{"id":219027,"date":"1999-11-05T00:00:00","date_gmt":"1999-11-04T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/srg-infotec-ltd-vs-securities-and-exchange-board-of-on-5-november-1999"},"modified":"2015-12-25T16:55:27","modified_gmt":"2015-12-25T11:25:27","slug":"srg-infotec-ltd-vs-securities-and-exchange-board-of-on-5-november-1999","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/srg-infotec-ltd-vs-securities-and-exchange-board-of-on-5-november-1999","title":{"rendered":"Srg Infotec Ltd. vs Securities And Exchange Board Of … on 5 November, 1999"},"content":{"rendered":"
Securities Appellate Tribunal<\/div>\n
Srg Infotec Ltd. vs Securities And Exchange Board Of … on 5 November, 1999<\/div>\n<\/p>\n
<\/pre>\n
ORDER<\/p>\n
  1. SRG Infotec Limited, the appellants herein, are aggrieved by the order
\ndated 1-4-1999 made by the Adjudicating Officer, holding them guilty of
\nnon-compliance of the requirements of Securities and Exchange Board of
\nIndia (Registrars to an Issue and Share Transfer Agents) Rules, 1993 (‘the
\nRules’), read with Section 15B of the Securities and Exchange Board of
\nIndia Act, 1992 (‘the Act’) and imposing penalty of Rs. 3 lakhs.\n<\/p>\n
 2. The appellants, registered as a public limited company under the
\nCompanies Act, 1956, are engaged in providing services of Registrars to an
\nIssue (Registrars) and Share Transfer Agents (Transfer Agents) to corpo-
\nrate entities. They are holding Category I registration certificate granted
\nby the Securities and Exchange Board of India (SEBI). On the basis of
\ninformation in the quarterly reports submitted by the appellants, the
\nSEBI prima facie felt that the appellants were not complying with the
\nrequirements of the Rules and appointed an Adjudicating Officer on
\n28-9-1998 to conduct requisite enquiry and impose monetary penalty, if
\nso warranted. The Adjudicating Officer, conducted the enquiry and came
\nto the conclusion that the appellants had failed to comply with the
\nrequirements of Rule 4(1)(b) of the Rules as they did not enter into the
\nrequisite agreements with the clients before taking up the assignment of
\nRegistrars\/Transfer Agents and imposed a sum of Rs. 3 lakhs as penalty.
\nThe Adjudicating Officer had reported appellant’s failure to enter into
\nagreement with the following nine companies:\n<\/p>\n
 (i) NCJ International Ltd.\n<\/p>\n
 (ii) Jay Rapid Roller Ltd.\n<\/p>\n
 (iii) Jay Vinyls Ltd.\n<\/p>\n
 (iv) KEI Industries Ltd.\n<\/p>\n
 (v) Punjab Communications Ltd.\n<\/p>\n
 (vi) Noida Medicare Centre Ltd.\n<\/p>\n
 (vii) Tarai Foods Ltd.\n<\/p>\n
 (viii) SBEC Systems (India) Ltd.\n<\/p>\n
 (ix) Liberty Shoes Ltd.\n<\/p>\n
 3. The present appeal is directed against the adjudication order dated
\n1-4-1999 referred to above. According to Rule 9 of the Securities Appellate
\nTribunal (Procedure) Rules, 1995 predeposit of the penalty amount is a
\ncondition for entertaining the appeal, unless the requirement is waived by
\nthe Tribunal for sufficient reasons. The appellants vide application 4 of
\n1999 have prayed for waiver of the requirement of depositing the penalty
\namount. In this context it is pertinent to mention that the respondents
\nhave already filed their detailed reply to the appeal. Both the parties have
\nexpressed their willingness to proceed with the appeal itself and that being
\nthe case, I do not find any need to go into the merits of the waiver
\napplication now, as waiver has become only a technical requirement.
\nAccordingly, I allow the application and proceed with the appeal as
\nconsented to, by the parties.\n<\/p>\n
 4. A few facts, based on which the Adjudicating Officer has held the
\nappellants guilty, deserve to be narrated.\n<\/p>\n
 NCJ International Ltd. (NCJ)  <\/p>\n
 (i) The appellants were acting as Registrars to the company’s public issue
\nopened on 16-1-1995. They were also acting as Transfer Agents thereafter.
