Adjudication Order in respect of Vidarbha Industries Limited in the matter of Vidarbha Industries Limited

Page 1 of 7 August 28, 2014

BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

ADJUDICATION ORDER NO. JJ/AM/AO116/2014

UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA
ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR HOLDING
INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES,
1995

In respect of:
Vidarbha Industries Limited
(PAN AAACV8686N)
In the Matter of: Vidarbha Industries Limited

BACKGROUND

1. Securities and Exchange Board of India (SEBI) had issued Circular No.
CIR/OIAE/2/2011 dated June 3, 2011 regarding commencement of SEBI
Complaints Redress System (SCORES) and advising all companies whose
securities are listed on various stock exchanges to comply with the
provisions of the said circular. On August 13, 2012, SEBI came out with
another circular advising all companies, whose securities are listed on
stock exchanges to obtain SCORES authentication. Subsequently, SEBI
came out with a Circular on April 17, 2013 in terms of which all listed
companies were inter alia called upon to redress the grievances of
investors within 30 days of the receipt of the complaints and all listed
companies which were yet to obtain SCORES user id and password were
required to obtain the same.

2. As the SCORES is online electronic system, therefore, for the purposes of
accessing the complaints of the investors against them, as uploaded in the
SCORES, listed companies were required to login to SCORES system
electronically through a company specific user id and password, to be
provided by SEBI. For the purpose of generating said user id and
password, listed companies which were yet to obtain SCORES user id and
password, were required to submit the details for authentication to SEBI,
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Adjudication Order in respect of Vidarbha Industries Limited in the matter of Vidarbha Industries Limited
Page 2 of 7 August 28, 2014
in the format annexed to the Circular dated April 17, 2013. However, it
was observed that Vidarbha Industries Limited (Noticee) did not submit
the details to SEBI which were required to be furnished in terms of the
Circular dated April 17, 2013.

3. In order to further remind the Noticee about the compliance with the
requirements as laid down in the SEBI Circular dated April 17, 2013 and
to resolve pending investor grievances, letter dated November 26, 2013
was sent to the Noticee and the same was duly delivered by way of
Affixture on November 28, 2013. The said letter also informed the
Noticee that as on November 26, 2013 that there was 01 (one) investor
grievance pending against it for more than 30 days in SCORES. The said
letter also advised the Noticee to obtain SCORES user id and password
and redress all pending investor grievances by December 10, 2013 and
submit the Action Taken Report (ATR) in SCORES. However, it was
alleged that the Noticee failed to redress pending investor grievance and
also failed to obtain SCORES authentication in spite of being called upon
by SEBI to do so thereby violating the provisions of Section 15C and 15HB
of the SEBI Act, 1992.

4. The undersigned was appointed as the Adjudicating Officer vide order
dated February 18, 2014 and the said appointment was conveyed vide
proceedings of the Whole Time Member dated March 07, 2014 to inquire
and adjudge under Section 15C and 15HB of the SEBI Act, 1992, the
alleged violations committed by the Noticee.

SHOW CAUSE NOTICE, HEARING & REPLY

5. Show Cause Notice (SCN) in terms of the provisions of Rule 4(1) of SEBI
(Procedure for Holding Inquiry and Imposing Penalties by Adjudicating
Officer) Rules, 1995 (Adjudication Rules) was issued to the Noticee on
July 18, 2014, calling upon the Noticee to show cause why an inquiry
should not be held against it under Rule 4(3) of the Adjudication Rules
and penalty be not imposed under Section 15C and 15HB of the SEBI Act,
1992 for the alleged violations.

6. The aforesaid SCN was duly delivered to the Noticee by affixture on July
24, 2014. Vide letter dated July 28, 2014 the Noticee acknowledged the
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Adjudication Order in respect of Vidarbha Industries Limited in the matter of Vidarbha Industries Limited
Page 3 of 7 August 28, 2014
receipt of the SCN and while giving the address of their corporate office
for correspondence, inter alia, made the following submissions:
o Our immediate reply is that our Company has seized to be a listed
Company since 2004.
o We have not paid stock exchange fees from the year 1999-2000.
o Further we have to mention that as per our records we do not have any
member by name of Mr. Prakash Deshmukh.
o Since we are not a listed Company the pursuing of sections referred by
you in your letter are not applicable to us. Hence we request you to
kindly drop the proceedings.
o Without prejudice to that has been mentioned above we will be filing
our detailed submission after consulting senior lawyer.

