BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. EAD-5/SVKM/AO/49/2015-16]
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, 1995AGAINST
SHRI PRAMOD JAIN
(PAN ADHPJ8942J)
L-7, Green Park Extension,
New Delhi 110 016

Inthe Matter of SRG INFOTECH LIMITED

__________________________________________________________________
BACKGROUND IN BRIEF

1. Securities and Exchange Board of India (SEBI) conducted investigation into

the irregular trading activities in the scrip of SRG Infotech Ltd. (hereinafter
referred to as "SRG/Company"). It was observed that SRG had come out
with a Rights Issue in 1995 and also stated that software development and
exports, computer education, multimedia and registrar and share transfer
agents as their business activities. SRG had not carried out any of the aforementioned activities except that of registrar and share transfer agent. The price
of the scrip was rigged up in the no-delivery period wherein it rose from ` 9
to ` 20, an increase of 122%. Arihant Equity Fund Ltd. and New Age Shares
and Stock Brokers Pvt Ltd are the promoters of SRG and also dealt in the
scrip in large quantities. These two entities entered orders for large quantities

Adjudication Order against Shri Pramod Jain in the matter of SRG Infotech Ltd.Page 1 of 15

and subsequently deleted them either after updating the price or after part
execution of the order.
2. During the fact finding process, the Investigating Authority (IA) issued
Summons dated June 16, 2004 to the ShriPramod Jain (herein after referred to
asNoticee) for production of documents and personal appearance to
ascertain their role in the irregularities in the scrip of SRG.
3. Pursuant to the aforesaid summons Noticeeappeared before the IAon July 19,
2004 and allegedly made incorrect statements with regard to opening of a
Bank Account in the name of Arihant Equity Fund Ltd. SEBI initiated
adjudication proceedings against theNoticee,under Section 15HB of SEBI
Act, 1992 (hereinafter referred to as SEBI Act)for violationof the
provisions of Sections 11C(3), (5) and (6) of SEBI Act.
APPOINTMENT OF ADJUDICATING OFFICER

4. Shri SatyaRanjan Prasad was appointed as the Adjudicating Officer (AO) vide
order dated 16.11.04 and consequent upon the transfer of Shri SatyaRanjan
Prasad, Shri A Sunil Kumar was appointed as the AO vide orders dated
09.04.2014 and 15.01.2015. Consequent to the transfer of Shri. A. Sunil
Kumar,the undersigned, was appointed as the Adjudicating Officer vide order
dated June03, 2015 to inquire into and adjudge under Section 15HB of the
SEBI Act, the alleged violation of the provisions of Section 11C(3), (5) and
(6) of SEBI Act, 1992, by the Noticee.

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SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

5. Show Cause Notice dated December 07, 2015 (hereinafter referred to as

SCN) was issued to the Noticee in terms of Rule 4 of SEBI (Procedure for
Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995
(hereinafter referred to as the Adjudication Rules) read with section 15I of
SEBI Act, 1992 to show cause as to why an inquiry should not be initiated and
penalty be not imposed under section 15HB of SEBI Act, for the aforesaid
alleged contravention of the provisions of Sections 11C(3), (5) and (6) of
SEBI Act. Copies of the documents relied upon in the SCN were also
provided to the Noticee along with the SCN.It was alleged in the SCN that the
Noticee had made incorrect statement before the IA that he was not aware
about the opening of the bank account in the name of Arihant Equity Fund
Ltd. with Bank of America and it was not supported by any Board Resolution
of the Company.
6. In response to the SCN, Noticee submitted his reply vide email dated
17.12.2015 and the relevant portionsare reproduced hereunder:6.1. Nevertheless, I submit it as follows:

