sebi:VSS/AO-46/2008

SEBI · SEBI · 2008-03-10 · V.S. Sundaresan, Adjudicating Officer

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Facts / Headnote

Violation of Regulation 54(5) held established; monetary penalty of Rs.15,000 imposed under Section 19D of the Depositories Act, 1996

Provisions invoked

• s. 4(3)
• s. 12
• s. 19H
• s. 19D
• s. 19I

Regulations

• Reg. 199
• Reg. 54(5)
• Reg. 54

Parties

• Garlon

Holding

The Noticee violated Regulation 54(5) of the DP Regulations by delay of 104 days in dematerialisation of 26,100 shares and is liable for monetary penalty under Section 19D of the Depositories Act, 1996. A penalty of Rs.15,000 was imposed.

Full text

Page 2 of 11 2. 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”). Accordingly, Securities and Exchange Board of India (hereinafter referred to as “SEBI”) initiated adjudication proceedings under section 4(3) of Securities and Exchange Board of India,1992 (hereinafter referred to as “SEBI Act”) read with section 19H of the Depositories Act against Garlon vide order dated March 10, 2008.

Page 3 of 11 5. The Noticees replied to the SCN vide their letter dated April 11, 2008. The summary of the submissions of the Noticees, inter alia, are as under: • That the company has been referred to the BIFR for being declared sick, since the Nett worth of the company stands eroded and the matter is registered vide its acknowledgement letter no. 51/2001 dt. 31/1/2001. • That the Assets of the Company have also been taken over by the State Financial Institution i.e. UPFC under Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act 2002 (SRFAESIA’2002) on 28/6/2003. • That all the Business Activities of the company had come to a stand still and the situation continues till date. • That still the company is regularly filing its Audited accounts and making all other compliances timely with all Govt. Deptts., including Stock Exchange, ROC. • That the RTA M/s. R&D Consultants (P) Ltd., Mumbai, appointed by us in 2002-03, had abruptly closed its operations without any information to the company and with great effort the company was able to retrieve the shares sent for release in DEMAT form, from the said RTA. • That immediately on coming to know that the said RTA has shut its operations, the company appointed M/s.Abhipra Capital Ltd., New Delhi (INR 000003829) as its new RTA and even applied alongwith requisite charges to CDSL for making the necessary changes (copy of letter enclosed). • That in July’2007 CDSL issued a querry letter to us infor

Page 4 of 11 • That however we did not hear from CDSL and regularly pursued with CDSL as well as Abhipra Capital Ltd., to get the connectivity established for our ISIN, however we were informed by both of them (i.e. CDSL & New RTA) that the same is under processing. • That in Oct’07 we recd a letter from CDSL dt. 23/10/07, mentioning that SEBI vide its order no. WTM/VKC/MIRSD/DPS-2/93/07 dt. 17/8/07, has directed CDSL to not to undertake any new Agreement with Abhipra Capital Ltd., New Delhi as a RTA/Share Transfer Agent and it further informed that our request for change in RTA has been kept in abeyance. (copy enclosed). • The company has always been particular in filing and maintaining all records diligently including timely despatch of shares, despite its not so good financial condition. • The company had already taken steps for timely appointment of a new RTA i.e. M/s. Abhipra Capital Ltd., New Delhi, the moment it became aware of its latter RTA (R&D Consultants (P) Ltd) closing shop and had approached CDSL with the request to make the change alongwith filing the required fee also. • That the alleged default/delay of 104 days (3.5 months) in release of shares in DMAT, has not been due to any negligence on part of the company, but due to a SEBI order against the newly appointed RTA. • That the company had already filed request in June’07 for change in RTA i.e. almost 4 months prior to receipt of the alleged 26,100 shares and the same would have got released in time, if the

Source: SecMarx — sebi:VSS/AO-46/2008. 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.