before the adjudicating officer securities and ...nsdl/cdsl, which would follow the in principle...

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BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. PB/AO-113/2010]

In respect of M/s SHARP INDUSTRIES LIMITED

(PAN. AAFFS9104E)

UNDER SECTION 19 H (1) OF THE DEPOSITORIES ACT, 1996, READ WITH RULE 5 OF DEPOSITORIES (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 2005

FACTS OF THE CASE IN BRIEF

1. On perusal of the monthly status report submitted by NSDL and CDSL vide

their e-mail dated January 15, 2008, SEBI observed that M/s Sharp

Industries Limited (hereinafter referred to as “SIL/Noticee/Company”) had

delayed dematerialization of securities. The details of the delay as on

January 15, 2008 are as under:-

Name of the depository

No. of Requests pending for more than thirty days

No. of Shares involved

NSDL 213 10,139CDSL 157 13,927

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The aforesaid delay is alleged to be in violation of regulation 54 (5) of

SEBI (Depositories and Participants) Regulations 1996, (hereinafter

referred as "DP Regulations") and liable for penalty under section 19D of

the Depositories Act, 1996 (hereinafter referred to as the “Depositories Act”).

APPOINTMENT OF ADJUDICATING OFFICER 2. Mr. V. S. Sundaresan was appointed as Adjudicating Officer under section

19H of Depositories Act read with rule 3 of Depositories (Procedure for

Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 2005

(hereinafter referred to as “Rules”) vide order dated March 11, 2008 to

inquire into and adjudge the alleged violation of regulation 54 (5) of DP

Regulations. Consequent to the transfer of Mr. V.S Sundaresan, I have

been appointed as the Adjudicating Officer vide order dated December 24,

2009.

SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

3. Show Cause Notice No.EAD-5/VSS/SS/121261/2008 dated March 25, 2008

(hereinafter referred to as “SCN”) was issued to the Noticee under rule 4(1)

of the Rules to show cause as to why an inquiry should not be held against

the Noticee and penalty be not imposed on the Noticee under section 19D

of the Depositories Act for the alleged violation specified in the said SCN.

4. I find from the records that the SCN issued through Registered A.D. to the

Noticee at, “Plot No.6, Survey No.70, Village Waliv, Vasai (E) Thane –

401208” was delivered as per the signed acknowledgement card received.

5. The Noticee replied vide letter dated April 05, 2008 and August 23, 2008,

stating the reasons for failure to dematerialize the securities on time and

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steps taken to redress grievances of the investors. The outcome of the

replies are as follows;

i. Company had proposed a scheme of compromise and arrangement

under section 100, 391 & 392 of the Companies Act 1956. The

Hon’ble High Court of Judicature at Bomaby vide its certified order

dated February 06, 2006 has approved the said scheme. As per the

term of the order equity capital of the company shall be written-down

by 95% of its existing paid-up equity capital of the company.

Accordingly company has issued new share certificates to that effect

to its existing equity shareholders holding shares in physical form.

However effect of the scheme is yet to be given for the shares

dematerialization form. When approached to NSDL/CDSL, we were

informed that first in principal approval of the stock exchange would

be required to give effect to the corporate action.

ii. Company had filed the necessary papers with the Bombay Stock

Exchange (BSE) and have been consistently following up for the

listing approval for reduction of capital as well as for listing of

additional shares allotted under the scheme. On visiting BSE

personally, company’s Chairman and Managing Director were

advised to submit No Objection Certificate (NOC) from Securities and

Exchange Board of India (SEBI).

iii. SEBI had issued notice for payment of penalty imposed by

Adjudication order no. ADJ/12/-15/2005 AP dated January 31, 2005

under rule 6 of SEBI (procedure for Holding Inquiry by Adjudicating

Officer) Rules, 1995 in respect of company and all three directors on

29/08/2005. Company had made the payment of penalty for the

abovementioned adjudication order on February 04, 2008.

Subsequent to the payment of penalty, company had approached to

SEBI for issuance of NOC vide its letter dated February 12, 2008,

requesting SEBI to make BSE compliances however, SEBI issued

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further notice for initiation of prosecution proceedings for delay in

payment of penalty amount and payment of interest on July 31, 2008

under reference no. IVD/IDI/BM/MB/SIL/133686/08. Company had

filed the consent application on August 04, 2008, against the said

prosecution proceedings.

iv. Unless SEBI grants NOC, BSE cannot grant listing approval to

company, subsequent to which NSDL/CDSL would not take

corporate action of reduction of the existing demat shares, which

would mean that shareholders would continued holding their original

quantity.

v. Company cannot confirm the new share certificates under same INE

number as it would be difficult to separate the old and new shares

once the listing approval is received and effect of the scheme is to be

given in the demat category.

vi. Company in the present context would not be able to confirm the

demat request’s received by it unless effect of the scheme is given by

NSDL/CDSL, which would follow the in principle approval of the stock

exchange.

vii. We assure you that as soon as the BSE grants in principle approval

and NSDL/CDSL give effect to the corporate action for the scheme

and immediately thereafter we would clear the pending demat

request.

6. In the interest of natural justice and in order to conduct an inquiry as per rule

4 (3) of the Rules, the Noticee was granted first opportunity of personal

hearing on August 28, 2008 by notice dated August 06, 2008. The Noticee

vide its letter dated August 25, 2008 had requested the erstwhile Adjudicating

Officer to pre-pone the hearing on August 27, 2008. The request of the

Noticee was acceded and hearing took place before the erstwhile

Adjudicating Officer on August 27, 2008 at 10:30 A.M. Mr. Ravi Kapoor,

practicing company secretary, Authorized Representative, (hereinafter

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referred to as “AR”) had appeared for the hearing. During the hearing, the AR

reiterated the submissions made vide letter dated August 23, 2008 and the

erstwhile Adjudicating Officer had advised to file an affidavit duly notarized

detailing the problem faced by the company because of BSE insistence on

obtaining a NOC from SEBI. The AR requested time till September 05, 2008

to file the affidavit. The request of the Noticee was acceded. Mr. Hasmukh

Sheth, Managing Director, Sharp Industries Limited submitted the affidavit

dated September 02, 2008 on behalf of the Noticee stating inter alia that “As

soon as BSE grants the approval for listing, company will resolve the pending

issues and produce suitable documentary for having resolved the issues

before the Adjudicating Officer”

7. Subsequent to my appointment as the Adjudicating Officer (hereinafter

referred to as “AO”) and in the interest of natural justice, an opportunity of

hearing was given to the Noticee vide letter dated March 12, 2010 to appear

on March 26, 2010 at SEBI, Head Office, Mumbai. However, the Noticee had

replied to the letter dated March 12, 2010 vide its letter dated March 22, 2010

and requested for exemption from attending personal hearing fixed on March

26, 2010 or to give the Noticee an opportunity to appear for hearing at a

future date. Acceding to the request of the Noticee a last opportunity of

hearing was given to the Noticee vide letter dated August 26, 2010 to appear

on September 06, 2010 at SEBI, Head Office, Mumbai. Mr. Hasmukh Sheth

Managing Director, of the Noticee appeared on September 06, 2010. During

the hearing, the Noticee was advised to submit the details of the pending

demat requests with NSDL and CDSL. The Noticee requested two weeks

time to submit the details. The request of the Noticee was acceded to.