A) The board resolution which you have attached is part of the bank
account opening form, which clearly states on the top of the form that it
needs to be printed on the letter head. No such resolution was ever passed
or printed on the letter head
B) not a single cheque has ever been signed by me
C) Alleged bank account was never operated by me
D) no trade orders have ever been given by me. Neither any
communication by the Said broker
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E) there is no history of any transaction ever in the said scrip, past or in

the future ever done by me, directly or indirectly.
F) there is no motive or benefit behind the alleged offense nor I have ever
received any benefit directly or indirectly.
G) I have never ever dealt with the Said broker not only in the said scrip
or any other scrip, be it in past or future.
H) The allegation fails to justify how a mere signature on bank format
may lead to my culpability in the alleged offense of rigging of share
prices.
6.2. The whole story of the alleged offence lies on mere signing of a bank

format, there is no other iota of evidence even corroborative evidence

suggests of my involvement in any such offence.
7. Thereafter, Noticee was given an opportunity of personal hearing on January
20, 2016. Noticee , vide letter dated January 13, 2016,requested to proceed in
the matter on the basis of documents available on record and also submitted as
under:
7.1. Before going into the merits of the matter, I have to state as under:
7.2. The said SCN is barred by limitation as the offence alleged u/s 11(6)
SEBI Act, is of the period 1998-99 or at least of 2004-2005 (year on which
15H was invoked) and as per the Section 468 CrPC the limitation for taking
cognizance in a matter punishment of 1 year is prescribed is only 1 year and
hence the said SCN is time barred and not maintainable.
7.3. As per Section 11C (11) SEBI Act provision of CrPC is applicable to
proceedings under the act. As per Section 4 (2) CrPC also Section 468 CrPC
is applicable in the present matter
7.4. Section 15 HB of the SEBI Act cannot be invoked as the Section 11(6)
already prescribed penalty.
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7.5. Without Prejudice to above, I have to reassert and state as following.

a) Merely signing on bank format of account opening form, does not
tantamount to myself being involved into alleged price rigging or any
violation. I deny that I was ever been even communicated by the said
bank. Bank forms are required to supported by various other
documents and I deny I have ever signed any other document
b) There was no involvement with any affairs of the company, or share
dealing, communication, in any form, including any telephonic records,
to and from the broker and SEBI has failed to Substantiate.
c) I was inducted director with a limited purpose and as mentioned in my
reply dated 19/7/2004.
d) I was not authorized signatory in any banking transaction nor I have
signed of any cheque, be it the said bank account or any other bank.
e) I have not been any beneficiary of any nature, whatsoever, to the
alleged offence nor any motive can be accrued to me.
f) I preferred to not to appeal the Honble Supreme court against SAT
order, purely considering the cost constraints.
g) I stand by all the statement made by me before SEBI on 19th July 2004
and I have nothing further to add.
h) I continue to be active in the stock market directly or through
companies, there is no history of my association with the said broker
before and after the said event.
i) Involvement of a person in any transaction can be said only if there is
any communication to and from the trading member but linking and
corroborating the involvement with mere signing, that too a bank
account form, is totally irrational, illogical and unjustified.

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7.6. In the absence of your any further questionnaire, you may be pleased to
decide the matter on the basis of document available on record and taking
cognizance of my present reply.
CONSIDERATION OF ISSUES AND FINDINGS
8.

I have carefully perused the written submissions of the Noticee and the
documents available on record. The issues that arise for consideration in
the present case are :
a)

Whether the Noticeehad made incorrect statement before the IA and

whether he violated the provisions of section 11C(3), 11C(5)and
11C(6) of SEBI Act, 1992?

b)

Whether the Noticee is liable for monetary penalty under section

15HB of 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?

Issue I Violations of the provisions of section 11C(3), 11C(5)and 11C(6) of

SEBI Act, 1992?
9.

