Ignorance of the law is no excuse and a person cannot defend illegal actions by stating unawareness about his actions – THE SECURITIES AND EXCHANGE BOARD OF INDIA
Ignorance of the law is no excuse and a person cannot defend illegal actions by stating unawareness about his actions – THE SECURITIES AND EXCHANGE BOARD OF INDIA The SEBI received a letter from TITAN company limited about the violation of  SEBI (Prohibition of Insider Trading) Regulations, 2015. An investigation was conducted and several non-compliances of violating PTI regulation were observed and adjudication proceedings were initiated against Mr. Johnson Victorarockiaraj (Noticee) under the provisions of Section 15A(b) of Securities and Exchange Board of India Act, 1992 and in violation of Regulation 7(2)(a) of PIT Regulations. The proceedings were conducted by the appointed adjudication officer SOMA MAJUMDER [ADJUDICATION ORDER NO. Order/SM/DD/2021-22/14937] A show-cause notice was issued with regards to the alleged violations under Rule 4 of the Adjudication Rules to show-cause as to why an inquiry should not be initiated against Noticee and penalty, if any, not be imposed upon him under the provisions of Section 15A(b) of SEBI Act for the aforesaid violation alleged to have been committed by him. The proceeding was initiated after the response of the noticee. Adjudication proceedings were initiated and it was observed that the total value traded by Noticee in the scrip of Titan was Rs. 16,59,938/- which was more than rupees ten lakhs. the officer notices that the noticee has not disputed the impugned transactions by him in the scrip of Titan as specified above and in terms of  Regulation 7(2)(a) of PIT Regulations, Noticee, being an employee of the company, was required to make disclosures to Titan, for each of the aforesaid transactions within two (2) working days and there was no evidence available on record to show the disclosures. The noticee through his response contends that he was not aware of trading restrictions under PIT Regulations. the authority relies on the principle of  “ignorant Juris non excusat”, ignorance of the law is no excuse and everyone is presumed to know the law of the land. A person cannot defend his illegal actions by stating that he was not aware his actions were illegal, even if the noticee has honestly believed that they were not breaking the law. No merit was found in this response and the noticee was found to have violated Regulation 7(2)(a) of PIT Regulations. the authority with regards to the attraction of monetary violations for the alleged violations relies on the case of Virendrakumar Jayantilal Patel vs. SEBI and SEBI v/s Shri Ram Mutual Fund [2006] 68 SCL 216(SC) and a penalty of Rs. 1,00,000/- were imposed under Section 15-I of the SEBI Act and order and directions were passed.
BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA ADJUDICATION ORDER NO. Order SM DD 2021 22 14937] UNDER SECTION 15 I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT 1992 READ WITH RULE 5 OF SEBIRULES 1995 In respect of Mr. Johnson Victorarockiaraj PAN: ABUPV3321L In the matter of Titan Company Limited FACTS OF THE CASE IN BRIEF 1. Securities and Exchange Board of Indiareceived from Titan Company Limited to as ‘Company Titan TCL’) wherein the company intimated SEBI about contravention of SEBIRegulations 2015and Company’s Code of Conduct for Prevention of Insider Trading by some of its designated persons employees. 2. Thereafter SEBI conducted an investigation in the scrip of Titan and observed several non compliances of PIT Regulations during the period April 01 2018 to March 31 2019 by employees and designated persons of TCL including Mr. Johnson Victorarockiaraj hereinafter referred to as ‘Noticee by name’). Therefore SEBI initiated adjudication proceedings against Noticee under the provisions of Section 15A(b) of Securities and Exchange Board of India Act 1992 for alleged violation of Regulation 7(2)(a) of PIT Regulations by Noticee. Adjudication Order in respect of Johnson Victorarockiaraj in the matter of Titan Company APPOINTMENT OF ADJUDICATING OFFICER 3. Vide order dated March 02 2021 SEBI appointed the undersigned as Adjudicating Officer under Section 15I of the SEBI Act read with Section 19 of the SEBI Act and Rule 3 of the SEBIRules 1995to inquire into and adjudge under the provisions of Section 15A(b) of SEBI Act the aforesaid alleged violation by Noticee. SHOW CAUSE NOTICE REPLY AND PERSONAL HEARING 4. A show cause notice dated August 09 2021(hereinafter referred to as ‘SCN’) was issued to Noticee under Rule 4 of the Adjudication Rules to show cause as to why