BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Order Reserved on:23.9.2019 Date of Decision: 6.11.2019 Appeal No.447 of 2018 Soumitra Ghose 210/A Prince Anwar Shah Road, Kolkata 700045. ….. Appellant Versus The Securities & Exchange Board of India SEBI Bhavan, C-4A, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. …… Respondent Mr. Jayesh R. Vyas, Advocate for the Appellant. Mr. Karan Bhosale, Advocate with Mr. Chirag Bhavsar, Advocate i/b. MDP & Partners for the Respondent. CORAM: Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member Per : Justice M.T. Joshi

1. Aggrieved by the imposition of penalty of Rs.5 lakhs

for violation of provisions of Section 11C(3) and 11C(5) of Securities and Exchange Board of India Act, 1992 Appellant Soumitra Ghose has filed the present appeal. From the record it appears that respondent Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) wanted to carry investigation on the acquisition of shares through preferential allotment in the scrip of Falcon Tyre Ltd. (hereinafter referred to as ‘Falcon’) and Dunlop India Ltd. (hereinafter referred to as ‘Dunlop’) in the year

2012. Manali Properties & Finance Ltd. (hereinafter referred

to as ‘Manali’), it Managing Director and present appellant Mr. Soumitra Ghose as a Director of Manali appeared to be involved or having knowledge in the episode. In the circumstances, in the year 2015 respondent SEBI issued five summonses to Manali and four summons to appellant Mr. Soumitra Ghose asking them to furnish certain information and to appear before the investigating authority. All the summonses were actually received except the summons dated 19th November, 2015 of which delivery was refused by the appellant Mr. Soumitra Ghose. However, the appellant or anybody from Manali had not appeared before the investigating authority nor any information was supplied. In the circumstances on account of non cooperation in the investigation, alleging violation of Section 11C(3) and 11C(5) of the SEBI Act adjudication proceedings was initiated. Accordingly, show cause notice was issued by the Adjudicating Officer, directing the appellant to appear before the Adjudicating Officer and to show cause as to why the penalty should not be imposed. In response, the appellant sent one email dated 19th March, 2018, wherein instead of showing any cause of non appearance, the appellant gave the reason that so far as Dunlop is concerned he was merely an employee and forced to be a Director. He was required to put signatures on any document on the direction of his employer and more particularly Mr. Pawan Kumar Ruia in the capacity of Non Executive Director. In that view of the matter, he requested that he be exonerated from all the charges. During the pendency of the proceedings, appellant Soumitra Ghose sent letters dated 18th August, 2016, 3rd September, 2016 and 20th September, 2016 submitting information that winding up of the Company has been confirmed by the Hon’ble Supreme Court and, therefore, he does not have any locus standi. The Adjudicating Officer therefore was requested by the appellant to summon the Official Liquidator attached to Calcutta High Court for information if any. The Adjudicating Officer however concluded that the information that was sought by the summons as detailed in para no.25 of the impugned order was within the knowledge of the appellant and Manali. Further, as against the plea of the appellant that he was Non Executive Director and used to be merely directed to sign any document, the appellant was in fact Additional Director and even Manali under his signature had sought time to file reply to the earlier summonses. Thus, finding violation of the provisions as detailed supra the penalty of Rs.5 lakhs came to be imposed.

2. The learned counsel for the appellant sought to

impress upon us that as per the impugned order itself there was one Managing Director of Manali. The said Managing Director could not be served and the appellant is being made a scapegoat. He further submitted that there is now Official Liquidator appointed for the Company and, therefore, no information is available with the appellant. Alternatively he submitted that imposition of penalty of Rs.5 lakhs is excessive.

3. On the other hand, learned counsel for the respondent

submits that winding up of the Company has nothing to do with the present proceedings and non cooperation of the appellant to give the information, whatever would be with him. Further, the fact that the appellant acted on behalf of Manali by signing the applications of Manali seeking time for replying to the summons is highlighted.

4. Upon hearing both the sides, in our view, the appellant

has clearly committed the violation by not responding to the summons after summonses as detailed supra. Further, the case that he was merely a dummy Non Executive Director stood repelled by the very fact that he sent letters to the Investigating Authority on behalf of Manali as well as on his own behalf. However, no information was supplied at that point of time. No explanation is forwarded as to why no information was supplied that time. Therefore, the violation is clearly established.

5. As regards the quantum of penalty of Rs.5 lakhs, the

Adjudicating Officer had adverted to the provisions of Section 15A of the SEBI Act which inter alia provides that failure to furnish the information sought by SEBI would be liable for a penalty of Rs.1 lakh rupees for each day or Rs.1 crore whichever is less. Still exercising the discretion available under Section 15J of the SEBI Act the Adjudicating Officer concluded that since there is no material on record to assess the amount of loss caused to the investors a consolidated penalty of Rs.5 lakhs was imposed.

6. Taking into consideration the nature of continuous

disrespect to the summons and the discretion already exercised by the Adjudicating Officer as regards the quantum of penalty, we do not think that any interference in the quantum of penalty is warranted.

7. In the result, appeal is hereby dismissed.

Sd/- Dr. C. K. G. Nair Member Sd/- Justice M.T. Joshi Judicial Member 6.11.2019 Prepared and compared by RHN