SEBI slaps INR 3 lakh penalty for non-compliance with summons

SEBI slaps INR 3 lakh penalty for non-compliance with summons

Despite repeatedly seeking information pertaining to an investigation from SAI PRAKASH PROPERTIES DEVELOPMENT LIMITED, the company failed to furnish it

A penalty of Rs. 3 lakh has been imposed upon the Noticee (Shri Pushpendra Singh Baghel)for violating the provisions of Sections 11C(2)and 11C(3) of the Securities and Exchange Board of India Act, 1992 (SEBI Act) by not complying with the summons.

In this matter, the Securities and Exchange Board of India ( SEBI) started an investigation into the affairs of Sai Prakash Properties Development Limited (SPPDL/ Company) as it was in receipt of information regarding illegal money mobilization by SPPDL and sought to safeguard the interests of investors.

SEBI conducted an investigation into the matter. During the course of the investigation, the Investigating Authority (IA) issued summons to the Noticee seeking some information including the complete list of investors, amount invested, maturity amount and details of investment; copies of bank statements; details of agents and details of agent-wise collection; and details of all bank accounts maintained by SPPDL and any other information pertaining to fund mobilization by SPPDL.

However, the Noticee did not furnish the required information to the IA. Various summons stayed undelivered. Then, the IA issued summons dated January 16, 2017and January 19, 2017 to the Noticee which were duly affixed on the last known addresses of the Noticee and were thus properly served. However, no information was served to the IA by the Noticee as sought in the summons. a

The Adjudicating Officer(AO) noted that multiple attempts had been made to serve summons to the Noticee It was also mentioned in the Investigation Report that due to non-submission of information by the Noticee, the investigation was concluded on the basis of data available on record and in the absence of documents/information sought from the Noticee.

The present proceedings against the Noticee were undertaken ex-parte.

The AO concluded that the Noticee had violated provisions of Sections 11C(2)and 11C(3) of the SEBI Act by not complying with the summons. Any non-compliance with the summons issued by the IA hampers the process of investigation.

The judgement of the Hon'ble Securities Appellate Tribunal (SAT) in the matter of DKG Buildcon Pvt. Ltd. v. SEBI was referred to wherein it was held that every person from whom information is sought should fully co-operate with the investigating officer and promptly produce all documents, records, information as may be necessary for the investigation. If persons are allowed to flout the summons issued to them during the course of the investigation, the Board, as the watchdog of the securities market, will not be able to perform its duties in protecting the interests of the investors and safeguarding the integrity of the securities market.

The AO also opined that it is well established that timely submission of information is very important for the purpose of effective investigation proceedings and non-cooperation by an entity can be detrimental to the interest of investors and the securities market on account of delay or hindrance in the investigation.

The next judgement relied upon was that of the Hon'ble SAT in Mayfair Paper & Board Pvt. Ltd. v. SEBI wherein it was held that failure to furnish information to the Investigating Authority of the SEBI shall attract the penalty prescribed under Section 15A of the SEBI Act

.

The AO noted that sufficient opportunities were granted to the Noticee to submit his reply to the SCN(Show Cause Notice) and to appear for personal hearing. However, despite the SCN and hearing notice, none of the given opportunities were availed of by the Noticee.

The judgement of the Hon'ble Supreme Court of India in the matter of SEBI v. Shriram Mutual Fund was also relied upon wherein the Court observed that penalty is attracted as soon as contravention of the statutory obligation as contemplated by the Act and the Regulations is established and hence, the intention of the parties committing such violation becomes wholly irrelevant. In view of the same, it was opined that the Noticee's failure to comply with the summons attracted penalty under section 15A(a) of the SEBI Act.