an inquiry should not be initiated against Noticee and penalty if any not be imposed upon him under the provisions of Section 15A(b) of SEBI Act for the aforesaid violation alleged to have been committed by him. 5. The allegations levelled against Noticee in the SCN are as under: a) During the course of investigation it was observed that Noticee had traded in the shares of the Titan during the Investigation Period. Details of his trading are as under: Name of Noticee Table 1 BSE+NSE)April June July Sep No. of occasions on which traded value exceeded Rs. 10 lakh Mr. Johnson Victorarockiaraj b) It was observed from the table above that in the calendar quarter ending on June 2018 the total traded value of the securities traded by Noticee in the scrip of Titan was Rs. 16 68 065 and for the calendar quarter ending on September 2018 the total traded value of the securities traded by Noticee in the scrip of Titan was Rs. 25 51 838. It was observed that on 3 occasions in the aforesaid calendar quarters the traded value of shares exceeded rupees ten lakhs. Therefore for the aforesaid threetransactions which were in excess of the Adjudication Order in respect of Johnson Victorarockiaraj in the matter of Titan Company limit specified in Regulation 7(2)(a) of PIT Regulations Noticee was required to make disclosure in terms of the aforesaid Regulation. In this regard in reply to a query by SEBI TCL vide email dated October 28 2020 confirmed that it had not received any disclosures from Noticee. c) In view of the above observations it was alleged that Noticee has violated Regulation 7(2)(a) of PIT Regulations on three occasions by not making disclosures as required in terms of aforesaid Regulation. 6. The SCN was sent to Noticee through Speed Post Acknowledgement dueon August 09 2021 and digitally signed email dated August 12 2021. The SCN sent through SPAD was duly served on Noticee. Noticee was given fifteendays’ time to make his submissions in respect of the allegations made in the SCN. Vide email dated September 01 2021 Noticee submitted his reply to the SCN. 7. Thereafter in the interest of natural justice vide hearing notice dated September 21 2021 Noticee was granted an opportunity of personal hearing before the undersigned on October 07 2021. The aforesaid hearing notice was sent to Noticee through SPAD and also through digitally signed email on September 22 2021 and was duly served upon him. However it is noted that Noticee failed to avail the opportunity of hearing granted to him on October 07 2021. Thereafter vide a second hearing notice dated October 20 2021 Noticee was granted another opportunity of personal hearing before the undersigned on November 10 2021. The aforesaid hearing notice was sent to Noticee through SPAD and also through digitally signed email on October 21 2021 and was duly served upon him. However Noticee did not appear for the hearing on the scheduled date. A final opportunity of hearing was granted to Noticee on January 04 2022 vide email dated December 09 2021. However Noticee still failed to appear for the hearing. The reply submitted by Noticee vide email dated September 01 2021 is summarized hereunder: a. Noticee was trading in options only b. He was not aware about trading in prohibited time period c. He was working as a technician in Titan. Adjudication Order in respect of Johnson Victorarockiaraj in the matter of Titan Company CONSIDERATION OF ISSUES EVIDENCE AND FINDINGS 8. I have carefully perused the charges levelled against Noticee replies submissions filed by Noticee and other documents evidence available on record. The issues that arise for consideration in the present case are: 1) Whether Noticee has violated Regulation 7(2)(a) of PIT Regulations 2) Does the violation if any attract monetary penalty under Section 15A(b) of 3) If the answer to issue no. 2 is in affirmative then what should be the quantum 9. Before moving forward it is pertinent to refer to the relevant provision of the PIT Regulations which was in force at the time of impugned transactions which are SEBI Act of monetary penalty reproduced as under: Relevant provisions of PIT Regulations: Disclosures by certain persons. 