Pursuant to the aforesaid hearing, the Noticee vide its letter dated September

20, 2010 had furnished the details of the pending demat requests along with

additional written submissions, the gist of which is as follows;

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• We would like to inform you that the demat requests were pending due

to delay in issuance of in principal approval from BSE and thereby

causing delay in activation of new ISIN No.

• As on date company has no pending demat request which due for

more than 21 days.

CONSIDERATION OF ISSUES AND FINDINGS

8. I have carefully perused the written submissions of the Noticee and the

documents available on record. The issues that arise for consideration in

the present case are :

a) Whether the Noticee had violated Regulation 54 (5) of DP

Regulations?

b) Does the violation, if any, on the part of the Noticee attract

monetary penalty under section 19D of the Depositories Act?

c) If so, what would be the monetary penalty that can be imposed

taking into consideration the factors mentioned in section 19 I of

the Depositories Act?

9. Before moving forward, it will be appropriate to refer to the relevant

provisions of the DP Regulations, which reads as under:

“Manner of surrender of certificate of securities

54(1) ……………………..

(2) …………………….

(3) ……………………

(4) ……………………

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(5) Within 15 days of receipt of the certificate of security from the

participant the issuer shall confirm to the depository that

securities comprised in the said certificate have been listed on

the stock exchange or exchanges where the earlier issued

securities are listed and shall also after due verification

immediately mutilate and cancel the certificate of security and

substitute in its record the name of the depository as the

registered owner and shall send a certificate to this effect to

the depository and to every stock exchange where the security

is listed.

(6) …………………….

(7) ……………………”

10. It is observed from the provisions of regulation 54(5) of DP Regulations that,

the issuer company shall, within 15 days of the receipt of certificate of

security from the participant, confirm to the depository that securities

comprised in the said certificate have been listed on the stock exchange/s

where the earlier issued securities are listed and shall also after due

verification, immediately mutilate and cancel the certificate and substitute in

its records the name of the depository as its registered owner and shall

send a certificate to this effect to the depository and to every stock

exchange where the security is listed.

11. In the instant case, it is alleged that the Noticee had not complied with

regulation 54(5) of DP Regulations. The details of delay in

dematerialization of securities as on January 15, 2008 are given below:

Name of the depository



NSDL 213 10,139CDSL 157 13,927

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12. Upon perusal of the documents available, I find that the erstwhile

adjudicating officer, vide letter dated September 10, 2008 to BSE, advised

to furnish the reasons for withholding the listing approval to SIL. BSE vide

its letter dated September 18, 2008 furnished the following reasons :

• In May 2000, SIL made a preferential issue of 12,00,000 equity shares of

`10 issued at a premium of ` 90 per share bearing distinctive numbers

96,16,383 to 1,08,16,382 & allotted to promoters and their associates on a

preferential basis. However till date, SIL has failed to submit all the

necessary documents to the exchange. The exchange vide letters dated

May 16, 2000, May 30, 2000, February 14, 2001, January 08, 2002,

August 01, 2003 advised the company to submit the remaining documents

to enable the exchange to process its matter.

• SEBI vide its letter No. IVD/ID1/PKN/JJ/17613/2004 dated August 10,

2004 had advised the exchange to keep the listing of aforesaid

preferential issue in abeyance since it has decided to initiate adjudication

proceeding against SIL and its promoter director under section 15A of the

SEBI Act, 1992 for not providing information in response to their

summons.

• SIL subsequently informed the exchange the SEBI vide its order dated

January 31, 2005 imposed financial penalties on SIL and the promoter

directors.

• In April 2006, SIL applied for listing of 5,40,818 equity shares of ` 10 each

issued upon reduction in capital by 95% i.e. 1 new equity share of ` 10

each fully paid for every 20 equity shares of ` 10 each held by the

shareholders. The said application also includes 12,00,000 equity shares

(which becomes 60,000 equity shares of ` 10 each after reduction) issued

on preferential basis which are not listed on the exchange.

• The exchange vide letter dated March 26, 2008 requested SEBI to advise

as to whether the exchange could now proceed to process the SIL

application suitably.

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• SEBI vide letter No. IVD/ID1/BM/MB/125340/08 dated May 13, 2008

sought additional clarifications from exchange regarding the preferential

issue. The exchange vide letter dated May 20, 2008 inter alia, provided

SEBI, the complete list of documents not submitted by the SIL in

connection with preferential issue.

13. I find from the documents available on record that, SEBI vide its order dated

January 31, 2005 had imposed monetary penalty on SIL and its promoter

directors. Further, there was a delay of 3 years in payment of penalty by SIL

and its promoter directors. SEBI issued a notice for initiation of prosecution

proceedings for delay in payment of penalty amount and interest thereon on

July 31, 2008. SIL had filed the consent application on August 04, 2008,

against the said prosecution proceedings.

14. During the course of hearing, the Noticee was advised to submit the

detailed status of the demat requests pending with NSDL and CDSL as

alleged in the SCN.

15. The Noticee vide its letter dated September 20, 2010 stated that BSE vide

letter dated March 26, 2009 had granted the trading approval subject to the

revocation of suspension for the equity shares and thereby total capital of

the company i.e. 5,40,819 equity shares of ` 10 each issued as per scheme

of capital reduction, got admitted for listing on BSE. NSDL and CDSL vide

their letter dated August 06, 2009 admitted the reduced capital of the

company under new ISIN no. Further, Noticee also enclosed the letter of

M/s Sharepro Services (India) Private Limited, their Registrars and Share

Transfer Agents dated September 04, 2010 in which the following was

mentioned:

“We hereby confirm that there is no cases pending beyond 21 days.”

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16. The Noticee vide its letter dated September 20, 2010 had submitted the

detailed status of the pending demat requests with NSDL and CDSL as

alleged in the SCN. The details of pending demat requests submitted by the

Noticee were also verified with details obtained separately from NSDL and

CDSL. The same were found to be matching. The details of the pending

demat requests in NSDL system are as follows:

From the above table, I find the following:

• As on January 15, 2008, 213 demat requests were pending in the NSDL

system for more than thirty days and a total of 10,139 shares of the said

ISIN were requested for dematerialization through these requests.

