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BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA


[ADJUDICATION ORDER NO. ASK/AO/171/2014-15]
UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD
OF INDIA ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE
FOR

HOLDING

INQUIRY

AND

IMPOSING

PENALTIES

BY

ADJUDICATING OFFICER) RULES, 1995


In respect of
M/s Shree Mahaganga Sugarmills Ltd.
(Formerly known as M/s Eltrol Ltd.)
(PAN: AABCE0969L)
In the matter of Non-redressal of Investor Grievances
BACKGROUND IN BRIEF
1.

Securities and Exchange Board of India (SEBI) had issued circular no.
CIR/OIAE/2/2011 dated June 03, 2011 regarding commencement of
SEBI Complaints Redress System (hereinafter referred to as
SCORES) and advised all companies whose securities are listed on
stock exchanges to comply with the provisions of the said circular. Vide
letters dated April 17, 2012 and May 28, 2012, M/s Shree Mahaganga
Sugarmills Ltd. (formerly known as M/s Eltrol Ltd.) (hereinafter
referred to as Noticee) was informed by SEBI that it has not
furnished the authentication details for the implementation of SCORES
and that there are 8 investor grievances pending against it in SCORES.
Vide the said letters, the noticee was further advised to obtain SCORES
authentication and to redress all the grievances received on SCORES
within 15 days by uploading Action taken Report in SCORES.

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2.

SEBI again vide circular no. CIR/OIAE/1/2012 dated August 13, 2012
advised all companies whose securities are listed on stock exchanges to
obtain SCORES authentication by September 14, 2012 and required all
companies against whom complaints are pending on SCORES to take
appropriate necessary steps within 7 days of receipt of complaint by the
concerned company through SCORES, so as to resolve the complaint
within 30 days of receipt of complaint and also keep the complainant
duly informed of the action taken thereon.

3.

However, it was noted by SEBI that till the date of initiation of


adjudication proceedings against the Noticee, it had not redressed the
investor grievances and there were 8 complaints pending against it. In
view of the above, it was alleged that the noticee has failed to redress
the investor grievances after having been called upon by SEBI to redress
the same within the time specified and thereby violated section 15C of
Securities and Exchange Board of India Act, 1992 (hereinafter referred
to as SEBI Act).

APPOINTMENT OF ADJUDICATING OFFICER


4.

Shri Piyoosh Gupta was appointed as Adjudicating Officer vide order


dated November 15, 2012 under section 15I of the SEBI Act read with
rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalty by
Adjudicating Officer) Rules, 1995 (hereinafter referred to as the
Rules) to inquire into and adjudge under section 15C of the SEBI Act,
the alleged non-redressal of investor grievances by the Noticee.
Subsequently, upon the transfer of Shri Piyoosh Gupta, I have been
appointed as Adjudicating Officer, in the present matter, vide order
dated November 08, 2013.

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SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING


5.

Show Cause Notice No. EAD/ADJ/ASK/AA/32919/2013 dated


December 18, 2013 (herein after referred to as SCN) was issued to the
Noticee under rule 4 of the Rules to show cause as to why an inquiry be
not held against it in terms of rule 4 of the Rules read with section 15-I
of SEBI Act and penalty be not imposed under section 15C of SEBI Act
for non-redressal of investor grievances by the Noticee. It was alleged in
the SCN that the Noticee has failed to redress the pending investor
grievances against it in the SCORES within the time specified and
thereby violated section 15C of SEBI Act, 1992. The copies of the
documents relied upon in the SCN were provided to the Noticee along
with the SCN.

6.

The said SCN returned undelivered with the comment "Unclaimed".


Copy of the said SCN was again sent to the address of the noticee as
available on the BSE website vide letter dated January 06, 2014.
However, the said letter alongwith the copy of SCN also returned
undelivered with the comment "Left". In terms of rule 7 of the
Adjudication Rules copy of the SCN was affixed on the last known
addresses available with us on February 05, 2014.