Before moving forward, it is pertinent to refer to the relevant provisions of

Section 11C (3), (5) and (6) of SEBI Act, 1992 which reads as under:

Section 11C(3), 11C(5) and Section 11C(6) of the SEBI Act, 1992
Section 11C(3): The Investigating Authority may require any intermediary
or any person associated with securities market in any manner to furnish
such information to, or produce such books, or registers, or other
documents, or record before him or any person authorised by it in this
behalf as it may consider necessary if the furnishing of such information
or the production of such books, or registers, or other documents, or
record is relevant or necessary for the purposes of its investigation.
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Section 11C(5): Any person, directed to make an investigation under subsection (1), may examine on oath, any manager, managing director,
officer and other employee of any intermediary or any person associated
with securities market in any manner, in relation to the affairs of his
business and may administer an oath accordingly and for that purpose
may require any of those persons to appear before it personally.
Section 11C(6): If any person fails without reasonable cause or refuses
(a) to produce to the Investigating Authority or any person authorised by
it in this behalf any book, register, other document and record which is his
duty under sub-section (2) or sub-section (3) to produce; or
(b) to furnish any information which is his duty under sub-section (3) to
furnish; or
(c) to appear before the Investigating Authority personally when required
to do so under sub-section (5) or to answer any question which is put to
him by the Investigating Authority in pursuance of that sub-section; or
(d) to sign the notes of any examination referred to in sub-section (7), he
shall be punishable with imprisonment for a term which may extend to one
year, or with fine, which may extend to one crore rupees, or with both, and
also with a further fine which may extend to five lakh rupees for every day
after the first during which the failure or refusal continues.
10.

I note that against the backdrop of unusual price rise in the scrip of SRG
from ` 9 to ` 20 and entering of large quantities of orders and
subsequently deletion of the same either after updating the price or after
part execution of the order by Arihant Equity Fund Ltd. and New Age
Shares and Stock Brokers Pvt Ltd who are the promoters of SRG,
Summons dated June 16, 2004 was issued to the Noticee who was director
of Arihant Equity Fund Ltd. for production of documents and personal
appearance to ascertain their role in the irregularities in the scrip of SRG.

11.

I note that the noticee appeared before the IA on July 19, 2004 and, inter
alia, made statement that he was not aware about the opening of the bank
account with Bank of America and it was not supported by any Board
Resolution of the Company. It was alleged that these statements made by
the noticee before IA was incorrect.

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12.

I find from the records available that the Bank A/c No. 325052 was
opened in the name of Arihant Equity Fund Ltd. on 20.01.1999 with the
Bank of America with Pramod Jain and Sanjeev Bansal as authorized
signatory.It is also not in dispute that the said Bank account was used for
the trading activity in the scrip of SRG by Arihant Equity Fund Ltd.

13.

In response to the SCN, Noticee reiterated his statement dated 19.07.2004

made before the IA that he did not know that the account was ever opened.
In this regard I, note that the Bank of America has been provided bank
account opening form along with Board Resolution of Arihant Equity
Fund Ltd. in a printed format provided by the bank which was signed by
the Noticee. It is clearly stipulated in the format of Board resolution that
the document is being submitted to the bank for the purpose of opening of
Bank account. Therefore, I do not find any merit in the argument put forth
by the Noticee that he did not know that the account was ever opened.

14.

Noticee has further contended that as per Bank account opening form, the
Board resolution needs to be printed on the letter head of the company but
no such resolution was ever passed on the letter head. In this regard, I find
that the Noticee signed the extract of the Board resolution in a printed
format provided by the bank as a Director of the Company and the same
also bore the stamp of the Company.In view of the above, it becomes
irrelevant whether or not the Board Resolution was on the letter head of
the Company.

15.

Noticee has further submitted that he never signed any cheque of the said
Bank account, he never operated the account, no trade orders have ever
been given by him and there is no history of any transaction ever in the
scrip by him. However, I am of view of that these submissions are of no
merit in the facts of the present case as the charge in the instant

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proceedings is that of making incorrect statements before the IA.