• Out of the total of pending 213 demat requests, all requests for 10,139

shares were processed. A perusal of the details of 213 demat requests

submitted by the Noticee indicates that there was delay in

dematerialization requests by the Noticee within the range of 112 days to

2097 days. For example: On August 09, 2003, the Noticee has received

the request for dematerialization for 150 shares. However, the Noticee

has confirmed the same request on May 27, 2009, with a delay of 2097

days. The details of demat requests received, demat requests processed

vis-à-vis no. of days of delay are as follows:

Column No. 1 Column No. 2 Column No. 3

Pending as on 15-Jan-2008 No of Pending cases in column no. 1 processed

Pending as on 04-Sep -2010

No. of Requests

Pending for more than thirty days


No. of Requests No. of Shares involved



213

10,139

213

10,139

0 0

Sr. No.

Demat Request No.(DRN)

DP ID Client ID Date of Demat

Request Received

Quantity Requested

Date of Demat

Request Processed

No. of days of delay

1 301837 IN300907 10277276 29-Oct-2007 100 19-Apr-2008 1522 42835 IN301895 10361443 17-Jun-2006 128 6-Aug-2009 11253 784132 IN300829 10016603 8-Dec-2007 52 19-Apr-2008 112

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4 507817 IN301039 24457092 28-Jun-2006 210 19-Apr-2008 6405 25311 IN302277 20063991 29-May-2006 100 19-Apr-2008 6706 340046 IN300280 10580107 29-Jun-2006 200 19-Apr-2008 6397 390215 IN300327 10055677 22-Nov-2007 28 19-Apr-2008 1288 56988 IN301209 10157942 6-Dec-2007 100 19-Apr-2008 1149 948498 IN300450 10956924 23-Jun-2006 200 19-Apr-2008 645

10 948947 IN300450 10218688 27-Jun-2006 1000 19-Apr-2008 64111 101780 IN301846 10055733 28-Mar-2007 50 19-Apr-2008 36712 2809 IN303093 10002509 19-Jul-2007 100 27-May-2009 65713 145 IN303093 10002509 16-Sep-2006 5 27-May-2009 96314 53696 IN302269 10914115 12-Dec-2006 400 27-May-2009 87615 46088 IN302269 10914115 22-Aug-2006 20 27-May-2009 98816 46021 IN302269 10374358 21-Aug-2006 10 27-May-2009 98917 46018 IN302269 10429992 21-Aug-2006 10 27-May-2009 98918 43752 IN302269 10932441 11-Jul-2006 5 27-May-2009 103019 75001 IN301485 10045601 12-Jan-2007 2 27-May-2009 84520 72647 IN301485 10031211 11-Jul-2006 5 27-May-2009 103021 31105 IN301469 10056081 28-Dec-2006 5 27-May-2009 86022 16298 IN302164 10016442 17-Nov-2006 5 27-May-2009 90123 255205 IN301436 10085897 23-Jun-2006 11 27-May-2009 104824 255204 IN301436 10085902 23-Jun-2006 6 27-May-2009 104825 255203 IN301436 10091995 23-Jun-2006 5 27-May-2009 104826 96847 IN301356 10049098 11-Sep-2007 100 27-May-2009 60327 93013 IN301356 10057828 24-Feb-2007 10 27-May-2009 80228 89955 IN301356 20167805 13-Oct-2006 150 27-May-2009 93629 5889 IN302951 20006269 3-Sep-2007 10 27-May-2009 61130 4478 IN302871 20060662 29-Jun-2006 5 27-May-2009 104231 16204 IN302863 10165971 9-Sep-2006 5 27-May-2009 97032 287909 IN301321 10044818 17-May-2006 200 27-May-2009 108533 18935 IN302814 10131285 31-Jan-2007 10 27-May-2009 82634 18934 IN302814 10131285 31-Jan-2007 200 27-May-2009 82635 17090 IN302814 10109587 1-Sep-2006 30 27-May-2009 97836 17063 IN302814 10109018 29-Aug-2006 25 27-May-2009 98137 2020 IN302759 10005050 17-Jun-2006 5 27-May-2009 105438 106744 IN301991 10077172 22-Feb-2007 5 27-May-2009 80439 102034 IN301991 10089401 12-Jul-2006 10 27-May-2009 102940 28262 IN301983 10005637 13-Jul-2006 6 27-May-2009 102841 24183 IN301975 10075457 1-Aug-2006 11 27-May-2009 100942 189875 IN301926 10267678 20-Jul-2007 5 27-May-2009 65643 15531 IN301918 10021468 24-Oct-2007 5 27-May-2009 56044 44728 IN301895 10171746 21-Aug-2006 10 27-May-2009 98945 43234 IN301895 10117155 29-Jun-2006 2 27-May-2009 104246 769381 IN302679 30884594 14-Jul-2006 7 27-May-2009 102747 231736 IN302679 30332223 8-Sep-2003 50 27-May-2009 206748 9804 IN302662 10054944 1-Jan-2004 100 27-May-2009 195249 103753 IN301846 10162497 2-Aug-2007 5 27-May-2009 64350 101782 IN301846 10040851 28-Mar-2007 2 27-May-2009 77051 101025 IN301846 10040851 17-Feb-2007 2 27-May-2009 809

