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HOLDING
INQUIRY
AND
IMPOSING
PENALTIES
BY
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.
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6.
7.
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8.
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.
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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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
6
7
8
SEBIP/MHO7/9111981/1
SEBIP/MHO7/9113814/1
SEBIP/MHO8/9100742/1
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
Dharmendra V Katira
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.
20.
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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.
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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24.
25.
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26.
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.
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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.
A. Sunil Kumar
Adjudicating Officer
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