7.

Thereafter, noticee was given an opportunity of personal hearing on


March 26, 2014 and April 15, 2014 vide notices dated March 18, 2014
and April 01, 2014 respectively by affixing notices on the addresses
available with us. However, Noticee neither replied to the SCN nor
attended the personal hearing. Again a copy of the said SCN was
forwarded to the updated address of the noticee as obtained from the
MCA website on July 31, 2014.

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8.

Subsequently, noticee was given another opportunity of personal


hearing on September 18, 2014 vide notice dated September 02, 2014.
On the scheduled date of hearing Mr. Vishal Manseta appeared as
Authorised Representative on behalf of the Noticee and stated that the
dates of the complaints are quite old and therefore requested for grant of
three week's time for filing reply to the SCN which was granted. Since
there was no reply to the SCN even after lapse of the time granted to the
noticee, another opportunity of personal hearing was given to the
noticee on November 12, 2014 vide notice dated October 16, 2014.

9.

Noticee vide letters dated November 05, 2014 and November 20, 2014
replied to the SCN, however, it did not attend the personal hearing on
the scheduled date of hearing. Noticees main submissions in respect of
the charges in the SCN are given as under :
Noticee in its 14th Annual general Meeting held on May 31, 2005 had
declared a bonus issue in the ratio of 3:1 i.e three bonus shares for
every one existing shares held as on record date to be fixed by the
directors of the company after obtaining approval of the members of
the company. After the resolution passed in the above mentioned AGM,
application for the issue of bonus had been made to BSE with all the
required documents for their approval.
In the meanwhile before allotting bonus shares SEBI passed an order
dated October 05, 2005 against the company directing company not to
issue any equity shares or any other instrument convertible into equity
shares or alter its capital structure in any manner till further direction
in this regard. Accordingly, listing application for the issue of bonus
shares was kept in abeyance by BSE due to SEBI order. The said SEBI
order has taken objection on the issue of bonus shares. Since Stock
Exchange has not granted permission to the company has not issued
and/or allotted bonus shares to any of the shareholders of the
company.
Majority of the complaints were related to the Bonus shares which was
not issued and/or allotted due to SEBI order and BSE objections. The
position has been made clear to the shareholders and the same has
been informed to the complainants many times.

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It is stated that all the 8 investor complaints from the SEBI Grievance
Department have been resolved by the company
10.

Vide notice dated December 24, 2014, another opportunity of personal


hearing was granted to the noticee on January 08, 2015. Since the
noticee had not submitted copies of the documents supporting its claims
about the redressal of investor grievances, it was asked to submit all the
relevant supporting documents on or before the date of hearing. Vide
letter dated December 31, 2014, copies of the various complaints
alongwith the various correspondences made with complainants were
submitted by the noticee. On the scheduled date of hearing Ms. Hita
Vadgama appeared on behalf of the noticee and reiterated the
submissions made vide letters dated November 05, 2014 and November
20, 2014. She further stated that she would be submitting the complete
list of correspondences made with the complainants and chronology of
events as regards the bonus issue within 10 days time. Vide letter dated
January 14, 2015, noticee, inter alia, submitted all correspondences with
complainants Mr. Gopinathan Unni and Mr. Arvind Garach, chronology
of events as regards the bonus issue and copy of SCORES
authentication dated July 11, 2014.

CONSIDERATION OF ISSUES AND FINDINGS


11.

I have taken into consideration the facts and circumstances of the case,
and the material made available on record. It was alleged in the SCN
that the Noticee has failed to redress the pending investor grievances
against it in the SCORES within the time specified and thereby violated
section 15C of SEBI Act, 1992.

12.