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52 89011 IN301774 11912664 6-Nov-2007 5 27-May-2009 54753 15751 IN302566 10000038 27-Oct-2006 10 27-May-2009 92254 7638 IN302540 10019844 12-Mar-2007 5 27-May-2009 78655 6263 IN302531 10003064 4-Jul-2006 2 27-May-2009 103756 46783 IN302470 40001536 3-Jul-2006 5 27-May-2009 103857 74648 IN301774 10212170 11-Jun-2007 5 27-May-2009 69558 65446 IN301774 10263163 13-Feb-2007 10 27-May-2009 81359 58233 IN301774 10145374 7-Nov-2006 100 27-May-2009 91160 58229 IN301774 10145374 7-Nov-2006 50 27-May-2009 91161 7972 IN301731 20005314 29-May-2006 100 27-May-2009 107362 108217 IN301233 10086466 28-Jun-2007 5 27-May-2009 67863 108216 IN301233 10086474 28-Jun-2007 10 27-May-2009 67864 95484 IN301225 10204077 12-Jun-2007 12 27-May-2009 69465 55149 IN301209 10029332 28-Jun-2007 3 27-May-2009 67866 31738 IN301688 10000211 30-Sep-2006 10 27-May-2009 94967 31570 IN301688 10000211 18-Aug-2006 175 27-May-2009 99268 31569 IN301688 20047789 18-Aug-2006 680 27-May-2009 99269 23820 IN301670 10056087 28-Dec-2006 3 27-May-2009 86070 22162 IN301670 10079858 3-Jul-2006 5 27-May-2009 103871 146674 IN301637 40685020 23-Nov-2007 10 27-May-2009 53072 48365 IN301604 10155709 10-Dec-2007 30 27-May-2009 51373 19509 IN301590 10035074 25-May-2006 100 27-May-2009 107774 29038 IN301565 10077474 27-Nov-2006 7 27-May-2009 89175 414042 IN301557 21345316 13-Jan-2007 10 27-May-2009 84476 404317 IN301557 21160811 11-Jul-2006 200 27-May-2009 103077 403524 IN301557 20266673 27-Jun-2006 5 27-May-2009 104478 400108 IN301557 21861995 12-May-2006 100 27-May-2009 109079 57707 IN302349 10197949 31-Jul-2006 10 27-May-2009 101080 31961 IN302293 10021188 17-Sep-2007 10 27-May-2009 59781 126173 IN300708 10099714 22-Nov-2007 5 27-May-2009 53182 120133 IN300708 10308123 27-Dec-2006 2 27-May-2009 86183 117982 IN300708 10099714 14-Sep-2006 5 27-May-2009 96584 116699 IN300708 10247568 7-Jul-2006 5 27-May-2009 103485 106677 IN300708 10150600 14-Sep-2005 100 27-May-2009 133086 52592 IN300669 10032479 22-Aug-2007 5 27-May-2009 62387 193260 IN300175 10026949 8-Nov-2006 15 27-May-2009 91088 192410 IN300175 10098829 3-Oct-2006 5 27-May-2009 94689 189868 IN300175 10009751 15-Jun-2006 3 27-May-2009 105690 253071 IN301098 10615158 17-Jun-2006 10 27-May-2009 105491 141634 IN300644 10130919 22-Nov-2007 35 27-May-2009 53192 138745 IN300644 10104066 23-Jan-2007 10 27-May-2009 83493 142547 IN300636 10146912 13-Aug-2007 105 27-May-2009 63294 94448 IN301071 10033182 24-Aug-2006 10 27-May-2009 98695 23006 IN300628 10002761 26-Sep-2006 9 27-May-2009 95396 94781 IN300530 10003779 8-Feb-2007 11 27-May-2009 81897 93231 IN300530 10003779 10-Aug-2006 11 27-May-2009 100098 92941 IN300530 10135150 29-Jun-2006 86 27-May-2009 104299 573216 IN300118 10616417 4-Oct-2007 10 27-May-2009 580

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100 550926 IN300118 10030241 11-Oct-2006 10 27-May-2009 938101 547238 IN300118 10116352 14-Aug-2006 10 27-May-2009 996102 543009 IN300118 10972396 15-Jun-2006 10 27-May-2009 1056103 542924 IN300118 10032868 15-Jun-2006 5 27-May-2009 1056104 210873 IN301055 10249092 12-Sep-2007 5 27-May-2009 602105 26920 IN301047 30050038 6-Mar-2007 5 27-May-2009 792106 143680 IN300386 10006732 27-Sep-2007 3 27-May-2009 587107 142050 IN300386 10141530 13-Feb-2007 100 27-May-2009 813108 141268 IN300386 10141530 7-Dec-2006 100 27-May-2009 881109 92697 IN300360 10214320 17-Mar-2007 10 27-May-2009 781110 5662 IN301014 10000012 13-Sep-2006 25 27-May-2009 966111 57673 IN300351 10004048 17-Jun-2006 5 27-May-2009 1054112 616302 IN300095 10162822 20-Jul-2005 200 27-May-2009 1386113 270323 IN300982 10625244 11-Aug-2007 10 27-May-2009 634114 266976 IN300982 10388556 4-Apr-2007 5 27-May-2009 763115 260824 IN300982 10436063 28-Sep-2006 5 27-May-2009 951116 258584 IN300982 10525697 15-Jul-2006 11 27-May-2009 1026117 1025297 IN300020 10418642 21-May-2007 5 27-May-2009 716118 1012345 IN300020 10194677 14-Nov-2006 5 27-May-2009 904119 1010796 IN300020 10588002 30-Oct-2006 5 27-May-2009 919120 1009105 IN300020 10254990 26-Sep-2006 11 27-May-2009 953121 1008550 IN300020 10254965 20-Sep-2006 8 27-May-2009 959122 1007353 IN300020 10254965 7-Sep-2006 100 27-May-2009 972123 1006966 IN300020 10254990 4-Sep-2006 164 27-May-2009 975124 998505 IN300020 10588002 23-May-2006 100 27-May-2009 1079125 83976 IN300966 10006360 3-Dec-2007 2 27-May-2009 520126 97534 IN300940 10043064 4-Jul-2007 50 27-May-2009 672127 95551 IN300940 10234997 9-Nov-2006 11 27-May-2009 909128 280506 IN300505 10369587 15-Oct-2007 10 27-May-2009 569129 270225 IN300505 10468027 1-Sep-2006 5 27-May-2009 978130 268878 IN300505 10020458 21-Jul-2006 5 27-May-2009 1020131 268582 IN300505 10137822 6-Jul-2006 10 27-May-2009 1035132 266837 IN300505 10021897 30-May-2006 156 27-May-2009 1072133 389490 IN300327 10150137 17-Oct-2007 100 27-May-2009 567134 386096 IN300327 10190733 21-May-2007 10 27-May-2009 716135 95535 IN300940 10234997 6-Nov-2006 164 27-May-2009 912136 292325 IN300907 10008994 16-Oct-2006 5 27-May-2009 933137 292270 IN300907 10087176 10-Oct-2006 20 27-May-2009 939138 291353 IN300907 10300389 4-Sep-2006 200 27-May-2009 975139 291352 IN300907 10300389 4-Sep-2006 10 27-May-2009 975140 291025 IN300907 10045771 30-Aug-2006 5 27-May-2009 980141 290304 IN300907 10055038 31-Jul-2006 6 27-May-2009 1010142 289272 IN300907 10287410 26-Jun-2006 20 27-May-2009 1045143 86849 IN300896 10085366 21-Dec-2006 10 27-May-2009 867144 46689 IN300896 10085366 9-Aug-2003 150 27-May-2009 2097145 1558765 IN300888 13152852 12-Jul-2006 5 27-May-2009 1029146 96578 IN300870 10134984 9-Nov-2006 100 27-May-2009 909147 355138 IN300280 10101969 3-Sep-2007 105 27-May-2009 611

