2019 (9) TMI 799 - AT - SEBI

Non furnishing the information pursuant to the summons - Violation of Section 11C(3) read with Section 11(2)(i) of SEBI Act 1992 - penalty under Section 15A(a) of the SEBI Act 1992 - HELD THAT - 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. 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. 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. Thus we are of the opinion that imposition of penalty is justified. However in the circumstances since eventually the information was supplied during the pendency of the adjudication proceedings coupled with the fact that the Managing Director of the Company had appeared and cooperated in the proceedings the penalty of Rs. 5 Lakhs appears to be on the higher side. We accordingly reduce the quantum of penalty from Rs. 5 Lakhs to Rs. 2 Lakhs.

Summary

Issues:
Violation of Section 11C(3) read with Section 11(2)(i) of SEBI Act, 1992 - Imposition of penalty under Section 15A(a) of the SEBI Act, 1992 for failure to furnish required information during investigation.

Analysis:

1. Issue 1 - Violation of SEBI Act and Imposition of Penalty:
The Adjudicating Officer (AO) of SEBI imposed penalties on the appellants for not providing necessary information during an investigation into trading irregularities. The appellants failed to furnish information despite multiple summons and a show cause notice, leading to penalties under Section 15A(a) of the SEBI Act, 1992.

2. Issue 2 - Justification of Penalties:
The AO found that the appellants' non-cooperation hindered the investigation, justifying the penalties. While the appellant Company eventually provided the required information during adjudication proceedings, the penalties were reduced considering the belated compliance and the Managing Director's cooperation.

3. Issue 3 - Service of Summons and Non-Compliance:
In Appeal No. 308 of 2017, the appellants claimed irregularities in the service of summons and cited the failure of their Advocate to respond due to unfortunate circumstances. However, the Tribunal deemed the service sufficient and found the appellants had knowledge of the information sought but failed to comply.

4. Issue 4 - Reduction of Penalties:
Despite acknowledging the violation of Section 11C(3) of the SEBI Act, the Tribunal reduced the penalties for the appellants in Appeal No. 308 of 2017 due to the Advocate's death causing non-compliance. The penalties were decreased from Rs. 2 Lakhs to Rs. 1 Lakh each, granting a benefit of doubt to the appellants.

5. Final Decision:
Both appeals were partly allowed, affirming the violation of Section 11C(3) of the SEBI Act, 1992, but reducing the penalties. The penalty for the appellant Company in Appeal No. 282 of 2017 was reduced from Rs. 5 Lakhs to Rs. 2 Lakhs, and for the appellants in Appeal No. 308 of 2017, from Rs. 2 Lakhs each to Rs. 1 Lakh each. The appellants were directed to pay the revised penalties within four weeks, with no additional costs imposed.