BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI

             Appeal No.172 of 2011 

Date of Decision: 22.11.2011

Gennex Laboratories Ltd.
‘Akash Ganga’, 144, IV Floor,
Srinagar Colony, Hyderabad – 500 073.

                ….. Appellant 

Versus

Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A,
G-Block, Bandra Kurla Complex,
Mumbai – 400 051.

                …...Respondent       

Mr. Vinay Chauhan, Advocate with Mr. Deepak Dhane, Advocate for the Appellant.
Mr. Prateek Seksaria, Advocate with Mr s. Harshada Nagare, Advocate for the
Respondent.

CORAM : P.K. Malhotra, Member
S.S.N. Moorthy, Member
Per : S.S.N. Moorthy, Member
This appeal is directed against the le vy of penalty under section 15A (a) of the
Securities and Exchange Board of India Act, 1992 read with Rule 5(1) thereunder. The
adjudicating officer imposed a penalty of ` 10 lacs on the appellant for non compliance
to summons issued by the investigating officer.

2. The appellant is a listed company enga ged in the business of setting up facilities
   for manufacturing of bulk drugs and drug interm ediaries. Investigations were conducted
   to ascertain whether there was any violation by the appellant company with regard to the
   Securities and Exchange Board of India (P rohibition of Fraudulent and Unfair Trade
   Practices Relating to Securities Market) Re gulations, 2003 and Securities and Exchange
   Board of India (Substantial Acquisition of Sh ares and Takeovers) Regulations, 1997. In
   the course of investigations, the appellant was called upon to furnish certain information
   relevant to the enquiry being conducted by the investigating officer. On 26 th April, 2010
   a summons was issued to the appellant to furnish certain information annexed thereto.
   The appellant complied with the summons pa rtially. Another summons was issued on

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20th May, 2010 since the response to the earlier summons was not complete and
satisfactory. By way of the summons issued on 20 th May, 2010 the investigating officer
called upon the appellant to fu rnish certain details which we re in amplification of the
details originally asked for and also some a dditional information. It is an admitted fact
that summons dated 20 th May, 2010 was not responded to. The appellant sought some
time to respond to the summons to furnish the relevant details, but failed to furnish the
details asked for.

3. From the above facts it would emerge th at the appellant part ially complied with
   the first summons issued by th e investigating officer whereas there was non compliance
   to the second summons issued by him. This factual position remains undisputed.
4. We have heard the learned counsel for the parties who took us through the records
   of the case. According to the learned counsel for the appellant a major part of the
   information sought by the respondent was not in the possession of the appellant and the
   investigating officer also had probably knowledg e about it. It is al so submitted that the
   concerned officers dealing with the relevant subject matter were not available and the
   independent directors were not in charge of the day to day administration of the affairs of
   the company. The learned counsel appearing for the respondent defended the impugned
   order holding that non compliance to summons issued by a statutory authority is a serious
   violation and exemplary penalty is called for in such a case.
5. On a consideration of the rival contentions we are of the view that the conduct of
   the appellant in so far as it relates to non compliance to summons cannot be taken lightly.
   This Tribunal has taken a consistent stand in several appeals that non compliance to
   summons and consequent non furnishing of information hampers investigation by
   statutory authorities and it acts as a severe handicap in arriving at just and reasonable
   conclusion by the statutory authorities within a reasonable period of time. In the present
   case also the factum of non compliance to summons remains undisputed. When
   confronted with the above factual position th e learned counsel for the appellant pleaded
   for reduction of the penalty imposed as, according to him, the penalty of 10 lacs in the facts and circumstances of the case is highly excessive. He drew our attention to a few orders passed by the adjudicating officer where penalty of even 50,000 has been
   imposed in cases of non complia nce to summons. According to him, the present case

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calls for considerable reduction in penalty since convincing explanation has been
provided to the investigating officer with regard to the reasons for non compliance to
summons.

6. It is true that penalty under section 15 A (a) of the Securities and Exchange Board
   of India Act 1992 spans over a broad spectrum from 1 lac for each day of failure to 1 crore whichever is less. Penalty provisions cannot be straight jacketed in respect of
   quantum since the statutory authority has to ta ke into account facts and circumstances of
   each case and gravity of the violation committe d. In the present case there were a few
   mitigating circumstances like the non availability of officers dealing with the subject and
   non possession of some of the information by the appellant. Be that as it may, the failure
   to comply with the summons issued by the investigating officer persists. Taking into
   account the gravity of the violation and the facts and circumstances of the present case
   we reduce the penalty to ` 5 lacs.
   Appeal is partly allowed. No order as to costs. Sd/- P.K. Malhotra Member Sd/- </code></pre>S.S.N. Moorthy
Member
22.11.2011
Prepared and compared by
RHN

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