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148 354638 IN300280 10214787 13-Aug-2007 10 27-May-2009 632149 343800 IN300280 10149464 28-Sep-2006 9 27-May-2009 951150 342229 IN300280 10445623 21-Aug-2006 200 27-May-2009 989151 342185 IN300280 10445623 21-Aug-2006 10 27-May-2009 989152 341896 IN300280 10214787 12-Aug-2006 10 27-May-2009 998153 341692 IN300280 10189817 5-Aug-2006 10 27-May-2009 1005154 340706 IN300280 10580107 14-Jul-2006 10 27-May-2009 1027155 172048 IN301143 10426242 28-Dec-2006 5 27-May-2009 860156 171203 IN301143 10206885 7-Nov-2006 10 27-May-2009 911157 170205 IN301143 10003711 23-Aug-2006 5 27-May-2009 987158 170186 IN301143 10003703 23-Aug-2006 5 27-May-2009 987159 981614 IN300450 11916459 29-Jun-2007 100 27-May-2009 677160 973352 IN300450 10543344 8-Mar-2007 11 27-May-2009 790161 970743 IN300450 13017050 9-Feb-2007 3 27-May-2009 817162 970742 IN300450 13012329 9-Feb-2007 3 27-May-2009 817163 961840 IN300450 11104092 20-Nov-2006 5 27-May-2009 898164 959861 IN300450 11893947 31-Oct-2006 5 27-May-2009 918165 59579 IN300247 10057828 7-Jul-2006 10 27-May-2009 1034166 1230216 IN301127 16233216 23-Apr-2007 5 27-May-2009 744167 67511 IN300861 10065049 19-Feb-2007 5 27-May-2009 807168 67497 IN300861 10064999 19-Feb-2007 5 27-May-2009 807169 67486 IN300861 10065058 15-Feb-2007 5 27-May-2009 811170 66315 IN300861 10025639 17-Aug-2006 5 27-May-2009 993171 380999 IN300845 10273492 6-Feb-2007 3 27-May-2009 820172 91125 IN300837 60047783 14-Jul-2006 10 27-May-2009 1027173 91102 IN300837 60059825 11-Jul-2006 5 27-May-2009 1030174 91079 IN300837 60059817 7-Jul-2006 5 27-May-2009 1034175 81496 IN300837 60047783 23-Nov-2004 200 27-May-2009 1625176 956685 IN300450 10543344 22-Sep-2006 11 27-May-2009 957177 954254 IN300450 10531979 28-Aug-2006 15 27-May-2009 982178 953785 IN300450 10063589 22-Aug-2006 10 27-May-2009 988179 953368 IN300450 10641415 16-Aug-2006 10 27-May-2009 994180 952777 IN300450 10956924 7-Aug-2006 10 27-May-2009 1003181 952130 IN300450 11450387 28-Jul-2006 10 27-May-2009 1013182 948802 IN300450 10514216 26-Jun-2006 15 27-May-2009 1045183 947540 IN300450 11942815 15-Jun-2006 50 27-May-2009 1056184 941707 IN300450 10956924 8-May-2006 200 27-May-2009 1094185 738957 IN300829 10323244 10-Jul-2006 3 27-May-2009 1031186 735025 IN300829 11283432 31-May-2006 14 27-May-2009 1071187 45275 IN300812 10079933 28-Jun-2006 40 27-May-2009 1043188 104764 IN300773 10000300 17-Jul-2006 5 27-May-2009 1024189 119775 IN300425 10063708 14-Feb-2007 200 27-May-2009 812190 145558 IN300409 10096706 26-Jul-2007 6 27-May-2009 650191 142618 IN300409 10155962 29-Jun-2006 5 27-May-2009 1042192 142353 IN300409 10019816 26-May-2006 100 27-May-2009 1076193 447167 IN300239 11216820 19-Oct-2007 5 27-May-2009 565194 444958 IN300239 11983987 27-Sep-2007 10 27-May-2009 587195 423392 IN300239 10412724 2-Feb-2007 100 27-May-2009 824

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17. The details of the pending demat requests in CDSL system are as follows:

Column No.1 Column No.2 Column No.3

Pending as on 15-Jan-2008

No of Pending cases in column no. 1 processed Pending as on 04 – Sep -2010

No. of Requests Pending for than

thirty days

No. of Shares

involved No. of Requests

No. of Shares

involved

No. of Requests Pending for than

thirty days


157 13,927 157 13,927 0 0

From the above table, I find the following:

• As on January 15, 2008, 157 demat requests were pending in the CDSL

system for more than thirty days and a total of 13,927 shares of the said

ISIN were requested for dematerialization through these requests.

196 408856 IN300239 11467872 19-Sep-2006 5 27-May-2009 960197 102700 IN300765 10134726 5-Jul-2007 200 27-May-2009 671198 99668 IN300765 10134726 13-Jun-2006 17 27-May-2009 1058199 537657 IN300206 10665071 24-Nov-2006 10 27-May-2009 894200 1374117 IN300183 10293565 28-Aug-2003 200 27-May-2009 2078201 422271 IN300749 10513302 29-Nov-2007 5 27-May-2009 524202 420488 IN300749 10473859 31-Oct-2007 5 27-May-2009 553203 418179 IN300749 10294000 27-Sep-2007 32 27-May-2009 587204 415821 IN300749 10805590 21-Aug-2007 5 27-May-2009 624205 415820 IN300749 10654662 21-Aug-2007 100 27-May-2009 624206 414720 IN300749 10805590 31-Jul-2007 5 27-May-2009 645207 414719 IN300749 10654662 31-Jul-2007 100 27-May-2009 645208 411315 IN300749 10805590 4-Jun-2007 5 27-May-2009 702209 407132 IN300749 10582812 28-Mar-2007 10 27-May-2009 770210 401070 IN300749 10653127 12-Jan-2007 10 27-May-2009 845211 397324 IN300749 10654662 27-Nov-2006 5 27-May-2009 891212 394983 IN300749 10513302 1-Nov-2006 5 27-May-2009 917213 394733 IN300749 10739186 26-Oct-2006 10 27-May-2009 923

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• Out of the total of pending 157 demat requests, all requests for 13,927

shares were processed. A perusal of the details of 157 demat requests

submitted by the Noticee indicates that there was delay in

dematerialization requests by the Noticee within the range of 128 days to

1531 days. For example: On February 24, 2005, the Noticee has

received the request for dematerialization for 100 shares. However, the

Noticee has confirmed the same request on May 26, 2009, with a delay

of 1531 days. The details of demat requests received, demat requests

processed vis-à-vis no. of days of delay are as follows:

Sr. No.

