BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 129 of 2011
Date of decision: 30.8.2011
Eider Technologies Limited
S.C.O. 914, NAC, Manimajra,
Chandigarh. ……Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai.
… Respondent None for the Appellant.
Ms. Daya Gupta, Advocate with Ms. Harshada Nagare, Advocate for the Respondent.
CORAM : Justice N. K. Sodhi, Presiding Officer
P. K. Malhotra, Member
S.S.N. Moorthy, Member
Per : Justice N. K. Sodhi, Presiding Officer (Oral)
This appeal deserves to be dismissed on the short ground that the appellant has
not approached this Tribunal with clean hands and has made false averments. Another
fact which goes to show that the appellant had the intention to play dirty is that every
time it addressed a communication to the re spondent, its letterhead had a different
address in a different State. On some lette rheads the address given is of Manimajra,
Chandigarh and in some others it is Panchkula in the State of Haryana and in the latest
communication dated June 26, 2010 the address is of Kala Amb, District Sirmour in the
State of Himachal Pradesh. One of the letterhea ds mentions that the corporate office of
the company is in Manimajra, Chandigarh t hough it had temporarily shifted to Industrial
Area, Panchkula and the registered office is in District Sirmour in the State of Himachal
Pradesh. Despite service, no one has appeared in support of the appeal.
- Challenge in this appeal is to the order dated February 24, 2011 passed by the
adjudicating officer imposing a monetary pe nalty of Rs.11 lacs on the appellant for
violating regulation 54 of the Securities and Exchange Board of India (Depositories and 2
Participants) Regulations, 1996 (for short the Regulations). The appellant is a public
limited company whose shares are listed on the Bombay Stock Exchange Limited,
Mumbai (BSE). The shares of the appellant -company were held by the shareholders in
the physical form. They applied through the participants for dematerialization. Regulation
54(5) of the Regulations provide s that within 15 days of the receipt of the certificate of
security from the participant, the issuer company shall confirm that the shares had been
dematerialized and immediately mutilate and cancel the certificate of security and
substitute the name of the depository as the registered owner and send a certificate to this
effect to the depository and to every stock exchange where the security is listed. We
have on record that when the shareholders of the appellant-company applied for the
dematerialization of their shares, the a ppellant-company did not dematerialize those
shares within the stipulated period and the re quest of the shareholders remained pending
for more than 2000-3000 days. In other words, the requests for dematerialization from the
shareholders remained pending with the a ppellant-company for years together. This
obviously hampered the shareholders from trading in the scrip. This is, indeed, a serious
lapse on the part of the company for which action could be taken against it. The
Securities and Exchange Board of India (for short the Board) initiated adjudication
proceedings and notice dated September 26, 2007 was issued calling upon the appellant
to show cause why appropriate penalty be not imposed on it for violating regulation 54 of
the Regulations. Interestingly, the appellant filed a reply dated October 19, 2007 failing
to respond to the charge levelled against it and submitted that its corporate office had
been sealed by the Municipal Corporation of Chandigarh as a result whereof it could not
file any reply on merits. A prayer was ma de that no enquiry be held against the
appellant. On a consideration of the material on the record the adjudicating officer found
that the demat requests from the shareholde rs remained pending for years together and
thereby the appellant violated the mandatory provisions of the Regulations. By the
impugned order he imposed a monetary penalty of Rs.11 lacs. Hence this appeal. - We have gone through the memorandum of appeal and find that at the outset in
para 5(iii) of the memorandum of appeal, it is stated that the appellant-company is a sick
company since the year 2001 and that the matter is now pending before the appellate
authority under that Act. There is nothing on the record to substantiate this plea. In any 3
case, in its reply dated October 19, 2007 it did not mention that it was a sick company.
The learned counsel appearing for the Board informs us that there is nothing on the
record available with it to show that the appellant was a sick company. As already
observed, we are satisfied that the company ha s not made a true stat ement of fact. We
have also seen the letterheads of the comp any which contained di fferent addresses and
every time it sends a communication, the addr ess on the letterhead is different. The
appellant has nowhere disputed in the memorandum of appeal that there was long delay
in dematerializing the shares held by the shareholders in the physical form. As a matter of
fact, the shares have not been dematerialized till date. In these circumstances, no fault can
be found with the impugned order imposing a monetary penalty of Rs.11 lacs. Section
19D of the Depositories Act, 1996 provides for penalty for delay in dematerializing the
shares held in the physical form. It provi des a penalty of Rs.1 lac for each day during
which the failure continues subject to a maxi mum of Rs.1 crore. In the present case, the
adjudicating officer has imposed a sum of Rs.11 lacs only. There is no scope for us to
reduce the same.
In the result, the appeal fails and the same is dismissed with no order as to costs.
Sd/-
Justice N. K. Sodhi
Presiding Officer
Sd/-
P. K. Malhotra
Member
Sd/-
S.S.N. Moorthy
Member
30.8.2011
Prepared and compared by-ddg