I note from the documents before me that SEBI had issued circular no.
CIR/OIAE/2/2011 dated June 03, 2011 regarding commencement of

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SCORES and advised all companies whose securities are listed on stock
exchanges to comply with the provisions of the said circular. In terms of
said Circular, all listed companies were inter alia required to view the
complaints pending against them, redress them and submit Action
Taken Reports (ATRs) electronically in SCORES. As the SCORES is
online electronic system, therefore, for the purposes of accessing the
complaints of the investors against them, as uploaded in the SCORES,
listed companies were required to login to SCORES system
electronically through a company specific user id and password, to be
provided by SEBI. For the purpose of generating said user id and
password, listed companies which were yet to obtain SCORES user id
and password, were required to submit the details for authentication to
SEBI in the format annexed to the said Circular.
13.

I find that SEBI sent letters dated April 17, 2012 and May 28, 2012 to
the Noticee informing that it had not furnished the authentication details
for the implementation of SCORES and that there are 8 investor
grievances pending against it in SCORES. Vide the said letters, the
noticee was also advised to submit the said information as per format in
Annexure enclosed with the circular dated June 03, 2011 within 7 days
so as to create a user name and password which would enable the
noticee to view and resolve investor grievance in SCORES. Vide the
said letters, noticee was further advised to obtain SCORES
authentication and to redress all the grievances received on SCORES
within 15 days by uploading ATR in SCORES.

14.

Again vide circular no. CIR/OIAE/1/2012 dated August 13, 2012, SEBI
advised all companies whose securities are listed on stock exchanges to
obtain SCORES authentication by September 14, 2012 and required all

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companies against whom complaints are pending on SCORES to take


appropriate necessary steps within 7 days of receipt of complaint by the
concerned company through SCORES, so as to resolve the complaint
within 30 days of receipt of complaint and also keep the complainant
duly informed of the action taken thereon. As observed from the
contents of the Circular, SCORES introduced electronic dealing of the
complaints of the investors, by the respective companies. Thus, once a
complaint against a company was uploaded by SEBI in the SCORES, it
amounted to calling upon by SEBI to such company to redress the
investor grievance. Accordingly, it was incumbent upon such company
to redress the investor complaints uploaded on SCORES within the
specified time of 30 days.
15.

I note that as on the date of initiation of adjudication proceedings, there


were 8 investors complaints pending against the noticee, the details of
which are as under:

16.

Sr
No.
1
2
3
4
5

Registration No.

Complainant

Nature of complaint

SEBIP/MHO5/9107002/1
SEBIP/MHO5/9108287/1
SEBIP/MHO6/9108835/1
SEBIP/MHO6/9110356/1
SEBIP/MHO6/9110901/1

Archana Pravin Jain


Manick Lal Acharya
Alok Chamaria HUF
Dharmendra V Katira
Arvind N Garach

6
7
8

SEBIP/MHO7/9111981/1
SEBIP/MHO7/9113814/1
SEBIP/MHO8/9100742/1

Ravinder Kumar Gupta


P S Ananthanarayanan
Gopiathn Unni A K

Non-receipt of Bonus
Non-receipt of Bonus
Non-receipt of Bonus
Non-receipt of Bonus
Non-receipt of shares
after conversion /
endorsement /
consolidation /
splitting
Non-receipt of Bonus
Non-receipt of Bonus
Non-receipt of shares
in Public /Rights
issue (including
allotment letter)

Noticee in its replies has submitted that majority of the complaints were
related to the Bonus shares which it had declared in its 14th Annual
general Meeting held on May 31, 2005 in the ratio of 3:1 which could

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Date of
receipt
29/09/2005
28/12/2005
06/02/2006
22/06/2006
31/08/2006

15/02/2007
24/10/2007
20/11/2008

not be issued and/or allotted due to SEBI order dated October 05, 2005
whereby it was directed not to issue any equity shares or any other
instrument convertible into equity shares or alter its capital structure in
any manner till further directions. Accordingly, listing application for
the issue of bonus shares was kept in abeyance by BSE due to SEBI
order. Since Stock Exchange did not grant permission, noticee has not
issued and/or allotted bonus shares to any of the shareholders of the
company. It further submitted that the position has been made clear to
the shareholders and the same has been informed to the complainants
many times. No records, however, have been made available by the
noticee to show as to how the shareholders in general or all the
complainants in particular have been informed about the non-issuance /
allotment of the bonus shares.
17.