\nAccording to the appellants, they had forwarded a Memorandum of
\nUnderstanding dated 4-5-1995 to NCJ vide their letter of 19-6-1995, with
\na request to return the same duly signed. However, they could not
\nproduce the same or any tangible evidence to show the existence of a valid
\nagreement between the parties. Their contention was that it could not
\nhave been possible for them to act as Registrar and Transfer Agents
\nwithout the existence of an agreement and may not be viewed that the
\nagreement with NCJ never existed. They had stated before the Adjudi-
\ncating Officer that – ‘we have been carrying the job of Transfer Agents of
\nM\/s. NCJ International Ltd. after public issue. We had prepared the
\nagreement and sent it to the company many times for signature, but we
\nhave not received the same back’. In the light of the appellants’ own
\nadmission that the agreement was not received back duly signed by NCJ,
\nthe Adjudicating Officer concluded that the appellants had failed to enter
\ninto a valid agreement with NCJ before taking up the assignment as
\nRegistrars and Transfer Agents.\n<\/p>\n
 Jay Rapid Roller Ltd. (JRR)  <\/p>\n
 (ii) The appellants were acting as Registrars to the company’s public issue
\nopened on 1-3-1994 and as Transfer Agents thereafter. According to them
\nthe draft agreement relating to their appointments as Transfer Agents was
\nsent to the company on 28-1-1995. But they could not produce the
\nagreement or any evidence to show that the agreement was executed as
\nrequirement under the rules. The appellants had produced correspondence
\nbetween them and JRR indicating that they were appointed as Transfer
\nAgents. However, they had admitted that they were not aware of the
\nimplications of the requirements of continued existence of a valid agree-
\nment with the company and that is why some times they were exchanging
\nletters with the issuer company after the expiry of the original agreement.
\nAccording to the Adjudicating Officer, the correspondence exchanged
\nbetween the parties could at the most be considered as extending the
\nexisting agreement subject to the same terms and conditions, if at all there
\nexisted any agreement originally. Text of any agreement for the period
\nprior to 21-10-1998 was not available though they were acting as Transfer Agents since 1994. The Adjudicating Officer came to the conclusion that
\nthe requisite agreement was not entered into by the appellants with JRR
\nbefore taking up the work of Registrars for the public issue opened on
\n1-3-1994 and for carrying on the activities as Transfer Agents.\n<\/p>\n
 Jay Vinyls Ltd. (JVL)  <\/p>\n
 (iii) The appellants had admitted that they had acted as Registrars to the
\ncompany’s public issue opened on 9-8-1994 and thereafter as Transfer
\nAgents. Relevant agreement was not produced. But they had stated that
\n‘an agreement must have been entered into with JVL, however, we are not
\nable to locate the same and cannot produce the same’. According to them,
\nthey were appointed as Transfer Agents for a further period of 1 year from
\n1-10-1996 and again upto 30-9-1997 and thereafter upto 20-10-1997 and thereafter upto 20-10-1998 by
\nexchanging letters. A copy of the agreement dated 21-10-1998 appointing
\nthem as Transfer Agents for a further period of 1 year was produced.
\nSince they did not produce any agreement, to which the subsequent
\nappointment letters referred to, the Adjudicating Officer concluded that
\nno agreement was entered into for acting as Registrars and as Transfer Agents, till 21-10-1998.\n<\/p>\n
 KEI Industries Ltd. (KIL)  <\/p>\n
 (iv) According to the appellants, they were acting as Registrars\/Transfer
\nAgents for KIL since the company’s public issue opened on 16-1-1995 that
\nthey had sent a Memorandum of Understanding for their appointment as
\nTransfer Agents for the period February, 1995 to 31-12-1996 to the
\ncompany vide letter dated 19-6-1995 for their signature. But the agree-
\nment or even its copy was not produced before the Adjudicating Officer.
\nThey repeated the excuse that ‘since we had handled the public issue of
\nthe company, there must have been an agreement with the company’.