Moreover, all these contentions had previously also been raised by the
noticee before the Honble Securities Appellate Tribunal (SAT) in Appeal
no. 140 off 2008 in the matter of Pramod Jain vs. SEBI (order dated
July 15, 2009). In the said matter, Honble SAT had made the following
observations against the Noticee.
The appellant completely denied any role as a director ofArihant in the
execution of trades in the scrip of SRG. We have carefully gone
throughthe statements of the persons who were summoned to appear
during the course of theinvestigations including that of the appellant and
find that they are all contradictingeach other in material respects and we
are satisfied that the statement of the appellantdoes not inspire
confidence. He has admittedly signed the bank account opening form
which was submitted to the Bank of America for opening a bank account.
This accountwas opened on 22.1.1999 and closed in September, 1999. He
has also signed the boardresolution which was submitted to the bank at
the time of the opening of the account in a printed format provided by the
bank. It is not in dispute that this account was used fortrading in the scrip
of SRG. The learned counsel for the appellant contends that hisclient had
signed a blank bank account opening form and the printed format of
theboard resolution with the details left blank. We have perused the format
of the boardresolution and also the bank account opening form signed by
the appellant. It is clearlystipulated in the format that the document is
being submitted to the bank for the purposeof opening an account. The
appellant cannot be heard to say that he did not know thatthe account was
ever opened. He signed these documents as a director of the companyand
they also bear the stamp of the company. It is, thus, established that the
appellantalso played some role in the entire game plan and had opened a
bank account to enableArihant to trade in the scrip of SRG. Shri.
Chauhan contends that the demat account and the trading account with
the broker which were necessary for the trading had beenopened and
operated by Sanjeev Bansal and it was he alone who executed
themanipulative trades and not the appellant. May be, the appellant did
not open those twoaccounts but the fact that he opened the bank account
through which trading was done is enough to establish his part of the role
in the execution of the manipulative trades. He is not as innocent as he
claims to be and, it appears to us that Sanjeev Bansal obviously played a
major role in the whole episode.
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16.

With regard to contention of Noticee that a mere signature on bank format

does not lead to his culpability in the alleged offense of rigging of share
prices. I find that the SCNin the present matter clearly mentioned that the
Noticee has been charged for submission of false and incorrect statement
before the IA. Therefore, I do not find any merit in the said argument.
Moreover, the Honble SAT in Appeal no. 140 of 2008 suprahad already
established thatthe appellant also played some role in the entire game
plan and had opened a bank account to enable Arihant to trade in the
scrip of SRG.

17.

Noticee has also made references of Section 11C (11) of SEBI Act, 1992
and Section 4 (2) & Section 468 of The Code of Criminal Procedure, 1973
with regard to limitation in the present case.I, however, find that under the
SEBI Act there is nolimitation on initiation of adjudication proceedings
for violation of various provisions ofAct and Regulations made
thereunder.Delay in initiating the proceedings itself cannot be a ground for
discharging the Noticee.

18.

Now as regards the violation of section 11C(3), 11C(5)and 11C(6) of

SEBI Act, 1992, I note that section 11C (3) of SEBI Act, authorize the IA
to summon any person associated with securities market in any manner to
furnish such informations, documents, records etc. if the same are
considered relevant for the investigation. This section also authorizes the
IA to call upon the persons before him to provide the necessary or relevant
information for the purposes of its investigation. SAT has observed in the
matter of DKG Buildcon Pvt. Ltd. V/s SEBI, Appeal No. 106/2006, order
dated 07.01.2009 thatSection 11C of the Act was introduced with effect
from 29.10.2002 and sub-section (3) thereof provides that the
investigating authority may require any person associated with the
securities market to furnish such information, or produce such books, or

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registers, or other documents, or record before him. The power to

require a person to furnish any information or record or documents
includes the power to require such person to make a statement and give
clarifications with regard to the information and documents produced by
him. In the absence of such a power the purpose of the legislature in
introducing section 11C would be frustrated and the Board will not be
able to investigate properly the market irregularities and offences. In
order to advance the object of Parliament the language used in subsection (3) of section 11C has to be given a wider meaning. We are,
therefore, of the considered opinion that section 11C (3) gives the power
to the investigating authority to call upon any person to make a statement
while furnishing any information, document or record. Similarly, Section
11C (5) of the SEBI Act empowers the IA to require the personal
appearance of such personto furnish any information or record or
documents and the said power also includes the power to require such
person to make a statement and give clarifications with regard to the
information and documents produced by him. Further, Section 11C (6)
provides for prosecution in case of failure without reasonable cause or
refusal to produce the documents or records, information, appear for
examination and sign the notes of examination. This provision of SEBI
Act, seeks to ensure that the investigation process is not unduly hampered
or delayed and provide effective deterrent against the same.
19.