It is a matter of record that 6 out of 8 complaints pertained to nonreceipt of bonus shares which, though initially declared in 2005, was not
issued by the noticee. The correspondences made by the noticee with
these complaints are as under:
Sr. No.
1

Name of the complainant


Archana Pravin Jain

Manick Lal Acharya

Alok Chamaria HUF

Dharmendra V Katira

Ravinder Kumar Gupta

P S Ananthanarayanan

Dates of correspondences
January 18, 2006
September 30, 2014
October 10, 2014
May 26, 2011
September 30, 2014
October 10, 2014
September 30, 2014
October 10, 2014
September 30, 2014
October 17, 2014
September 30, 2014
October 10, 2014
September 30, 2014
October 10, 2014

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18.

I find that as against the complaints of Archana Pravin Jain and Manick
Lal Acharya, listed at serial no. 1 and 2 in the table above, noticee made
correspondences with them first on January 18, 2006 and May 26, 2011
respectively and thereafter on September 30, 2014 and October 10,
2014. As regards the four other complaints, listed at serial no 3 to 6 in
the table above pertaining to non-receipt of bonus shares, I note that
correspondences were made by the noticee only subsequent to issuance
of SCN.

19.

As regards other two complaints of Arvind N Garach and Gopiathn


Unni A K, listed at serial no. 5 and 8 in the table at para no. 15, I note
that these pertained to the stock split done by the noticee in the year
2003. I find from the documents submitted by the noticee that as against
the complaint of Gopiathn Unni A K, noticee vide letter dated
December 12, 2006 had sent share certificate pertaining to the
complainant to Sharex Dynamic (India) Pvt. Ltd. Further the said
complainant vide letter dated July 27, 2009 had informed the company
that pursuant to resolution of his complaint, he does not have any
complaint against the noticee.

20.

As regards the complaint of Arvind N Garach, I find that vide letter


dated December 12, 2006, noticee had sent share certificate pertaining
to the complainant to Sharex Dynamic (India) Pvt. Ltd. Further, the
noticee has sent letter dated September 30, 2014 to the complainant
intimating that as per the records of the RTA, as on the date of letter he
is not the shareholder of the noticee and requested him to provide the
updated contact details to enable it to resolve his complaint. Vide letters
dated October 17, 2014 and November 03, 2014 noticee informed the
complainant that in the absence of any response, it would consider that

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the complainant does not have any complaint against the noticee. No
records have been made available to show that the complainant has
reverted back to the noticee.
21.

Further, a confirmation was sought from the concerned department of


SEBI regarding the status of the resolution of the complaints by the
noticee. It was confirmed by the said department that all the 8
complaints against the noticee as referred to in the SCN stand redressed.

22.

From the forgoing, I find that SEBI had issued its first circular on
SCORES in June 2011 which was followed by various other
circulars/correspondences from time to time requiring listed companies,
including the noticee, to obtain SCORES authentication and redress
complaints uploaded on SCORES within the specified time. In this
regard, I find that the noticee obtained SCORES authentication in July
2014 and started taking action on majority of the complaints only
thereafter. This shows that there was complete disregard on the part of
the noticee towards complying with SEBI's directions as well as
redressal of investor complaints. In this context, I would like to refer to
the judgment of Hon'ble Securities Appellate Tribunal (SAT) in S. S.
Forgings & Engineering Limited & Others v SEBI, (Appeal No. 176 of
2014 decided on August 28, 2014) wherein it, inter alia, observed
thatThis Tribunal has consistently held that redressal of
investors grievances is extremely important for the Regulator to
regulate the capital market. If the grievances are not redressed within a
time bound framework, it leads to frustration among the investors who
may not be motivated to further invest in the capital market. Hence the
importance of complaints redressal system initiated by SEBI in June,

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2011 cannot be undermined and its sanctity has to be maintained by all


the listed companies..
23.

