In the matter of SCORES Adjudications - Adjudication Order no.: SM / AO-5 / 2014 dated August 12, 2014 Adjudication Order in the matter of Kanika Infrastructure and Power Limited (erstwhile Kanika Infotech Limited). SEBI had issued Circular No. CIR / OIAE / 2 / 2011 dated June 3, 2011 regarding commencement OF SEBI Complaints Redress System (SCORES)
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Adjudication Order against Kanika Infotech Limited in the matter of SCORES
In the matter of SCORES Adjudications - Adjudication Order no.: SM / AO-5 / 2014 dated August 12, 2014 Adjudication Order in the matter of Kanika Infrastructure and Power Limited (erstwhile Kanika Infotech Limited). SEBI had issued Circular No. CIR / OIAE / 2 / 2011 dated June 3, 2011 regarding commencement OF SEBI Complaints Redress System (SCORES)
In the matter of SCORES Adjudications - Adjudication Order no.: SM / AO-5 / 2014 dated August 12, 2014 Adjudication Order in the matter of Kanika Infrastructure and Power Limited (erstwhile Kanika Infotech Limited). SEBI had issued Circular No. CIR / OIAE / 2 / 2011 dated June 3, 2011 regarding commencement OF SEBI Complaints Redress System (SCORES)
In the matter of SCORES Adjudications - Adjudication Order No.
: SM/AO5/2014 dated August 12, 2014
Adjudication Order in the matter of Kanika Infrastructure and Power Limited (erstwhile Kanika Infotech Limited) Page 1 of 5 BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA [ADJUDICATION ORDER NO.SM/AO5/2014] 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 ofKanika Infrastructure and Power Limited (erstwhile Kanika Infotech Limited) (PAN. AACCK0736C) In the matter of SCORES
FACTS OF THE CASE IN BRIEF 1. Securities and Exchange Board of India (hereinafter referred to as SEBI) had issued Circular No. CIR/OIAE/2/2011 dated June 3, 2011 regarding commencement of SEBI Complaints Redress System (SCORES) and advising all companies, whose securities are listed on various stock exchanges, to comply with the provisions of the said circular. Subsequently, vide Circular No. CIR/OIAE/1/2012 dated August 13, 2012, SEBI once again advised all companies, whose securities were listed on stock exchanges, to obtain SCORES authentication by September 14, 2012 failing which SEBI would be constrained to initiate action against them.
2. It was observed by SEBI that certain companies including M/s Kanika Infrastructure and Power Limited (hereinafter referred to as "Noticee") had failed to obtain SCORES authentication within the timeline stipulated under the aforementioned Circular No. CIR/OIAE/1/2012 dated August 13, 2012. Thereafter, SEBI through an advertisement in the newspapers dated October 20, 2012 advised these companies to get SCORES authentication within 7 days. However, it was noted by SEBI that the Noticee failed to obtain SCORES authentication even then.
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In the matter of SCORES Adjudications - Adjudication Order No.: SM/AO5/2014 dated August 12, 2014 Adjudication Order in the matter of Kanika Infrastructure and Power Limited (erstwhile Kanika Infotech Limited) Page 2 of 5 3. Based on the aforesaid observations, it was alleged that by failing to obtain SCORES authentication, the Noticee has violated the aforesaid SEBI Circular No. CIR/OIAE/1/2012 dated August 13, 2012. The alleged violation, if established, makes the Noticee liable for monetary penalty under section 15 HB of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act).
APPOINTMENT OF ADJUDICATING OFFICER
4. The undersigned was appointed as Adjudicating Officer under section 15-I of SEBI Act and rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as Rules) to enquire into and adjudicate under section 15HB of SEBI Act for the alleged violation by the Noticee.
SHOW CAUSE NOTICE AND REPLY
5. A Show Cause Notice No. SEBI/ERO/SM/ADJ/7081/2013 dated March 22, 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 15HB of SEBI Act for the violations alleged to have been committed by the Noticee. The copies of the documents relied upon in the SCN were provided to the Noticee along with the SCN.
6. The Noticee submitted their reply to the SCN vide letter dated April 05. Thereafter, the Noticee was granted an opportunity of personal hearing on August 22, 2013. Shri A. K. Labh, the Authorized Representative (AR) of the Noticee appeared for the hearing, and made submissions on behalf of the Noticee, reiterating their earlier written submissions.
7. The submissions made by the Noticee are summarized below: The Noticee did not come across any public circulars/notices for any requirement for SCORES authentication. The Noticee had received a letter from the BSE and had sent the requisite data to the email-id is@bseindia.com on October 09, 2012. The Noticee Brought to you by http://StockViz.biz
In the matter of SCORES Adjudications - Adjudication Order No.: SM/AO5/2014 dated August 12, 2014 Adjudication Order in the matter of Kanika Infrastructure and Power Limited (erstwhile Kanika Infotech Limited) Page 3 of 5 assumed that they were compliant with SCORES since they had sent the data to the BSE. The reason for delay was due to lack of understanding of the proper authority to whom the application was required to be made on the part of the Noticee and there was no mala fide intention or gross negligence on the part of the Noticee in the said context. Further, the Noticee was prompt in redressing the investor complaints and that there were no complaints pending against them. The Noticee had applied for SCORES authentication on October 09, 2012 (to the BSE)and had obtained SCORES authentication on April 08, 2013.
