In re Dwitiya Trading Limited (SEBI)
The conduct of the Noticee in not paying heed to the summonses issued by SEBI and resultant non-cooperation with the process of investigation cannot be taken lightly. The SEBI Act grants powers of investigation and collection of information/documents for the purposes of investigation. For this purpose, SEBI has been empowered to issue summons to compel production of documents/ information. These powers of issuing summons have been granted to SEBI keeping in mind the statutory mandate of safeguarding the securities market and the interests of the bona fide investors/ participants in the securities market. It is also noted that the Noticee has failed to comply with three summonses that were issued and served upon him. The conduct of the Noticee shows brazen unwillingness on its part to cooperate with the investigation of SEBI, a statutory regulator and such defaults seriously compromise the regulatory framework. A lenient view in such cases would defeat the legislative intent of section 15A(a). Since the default has already occurred, the penalty must follow in this case.
Considering all the facts and circumstances of the case and exercising the powers conferred upon me under section 15I of the SEBI Act read with rule 5 of the Adjudication Rules, I hereby impose the monetary penalty of Rs. 5,00,000/-(Rupees Five Lacs only) on the Noticee, viz. Jahman Dealers Private Limited under section 15A(a), for not complying with the summonses issued on September 27, 2019 and subsequently two reminder summonses which were issued on October 23, 2019 and November 01, 2019, as found hereinabove. In my view, the said penalty is commensurate with the violation committed by the Noticee in this case.
FULL TEXT OF THE ORDER OF SEBI
FACTS OF THE CASE IN BRIEF:
1. The BSE had sought certain documents from certain companies which had raised funds through preferential issue. Subsequently, BSE appointed an Auditor’s Committee to scrutinize these documents submitted by the companies, such as Auditor’s certificates, AOA, MOA, Ledger accounts, invoices, bank account statements, loan agreements etc. Pursuant to examination of the same BSE had concluded that prima facie there were misutilization of funds received against issue of equity shares on preferential basis by several companies including Dwitiya Trading Limited (“DTL”/ “The Company”). Subsequently, the matter was referred to SEBI by the BSE.
2. The case was then taken up by SEBI for detailed investigation to ascertain the possible violations inter alia of the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (“PFUTP Regulations”), Securities and Exchange Board of India Act, 1992 (“SEBI Act”), Securities Contracts (Regulation) Act, 1956 (“SCRA”) and any other Regulations made there under, if any. The period of investigation for SEBI was from February 28, 2013 to May 10, 2013. It was prima facie observed that the company had misutilised its fund raised through the issue of preferential shares and a part of the said funds was transferred to certain entities purportedly for purchasing shares from the said entities, which included Jahman Dealers Pvt. Ltd (“hereinafter referred to as the “Noticee”).
3. The company in its Extraordinary General Meeting (“EGM”) held on February 28, 2013, had approved the issue of preferential shares of 48 lakh shares at Rs 10 each. The shares issued on a preferential basis were allotted on May 10, 2013 and an amount of Rs. 4.80 crores was raised through the preferential issue
4. It has been prima facie observed from the investigations of SEBI that the company had used the proceeds of the aforesaid preferential allotment of shares to grant loan/ invest in the following entities:
