Adjudication Order in respect of JMD Alloys Limited in the matter of JMD Alloys Limited

Page 1 of 6 September 25, 2014

BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

ADJUDICATION ORDER NO. JJ/AM/AO143/2014

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 of:
M/s. JMD Alloys Limited
(PAN AAACJ7070J)
In the Matter of: JMD Alloys Limited

BACKGROUND

1. Securities and Exchange Board of India (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. On August 13, 2012, SEBI came out with
another circular advising all companies, whose securities are listed on
stock exchanges to obtain SCORES authentication. Subsequently, SEBI
came out with a Circular on April 17, 2013 in terms of which all listed
companies were inter alia called upon to redress the grievances of
investors within 30 days of the receipt of the complaints and all listed
companies which were yet to obtain SCORES user id and password were
required to obtain the same.

2. 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 Circular dated April 17, 2013. However, it
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Adjudication Order in respect of JMD Alloys Limited in the matter of JMD Alloys Limited
Page 2 of 6 September 25, 2014
was observed that JMD Alloys Limited (Noticee) did not submit the
details to SEBI which were required to be furnished in terms of the
Circular dated April 17, 2013.

3. In order to further remind the Noticee about the compliance with the
requirements as laid down in the SEBI Circular dated April 17, 2013,
letter dated December 10, 2013 was sent to the Noticee and the same was
duly delivered on December 11, 2013 by the Department of Posts. The
said letter also advised the Noticee to obtain SCORES user id and
password by December 25, 2013 failing which SEBI would be constrained
to initiate enforcement actions as per SEBI Act, 1992. However, it was
alleged that the Noticee failed to obtain SCORES authentication in spite of
being called upon by SEBI to do so thereby violating the provisions of
Section 15HB of the SEBI Act, 1992.

4. The undersigned was appointed as the Adjudicating Officer vide order
dated February 25, 2014 and the said appointment was conveyed vide
proceedings of the Whole Time Member dated March 13, 2014 to inquire
and adjudge under Section 15HB of the SEBI Act, 1992, the alleged
violations committed by the Noticee.

SHOW CAUSE NOTICE, HEARING & REPLY

5. Show Cause Notice (SCN) in terms of the provisions of Rule 4(1) of SEBI
(Procedure for Holding Inquiry and Imposing Penalties by Adjudicating
Officer) Rules, 1995 (Adjudication Rules) was issued to the Noticee on
July 11, 2014, calling upon the Noticee to show cause why an inquiry
should not be held against it under Rule 4(3) of the Adjudication Rules
and penalty be not imposed under Section 15HB of the SEBI Act, 1992 for
the alleged violations.

6. The aforesaid SCN was duly delivered to the Noticee on July 15, 2014.
However, as no reply was received, vide Notice dated August 20, 2014 the
Noticee was advised to submit its reply on or before September 05, 2014
and the Noticee was given an opportunity of personal hearing on
September 05, 2014. The said Notice dated August 20, 2014 was also duly
served on the Noticee. However, the Noticee failed to avail the
opportunity of personal hearing. The Noticee vide letter dated August 24,
2014 submitted that it has submitted the details for authentication to
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Adjudication Order in respect of JMD Alloys Limited in the matter of JMD Alloys Limited
Page 3 of 6 September 25, 2014
SEBI and the login id and password to SCORES system was received by
the Noticee on August 11, 2014. The Noticee also submitted that there
was no complaints received or pending against it and stated that the
delay in obtaining user id and password was not intentional. The Noticee
further submitted that there has been neither disproportionate gain or
unfair advantage to it as a result of such delay nor any loss caused to any
investor or investor group.

7. Vide Notice dated September 05, 2014 the Noticee was given final
opportunity of personal hearing on September 22, 2014. On the
scheduled date of personal hearing, Shri Akhilesh Prajapati appeared as
Authorised Representative and reiterated the submissions made by the
Noticee vide letter dated August 24, 2014.

ISSUES FOR CONSIDERATION

8. After perusal of the material available on record, I have the following
issues for consideration, viz.,
A. Whether the Noticee has violated provisions of SEBI Circular dated
April 17, 2013 by not taking SCORES authentication?
B. Whether the Noticee is liable for monetary penalty under Section
15HB of the SEBI Act, 1992?
C. What quantum of monetary penalty should be imposed on the Noticee
taking into consideration the factors mentioned in Section 15J of the
SEBI Act, 1992?

FINDINGS

9. On perusal of the material available on record and giving regard to the
facts and circumstances of the case, I record my findings hereunder.

ISSUE 1: Whether the Noticee has violated provisions of SEBI Circular
dated April 17, 2013 by not taking SCORES authentication?