\nHowever, they had produced copy of an agreement dated 1-1-1997
\ncovering a period of 1 year and another Memorandum of Understanding
\ndated 30-9-1998 for 2 years with effect from 30-9-1998. They had admitted
\nthat there was no formal agreement for their appointment as Transfer
\nAgents for the period 31-12-1997 to 30-9-1998. The Adjudicating Officer
\nconcluded that the appellants were acting as Registrars\/Transfer Agents
\nwithout entering into an agreement for a period of 2 years since their
\nappointment and also there was no agreement to act as Transfer Agents
\nfor the period 31-12-1997 to 30-9-1998.\n<\/p>\n
 Punjab Communications Ltd. (PCL)  <\/p>\n
 (v) In this case the appellants were acting as Registrars to the PCL’s public
\nissued opened on 24-10-1994 and thereafter as Transfer Agents. However,
\nthey did not produce the agreement or a copy thereof, though they
\nasserted that an agreement had been entered into with PCL at the time of
\npublic issue and that the said initial agreement was for one year. This
\nstatement remained unsupported with any evidence. They had admitted
\nthat they had not entered into any formal agreement with PCL, that they
\nhad written several times to PCL explaining the need for executing such
\nan agreement. The Adjudicating Officer concluded that there was no valid agreement in existence to act as Registrar and Transfer Agents.\n<\/p>\n
 Noida Medicare Centre Ltd. (NML)  <\/p>\n
 (vi) The appellants were Registrars for the NML’s public issue opened on
\n1-12-1992 and Transfer Agents since then. They had taken the stand that
\nsince Rules were notified only 31-5-1993 there was no need for entering
\ninto an agreement  in 1992. According to then they could find only a copy
\nof the agreement dated 1-1-1996 for their appointment as Transfer Agents
\nfor the period covering 1-1-1996 to 29-9-1998. Through another agree-
\nment the period was extended by one year from 30-9-1998. Though the
\nAdjudicating Officer admitted the appellant’s contention that there was
\nno statutory requirement to have an agreement executed in 1992, it was
\nincumbent on them to enter into an agreement in 1993, after their
\nregistration with SEBI on 16-10-1993 as Registrars and Transfer Agents.
\nEven after coming into force of the Rules, the appellants had failed to
\nenter into a valid agreement with NML for the period 1993 to 1995.\n<\/p>\n
 (Tarai Foods Ltd. (TFL)  <\/p>\n
 (vii) The appellants were appointed as Registrars for the TFL’s public issue
\nopened on 24-11-1993. It has been stated that on 23-1-1995 the appellants
\nforwarded a draft copy of the agreement relating to their appointment as
\nTransfer Agents to the company. However, this agreement was not
\nexecuted but returned with certain suggestions for modification. The
\ncorrespondence went on. The agreement was ultimately executed on
\n30-9-1998 appointing the appellants as Transfer Agents of the company
\nfor 3 months from the said date. The Adjudicating Officer, in the light of
\nthe facts, concluded that though the appellants were acting as Registrar\/
\nTransfer Agents since the public issue opened on 24-11-1993, there was no
\nvalid agreement as mandated under Rule 4(1)(b), till 30-9-1998.\n<\/p>\n
 SBEC System (India) Ltd. (SSL)  <\/p>\n
 (viii) The appellants were acting as Registrars to the public issue of SSL opened on 23-11-1993 and acted as Transfer Agents since them. They had
\nstated that the original agreement with SSL dated 4-5-1995 was valid for
\ntwo years from 1-4-1994 to 31-3-1996. Thereafter the agreement was
\nrenewed fro a further period of 1 year from 1-4-1996 to 14-5-1997 vide
\nletter dated 1-4-1996. A Memorandum of Understanding was signed on
\n15-5-1997 for 2 years with effect from 15-5-1997. The Adjudicating Officer
\nhas doubted the authenticity of the agreement made on 4-5-1995 on the
\nground that in Clause 27 of the agreement originally the period was filed
\nin handwriting as ‘one’ and ‘April 1, 1995’, as the date from which the
\nagreement was to be effective. According to the Adjudicating Officer the
\nclause was interpolated by substituting the words ‘two’ and ‘April 1, 1994’
\nin place of ‘one’ and ‘April 1, 1995’ apparently to cover up the gap. The
\nappellants could not explain this interpolation on the ground that Shri A.K.