Demat Request

No. [DRN]

DP ID Client ID Date of Request Received

Quantity Requested

Date of Demat Request Processed

No. of days of delay

1 2279301 12012101 00014440 24-Feb-05 100 26-May-09 1,5312 2519926 13017600 00086522 01-Jun-05 150 26-May-09 1,4343 2523497 12010600 00204343 03-Jun-05 200 26-May-09 1,4324 2569875 13018700 00011899 23-Jun-05 150 26-May-09 1,4125 2571456 12024400 00001806 24-Jun-05 50 26-May-09 1,4116 2588145 12013204 00016928 01-Jul-05 300 26-May-09 1,4047 2634371 13023800 00009389 21-Jul-05 50 26-May-09 1,3848 2634372 13023800 00009389 21-Jul-05 50 26-May-09 1,3849 2672392 13019900 00144753 05-Aug-05 150 26-May-09 1,369

10 2686124 12019101 00076630 10-Aug-05 100 26-May-09 1,36411 2715453 12010900 00168140 20-Aug-05 64 26-May-09 1,35412 2719611 12026700 00005879 22-Aug-05 100 26-May-09 1,35213 2723492 13014200 00012850 23-Aug-05 1000 26-May-09 1,35114 2740089 12031400 00022222 27-Aug-05 228 26-May-09 1,34715 2765422 12012100 00040897 05-Sep-05 100 26-May-09 1,33816 2769027 12013709 00000750 06-Sep-05 200 26-May-09 1,33717 2779822 12019110 00033391 09-Sep-05 100 26-May-09 1,33418 2812506 13020803 00015343 19-Sep-05 100 26-May-09 1,32419 2816851 13016700 00208384 20-Sep-05 50 26-May-09 1,32320 2816973 13016700 00105285 20-Sep-05 228 26-May-09 1,32321 2835178 12010600 00202652 23-Sep-05 100 26-May-09 1,32022 2850275 12018902 00003437 27-Sep-05 150 26-May-09 1,31623 2878174 12033500 00023429 03-Oct-05 200 26-May-09 1,31024 2894631 12011201 00005179 07-Oct-05 200 26-May-09 1,30625 2901746 12017001 00027637 08-Oct-05 200 26-May-09 1,30526 2906588 12010900 00049743 10-Oct-05 50 26-May-09 1,30327 2910854 13023800 00135659 13-Oct-05 150 26-May-09 1,300

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28 2911112 12027601 00017694 13-Oct-05 150 26-May-09 1,30029 2921149 12010600 00215222 15-Oct-05 100 26-May-09 1,29830 2934459 12024203 00018589 19-Oct-05 500 26-May-09 1,29431 2943477 12015000 00004899 22-Oct-05 200 26-May-09 1,29132 2955877 13017600 00410175 27-Oct-05 200 26-May-09 1,28633 3011169 12010900 00723573 25-Nov-05 50 26-May-09 1,25734 3029612 12033503 00015096 03-Dec-05 100 26-May-09 1,24935 3047159 13031901 00049624 12-Dec-05 100 26-May-09 1,24036 3083899 12017701 00037442 27-Dec-05 200 26-May-09 1,22537 3093626 12020000 00101266 31-Dec-05 64 26-May-09 1,22138 3106672 12026701 00006957 06-Jan-06 150 19-Apr-08 81339 3117026 13019900 00212994 12-Jan-06 100 26-May-09 1,20940 3119549 12032300 00013365 13-Jan-06 328 19-Apr-08 80641 3121545 12022900 00089751 13-Jan-06 100 26-May-09 1,20842 3147111 12012100 00051417 25-Jan-06 100 26-May-09 1,19643 3197300 12022900 00099578 17-Feb-06 60 26-May-09 1,17344 3228779 12010600 00266282 01-Mar-06 150 26-May-09 1,16145 3251093 13016700 00319395 08-Mar-06 1000 19-Apr-08 75246 3266256 13017600 00557559 14-Mar-06 100 18-Sep-08 89847 3266716 13027900 00036931 15-Mar-06 1 26-May-09 1,14748 3266717 13027900 00036931 15-Mar-06 4 26-May-09 1,14749 3278575 13025900 01005316 20-Mar-06 50 26-May-09 1,14250 3278576 13025900 01005316 20-Mar-06 150 19-Apr-08 74051 3322977 12035900 00010548 06-Apr-06 100 26-May-09 1,12552 3330067 12035400 00015312 10-Apr-06 100 26-May-09 1,12153 3331821 13018700 00007090 10-Apr-06 100 26-May-09 1,12154 3338456 13020804 00054121 13-Apr-06 128 07-Apr-08 70455 3341772 12010919 00018112 14-Apr-06 1800 19-Apr-08 71556 3416885 12033503 00059600 16-May-06 5 26-May-09 1,08557 3452472 12027601 00004119 31-May-06 50 19-Apr-08 66858 3452788 12027601 00004119 31-May-06 50 19-Apr-08 66859 3482044 13017600 00174980 15-Jun-06 25 26-May-09 1,05560 3484941 12012600 00004891 16-Jun-06 10 26-May-09 1,05461 3486351 13025900 00365635 17-Jun-06 3 26-May-09 1,05362 3486353 13025900 00365732 17-Jun-06 3 26-May-09 1,05363 3488805 12026501 00016509 19-Jun-06 50 19-Apr-08 64964 3489427 12018000 00147631 20-Jun-06 5 26-May-09 1,05065 3489729 13031901 00051627 20-Jun-06 15 26-May-09 1,05066 3490342 12035400 00015312 20-Jun-06 5 26-May-09 1,05067 3490687 13025900 01025231 20-Jun-06 3 26-May-09 1,05068 3494062 12027601 00004119 22-Jun-06 5 26-May-09 1,04869 3495300 12027001 00012805 22-Jun-06 10 26-May-09 1,04870 3496191 12019700 00000750 23-Jun-06 3 26-May-09 1,04771 3502616 12013700 00033405 27-Jun-06 5 26-May-09 1,04372 3502880 12011800 00003171 27-Jun-06 6 26-May-09 1,04373 3502894 12011800 00003184 27-Jun-06 6 26-May-09 1,04374 3504866 13015400 00011693 28-Jun-06 30 26-May-09 1,04275 3505049 13025900 00061925 28-Jun-06 2 26-May-09 1,042