7. Vide Notice dated August 08, 2014 the Noticee was given an opportunity
of personal hearing on August 26, 2014. Vide letter dated August 21, 2014
the Noticee submitted its reply salient points of which are as under:
o The Company is closely held since 05/09/1995 and Mr. Prakash
Deshmukh is not our share holder and we confirm that he has never
been our share holder in past.
o The Company had withdrawn itself from being registered with Stock
Exchange.
o The provisions of the act are applicable only to a listed company and
we are not listed since 1999-2000 and hence the penal provisions
should not be made applicable on us.
o The email address of the company is easily available from the ROC site
where the entire annual report with full details of the Company is
readily available. Had the complainant ever tried to genuinely contact
us then he could had easily traced our source.

8. Shri Paresh Jairam Tank, Chartered Accountant, appeared on the
scheduled date of hearing as Authorised Representative (AR) of the
Noticee and reiterated its reply made vide letter dated August 21, 2014.
The AR of the Noticee was also given a copy of email dated August 25,
2014 received from the Calcutta Stock Exchange Limited (CSE) in which it
was mentioned that the shares of the Noticee are listed with CSE w.e.f.
26/02/1997 and trading in shares of the Noticee was suspended for non-
compliance of Listing Agreement. Vide letter dated August 27, 2014 the
Noticee submitted a scan copy of Complaint Details and stated that the
complainant, i.e., Mr. Prakash Deshmukh had filed the complaint against a
company under the name Vidarbha Consultants Private Ltd. The Noticee
also stated that it had already written to CSE to delist the company way
since 2004 and it would once again take up the matter with CSE and
comply with the procedures for delisting.

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Adjudication Order in respect of Vidarbha Industries Limited in the matter of Vidarbha Industries Limited
Page 4 of 7 August 28, 2014

ISSUES FOR CONSIDERATION

9. After perusal of the material available on record, I have the following
issues for consideration, viz.,
A. Whether the Noticee has violated provisions of SEBI Circular dated
April 17, 2013 by not taking SCORES authentication and not resolving
investor grievances?
B. Whether the Noticee is liable for monetary penalty under Section 15C
and 15HB of the SEBI Act, 1992?
C. What quantum of monetary penalty should be imposed on the Noticee
taking into consideration the factors mentioned in Section 15J of the
SEBI Act, 1992?

FINDINGS

10. On perusal of the material available on record and giving regard to the
facts and circumstances of the case, I record my findings hereunder.

ISSUE 1: Whether the Noticee has violated provisions of SEBI Circular
dated April 17, 2013 by not taking SCORES authentication and not
resolving investor grievances?

11. As already observed, SEBI introduced an online electronic system for
resolution of investor grievances, i.e., SCORES in 2011. For the purposes
of accessing the complaints of the investors against them, as uploaded in
the SCORES, listed companies were required to login to SCORES system
electronically through a company specific user id and password, to be
provided by SEBI. SEBI came out with a Circular on April 17, 2013 in
terms of which all listed companies were inter alia called upon to redress
the grievances of investors within 30 days of the receipt of the complaints
and all listed companies which were yet to obtain SCORES user id and
password were required to obtain the same. However, it was observed
that for the purpose of generating said user id and password, the Noticee,
which was yet to obtain SCORES user id and password, failed to submit
the details for authentication to SEBI, in the format annexed to the
Circular dated April 17, 2013. Vide letter dated November 26, 2013 the
Noticee was once again advised to obtain the SCORES authentication.
However, the Noticee failed to obtain the SCORES authentication. The
Noticee in its reply has submitted that it is not a listed company. In order
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Adjudication Order in respect of Vidarbha Industries Limited in the matter of Vidarbha Industries Limited
Page 5 of 7 August 28, 2014
to substantiate its claim, the Noticee has only provided a copy of a letter
dated June 07, 2014 written by the Noticee to CSE wherein it has
expressed its disinterest to continue listing of its share on CSE. However,
the fact remains that the shares of the Noticee are still listed at CSE.
Hence, the Noticee should have taken SCORES authentication as advised
by the SEBI Circulars. Therefore I note that the Noticee has failed to
comply with SEBI Circular dated April 17, 2013 on this count.

