor grievances pending for long time and

restrained the company and the Directors from accessing the securities

market till those investor grievances were redressed. However, till the

resignation of the appellant in Appeal No. 379 of 2016 i.e. in July 2013,

these investor grievances were not redressed. Accordingly, even going by

the date of communication by SEBI i.e. April 21, 2011 till July 2013 when

the appellant was Director / Managing Director of the company those

investor grievances were not redressed.

8

10. Given the above facts of the matter the findings in the impugned

order that the company, its then Managing Director Mr. Deep Kumar

Trivedi and Whole Time Director Mr. Indrajit Vaghela Lakhaji have been

responsible for considerable delay in redressing grievances of the investors

cannot be faulted. They also did not follow the directions issued by the

WTM of SEBI vide his order dated August 10, 2012 to redress the investor

grievances and to submit ATR. Accordingly, the contention that the

appellants have violated Section 15C and the directions of the WTM cannot

be faulted and therefore the appellants are liable to be penalized under

Sections 15C and 15HB of the SEBI Act, both sections providing that for

each violation the penalty may extend to one crore rupees. Accordingly, AO

of SEBI imposed a penalty of ` 1,10,00,000/- (Rupees One CroreTen Lakh

Only) on the company (appellant no. 1 in Appeal No. 278 of 2016 -

` 1 Crore under section 15C and ` 10 Lakh under section 15HB of SEBI

Act) and ` 10 Lakh each on appellant no. 2 in Appeal No. 278 of 2016 and

on appellant in Appeal No. 379 of 2016.

11. However, though the Learned Senior Counsel for SEBI argued that

there is repeated violation regarding redressal of investor grievances, we

note that the six violations which are the subject matter of these appeals

have been redressed by the appellant before issue of the impugned order,

which is not disputed. Given the fact that the appellant company was

defunct should also come to the rescue of the appellant company as a

mitigating factor. Accordingly, we do not agree that this is a fit case for

imposing a maximum penalty of ` 1 crore against the company under

Section 15C. At the same time multiple investor grievances had been

pending for a long time upto 12 years is a fact. Therefore, considering all the

circumstances and on a balance, we reduce the penalty imposed on the 9

company (appellant no. 1 in Appeal No. 378 of 2016) to ` 50 Lakh as

against ` 1 Crore and ` 10 Lakh imposed by the impugned order. However,

the penalty of ` 10 Lakh each imposed on appellant no. 2 in Appeal No. 378

of 2016 and on appellant in Appeal No. 379 of 2016 remain unchanged.

12. Both the appeals are disposed of in the above terms with no order as

to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Dr. C.K.G. Nair Member 06.04.2018 Prepared and compared by:msb