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76 3511236 12011201 00005179 03-Jul-06 10 26-May-09 1,03777 3511743 12026501 00016509 03-Jul-06 5 26-May-09 1,03778 3519641 13040300 00000455 08-Jul-06 5 26-May-09 1,03279 3523668 12010926 00105031 11-Jul-06 5 26-May-09 1,02980 3524030 13040300 00000455 11-Jul-06 100 19-Apr-08 62781 3534487 12033200 00484035 17-Jul-06 5 26-May-09 1,02382 3545891 12032100 00010649 24-Jul-06 5 26-May-09 1,01683 3547369 12025700 00000411 25-Jul-06 2 26-May-09 1,01584 3556333 12010601 00034820 29-Jul-06 2 26-May-09 1,01185 3565642 12012101 00042259 05-Aug-06 5 26-May-09 1,00486 3578617 12013709 00000273 17-Aug-06 5 26-May-09 99287 3582411 13040300 00002150 21-Aug-06 10 26-May-09 98888 3584080 12012600 00029021 22-Aug-06 2 26-May-09 98789 3596474 13031901 00052008 29-Aug-06 150 26-May-09 98090 3598489 13019900 00198795 30-Aug-06 10 26-May-09 97991 3631602 13016700 00105285 20-Sep-06 11 26-May-09 95892 3648079 12011300 00098451 03-Oct-06 5 26-May-09 94593 3661249 12010601 00002551 11-Oct-06 2 26-May-09 93794 3662393 12032300 00013365 11-Oct-06 22 26-May-09 93795 3663410 12039900 00007501 12-Oct-06 5 26-May-09 93696 3666595 12029200 00060432 14-Oct-06 5 26-May-09 93497 3669583 12010700 00080925 16-Oct-06 2 26-May-09 93298 3691372 12036800 00017591 02-Nov-06 5 26-May-09 91599 3696618 13020800 00041670 06-Nov-06 5 26-May-09 911100 3696868 12035000 00139427 06-Nov-06 5 26-May-09 911101 3707887 12010600 00330725 11-Nov-06 100 07-Apr-08 492102 3707888 12010600 00330351 11-Nov-06 100 07-Apr-08 492103 3710135 12010900 00776476 13-Nov-06 15 26-May-09 904104 3719352 12026200 00030262 17-Nov-06 6 26-May-09 900105 3740287 13025900 01118094 28-Nov-06 20 26-May-09 889106 3746047 12010600 00394735 30-Nov-06 11 26-May-09 887107 3744841 13025900 01021178 30-Nov-06 11 26-May-09 887108 3744842 13025900 01021178 30-Nov-06 228 19-Apr-08 485109 3752838 12031400 00015713 05-Dec-06 10 26-May-09 882110 3759914 12010926 00026802 08-Dec-06 5 26-May-09 879111 3766651 13025900 00194124 12-Dec-06 100 19-Apr-08 473112 3765441 12021603 00006618 12-Dec-06 5 26-May-09 875113 3779274 12038200 00027507 19-Dec-06 10 26-May-09 868114 3781529 12038400 00283410 20-Dec-06 3 26-May-09 867115 3782508 13017600 00005163 21-Dec-06 10 26-May-09 866116 3785888 12039500 00018549 22-Dec-06 100 19-Apr-08 463117 3785889 12039500 00018549 22-Dec-06 5 26-May-09 865118 3802786 12022000 00013421 04-Jan-07 5 26-May-09 852119 3829468 12011300 00000344 18-Jan-07 2 26-May-09 838120 3834466 12017507 00003666 22-Jan-07 34 26-May-09 834121 3837618 12011000 00000503 23-Jan-07 5 26-May-09 833122 3845675 12015800 00009239 29-Jan-07 10 26-May-09 827123 3847200 13041400 00050082 30-Jan-07 11 26-May-09 826

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18. I find from the documents available on record that, Hon’ble High Court of

Bombay vide order dated February 06, 2006 had approved the scheme of

compromise and arrangement under sections 100, 391 and 392 of the

Companies Act 1956 for reduction of capital of equity shares by 95%. I also

find that before February 06, 2006, 42 and 7 demat request were pending in

CDSL and NSDL system respectively, whereas after February 06, 2006,

115 and 206 demat request were pending in CDSL and NSDL system.

124 3865260 12030000 00134981 09-Feb-07 50 19-Apr-08 414125 3871468 12033200 00317275 13-Feb-07 100 19-Apr-08 410126 3879900 12013707 00004028 19-Feb-07 25 26-May-09 806127 3883733 13016700 00319395 20-Feb-07 30 26-May-09 805128 3896892 12040400 00012506 27-Feb-07 9 26-May-09 798129 3898402 12026002 00002123 28-Feb-07 100 19-Apr-08 395130 3916875 12044400 00002969 12-Mar-07 3 26-May-09 785131 3918700 13016700 00438985 12-Mar-07 5 26-May-09 785132 3916876 12044400 00002969 12-Mar-07 13 19-Apr-08 383133 3931881 12029000 00008958 21-Mar-07 3 26-May-09 776134 3932926 12018500 00021069 21-Mar-07 50 19-Apr-08 374135 4086514 12012500 00001361 13-Jul-07 2 26-May-09 662136 4094720 12028900 00019395 19-Jul-07 8 26-May-09 656137 4119456 12033500 00023429 02-Aug-07 10 26-May-09 642138 4123430 12038300 00003337 06-Aug-07 5 26-May-09 638139 4145548 12018600 00012074 20-Aug-07 5 26-May-09 624140 4162714 13017600 00005163 29-Aug-07 200 26-May-09 615141 4176258 12013200 00668354 07-Sep-07 105 26-May-09 606142 4188729 13013800 00059357 14-Sep-07 10 26-May-09 599143 4207885 12039400 00005853 27-Sep-07 150 09-Apr-08 174144 4208306 12024700 00005280 28-Sep-07 200 19-Apr-08 183145 4210184 12016900 00005721 28-Sep-07 5 26-May-09 585146 4213750 12033000 00027145 01-Oct-07 10 26-May-09 582147 4223072 12038300 00000127 06-Oct-07 10 26-May-09 577148 4250384 12023000 00100418 18-Oct-07 10 26-May-09 565149 4252058 12019101 00379235 19-Oct-07 128 26-May-09 564150 4254772 12012900 00006759 20-Oct-07 17 26-May-09 563151 4257021 12010926 00088061 22-Oct-07 10 26-May-09 561152 4280578 13013800 00079044 01-Nov-07 34 26-May-09 551153 4298227 13040300 00002150 13-Nov-07 200 19-Apr-08 137154 4303707 12010801 00008507 15-Nov-07 10 26-May-09 537155 4317655 13017600 00697825 22-Nov-07 200 19-Apr-08 128156 4361465 12017701 00080524 10-Dec-07 10 26-May-09 512157 4373038 13017600 00698041 14-Dec-07 10 26-May-09 508

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19. From the correspondence entered amongst SEBI, BSE, NSDL, CDSL and

Noticee, I find that the Noticee has admitted the delay in dematerialization of

securities but defended the same by stating that the delay was caused due

to non-granting of NOC by SEBI, withholding of the listing approval of SIL by

BSE, non acceptance of corporate action of reduction of the existing demat

shares by NSDL/CDSL, etc.