7(2) continual disclosure. a)Every promoter employee and director of every company shall disclose to the company the number of such securities acquired or disposed of within two trading days of such transaction if the value of the securities traded whether in one transaction or a series of transactions over any calendar quarter aggregates to a traded value in excess of ten lakh rupees or such other value as may be specified Issue No.1 Whether Noticee has violated Regulation 7(2)(a) of PIT Regulations 10. I note from the available records that Noticee was one of the employees of Titan. While in employment of Titan Noticee had transacted in securities of Titan as seen from the details extracted from the trade log obtained from NSE which are given below: Adjudication Order in respect of Johnson Victorarockiaraj in the matter of Titan Company Table 2 Name of Noticee BSE+NSE)No. of occasions on which traded value exceeded Rs. 10 lakh April June July Sep Mr. Johnson Victorarockiaraj 11. On perusal of the trading details of Noticee for the quarter April to June 2018 I note that on May 9 2018 on a cumulative basis the total value traded by Noticee in the scrip of Titan was Rs. 16 59 938 which was in excess of rupees ten lakhs. Similarly I note that on September 21 2018 the total value traded by Noticee in the scrip of Titan was Rs. 12 47 813 which was in excess of rupees ten lakhs. Further I note that on September 25 2018 the total value traded by Noticee in the scrip of Titan on a cumulative basis was Rs. 12 17 025 which was in excess of rupees ten lakhs. I observe that the cumulative traded value as mentioned in the SCN differs slightly from the details of his trades as depicted in trading details extracted from the trade log obtained from NSE which has also been provided to Noticee as an annexure to the SCN. However from the submissions made by Noticee I note that he has not disputed the impugned transactions by him in the scrip of Titan as specified above. In any case I note that his transactions on each of the aforesaid three days exceeded rupees ten lakhs. 12. In terms of Regulation 7(2)(a) of PIT Regulations Noticee being an employee of the company was required to make disclosures to Titan for each of the aforesaid transactions within twoworking days. However there is no evidence available on record to show that Noticee had made any disclosures in terms of the aforesaid regulation for the above three transactions. 13. In terms of the aforesaid provision of PIT Regulations requisite disclosures are to be made based on every event of either acquisition or disposal of securities in excess of the limits specified therein in terms of number value percentage. In the instant matter disclosure requirements in terms of Regulation 7(2)(a) of PIT Adjudication Order in respect of Johnson Victorarockiaraj in the matter of Titan Company Regulations were triggered because the traded value of Noticee’s transactions in the scrip of Titan exceeded ten lakh rupees. 14. Noticee has contended that he was not aware of trading restrictions under PIT Regulations. In this regard I note that statement made by Noticee is not justified. As postulated by legal maxim “ignorantia juris non excusat” ignorance of law is no excuse and everyone is presumed to know the law of the land. A person cannot defend his illegal actions by stating that he was not aware his actions were illegal even if he honestly believed that they were not breaking the law. Therefore I do not find any merit in this contention of Noticee. 15. In view of the above I conclude that the allegation that Noticee has violated Regulation 7(2)(a) of PIT Regulations on threeoccasions stands established. Issue No. 2 Does the violation attract monetary penalty under Section 15Aof SEBI Act 16. In this regard I place reliance on the order of the Hon’ble SAT in the matter of Virendrakumar Jayantilal Patel vs. SEBI wherein Hon’ble SAT held that “ …. obligation to make disclosures within the stipulated time is a mandatory obligation and penalty is imposed for not complying with the mandatory obligation.” 17. I note that the Hon’ble Supreme Court of India in the matter of SEBI v s Shri Ram Mutual Fund68 SCL 216(SC) held that “In our considered opinion penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established...…”. 18. Therefore in view of the above judgments and considering that Noticee violated Regulation 7(2)(a) of PIT Regulations as established in the foregoing paragraphs I find that Noticee would be liable for monetary penalty under Section 15Aof the SEBI Act. The text of Section 15A(b) of the SEBI Act is reproduced below: SEBI Act Penalty for failure to furnish information return etc. Adjudication Order in respect of Johnson Victorarockiaraj in the matter of Titan Company 15A. If any person who is required under this Act or any rules or regulations made there under — b) to file any return or furnish any information books or other documents within the time specified therefore in the regulations fails to file return or furnish the same within the time specified therefore in