12. From the SCN I note that the Noticee was also alleged to have not
resolved 1 (one) investor grievance (Complainant - Prakash Deshmukh;
Registration No. SEBIE/WB13/0000220/1) pending against it as on
November 26, 2013. In its reply, the Noticee has submitted a copy of the
Complaint Details and stated that the said complaint was filed against a
different entity, i.e., Vidarbha Consultants Pvt. Ltd. I have perused the
Compliant Details and find merit in the submissions of the Noticee.
Therefore, the charge of not resolving investor grievance as alleged in the
SCN does not stand established.

ISSUE 2: Whether the Noticee is liable for monetary penalty under
Section 15C and 15HB of the SEBI Act, 1992?

13. The provisions of Section 15C and 15HB of the SEBI Act, 1992, read as
under:
15C Penalty for failure to redress investors' grievances: If any listed
company or any person who is registered as an intermediary, after
having been called upon by the Board in writing, to redress the
grievances of investors, fails to redress such grievances within the time
specified by the Board, such company 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.

15HB Penalty for contravention where no separate penalty has been
provided: Whoever fails to comply with any provision of this Act, the
rules or the regulations made or directions issued by the Board
thereunder for which no separate penalty has been provided, shall be
liable to a penalty which may extend to one crore rupees.


14. In the matter of SEBI Vs. Shri Ram Mutual Fund [2006] 68 SCL 216 (SC), the
Honble Supreme Court of India has 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 regulation is established and hence the
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Adjudication Order in respect of Vidarbha Industries Limited in the matter of Vidarbha Industries Limited
Page 6 of 7 August 28, 2014
intention of the parties committing such violation becomes wholly
irrelevant.

15. A listed company is expected to comply with the extant regulatory and
statutory requirements. As already observed, the Noticee, which is a
listed company, failed to take SCORES authentication in compliance with
SEBI Circular dated April 17, 2013. Therefore, I find that the Noticee is
liable for monetary penalty under Section 15HB of the SEBI Act, 1992. I
further note that the charge of not resolving investor grievance against
the Noticee has not been established, and therefore, the Noticee is not
liable for monetary penalty under Section 15C of the SEBI Act, 1992.

ISSUE 3: What quantum of monetary penalty should be imposed on the
Noticee taking into consideration the factors mentioned in Section 15J
of the SEBI Act, 1992?

16. While imposing monetary penalty it is important to consider the factors
stipulated in Section 15J of the Act, which reads as under:
15J - Factors to be taken into account by the adjudicating officer
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.

17. In the absence of material on record, the amount of disproportionate gain
or unfair advantage made as a result of the default and the amount of loss
caused to the investors due to the said default cannot be quantified.
However, the fact remains that the Noticee, being a listed company, failed
to fulfil its duty of complying with SEBI Circulars. It is the duty of SEBI to
ensure speedy resolution of investor grievances and to further the cause
SEBI has come out with SCORES which is a centralized web based
complaints redress system that enable investors to lodge and follow up
their complaints and track the status of redressal of such complaints from
anywhere. However, listed companies like the Noticee which do not
obtain SCORES authentication despite SEBI Circulars frustrate the entire
process. Hence, the omission on part of the Noticee was detrimental to
the interest of investors in securities market.
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Adjudication Order in respect of Vidarbha Industries Limited in the matter of Vidarbha Industries Limited
Page 7 of 7 August 28, 2014
18. In view of the aforesaid paragraphs, it is now established that the Noticee
failed to obtain SCORES authentication thereby violating SEBI Circular
dated April 17, 2013 for which I find that imposing a penalty of `
2,00,000/- (Rupees Two Lakhs only) on the Noticee would be
commensurate with the violation committed.

ORDER

19. Considering the facts and circumstances of the case, in terms of the
provisions of SEBI Act, 1992 and Rule 5(1) of the Adjudication Rules, I
hereby impose a penalty of ` 2,00,000/- (Rupees Two Lakhs only) on
Vidarbha Industries Limited under Section 15HB of the SEBI Act, 1992.

20. The penalty shall be paid by way of demand draft drawn 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 shall be
forwarded to the Regional Director, Eastern Regional Office, Securities
and Exchange Board of India, L & T Chambers, 3
rd
Floor, 16 Camac Street,
Kolkata 700017.

21. In terms of the provisions of Rule 6 of the SEBI (Procedure for Holding
Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995,
copies of this Order are being sent to the Noticee and also to Securities
and Exchange Board of India.




Date: August 28, 2014 Jayanta Jash
Place: Mumbai Adjudicating Officer

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