10. As already observed, SEBI introduced an online electronic system for
resolution of investor grievances, i.e., SCORES in 2011. 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. SEBI came out with a Circular on April 17, 2013 in
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Adjudication Order in respect of JMD Alloys Limited in the matter of JMD Alloys Limited
Page 4 of 6 September 25, 2014
terms of which all listed companies were inter alia called upon to redress
the grievances of investors within 30 days of the receipt of the complaints
and all listed companies which were yet to obtain SCORES user id and
password were required to obtain the same. However, it was observed
that for the purpose of generating said user id and password, the Noticee,
which was yet to obtain SCORES user id and password, failed to submit
the details for authentication to SEBI, in the format annexed to the
Circular dated April 17, 2013. The said Circular dated April 17, 2013 had
clearly stated that failure to obtain the SCORES user id and password
within 30 days of issue of the circular would not only be deemed as non
redressal of investor grievances but also indicate willful avoidance of the
same. In order to remind the Noticee of its obligation, vide letter dated
December 10, 2013 the Noticee was once again advised to obtain SCORES
user id and password by December 25, 2013. However, the Noticee failed
to obtain the SCORES authentication within the specified time limit.

11. The Noticee in its reply dated August 24, 2014 has submitted that it had
received SCORES user id and password on August 11, 2014. Hence, it is
abundantly clear that the Noticee took the necessary steps to obtain
SCORES user id and password only after receiving the SCN. Honble SAT
in S. S. Forgings & Engineering Limited & Others v SEBI, Appeal No. 176 of
2014 (decided on August 28, 2014) has, inter-alia, observed that
This 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, 2011 cannot be undermined and its sanctity
has to be maintained by all the listed companies.. Therefore, I hold that
the Noticee has violated provisions of SEBI Circular dated April 17, 2013.

ISSUE 2: Whether the Noticee is liable for monetary penalty under
Section 15HB of the SEBI Act, 1992?

12. The provisions of Section 15HB of the SEBI Act, 1992, read as under:

15HB Penalty for contravention where no separate penalty has been
provided: Whoever fails to comply with any provision of this Act, the
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Adjudication Order in respect of JMD Alloys Limited in the matter of JMD Alloys Limited
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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.


13. In the matter of SEBI Vs. Shri Ram Mutual Fund [2006] 68 SCL 216 (SC), the
Honble Supreme Court of India has 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 regulation is established and hence the
intention of the parties committing such violation becomes wholly
irrelevant.

14. A listed company is expected to comply with the extant regulatory and
statutory requirements. As already observed, the Noticee had violated
SEBI Circular dated April 17, 2013 as it had failed to take SCORES
authentication within the time limit specified by SEBI. Therefore, I find
that the Noticee is liable for monetary penalty under Section 15HB of the
SEBI Act, 1992.

ISSUE 3: What quantum of monetary penalty should be imposed on the
Noticee taking into consideration the factors mentioned in Section 15J
of the SEBI Act, 1992?

15. While imposing monetary penalty it is important to consider the factors
stipulated in Section 15J of the 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.

16. In the absence of material on record, the amount of disproportionate gain
or unfair advantage made as a result of the default and the amount of loss
caused to the investors due to the said default cannot be quantified. The
Noticee, in its reply dated August 24, 2014 submitted that there was no
complaints received or pending against it and stated that the delay in
obtaining user id and password was not intentional. The Noticee also
submitted that there has been neither disproportionate gain or unfair
advantage to it as a result of such delay nor any loss caused to any
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Adjudication Order in respect of JMD Alloys Limited in the matter of JMD Alloys Limited
Page 6 of 6 September 25, 2014
investor or investor group. However, the fact remains that the Noticee,
being a listed company, failed to fulfil its duty of complying with SEBI
Circulars. It is the duty of SEBI to ensure speedy resolution of investor
grievances and to further the cause SEBI has come out with SCORES
which is a centralized web based complaints redress system that enable
investors to lodge and follow up their complaints and track the status of
redressal of such complaints from anywhere. However, listed companies
like the Noticee which do not obtain SCORES authentication despite SEBI
Circulars and reminder frustrate the entire process. Hence, the omission
on part of the Noticee is detrimental to the interest of investors in
securities market.

17. In view of the aforesaid paragraphs, it is now established that the Noticee
failed to obtain SCORES user id and password within the time limit
specified by SEBI for which I find that imposing a penalty of ` 1,00,000/-
(Rupees One Lakh only) on the Noticee would be commensurate with the
violation committed.

ORDER

18. Considering the facts and circumstances of the case, in terms of the
provisions of SEBI Act, 1992 and Rule 5(1) of the Adjudication Rules, I
hereby impose a penalty of ` 1,00,000/- (Rupees One Lakh only) under
Section 15HB of the SEBI Act, 1992 on JMD Alloys Limited.

19. The penalty shall be paid by way of demand draft drawn 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 shall be
forwarded to the Regional Director, Eastern Regional Office, Securities
and Exchange Board of India, L & T Chambers, 3
rd
Floor, 16 Camac Street,
Kolkata 700017.

20. In terms of the provisions of Rule 6 of the SEBI (Procedure for Holding
Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995,
copies of this Order are being sent to the Noticee and also to Securities
and Exchange Board of India.


Date: September 25, 2014 Jayanta Jash
Place: Mumbai Adjudicating Officer
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