\nSrivastav, Vice-President, the signatory of the agreement was not with
\nthem. Further in the case of Memorandum of Understanding executed on
\n15-5-1997 it was noticed that the non-judicial stamp paper used for the
\npurpose was purchased on 14-9-1998. The agreement was executed
\nobviously pre-dated to cover up the default. To this the appellants
\nexplanation was that since there was an agreement on plain paper made
\non 15-5-1997 it was shown as the date of the agreement. The appellant
\nceased to be the share Transfer Agents of SSL with effect from 31-7-1998.
\nThe Adjudicating Officer concluded that back dated agreements were
\nexecuted to cover up the defaults for the period 1-4-1994 to 4-5-1995 and
\nfor the period 15-5-1997 to 14-9-1998.\n<\/p>\n
 Liberty Shoes Ltd. (LSL)  <\/p>\n
(ix) In this case the appellants were acting as Registrars to the company’s
\npublic issue opened in August 1994. A copy of the agreement dated
\n21-10-1994 appointing the appellants as the Transfer Agents for a year
\nfrom the said date was produced before the Adjudicating Officer. Letters
\nexchanged thereafter renewing the agreement on the original terms and
\nconditions for different spells were also produced before the Adjudicating
\nOfficer. Taking into consideration the material produced, the Adjudicat-
\ning Officer observed that ‘giving benefit of doubt to SRG, in view of the
\nfact that LSL in their letter 29-1-1996 has referred to the contract expiring
\non 21-7-1995 it can be concluded that there existed an agreement between
\nSRG and the company i.e., LSL during the period 21-10-1994 to 21-7-1995
\nand the LSL’s letter as produced later though undated, conveying an
\nextension of the existing agreement from time to time an be construed
\nas maintaining the continuity of the agreement to act as Share Transfer
\nAgents. But SRG has failed to produce any agreement, which was entered
\ninto by them before taking up the assignment as Registrar to an Issue for
\nLSL’s public issue, which is in violation of Rule 4(1)(b) of the said Rules.’   <\/p>\n
 5. Shri Sanjay Sharma, authorised officer, who appeared for the appel-
\nlants, reiterated the submissions made in their appeal memorandum. The
\nappellants had submitted that the present enquiry is based on the information voluntarily provided by them in one of their quarterly reports and
\nthis shows to prove their bona fides, that the impugned order is a non-
\nspeaking order as it does not bring out the material facts forming the basis
\nfor the alleged contravention by the appellants, that mens rea of the
\nappellants essential for the offence and the motive and the benefit derived
\nif any, have not been established, that the order is arbitrary in nature and
\nthat the conclusions arrived at by the Adjudicating Officer are based on
\nsurmises, conjectures and imaginations. Main thrust of Shri Sharma’s
\noral submission was to convince the Tribunal that penalty imposed was
\ndisproportionate to the offence, if any, committed by the appellants. he
\ndid not controvert any of the facts relied upon by the Adjudicating Officer.\n<\/p>\n
 6. Shri Sura Reddy, authorised of SEBI appearing for the respondents also reiterated the submissions made in their reply. He submitted
\nthat the Adjudicating Officer had conclusively established the offence
\nand the penalty of rupees three lakhs imposed is only a token penalty,
\nthough the penalty could go upto Rs. 45 lakhs as for each default the
\nmaximum penalty leviable being Rs. 5 lakhs. He submitted that no
\nleniency should be shown to the appellants as they are not short of
\nexpertise to understand the requisite provisions of law for compliance.\n<\/p>\n
 7. I have very carefully considered the submissions made by the parties.
\nThe appellants contention that since the enquiry was on the basis of
\ninformation provided by them, penalty should not have been imposed,
\ndoes not stand to reason. The allegation that the adjudication order is a
\nnon-speaking order, lacking material facts and reasoning, is totally baseless. The Adjudicating Officer in her 35 pages order has very clearly
\narrayed the facts and reasons leading to the conclusion in each case.