A listed company is expected to comply with the extant regulatory and


statutory requirements. It is a settled position that the obligation under
the SEBI Act to redress the investors grievances is mandatory. In view
of the same, I hold that by not redressing the grievances of investors
within the time prescribed, Noticee failed to comply with its statutory
obligation and, therefore, the charge of violation of section 15C of the
SEBI Act stands established against the noticee.

24.

The Honble Supreme Court of India in the matter of Chairman, SEBI


v.. Shriram Mutual Fund {[2006] 5 SCC 361} held that "In our view,
the penalty is attracted as soon as contravention of the statutory
obligations as contemplated by the Act is established and, therefore, the
intention of the parties committing such violation becomes immaterial.
. Hence, we are of the view that once the contravention is
established, then the penalty has to follow and only the quantum of
penalty is discretionary."

25.

As the violation of the statutory obligation under section 15C of SEBI


Act, 1992 has been established, I hold that the Noticee is liable for
monetary penalty under section 15C of SEBI Act, which reads as
under:"15C.Penalty for failure to redress investors' grievances.- If any listed
company or any person who is registered as an intermediary, after
having been called upon by the Board in writing, to redress the
grievances of investors, fails to redress such grievances within the time
specified by the Board, such company or intermediary shall be liable to
a penalty of one lakh rupees for each day during which such failure
continues or one crore rupees, whichever is less."

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26.

While determining the quantum of monetary penalty, it is important to


consider the factors stipulated in section 15J of SEBI Act, which reads
as under:15J - Factors to be taken into account by the adjudicating officer
While adjudging quantum of penalty under section 15-I, the
adjudicating officer shall have due regard to the following factors,
namely:(a) the amount of disproportionate gain or unfair advantage, wherever
quantifiable, made as a result of the default;
(b) the amount of loss caused to an investor or group of investors as a
result of the default;
(c) the repetitive nature of the default.

27.

The material made available on record has not quantified the amount of
disproportionate gain or unfair advantage made by the Noticee and the
loss suffered by the investors as a result of the Noticee's default. There
is also no material made available on record to assess the amount of loss
caused to investors or the amount of disproportionate gain or unfair
advantage made by the Noticee as a result of default. The fact, however,
remains that the Noticee, being a listed company, failed to fulfil its
statutory obligation of redressing the investor complaints within the
prescribed time limits. By its failure, the noticee frustrated the efforts of
SEBI which has put in place a centralized web based system for speedy
redressal of investors' complaints and thereby acted in a manner which
is detrimental to the interest of the investors in securities market.

ORDER
28.

Having considered all the facts and circumstances of the case, I, in


exercise of the powers conferred upon me under Section 15I (2) of the
SEBI Act read with Rule 5 of the Adjudication Rules, hereby impose a
penalty of ` 1,00,000/- (Rupees One Lakh only) on the noticee i.e. M/s
Shree Mahaganga Sugarmills Ltd. (formerly known as M/s Eltrol Ltd.)

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for violation of Section 15C SEBI Act. I am of the view that the penalty
imposed is commensurate with the violation committed by the Noticee.
29.

The Noticee shall pay the said amount of penalty by way of demand
draft in favour of SEBI - Penalties Remittable to Government of
India, payable at Mumbai, within 45 days of receipt of this order. The
said demand draft should be forwarded to The Division Chief (OIAE Investor Grievance Redressal Division), Securities and Exchange Board
of India, SEBI Bhavan, Plot No. C4 A, G Block, Bandra Kurla
Complex, Bandra (E), Mumbai 400 051.

30.

In terms of rule 6 of the Rules, copies of this order are sent to the
Noticee and also to the Securities and Exchange Board of India.

Date: March 03, 2015


Place: Mumbai

A. Sunil Kumar
Adjudicating Officer

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