the regulations he shall be liable to a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of Issue No.3 What should be the quantum of monetary penalty 19. While determining the quantum of penalty under Section 15A(b) of the SEBI Act it is important to consider the factors as stipulated in Section 15J of the SEBI Act one crore rupees which reads as under: SEBI Act Factors to be taken into account by the adjudicating officer. Section 15J While adjudging quantum of penalty under section 15 I 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. Explanation For the removal of doubts it is clarified that the power of an adjudicating officer to adjudge the quantum of penalty under sections 15A to 15E clausesandof section 15F 15G 15H and 15HA shall be and shall always be deemed to have been exercised under the provisions of this section. 20. In view of the charges established and the facts and circumstances of the case the quantum of penalty would depend on the factors referred in Section 15 J of Adjudication Order in respect of Johnson Victorarockiaraj in the matter of Titan Company the SEBI Act stated as above. In the instant case it is not possible from the material on record to quantify the amount of disproportionate gain or unfair advantage resulting from the default of Noticee in making disclosures or the consequent loss caused to investors as a result of the default. 21. However with respect to the disclosure violations by Noticee I note that the purpose of these disclosures is to bring about transparency in the transactions of Directors Promoters Acquirers employees and assist the Regulator to effectively monitor the transactions in the market. Hon ble SAT in the case of M s. Coimbatore Flavors & Fragrances Ltd. & Ors vs SEBI has held that "Undoubtedly the purpose of these disclosures is to bring about more transparency in the affairs of the companies. True and timely disclosures by a company or its promoters are very essential from two angles. Firstly investors can take a more informed decision to invest or not to invest in a particular scrip secondly the Regulator can properly monitor the transactions in the capital market to effectively regulate the same." Hon’ble SAT in the aforesaid order has articulated the importance of true and timely disclosures. Further I find that Noticee has violated the provisions of Regulation 7(2)(a) of PIT Regulations on threeoccasions. 22. Having considered all the facts and circumstances of the case the material available on record the submissions made by Noticee and also the factors mentioned in Section 15J of the SEBI Act as enumerated above I in exercise of the powers conferred upon me under Section 15 I of the SEBI Act read with Rule 5 of the Adjudication Rules hereby impose a penalty of Rs. 1 00 000 on Noticee i.e. Mr. Johnson Victorarockiaraj under the provisions of Section 15A(b) of SEBI Act. I am of the view that the said penalty is commensurate with the lapse omission on the part of Noticee. 23. Noticee shall remit pay the said amount of penalty within 45 days of receipt of this order through online payment facility available on the website of SEBI i.e. www.sebi.gov.in on the following path by clicking on the payment link: ENFORCEMENT > Orders > Orders of AO > PAY NOW. In case of any Adjudication Order in respect of Johnson Victorarockiaraj in the matter of Titan Company difficulties in payment of penalties Noticee may contact the support at 24. The said confirmation of e payment made in the format as given in table below should be sent to "The Division Chief EFD DRA I Securities and Exchange Board of India SEBI Bhavan Plot no. C 7 "G" Block Bandra Kurla Complex BandraMumbai 400 051” and also to e mail id: tad@sebi.gov.in 1. Case Name: 2. Name of payee: 3. Date of payment: 4. Amount paid: 5. Transaction no.: 6. Bank details in which payment is made: 7. Payment is made for: like penalties disgorgement recovery settlement amount and legal charges along with order details) 25. In the event of failure to pay the said amount of penalty within 45 days of the receipt of this Order recovery proceedings may be initiated under Section 28A of the SEBI Act for realization of the said amount of penalty along with interest thereon inter alia by attachment and sale of movable and immovable properties of Noticee. 26. In terms of the provisions of Rule 6 of the Adjudication Rules a copy of this order is being sent to Noticee viz. Mr. Johnson Victorarockiaraj and also to SEBI. Place: Mumbai SOMA MAJUMDER Date: February 09 2022 ADJUDICATING OFFICER Adjudication Order in respect of Johnson Victorarockiaraj in the matter of Titan Company 