\nFindings are supported by facts. Referring to the absence of mens rea, it
\nmay be stated that it is not an ingredient of the offence prescribed under
\nSection 15B of the Act. The allegation that the decision of the Adjudicating
\nOfficer is arbitrary and against the principles of natural justice is also
\nbaseless as is evident from the order itself that the appellants were given
\nsufficient opportunity to present their case and they had fully made use
\nof the same.\n<\/p>\n
 8. In terms of Section 12 of the Securities and Exchange Board of India Act,
\nbrought into force with effect from 30-1-1992, market intermediaries,
\nincluding Share Transfer Agents and Registrars to an Issue, are required
\nto obtain a certificate of registration from SEBI with the time frame
\nprescribed therein for carrying on their activities. They are required to
\ncomply with the conditions stipulated in the certificate of registration
\ngranted for the purpose. The Central Government had notified the rules
\nviz. Securities and Exchange Board of India (Registrars to an Issue and
\nShare Transfer Agents) Rules, 1993 on 31-5-1993, which, inter alia, contain
\nconditions for grant or renewal of certificate under Rule 4. According to
\nClause (b) of Sub-rule 4, Registrars to an Issue or Share Transfer
\nAgent is required to enter into a valid agreement with the person for or on
\nwhose behalf he is buying or selling or dealing in securities as a Registrars
\nto an Issue or as Transfer Agent and that agreement amongst other things
\nshould define the allocation of duties and responsibilities between him
\nand such body corporate. The certificate of registration is liable to be
\ncancelled or suspended by SEBI, under Section 12(3) of the Act for
\nsufficient reasons, which may include non-compliance of the conditions
\ngoverning grant of certificate of registration. Further, the Registrars\/
\nTransfer Agents is also liable to prosecution for violation of the provisions
\nof the Act and the rules and regulations made thereunder in terms of
\nSection 24 of the Act. These were the only penal provisions available to
\nmeet the contravention till the Act was amended in 1995. Through an
\namendment to the Act with effect from 25-1-1995 a new Section 15B was
\nadded. According to this newly introduced Section 15B, if any person, who
\nis registered as an intermediary and is required under the Act, or any rules
\nor regulations made thereunder to enter into an agreement with his client,
\nfails to enter into such agreement, he shall be liable to a penalty not
\nexceeding five lakh rupees for every such failure. Section 15B is applicable
\nprospectively. It was brought into force from 25-1-1995. Since the section
\nhas no retrospective application, the offences covered therein, committed
\nprior to the said date cannot be booked and penalised with monetary
\npenalty as provided therein.\n<\/p>\n
 9. Even though the Securities and Exchange Board of India (Registrars to
\nand Issue and Share Transfer Agents) Rules, 1993 are applicable to
\nRegistrars and Share Transfer Agents, it cannot be said that the duties and
\nfunctions of both these entities are one and the same. This is evident from
\nthe definitions of these two expressions provided in the Rules. The
\nactivities of Registrar to an Issue cover (i) collecting applications from
\ninvestors in respect of an issue of securities (ii) keeping proper records of
\napplication and monies received from investors or paid to the seller of
\nsecurities (iii) assisting the issuer in determining the basis of allotment,
\nfinalising the list of persons entitled to allotment and processing and
\ndespatching allotment letters, refund orders, certificates, etc. A Share
\nTransfer Agent on the other hand is one who on behalf of any body
\ncorporate, maintains the records of holders of securities issued by such
\nbody corporate and deals with all matters connected with the transfer and
\nredemption of its securities. It can be said that the activities of Registrar
\nis basically related to issue of securities and matters incidental thereto and
\nthat of a Share Transfer Agent, relate to transfer, transmission, redemp-
\ntion, etc. of securities after the allotment is completed. Regulations
\nnotified by SEBI permit entities to carry on the activities of both Regis-
\ntrars and Transfer Agents, subject to their fitness to carry on this ‘two in
\none’ activities. In such cases a combined certificate of registration is
\ngranted for carrying on the activities of Registrars and Transfer Agents.
