The monetary penalty imposed on noticee under section 15A (b) of the SEBI Act – The Security and Exchange Board of India
The monetary penalty imposed on noticee under section 15A (b) of the SEBI Act – The Security and Exchange Board of India The Securities and Exchange Board of India received a letter from TITAN company limited where the company disclosed to SEBI about the contravention of SEBI Regulations, 2015 and a violation of the Company’s Code of Conduct for Prevention of Insider Trading by some of its designated persons/employees. The proceedings were initiated and several non-compliances were found of violations of PIT regulations and proceedings were initiated against  Mr. Deepak Kumar (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. Adjudication proceedings were initiated by the appointed adjudication officer SOMA MAJUMDER [ADJUDICATION ORDER NO. Order/SM/DD/2021-22/14951] A show-cause notice under  Rule 4 of the Adjudication Rules as to show cause why adjudication proceedings should not be initiated against the noticee for the alleged violations. The noticee responded and the adjudication was initiated against this response. The allegations were that the noticee total traded value of securities was Rs. 66,42,117 and it was observed that on 3 occasions in the aforesaid calendar quarter, the traded value of shares exceeded rupees ten lakhs. Therefore, for the aforesaid three (3) transactions, which were more than the limit specified in Regulation 7(2)(a) of PIT Regulations and it was alleged that Noticee has violated Regulation 7(2)(a) of PIT Regulations, on three (3) occasions by not making disclosures as required. The proceedings were initiated and through the trading details, it was found out that there was no evidence of the noticee making the disclosures of transactions to the company, and as per the necessary PIT regulations the disclosures have to be made of every event of either acquisition or disposal of securities in excess of the limits specified therein in terms of number/value/percentage. Noticee in his response contented that he was not aware of the provisions of PIT Regulations. the officer states that this response is not justified as the ignorance of the law is no excuse and everyone is presumed to know the law of the land and a person cannot defend the actions by ignoring the law and hence it is concluded that the allegation that Noticee has violated Regulation 7(2)(a) of PIT Regulations on three (3) occasions, stands established. On the imposition of monetary penalty the officer refers to the case of Virendrakumar Jayantilal Patel vs. SEBI and SEBI v/s Shri Ram Mutual Fund [2006] 68 SCL 216(SC) and because of these judgments establishes that t Noticee would be liable for monetary penalty under Section 15A (b) of the SEBI Act and a penalty of Rs. 1,00,000/- was imposed. Click here to read the Order
BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA ADJUDICATION ORDER NO. Order SM DD 2021 22 14951] UNDER SECTION 15 I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT 1992 READ WITH RULE 5 OF SEBIRULES 1995 In respect of Mr. Deepak Kumar PAN: BEAPK8166A 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. Deepak Kumar 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 Deepak Kumar in the matter of Titan Company Ltd. 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 Total Traded Value BSE+NSE)Apr June 2018 No. of occasions on which traded value exceeded Rs. 10 lakh Mr. Deepak Kumar 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. 66 42 117. It was also observed that on 3 occasions in the aforesaid calendar quarter the traded value of shares exceeded rupees ten lakhs. Therefore for the aforesaid threetransactions which were in excess of the 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 Adjudication Order in respect of Deepak Kumar in the matter of Titan Company Ltd. 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 and 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 August 18 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 as well as digitally signed email on September 22 2021 and was duly served upon him. Noticee appeared for hearing on the scheduled date and reiterated the submissions by him vide his earlier email dated August 18 2021. Due to difficulties in view of the Covid 19 pandemic hearing was conducted through video conferencing. 8. The submissions by Noticee are summarized hereunder: a. Noticee had transacted in the FY 2018 19 as per given data but those were done out of ignorance and were unintentional. b. He was not aware about the fact the employees were not allowed to trade in the company’s shares. He was employed at a low level of hierarchy. c. He was trading in multiple shares one of which was Titan shares. d. He stopped trading in Titan shares as soon as he came to know about this e. He incurred losses in the transactions in Titan’s shares. CONSIDERATION OF ISSUES EVIDENCE AND FINDINGS Adjudication Order in respect of Deepak Kumar in the matter of Titan Company Ltd. 9. 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 SEBI Act of monetary penalty 10. 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 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 11. 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 Deepak Kumar in the matter of Titan Company Ltd. Table 2 Name of Noticee BSE+NSE)No. of occasions on which traded value exceeded Rs. 10 lakh April June 2018 Mr. Deepak Kumar 12. On perusal of the trading details of Noticee for the quarter April to June 2018 I note that on May 9 2018 the total value traded by Noticee in the scrip of Titan was Rs. 19 49 504 which was in excess of rupees ten lakhs. Similarly I note that on May 10 2018 the total value traded by Noticee in the scrip of Titan was Rs. 19 61 288 which was in excess of rupees ten lakhs. Further I note that on May 14 2018 the total value traded by Noticee in the scrip of Titan was Rs. 27 31 325 which was in excess of rupees ten lakhs. 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. 13. 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. 14. 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 Regulations were triggered because the traded value of Noticee’s transactions in the scrip of Titan exceeded ten lakh rupees. 15. Noticee has contended that he was not aware of the provisions of 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 Adjudication Order in respect of Deepak Kumar in the matter of Titan Company Ltd. 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. As regards his contention about incurring losses in these transactions I find that the requirement of disclosure under Regulation 7(2)(a) of PIT Regulations is not contingent on gains or losses made in the transactions and therefore this statement is without any merit. 16. In view of the above findings I conclude that the allegation that Noticee has violated Regulation 7(2)(a) of PIT Regulations on three occasions stands Issue No. 2 Does the violation attract monetary penalty under Section 15Aof SEBI Act 17. 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.” 18. 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...…”. 19. 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 there under — Penalty for failure to furnish information return etc. 15A. If any person who is required under this Act or any rules or regulations made Adjudication Order in respect of Deepak Kumar in the matter of Titan Company Ltd. 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 20. 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. 21. 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 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 Adjudication Order in respect of Deepak Kumar in the matter of Titan Company Ltd. advantage resulting from the default of Noticee in making disclosures or the consequent loss caused to investors as a result of the default. 22. 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. 23. 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. Deepak Kumar 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. 24. 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 difficulties in payment of penalties Noticee may contact the support at Adjudication Order in respect of Deepak Kumar in the matter of Titan Company Ltd. 25. 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) 26. 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. 27. In terms of the provisions of Rule 6 of the Adjudication Rules a copy of this order is being sent to Noticee viz. Mr. Deepak Kumar and also to SEBI. Place: Mumbai SOMA MAJUMDER Date: February 11 2022 ADJUDICATING OFFICER Adjudication Order in respect of Deepak Kumar in the matter of Titan Company Ltd. 