2013 (12) TMI 761 - AT - Companies Law

Tribunal Upholds Penalty for SEBI Act Violation by Private Company

The Tribunal upheld the penalty imposed on a private company (Appellant) for violating SEBI Act sections 11C(2) and 11C(3) due to failure to provide ... Penalty u/s 15A(a) of SEBI Act,1992 - Violation of sections 11C(2) and 11C(3) of the SEBI Act – Failure to furnish records while investigation – Held that:- After affording an opportunity of personal hearing and perusal of the material on record and giving regard to the facts and circumstances of the case, the Adjudicating came to the conclusion that the appellant violated the provisions of sections 11C(2) and 11C(3) of the SEBI Act, 1992 - The manner in which the replies have been submitted before the Investigating Officer is not appreciable by the Tribunal - Instead of passing the burden on others, the appellant should have fully co-operated with the Investigating Officer appointed by the SEBI – Penalty is reduced to Rupees Two Lakhs – Decided Partly in favour of Appellant. Issues:Violation of SEBI Act - Sections 11C(2) and 11C(3) - Imposition of penalty under section 15A(a) - Failure to provide complete information as required by summons - Liability of company for director's faults - Evasive responses by the Appellant - Reduction of penalty.Analysis:The case involved an appeal against an order imposing a penalty of Rs.5,00,000 on the Appellant for violating sections 11C(2) and 11C(3) of the SEBI Act, 1992. The Appellant, a private company, was alleged to have failed to provide complete information as required by summons during the investigation initiated by SEBI. The investigation stemmed from findings by the Income Tax Department regarding manipulation in the share price of a company and the involvement of certain entities, including the Appellant, in cornering a large part of the shareholding of the company. The Appellant's directors were accused of misleading and evasive responses, leading to the imposition of the penalty by the Adjudicating Officer.The Adjudicating Officer, after considering the facts and circumstances, concluded that the Appellant indeed violated the SEBI Act and imposed the penalty. The Appellant argued that all relevant information in its possession was provided to SEBI and that it should not be held responsible for the faults of its directors. However, the Respondent contended that the Appellant's replies were misleading and evasive, with some responses being altogether absent. The Tribunal noted the lack of full cooperation from the Appellant during the investigation and upheld the penalty imposed by the Adjudicating Officer.The Tribunal found the Appellant's manner of responding to the investigation unsatisfactory and emphasized the importance of full cooperation with the investigating authorities. While acknowledging the reduction in penalty requested by the Appellant, the Tribunal decided to reduce the penalty to Rs.2,00,000 to deter any future indifferent attitude towards summons. The modified order required the Appellant to deposit the reduced penalty within two months. Ultimately, the appeal was dismissed with no additional costs imposed, concluding the legal proceedings in the matter.