\nThe ‘two in one’ entities are granted Category I certificate and those
\nentites who carry on the either of these activities are given Category II
\ncertificate. The appellants were granted a Category I certificate with
\neffect from 16-10-1993 and thereafter the certificate of registration was
\nrenewed for further periods. One of the conditions for grant\/renewal of
\ncertificate of registration is that a Registrar\/Transfer Agent shall enter
\ninto a valid agreement with the person for or on whose behalf they are
\nacting and that the agreement should define the allocation of duties and
\nresponsibilities between him and such person. Apart from the rules and
\nregulations, SEBI had issued certain operational guidelines\/instructions
\nin this regard alongwith two model agreements for the purpose. If a
\nCategory I certificate holder enters into an agreement with an issuer
\ncompany clearly defining the allocation of duties between him and the
\ncompany in respect of his role as Registrars and also as Transfer Agents,
\nit cannot be said that the intermediary has contravened the provisions of
\nRule 4(1)(b); as such a combined agreement would be treated as sub-
\nstantial compliance of the statutory requirement. The thrust is for a valid
\nagreement with clear allocation of duties and responsibilities between the
\ncompany and the Registrar or Transfer Agent or in that ‘two in one’ role
\nrecognised by SEBI. It is also evident that the agreement is required to be
\nexecuted before taking up the assignment and should remain alive during
\nthe currency of that assignment. Normally the activities of Registrars are
\nconcluded once the issue related matters are over. But this is not the case
\nwith the Transfer Agents. Transfer\/transmission of securities is an on
\ngoing activity and as such the Transfer Agents’ activities are of continuing
\nnature. It has been clearly mentioned in the certificate of registration that
\nthe SEBI had granted the certificate of registration to the appellants as
\nRegistrars and Transfer Agents subject to the conditions in the rules and
\nin accordance with the regulations to carry out the activities as specified
\ntherein. Therefore, compliance of the requirements under Rule 4(1)(b) is
\na requirement of the condition subject to which the certificate was
\ngranted and failure to do so would attract penal consequences.\n<\/p>\n
 10. The Adjudicating Officer in the impugned order has charged the
\nappellants on two counts that (i) they had not entered into any valid
\nagreement with 9 companies before taking up the assignment as Regis-
\ntrars and (ii) there was no valid agreement for discharging the functions
\nof Transfer Agents for certain periods.\n<\/p>\n
 11. In this context it is pertinent to mention that in all the 9 cases, discussed
\nin the order the appellants had acted as Registrars to public issues opened
\non a date prior to the date on which Section 15B was brought into force.
\nIt is true that failure to enter into and agreement in terms of Rule 4(1)(b)
\nwas an offence even at that time, but the penal consequences were
\nrestricted to suspension or cancellation of registration certificate as
\nprovided in Section 12(3) of the Act or prosecution under Section 24.
\nImposition of monetary penalty provided under Section 15B was not
\npossible for an offence committed on a date prior to 25-1-1995 i.e., date on
\nwhich the said section came into force. In view of this, the Adjudicating
\nOfficer invoking the provisions of Section 15B against the appellants for
\nnon-compliance of the requirements of Rule 4(1)(b) with reference to their
\nappointment as Registrar, for the public issues opened earlier is not legally
\nsustainable. It is noticed from the facts that all those public issues were
\nmade before the section was brought into force. Imposition of monetary
\npenalty invoking Section 15B in these cases is not acceptable as the cause
\nof action relates to a period when 15B was not in existence.\n<\/p>\n
 12. Coming to the contravention of Rule 4(1)(b) with reference to the
\nappellants failure to enter into agreements for acting as Transfer Agents
\nin the 8 cases (LSL has been absolved of this charge), it may be stated that
\nthe appellants have not seriously rebutted the material facts relied upon
\nby the Adjudicating Officer. From the evidence discussed in the impugned
\norder it is clear that the appellants had not produced the original or copy
\nof the relevant agreement relating to their assignment as Transfer Agents,
\neither for the whole period during which they rendered the service or for
\ncertain periods during the currency of such assignment as pointed out by
\nthe Adjudicating Officer. The argument that the appellants would not
\nhave taken up the assignment without executing an agreement deserve to
\nbe discarded. Further, the contention that the appellants had exchanged
\nletters with their clients and these letters constituted valid agreement, per
\nse is not acceptable. No doubt, a valid agreement can be constituted
\nthrough exchange of letters. But if the law prescribes any particular
\nrequirement to be put in an agreement, the failure thereof would not
\nrecognise such a default agreement as an agreement in terms of the
\nregime. In the present case Rule 4(1)(b) stipulates as to what should contain
\nin the agreement. So an agreement not in conformity with those require-
\nments is not a proper agreement for the purpose. The appellants had not
\nproduced any evidence to show that the so called letters defined the
\nallocation of duties and responsibilities of each party as required under
\nRule 4(1)(b). A letter by itself, without including the mandatory clause
\nprovided in the rule, cannot be considered to have constituted an agree-
\nment under the said rule.\n<\/p>\n
 13. Legal position regarding applicability of Section 15B is the same as discussed in para 11 above, in respect of failure to enter into agreement
\nbefore taking up the assignment as Transfer Agents also. However, since
\nthe Transfer Agents continued to provide such service even after
\n25-1-1995, it was necessary to execute the requisite agreement thereafter.
