sebi:C/459/2003/IES/FUTP

SEBI · SEBI · 2002-10-08 · G. N. Bajpai, Chairman, Securities and Exchange Board of India

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Facts / Headnote

Show cause notice partly sustained; Hinduja TMT (formerly HFCL) directed not to deal in securities as an intermediary for a period of 2 years

Provisions invoked

Regulations

Parties

Holding

The proceedings were not bad in law due to efflux of time, and Hinduja TMT (formerly HFCL) was found guilty of violating SEBI (FUTP) Regulations, 1995 and SEBI (Merchant Bankers) Regulations, and was directed not to deal in securities as an intermediary for a period of 2 years under Section 4(3) read with Sections 11 and 11B of the SEBI Act, 1992.

Full text

3.3. HFCL had given applications accompanied by outstation cheques to SPML with a view to enabling the company to bring in subscription after closure of the issue; 3.4. HFCL knowingly permitted SPML to bring in applications after the date of closure of issue in order to avoid devolvement liability on them. 3.5. HFCL withdraw their applications on questionable grounds, apparently misusing the option given to investors; 3.6. HFCL failed to ensure that the rights issue of SPML genuinely received minimum subscription of 90%. 3.7. HFCL failed to intimate the regional stock exchange/ the post issue merchant banker/ the bankers to the issue about the

following judgments of the Supreme Court. 6.1.2. State of Gujarat V Patel Raghavnatha and others, Respondents, (AIR 1969 SC 1297). This was a case the Hon'ble Supreme Court had the occasion to examine sections 65 and 211 of the Bombay Land Revenue Code. Section 211 of the Code refers to power of the State Government to revision. As per section 211 of the said code, the State Government and any revenue officer, not inferior in rank to an Assistant or Deputy Collector or a Superintendent of Survey, in their respective Departments, may call for and examine the record of any subordinate revenue officer, for the purpose of satisfying itself or himself, as the case may be, as to the legality or propriety of any decision or order passed, and as to the regularity of the proceedings of such officer. In the captioned case, it seems that there were proceedings under section 65 and permission was granted for conversion of agricultural land into non agricultural purposes. As evident from the judgment the said permission was later revised under section 211 at the request of the Municipal Committee. It was held in this case that since section 65 it self indicates the length of the reasonable time within which the commissioner must Act under section 211, the commissioner must act within reasonable time , that in few months, to exercise the revisional powers. The facts of the present case are completely different and the ratio is not applicable here. Since the present proceedings are not revi

6.2.4. HFCL admitted that the advertisement was released only in two low circulation newspapers viz. ‘Dainik Jagran’ and ‘The Pioneer’ in Delhi whereas the majority of shareholders of SPML were in and around Calcutta. It is obvious that the said share holder did not have the benefit of the said additional disclosures. It is therefore charged that HFCL has violated SEBI (FUTP) Regulations. 6.2.5. It was replied by HFCL denying that their company had failed to monitor instructions given by SEBI and failed to ensure disclosure of vital information to investors and bring to SEBI’s notice their apprehensions in the matter. It was submitted that the above allegation did not fall in any of the categories of "unfair trade practices" enumerated in Regulation 6 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 and as such does not constitute violation of Regulation 6 ibid. Since, none of the facts alleged establish any unfair trade practice no action can be instituted by SEBI and the show cause notice is thus invalid. 6.2.6. The counsel during the course of personal hearing sated that an unsigned letter can not be relied on by the Board. However it is noted that it is not the fact of the letter that was under question but the contents of the letter admittedly found in the records of the HFCL. The contents of the letter were not disputed by the HFCL. The contents clearly reveal that there were undisclosed facts to the detrimen

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Source: SecMarx — sebi:C/459/2003/IES/FUTP. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.