BEFORE THE
SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved on: 24.06.2019
Date of Decision
: 02.07.2019
Appeal No. 282 of 2017
Sungold Capital Limited
House No. 7/13, Opp. White Tower,
Station Road, Nandod, Rajpipla,
Narmada – 393 145.

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

… Respondent
Mr. J.J. Bhatt, Advocate with Ms. Rinku Valanju, Advocate
i/b R.V. Legal for the Appellant.
Mr. Vishal Kanade, Advocate with Mr. Jinay Padh, Advocate
i/b Dave & Girish & Co. for the Respondent.

WITH
Appeal No. 308 of 2017
1. Smt. Shilpa Amit Kotia
2/B, State Bank Staff Colony,
Near Navrang School, Naranpura,
Ahmedabad – 380 013.
2. Smt. Shwetha Dhaval Kotia
2/B, State Bank Staff Colony,
Near Navrang School, Naranpura,
Ahmedabad – 380 013.
3. Shri Ravi Rajiv Kotia
A/73, Avani Complex,
Near Naranpura Bus Stop,
Naranpura,
Ahmedabad – 380 013.

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4. Smt. Seema Rajiv Kotia
A/73, Avani Complex,
Near Naranpura Bus Stop,
Naranpura,
Ahmedabad – 380 013.

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

…. Respondent
Mr. Amit Kotia, Authorized Representative for Appellants.
Mr. Vishal Kanade, Advocate with Mr. Jinay Padh, Advocate
i/b Dave & Girish & Co. for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer
Dr. C.K.G. Nair, Member
Justice M.T. Joshi, Judicial Member
Per : Justice Tarun Agarwala, Presiding Officer
1.

The Adjudicating Officer (‘AO’ for short) of the
Securities and Exchange Board of India (‘SEBI’ for short) by
order dated July 19, 2017 for violation of Section 11C(3) read
with Section 11(2)(i) of SEBI Act, 1992 has imposed a
penalty under Section 15A(a) of the SEBI Act, 1992 against
which two separate appeals have been filed and the same are
being decided together.

2.

SEBI while conducting investigation into the alleged
irregularities in the trading in the scrip of Sungold Capital
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Limited and into the possible violation of the SEBI laws and
regulations required the appellants to furnish certain
information. Insofar as the appellant in Appeal No. 282 of
2017 is concerned i.e. the Company, a summons dated
December 9, 2014 was issued asking the Company to furnish
the details regarding the relationship of the appellant with
other entities, namely, appellants in Appeal No. 308 of 2017.
In spite of receipt of summons no information was furnished
by
the
appellant
Company.

Subsequently,
additional
information was sought vide e-mail dated January 14, 2015
which information was supplied by the appellant Company on
January 19, 2015.

3.

Insofar as the appellants in Appeal No. 308 of 2017 are
concerned summons dated September 16, 2014, October 13,
2014, October 31, 2014, December 10, 2014 and January 1,
2015 were sent requiring the said appellants to furnish certain
information with regard to their trading in the scrips of the
Sungold Capital Limited.

4.

The information sought was not provided by the said
appellants. Since the information sought was not forthcoming,
an AO was appointed and a show cause notice was issued
directing the appellants to show cause as to why penalty
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should not be imposed under Section 15A(a) of the SEBI Act,
1992 for contravention of the provisions of Section 11C (3)
read with Section 11(2)(i) of the SEBI Act, 1992. In spite of
receipt of the show cause notice no reply was given by any of
the appellants though the appellant in Appeal No. 282 of 2017
attended the hearing in the proceedings before the AO.

5.

The AO after considering the material available on
record found that since the appellants failed to furnish the
information which was required by the investigating authority
the appellants have violated the provisions of Section 11C (3)
of the SEBI Act, 1992. Accordingly, a penalty of ` 5 Lakh on
the appellant Company in Appeal No. 282 of 2017 and a
penalty of ` 2 Lakhs each on the appellants in Appeal No. 308
of 2017 was imposed.

6.

We have heard Shri J. J. Bhatt, the learned counsel for
the appellant in Appeal No. 282 of 2017, Shri Amit Kotia,
Authorized Representative in Appeal No. 308 of 2017 and
Shri Vishal Kanade, the learned counsel for the respondent.

7.

Before us, the learned counsel for the appellant
Company submitted that even though they had not furnished
the information pursuant to the summons dated December 9,
2014 but the information sought as per e-mail dated January
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14, 2015 was duly given. It was also submitted that the
appellants had participated and co-operated in the proceedings
before the AO and in the hearing dated February 17, 2016 and
March 8, 2016 the Managing Director of the appellant
Company furnished the requisite information as sought in the
summons dated December 9, 2014. It was, thus, contended by
the learned counsel for the appellant Company that since
requisite information was furnished, even though belatedly,
no penalty could have been imposed.