\nIt is seen that in all 8 cases the appellants had carried on their assignment
\nas Transfer Agents even after 25-1-1995 and default was noticed for
\ncertain periods during the currency of their assignment. I have carefully
\nconsidered the evidence and find that the appellants had defaulted in this
\nregard in the post-amendment period. Therefore, it cannot be said that the
\nappellants had not contravened any legal provision to attract the penalty
\nprovided under Section 15B.\n<\/p>\n
 Coming to the quantum of penalty it is seen that the Adjudicating Officer
\nhad imposed a lump sum monetary penalty of Rs. 3 lakhs though as per
\nSection 15B, for every failure by any person to enter into agreement with
\nclients as required under the Act, or any rule or regulations, a maximum
\npenalty of Rs. 5 lakhs is leviable. The Adjudicating Officer has conclusively
\nestablished the appellants’ failure to have necessary agreements with 8
\ncompanies on whose behalf they had acted as Transfer Agents even after
\n25-1-1995. The Adjudicating Officer has stated in the order the factors
\nwhich guided her in deciding the quantum of penalty. The penalty was
\nimposed ‘taking into account the corrective steps taken by the SRG by
\nway of entering into the presented agreement with some of the above
\ncompanies, after receipt of letter from SEBI and also an undertaking as
\nsubmitted by SRG that they shall be more careful in future and shall
\nensure compliance with the said Rules and Regulations and shall not give
\nany chance to SEBI to raise any such complaint in future’. Thus, it appears
\nthat the sum of Rs. 3 lakhs imposed as penalty is not arrived at on any pro
\nrata basis. It is only a token penalty. I do not consider it necessary to
\ninterfere with the quantum of penalty decided by the Adjudicating
\nOfficer.\n<\/p>\n
 To sum up, the appellants cannot be held guilty of offence under Section
\n15B for not entering into any agreement before taking up the assignment
\nas Registrars to an Issue, as the cause of action relates to a period prior to
\n25-1-1995. However, the Adjudicating Officer has conclusively estab-
\nlished contravention of Rule 4(1)(b) read with Section 15B, in respect of the
\nappellants’ failure to have requisite agreement with the concerned com-
\npanies in respect of the services rendered by them as Transfer Agents,
\nafter the said date. The lump sum penalty of rupees 3 lakhs imposed as
\nagainst a maximum penalty of Rs. 5 lakhs leviable for each default appears
\nto be a token penalty.\n<\/p>\n
 In the light of the above discussion, it cannot be said that the appellants
\nare not guilty of any offence to warrant imposition of monetary penalty.\n<\/p>\n
 14. The appeal is, therefore, dismissed.<\/p>\n","protected":false},"excerpt":{"rendered":"
Securities Appellate Tribunal Srg Infotec Ltd. vs Securities And Exchange Board Of … on 5 November, 1999 ORDER 1. SRG Infotec Limited, the appellants herein, are aggrieved by the order dated 1-4-1999 made by the Adjudicating Officer, holding them guilty of non-compliance of the requirements of Securities and Exchange Board of India (Registrars to an […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-219027","post","type-post","status-publish","format-standard","hentry","category-judgements"],"yoast_head":"\nSrg Infotec Ltd. vs Securities And Exchange Board Of ... on 5 November, 1999 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/srg-infotec-ltd-vs-securities-and-exchange-board-of-on-5-november-1999\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Srg Infotec Ltd. vs Securities And Exchange Board Of ... on 5 November, 1999 - 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