2015 (7) TMI 454 - AT - Companies Law

Tribunal Upholds SEBI Act Compliance, Emphasizes Timely Redressal

The Tribunal condoned significant delays in filing appeals, emphasizing the importance of timely grievance redressal under the SEBI Act. Penalties were ... Penalty for violation of provisions of Sections 15C, 15A(a) of SEBI Act, 1992 - Delay in resolve of investors’ grievances - Delay in filing appeal by 3182 days & 1036 days respectively - Held that:- The delay is condoned by allowing two miscellaneous applications and consequently both the appeal have been heard on merit . Section 15C of the SEBI Act enjoins upon SEBI to levy penalty on listed company which has failed to redress investors’ grievances within the specified time prescribed by the Board. Undoubtedly, it is to be done after affording reasonable opportunity to the company which has been duly done in the present two appeals. Keeping in view the seriousness of the matter, a penalty of ₹ 1 lac for each day during which such failure to redress investors’ grievances continues has been prescribed by law which can be levied upon the defaulter company subject to a maximum of ₹ 1 crore. In the present case, admittedly, the default to redress investors’ grievances in question has continued for years together. This is a blatant violation of law and the regulators’ orders in this regard. Even after passing of the impugned order dated May 9, 2005 no steps were taken to redress the investors’ grievances. As the investors’ grievances increased to 114, fresh letter was issued to the appellant on September 25, 2008 calling upon the appellant to redress investors’ grievances. As the appellant failed and neglected to redress investors’ grievances, proceedings were initiated and by impugned order dated March 25, 2011 penalty of ₹ 20 lac under Section 15C and penalty of ₹ 2 lac under Section 15A(a) of SEBI Act has been imposed. Penalty at the rate of ₹ 1 lac per day from September 25, 2008 till passing of impugned order dated March 25, 2011 for not redressing 114 investors’ grievances would be more than ₹ 1 crore, however, inspite of persistent default on part of appellant, Ld. adjudicating officer has taken a lenient view and imposed penalty of ₹ 20 lac under Section 15C and penalty of ₹ 2 lac 15A(a) of SEBI Act which cannot be said to be unreasonable or excessive. Argument of the appellant that it was a sick company and had only few employees and, therefore, investors’ grievances could not be redressed does not impress us, because, obligation under the SEBI Act to comply with investors’ grievances is made mandatory and for non compliance stringent penalty of ₹ 1 lac per day is prescribed. Therefore, irrespective of being a sick company and irrespective of their being only few employees, appellant was obliged to redress investors’ grievances from time to time. Moreover, above argument is a dishonest one as can be seen from the conduct of the appellants / its directors. As soon as SEBI passed an order on December 15, 2010 restraining appellants and its directors from entering the capital market till redressal of investors’ grievances pending since 2004, appellant took steps to redress all investors’ grievances immediately and applied for revoking the debarment order dated December 15, 2010. - Decided against the appellants. Issues:1. Delay in filing appeals and condonation of delay.2. Violation of provisions of SEBI Act, 1992 regarding redressal of investors' grievances.3. Imposition of penalties by SEBI.4. Arguments regarding the quashing of orders and revocation of debarment.5. Compliance with SEBI regulations and penalties imposed.Analysis:1. Delay in filing appeals and condonation of delay:The appeals were filed with significant delays of 3182 days and 1036 days, respectively. The Tribunal condoned the delays after hearing both parties and considering the reasons provided in the miscellaneous applications. The appeals were then heard on merit.2. Violation of provisions of SEBI Act, 1992 regarding redressal of investors' grievances:The appellant, a registered company, failed to redress investors' grievances promptly, leading to penalties under Sections 15C and 15A(a) of the SEBI Act, 1992. SEBI issued show cause notices, but the appellant did not comply, resulting in penalties of Rs. 20 lac and Rs. 5 lac in one appeal and Rs. 2 lac in another. The Tribunal emphasized the importance of timely grievance redressal to maintain investor confidence and the growth of the capital market.3. Imposition of penalties by SEBI:SEBI imposed penalties for continuous failure to address investors' complaints. The penalties were imposed after due process, including show cause notices and opportunities for the appellant to respond. The Tribunal noted that penalties were within the prescribed limits and justified given the prolonged non-compliance by the appellant.4. Arguments regarding the quashing of orders and revocation of debarment:The appellant argued for quashing the orders, stating that all complaints were resolved after being informed by a director. However, SEBI contended that the appellant had been indifferent to the investors' complaints for a long period. The appellant's argument that it was a sick company with few employees was dismissed, emphasizing the mandatory nature of compliance with SEBI regulations.5. Compliance with SEBI regulations and penalties imposed:The Tribunal observed that the appellant took action to redress grievances only after directors were debarred from the capital market. Despite subsequent compliance, the penalties imposed for the prolonged non-compliance were deemed reasonable and justified. The Tribunal dismissed the appeals, emphasizing the importance of adhering to SEBI regulations and timely redressal of investors' grievances.