CONSIDERATION OF ISSUES AND FINDINGS
8. I have examined the SCN, the reply and the submissions of the Noticee, and other information and documents available on record.
9. The issues that arise for consideration in the present case are : a) Whether the Noticee by failing to obtain SCORES authentication has failed to comply with SEBI circular No. CIR/OIAE/1/2012 dated August 13, 2012? b) Does the violation, if any, on the part of the Noticee attract monetary penalty under Section 15 HB of the SEBI Act? c) If so, what would be the monetary penalty that can be imposed taking into consideration the factors mentioned in Section 15J of the SEBI Act?
10. The SEBI Circular no. CIR/OIAE/1/2012 dated August 13, 2012 clearly mentions that the requisite data is to be submitted to SEBI in both hard copy (to any SEBI Office/to the designated SEBI Department) and in soft copy (data sent by way of email to the designated email-id scores@sebi.gov.in). I note that on September 7, 2012, the BSE had sent a reminder to the Noticee regarding SCORES authentication. Despite that, the Noticee had sent the requisite data to the BSE instead of to SEBI.
11. A listed company is reasonably expected to comply with the regulatory and statutory requirements in its totality. The said BSE letter had mentioned about the SEBI Circulars and it was expected that the Noticee would read the contents of the Circular and comply with the same. The Noticee cannot escape responsibility from complying with extant regulatory provisions on the grounds of lack of understanding. I find that there were no other rational efforts taken by the Noticee to find out the designated authority for the purpose of obtaining SCORES authentication. Hence, the act of Brought to you by http://StockViz.biz
In the matter of SCORES Adjudications - Adjudication Order No.: SM/AO5/2014 dated August 12, 2014 Adjudication Order in the matter of Kanika Infrastructure and Power Limited (erstwhile Kanika Infotech Limited) Page 4 of 5 providing the details to the wrong authority constitutes negligence on the part of the Noticee.
12. Based on the material on record, I am of the considered view that the violation is clearly established against the Noticee. In the instant case, the Noticee had not complied with the aforesaid SEBI Circular within the stipulated time frame. It obtained SCORES authentication after considerable delay i.e., on April 08, 2013. In view of the foregoing, the alleged violation of the provisions of aforesaid SEBI circular by the Noticee as specified in the SCN stands established.
13. It is not expected from a responsible listed company, like the Noticee herein, to state that they were ignorant about the regulatory requirements. It is a well established legal maxim that "Ignorantia juris non excusat", or "ignorance of the law excuses no one". In view of the same, I find that in the instant matter at hand, the Noticee failed to exercise reasonable care and diligence in discharge of its duty as a listed company. Such acasual attitude, as demonstrated by the Noticee, is reproachable and deserves to be treated in fitting manner. Given the above, the Noticee cannot escape liability.
14. The Honble Supreme Court of India in the matter of SEBI Vs. Shri Ram Mutual Fund [2006] 68 SCL 216(SC) and (2006) 131 Comp. Cas. 591 (SC) held that In our considered opinion, penalty is attracted as soon as the 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.
15. In view of the aforementioned violation, the Noticee is liable for monetary penalty under Section 15HB of SEBI Act which reads as follows:
15HB.Penalty for contravention where no separate penalty has been provided.- Whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by the Board thereunder for which no separate penalty has been provided, shall be liable to a penalty which may extend to one crore rupees.
16. While determining the quantum of penalty under Section 15 HB of SEBI Act, it is important to consider the factors stipulated in Section 15J of SEBI Act, which reads as under:- 15JFactors to be taken into account by the adjudicating officer: Brought to you by http://StockViz.biz
In the matter of SCORES Adjudications - Adjudication Order No.: SM/AO5/2014 dated August 12, 2014 Adjudication Order in the matter of Kanika Infrastructure and Power Limited (erstwhile Kanika Infotech Limited) Page 5 of 5 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.
17. It is difficult, in cases of such nature, to quantify exactly the disproportionate gains or unfair advantage enjoyed by an entity because of the default and the magnitude of consequent losses suffered by the investors. I note that there were no investor complaints pending against the Noticee. In the absence of any actual harm done to the investors it is difficult to quantify the quantum of penalty. However, the lack of due diligence demonstrated by the Noticee is a risk to the securities market and thus loss to the investors to that extent. I observe that default by the Noticee occurred on continuous basis for more than 8 months and hence may be considered repetitive.
ORDER 18. After taking into consideration all the facts and circumstances of the case, I impose a penalty of Rs.1,50,000/- (Rupees One Lakh Fifty Thousand) only under Section 15 HB of the SEBI Act against the Noticee which will be commensurate with the violations committed by it.
19. 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 Regional Director, SEBI Eastern Regional Office, 16, Camac Street, 3rd. Floor, Unit 301, Kolkata 700017.
20. In terms of Rule 6 of the Rules, copy of this order is sent to the Noticee also to the Securities and Exchange Board of India.