8.

On this issue, we find that admittedly the information
sought by summons dated December 9, 2014 was eventually
supplied after more than one and half years on February 17,
2016 in adjudication proceedings. Prior to that such
information was not supplied. Section 11C(3) of the SEBI
Act, 1992 provides as under:“Section 11C:- Investigation
(3) The Investigating Authority may require any
intermediary or any person associated with
securities market in any manner to furnish such
information to, or produce such books, or
registers, or other documents, or record before
him or any person authorised by it in this behalf
as it may consider necessary if the furnishing of
such information or the production of such books,
or registers, or other documents, or record is
relevant or necessary for the purposes of its
investigation.”
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9.

The purpose of the aforesaid provision is that
information is required to be furnished to the investigating
authority. If information is not furnished, it would hamper the
investigation which was precisely being done in the instant
case. The alleged irregularities in the trading in the scrips of
the appellant Company could not be investigated on account
of non-furnishing of the information. Such non-furnishing of
the information hampered the investigation and, therefore,
penalty becomes leviable.

10. However, we find that it is not a case where it could be
said that there was total non co-operation on the part of the
appellant Company. Admittedly, most of the information was
submitted though the information as per summons dated
December 9, 2014 was furnished only at the stage of hearing
in
the
adjudicating
proceedings. Thus,
even
though
information was provided by the appellant Company
belatedly, we also find that even after the issuance of the
show cause notice in the adjudication proceedings no reply
was filed and therefore the violation of the alleged provisions
stood admitted by the appellant Company.

11. Thus, we are of the opinion that imposition of penalty is
justified. However, in the circumstances since eventually the
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information was supplied during the pendency of the
adjudication proceedings coupled with the fact that the
Managing Director of the Company had appeared and cooperated in the proceedings the penalty of ` 5 Lakhs appears
to be on the higher side. We, accordingly, reduce the quantum
of penalty from ` 5 Lakhs to ` 2 Lakhs.

12. Insofar as the appellants in Appeal No. 308 of 2017 are
concerned the contention is that only Appellant No. 4
Smt. Seema Rajiv Kotia received summons dated September
16, 2014 and the said summons were never received by the
other appellants. Further, summons dated October 13, 2014
was received by all the appellants but other summons were
never received.

13. Be that as it may. We find that the appellants in Appeal
No. 308 of 2017 are inter connected and are homogenous
group by itself in one way or the other. Once the summons
has been duly received by one, the same is sufficient service
and is deemed to be served by necessary implication insofar
as the remaining appellants are concerned. Further, the fact
remains that all the appellants had knowledge of the
information that was being sought by the respondent. The said
appellants neither supplied the requisite information to the
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investigating authorities nor filed any reply to the show cause
notice issued by the AO. Thus, the contention that they were
not served with the summons cannot be believed.

14. It has also been stated that they had engaged the services
of an Advocate to whom they had given the requisite
information and who was instructed to file the reply. It was
urged that the said Advocate failed to file the reply and
subsequently the appellants found that their Advocate had
died. It was, thus, contended that the appellants had no
intention of not providing any information to the respondent
and the non-furnishing of the information was on account of
the death of their Advocate.

15. The contention of the appellant appears to be an
afterthought. The appellants did not respond to the summons
and only sought further time to provide necessary information
which they failed to do so. However, the factum of the death
of the Advocate has not been denied by the respondent before
us. Thus, a benefit of doubt is given to the appellants. Since
Section 11C(3) of the SEBI Act, 1992 has been violated and
the information sought has not been furnished a penalty has
been imposed. However, in the given circumstances, the
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penalty of ` 2 Lakhs each payable by the appellants is
reduced to ` 1 Lakh each.

16. In the result, both the appeals are partly allowed. The
impugned order insofar as the violation of Section 11C(3) of
the SEBI Act, 1992 is concerned is affirmed. However, the
quantum of penalty is reduced. In the case of the appellant
Company in Appeal No. 282 of 2017 the penalty of ` 5 Lakhs
is reduced to ` 2 Lakhs and, in the case of the appellants in
Appeal No. 308 of 2017, the penalty of ` 2 Lakhs each is
reduced to ` 1 Lakh each. The aforesaid penalty shall be paid
by the appellants to the respondent within four weeks from
today. In the circumstances, there shall be no order on costs.

Sd/Justice Tarun Agarwala
Presiding Officer
Sd/Dr. C.K.G. Nair
Member
Sd/Justice M.T. Joshi
Judicial Member
02.07.2019
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