20. I find that SEBI had not granted the NOC to Noticee, consequent to which

BSE had withheld the listing approval of SIL because BSE had been

advised by SEBI to keep the listing approval of the Noticee in abeyance, as

SEBI vide its adjudication order no. ADJ/12/-15/2005 AP dated January 31,

2005 had imposed the monetary penalty in respect of SIL and its promoter

directors for non compliances of the summons. However, it is noticed that

when Noticee was in need for the listing of the reduced equity capital on

BSE, they have approached SEBI for the payment of penalty. Having waited

for more than 3 years, Noticee suddenly realized the importance of SEBI

penalty. Therefore, the Noticee had made the payment of penalty on

February 04, 2008. However, SEBI further issued the notice of prosecution

for delay in payment of penalty and interest thereof. I find from the material

available on record that, Noticee had applied for consent vide application

dated August 04, 2008 against the notice of prosecution and had settled the

matter by making the payment of consent amount on October 24, 2008.

21. I am of the view that, if the Noitcee had made the payment of penalty of

SEBI adjudication order dated January 31, 2005 on time, SEBI would have

granted the NOC to the Noticee, subsequently BSE would have granted the

listing approval and NSDL & CDSL would have admitted the reduced equity

capital and the delay being cited by the Noticee would not have been there.

Therefore I am of the view that, it is solely because of the Noticee’s fault

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and lack of cooperation with SEBI, it has delayed in dematerialization of

securities i.e a delay of around 2000 days which resulted in losses to

investors.

22. I am of the view that the abovementioned reasons cited by the Noticee, did

not, in any way, absolve the Noticee of its failure in complying with the

statutory requirements. At best, these are factors which may, to some

extent, be relevant while considering the penal consequences that could

attract the violation.

23. It would be relevant to note that had even a nominal delay been involved in

complying with the mandate laid down in the DP Regulations or sufficient

justification for the same been given by the Noticee, a lenient view could

have been taken for the belated compliance of Regulation 54(5) of DP

Regulations. However as this is a case involving a delay of more than five

years in complying with the provisions of the said Regulation and no

adequate justification has been given for the same, necessary cognizance

of the non adherence of the mandate laid down in the Regulations is very

much necessitated.

24. From the aforesaid information received from the Noticee, I find that the

Noticee had delayed considerably in resolving the demat requests which

were pending for more than thirty days as on January 15, 2008 and thus,

had failed to discharge its obligation to complete the process of

dematerialization of securities within the stipulated time period under the DP

Regulations. The violation of the provisions of regulation 54(5) of DP

Regulations, therefore, stands established.

25. Any evasion of the regulatory provisions issued by the regulator in the

interests of the investors or non adherence to the same for any reason

whatsoever is bound to affect the interests of such investors. Although such

a loss cannot be specifically computed in monetary terms, the fact remains

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that all regulatory provisions have a specific purpose behind their

enactment. The very purpose of enacting any legislation is due adherence

to the procedures laid down there under to ensure the sound and smooth

functioning of the capital market. If no cognizance were to be taken of any

breach of these provisions and no liability fixed there upon, the entire

purpose of incorporating the provisions in the said enactments would

become redundant.

26. The Hon’ble Supreme Court of India in the matter of SEBI Vs. Shri Ram

Mutual Fund [2006] 68 SCL 216(SC) held that “once the violation of statutory

regulations is established, imposition of penalty becomes sine qua non of violation and the

intention of parties committing such violation becomes totally irrelevant. Once the

contravention is established, then the penalty is to follow”.

27. As the violation of the statutory obligations under 54(5) of DP Regulations

has been established, I hold that the Noticee is liable for monetary penalty

under section 19D of the Depositories Act, which reads as under:-

“Penalty for delay in dematerialization or issue of certificate of securities

If any issuer or its agent or any person, who is registered as an intermediary

under the provisions of section 12 of the Securities and Exchange Board of

India Act, 1992 (15 of 1992) fails to dematerialize or issue the certificate of

securities on opting out of a depository by the investors, within the time

specified under this Act or regulations or by-laws made thereunder or abets in

delaying the process of dematerialization or issue the certificate of securities

on opting out of a depository of securities, such issuer or its agent or

intermediary shall be liable to a penalty of one lakh rupees for each day during

which such failure continues or one crore rupees, whichever is less.”

28. While determining the quantum of penalty under section 19D of the

Depositories Act, it is important to consider the factors stipulated in section

19 I of the Depositories Act, which reads as under:-

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“19 –I. Factors to be taken into account by the adjudicating officer

While adjudging quantum of penalty under section 19H, the adjudicating

officer shall have due regard to the following factors, namely:-

(a) the amount of disproportionate gain or unfair advantage,

wherever quantifiable, made as a result of the default;

(b) the amount of loss caused to an investor or group of investors as a

result of the default;

(c) the repetitive nature of the default.”

29. From the material available on record, it is not possible to ascertain the

disproportionate gain or unfair advantage to the Noticee which may have

accrued due to the aforesaid failure. Though it may not be possible to

ascertain the monetary loss to the investors on account of failure of the

Noticee to discharge its obligation towards the investors to meet the

requests for dematerialization, the delay in dematerialization of securities

being prejudicial to the interest of investors has to be viewed seriously.

Incidences of this nature definitely compromise the securities market

regulatory framework to the detriment of investors at large. Delay of each

demat request constitutes a separate violation. Therefore, it is noted that the

lapse is repetitive in nature and I am of the view that penalty needs to be

imposed taking into account each incidence of delay of demat requests. By

virtue of the failure on the part of the Noticee to dematerialize the shares of

the shareholders on time, the fact remains that it had deprived the

shareholders of the liquidity of their investments and loss of opportunity to

deal with their dematerialized shares.

ORDER

30. After taking into consideration all the facts and circumstances of the case, I

hereby impose a monetary penalty of `8,00,000 (Rupees eight lakh only) on

the Noticee which will be commensurate with the violation committed by it.

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31. The Noticee shall pay the said amount of penalty by way of demand draft in

favour of “SEBI - Penalties Remittable to Government of India”, payable at

Mumbai, within 45 days of receipt of this order. The said demand draft

should be forwarded to Mr. Prasanta Mahapatra , Deputy General Manager,

MIRSD-4, Securities and Exchange Board of India, SEBI Bhavan, Plot

No.C4-A, “G” Block, Bandra Kurla Complex, Bandra (East), Mumbai–400

051.

32. In terms of Rule 6 of the Adjudication Rules, copies of this order are sent to

the Noticee and also to the Securities and Exchange Board of India.

Date: October 28, 2010 PARAG BASU

Place: Mumbai ADJUDICATING OFFICER

before the adjudicating officer securities and ...nsdl/cdsl, which would follow the in principle...

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