SEBI | Failure to furnish the mandate results in restriction from the market which became a mandate thereafter

Securities and Exchange Board of India (SEBI): Ananta Barua, Whole Time Member while exercising the powers conferred under Sections 11(1), 11(4), 11(4A), 11A and 11B(1), 11B(2) and Section 12A(1) of SCRA, 1956 read with Section 19 and 11(2)(j) of the SEBI Act, 1992 and Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 imposed varied penalties on the Noticees, while restraining  them from the securities market.

In the instant case, it was alleged that the Noticees executed transactions which are non-genuine in nature, resulting in misrepresentation of the accounts/financial statements and misuse of account/funds of the company and that such acts were found to be fraudulent in nature as they induced the investors to trade in the securities of the company and had the potential to mislead the investors. Further, that the Directors have failed to exercise duty of care by misrepresenting the financial statements/misusing the funds of the company.

The Tribunal was of the opinion that,

“ …penalty under Sections 15A(a) and 15HB of the SEBI Act, 1992, only, is attracted and not the penalties under Section 15HA of SEBI Act, 1992 and Sections 23E and 23H of 78 SCRA, 1956”.

It further noted that

“Section 15HA of the SEBI Act, 1992 provides for imposition of penalty in case of fraudulent and unfair trade practices committed by any person. As in the present case, it has been found that violations of Section 12A (a), (b) & (c) of SEBI Act, 1992 and provisions of PFUTP Regulations, 2003 have not been made out, therefore, penalty under Section 15HA of SEBI Act, 1992 is not attracted against the Noticees (i.e. Noticee no. 1 to 9). I also not that Section 23E of SCRA, 1956 provides for penalty for failure to comply with, inter alia, listing conditions by ‘a company or any person managing collective investment scheme or mutual fund’”.

And the Tribunal imposed a penalty of Rs 30, 00, 000 on Eskay K ‘n’ it India Limited, Rs 2, 00, 000 on Noticee 3, Rs 3,00,000 on Noticee 4, Rs 3, 00, 000 on Noticee 5, Rs. 15, 00, 000 on Noticee 6 and Noticee 7.[Eskay K’n’it India Limited, In re, 2021 SCC OnLine SEBI 198, decided on 11-08-2021]


Agatha Shukla, Editorial Assistant has reported this brief.

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