BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI

  Appeal No. 47 of 2012  

  Date of Decision: 22.10.2012  

Kaleidoscope Films Ltd.
1st Floor, 101/2, Panorama Complex,
R C Dutt Road, Alkapuri,
Vadodara – 390 007.

            …… Appellant   

Versus

The Adjudicating Officer
Securities and Exchange Board of India
SEBI Bhavan, Plot No.C-4A, ‘G’ Block,
Bandra Kurla Complex, Bandra (East),
Mumbai – 400 051.

            ……Respondent  

Mr. Zal T. Andhyarujina, Advocate with Mr. Deepak Dhane, Advocate for the Appellant.
Dr. (Mrs.) Poornima Advani , Advocate with Mr. Ajay Khaire , Advocate for the
Respondent.

Coram : P. K. Malhotra, Member & Presiding Officer (Offg.)
S.S.N. Moorthy, Member
Per : S.S.N. Moorthy

The appellant is a public limited company incorporat ed under the Indian
Companies Act, 1956 and listed on the Bombay Stock Exchange Limited (BSE). It was
previously known as Gujarat Investment Casting Limited (the company) . The present
appeal is directed against an order dated March 23, 2011, passed by the adjudicating
officer of the Securities and Exchange Board of India (the Board) by which a penalty of
17 lacs has been imposed on the appellant. The adjudicating officer , acting under the powers conferred under section 15-I of the Securities and Exchange Board of India Act, 1992 (the Act), found the appellant guilty of violating section 15C and 15A(a) of the Act. Out of the above penalty of 17 lacs, ` 15 lacs related to violation of the provisions of

2
section 15C of the Act and ` 2 lacs related to violation of the provisions of section 15A(a)
of the Act.

2. The provisions of section 15 C and 15 A(a) of the Act deal with failure to furnish
   information, returns etc and failure to redress grievances of investors. For facility of
   reference, the aforesaid provisions are extracted below.
   “15A. Penalty for failure to furnish information, return, etc. – If any person,
   who is required under this Act or any rules or regulations made there under,-

(a) to furnish any document, return or report to the Board, fails to furnish the
same, he shall be liab le to a penalty of one lakh rupees for each day
during which such failure continues or one crore rupees, whichever is
less.
………………………………..

15C.Penalty for failure to redress investors’ grievances. – If any listed
company or any person who is registered as an intermediary, after having been
called upon by the Board in writing, to redress the grievances of investors, fails
to redress such grievances within the time specified by the Board, such
company or intermediary shall be liable to a penalty of one lakh r upees for
each day during which such failure continues or one crore rupees, whichever is
less.”

3. The Board issued notice to the appellant citing various pending grievances of the
   investors and directed the appellant to resolve the complaints and submit action taken
   report thereto. It is on record that the appellant failed to respond to the various notices
   issued by the Board. After the issue of a few notices, the Board received a request from
   the appellant for extension of time for filing action taken report. This process continued
   for some time. However, the appellant failed to furnish conclusive report on the action
   taken on the grievance s as directed by the Board. The appellant was served with a show
   cause notice on October 7, 2009 to show cause w hy enquiry should not be held against it
   and, if found guilty, penalty should not be imposed. The appellant sought further
   extension of time. However , a detailed written submission was filed by the appellant.
   After due consideration of the submissions fil ed by the appellant , the adjudicating officer
   concluded that the appellant had failed (1) to redress the grievances of the investors in
   time and (2) to furnish action taken report in time as directed by the Board. Hence the
   penalty.
4. We have heard Shri Zal Andhyarujina and Dr. (Mrs.) Poornima Advani learned
   counsel for the appellant and Board respectively. 3
5. During the hearing of the appeal , the appellant’s learned counsel fairly conceded
   that there had been failure and shortcomings in the response of the appellant with regard
   to resolution of grievance and timely submission of action taken report. According to
   him, there cannot be any major disagreement with the findings of the adjudicating officer
   as regards appellant’s failure to comply with the impugned provisions of the Act . The
   thrust of his argument was that many of the grievances related to periods as far back as
   1994 and the appellant was unable to produce evidence regarding resolution of grievances.
   According to him, passage of time is a significant mitigating factor and taking this into
   account, quantum of penalty imposed on the appellant is highly unjust and arbitrary.
6. The learned counsel for the Board sub mitted that the appellant has taken a careless
   attitude in its response to the notices issued by the Board and grievances of the investors
   remained unresolved for several years and the appellant was almost playing with the
   complaints of the investors in a totally negligent manner. The provisions of the Act
   empower the adjudicating officer to impose penalty at the rate of ` 1 lac per day of default
   and considering the gravity of the wrong doing in this case, the quantum of penalty cannot
   be held to be excessive.
7. We have considered the rival submissions. The appellant’s learned counsel has
   fairly conceded to the failure on the part of the appellant to compl y with the impugned
   provisions of the Act. The only issue which remains to be resolved is the quantum of
   penalty in the present case. A reading of the list of grievances issued by the adjudicating
   officer clearly shows that some of the grievances dated back to 1994 and near about
   periods. The Board started taking action and is suing notice to the appellant from 2007
   onwards. In fact , the crucial letter en closing the list of 88 investor grievances was issued
   to the appellant on September 25, 2008. It is on record that the investor grievances
   spanned over a period from 1994 to 2008. It is submitted that the appellant was in
   continuous process of resolving the grievances by contacting the investors on a regular
   basis and the action taken way back in the years 1994 and 2000 could not be specifically
   reported for want of records. The appellant has also brought this fact to the notice of the
   adjudicating officer while replying to the show cause notice. On a consideration of the
   facts on record we find that there is some force in the above argument of the appellant.
   We appreciate t he legal position canvassed by the learned counsel for the Board that the 4
   Act prescribes penalty of 1 lac per day of default. However, we are of the view that this norm has to be applied having regard to the facts and circumstances of each case. There are certain mitigating factors in this case like the period during which complaints were registered with the Board, repeated grievances by the same investors, periodical action taken by the appellant for resolution of grievance though not to the fullest extent etc. Keeping in mind these mitigating factors we are of the view that the penalty for violation of the provisions of section 15C can be reduced to 5 lacs. There is no reason for
   interfering with the penalty of 2 lacs imposed under section 15A(a) of the Act. In the result, while upholding the finding of the adjudicating officer, we reduce the penalty under section 15C to 5 lacs. Penalty imposed under section 15A(a) of the Act
   does not call for any modification. Appeal is partly allowed. No costs. Sd/- P.K. Malhotra Member Sd/- S.S.N. Moorthy
   Member
   22.10.2012
   Prepared and compared by
   RHN