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Alaknanda Capital Services Ltd. v/s Securities & Exchange Board of India

    Appeal No: 52 of 2006

    Decided On, 24 March 2006

    At, SEBI Securities Exchange Board of India Securities Appellate Tribunal

    By, CORAM: C. BHATTACHARYA
    By, MEMBER
    By, R.N. BHARDWAJ
    By, MEMBER

    Mr. U.C. Lakhwani, Advocate for the Appellant. Mr. Ravi Hegde, Advocate for the Respondent.



Judgment Text

R.N. Bhardwaj, Member


1. The appeal has been filed against the order dated August 29, 2005 of the adjudicating officer passed in terms of the provisions of Section 15A(a) of the SEBI Act, 1992 and Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 imposing a penalty of Rs. 10,000/- on the appellant i.e., Alaknanda Capital Services Private Limited.


2. Securities and Exchange Board of India (for short “SEBI”) wanted to get information regarding the appellant’s dealings in the scrip of Jagsonpal Pharmaceuticals Limited (hereinafter referred to as “JPL”). In order to obtain necessary information the investigating officer had issued two summons to the appellant on 28th April, 2004 and July 2, 2004. The appellant was required to submit certain information regarding price manipulation in the scrip of JPL as per annexure to the summons. The appellant was also required to personally appear before the investigating authority. The adjudicating officer appointed by SEBI vide its order dated 14/12/2004, issued a show cause notice dated 04/04/2005 in terms of Rule 4 of Securities and Exchange Board of India (Procedure for Holding Enquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 requiring the notice to show cause as to why an inquiry should not be held against the notice for the alleged violation committed by it. The appellant was also required to attend personal hearing on 25/05/2005 and was given another opportunity on 15/06/2005. The appellant neither replied to the show cause notice nor attended the hearing and hence ex-parte proceedings were conducted on the basis of facts and material available on record.


3. The adjudicating officer while examining the facts and records of the case came to the conclusion that the summons dated 28/04/2004 and the annexure along with which certain information pertaining to the dealings in the scrip of JPL was required by the investigating officer had been served on the appellant as per the acknowledgement available on record. The adjudicating officer, however, clearly records that there was no proof of the service of summons dated July 2, 2004. He goes on to record that the same cannot be deemed to have been served on the noticee. The adjudicating officer further mentions in his findings that the appellant failed to submit necessary information pertaining to its dealing in the scrip of JPL to the investigating officer as summons along with annexure dated 28/04/2004 had been received by the appellant.


4. The appellant has contended that he did not receive any of the summons since he had already shifted the address. In proof of his contention, the appellant submitted copy of Form No. 18 which was submitted to the Registrar of Companies that the address “1555, S.P. Mukherjee Marg, New Delhi was shifted to 56-B, Block J(D), Pitam Pura, Delhi-34 with effect from 5th April, 2002” and later on this address was changed to Naraina Vihar, New Delhi w.e.f. 1st September, 2004. The learned counsel for the appellant argued that there was no question of not supplying the necessary information to the investigating officer when the summons has not even been served on it. Both the summons issued by the investigating officer and the show cause notice by the adjudicating officer had been issued at the old address which it had changed in April, 2002 whereas summons were issued in the year 2004. It was therefore submitted that there was no violation of Section 11C of the SEBI Act, 1992 in this case. He further submitted that the impugned order dated 29th August, 2005 was received by the appellant on 28th November, 2005 vide SEBI’s letter dated 14/11/2005.


5. Learned counsel for the respondent submitted that the proceedings under Section 11B of SEBI Act, 1992 read with Regulations 11 and 13(3) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 had also been initiated against the appellant. A notice was issued to the appellant through HB Securities Limited i.e., the broker through which the appellant had traded in the scrip under investigation. He submitted that the appellant had received the notice which was sent through the broker. He argued that the appellant had received the summons issued on 28/04/2004 because the acknowledgement was received by SEBI and it was on record. He went on to argue that the appellant had deliberately not supplied the information regarding its dealings in the scrip of JPL which has lead to delay in the investigations. The learned counsel for the respondent also submitted an affidavit in support of his contention but we find that this does not help much in clarifying that the summons were served on the appellant.


6. Having heard both the learned counsels, we are of the view that we are not concerned with the action being taken by SEBI under Section 11B of the SEBI Act, 1992 against the appellant as this is not the subject matter of this appeal. The short point in this appeal is whether the two summons issued by the investigating officer mentioned in the impugned order by the adjudicating officer were received by the appellant or not. As far as the summons dated 2nd July, 2004 is concerned, the adjudicating officer himself admits that there is no proof of its having been served on the appellant. As regards the summons dated 28th April, 2004 is concerned the respondent could not show that the same had been served on the appellant. Admittedly, it has been sent at the old address and there is an acknowledgement that it has been received by someone but there is no proof that the same has been received by the appellant. It is not in dispute that even before the summons which was issued to the appellant by the investigating officer on 28/04/2004, an intimation had been given to the Registrar of Companies in Form No. 18 by the appellant that it had shifted the address to Pitam Pura, Delhi 11

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0034 whereas the summons had been sent at its old address of S.P. Mukherjee Market, New Delhi. The show cause dated 04/04/2005 and the notices to attend the personal hearings on 25/05/2005 and 15/06/2005 before the Adjudication Officer were issued at the old address of the appellant which it did not receive. It could not, therefore, be said that there was any violation of Section 15A(a) of SEBI Act, 1992. In view of above the order of adjudicating officer is set aside and the appeal is allowed. Penalty of Rs. 10,000/- which had been deposited by the appellant be refunded by the respondent within three weeks from this order. 7. No order as to costs.
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