Hence, the IA has been given adequate powers of investigation under

Section 11C (3) & (5) of SEBI Act, and provisions of Section 11C (6)
make it statutorily binding on the person to whom the summons have been
issued under sub-section (3) & (5) of section 11C to furnish necessary true
and correct information as required by the IA and this section also spell
out the consequences of non-cooperation by any person with the IA, which

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may led to initiation of prosecution. However, in addition to the provisions

of Section 11C (6), dealing with prosecution, it is open for SEBI to resort
to the adjudication mechanism under Chapter VIA of the SEBI Act.
20.

The issue in adjudication under section 11C(3) and (5) of SEBI Act, 1992,
is to see whether an intermediary/person associated with securities market
is under a statutory duty to produce records and documents to the IA and
whether there is default in this regard. The answer is in the affirmative.

21.

In view of the aforesaid discussions and findings, I find that the noticee
did make incorrect statements before the IA. The findings of Honble SAT
extracted earlier also discuss the role played by the Noticee in opening a
bank account with Bank of America which was used for trading in the
scrip of SRG Infotech ltd. It is a settled position of law that making a false
statement or if the information furnished is incorrect or misleading would
amount tofailure to furnish the information sought and thereby violative of
section 11C(3) and (5) of SEBI Act, 1992.

Issue II Whether Noticee is liable for monetary penalty under section 15HB
of SEBI Act, 1992?

22.

It, would also be appropriate here to refer the provision of Section 15HB
of SEBI Act, as it existed at the relevant point of time, which reads as
under: Penalty for contravention where no separate penalty has been provided.
Section 15HB 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."

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23. I note that Section 15HB is a residuary provision for imposing the monetary
penalty for violation which not covered by any section from 15A to 15HA
under chapter VI A of the SEBI Act. I am of the view that for making a false
statement before the IA no separate penalty has been provided under SEBI
Act and accordingly penalty can be imposed under section 15HB of SEBI Act,
1992.In this regard reliance is also placed on the order dated February 13,
2006 of Honble SAT in Appeal no. 20 of 2006 in the matter of SPS Share
Brokers Pvt. Ltd. vs. SEBI.
24. As regards the imposition of monetary penalty, reliance is placed upon the
order of the Honble Supreme Court of India in the matter of Chairman,SEBI
vs. Shriram Mutual Fund {[2006] 5 SCC 361} wherein it was held that "In
our view, the penalty is attracted as soon as contravention of the statutory
obligations as contemplated by the Act is established and, therefore, the
intention of the parties committing such violation becomes immaterial. .
Hence, we are of the view that once the contravention is established, then the
penalty has to follow and only the quantum of penalty is discretionary."
25. For the reasons stated earlier I hold that the Noticee is liable for monetary
penalty under section 15HB of SEBI Act.
Issue III What quantum of monetary penalty should be imposed on
theNoticee taking into consideration the factors mentioned inSection 15J of the
SEBI Act?

26. While determining the quantum of penalty under section 15HB of SEBI Act,
1992, the factors stipulated in section 15J of SEBI Act, which reads as under
are considered: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:Adjudication Order against Shri Pramod Jain in the matter of SRG Infotech Ltd.Page 13 of 15

(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 repetitivenature of the default.
27. I note that the material made available on record has not quantified the
amount of disproportionate gain or unfair advantage made by the Noticee and
the loss suffered by the investors as a result of the Noticee's default. Also
there is no material made available on record to assess the amount of loss
caused to investors or the amount of disproportionate gain or unfair advantage
made by the Noticee as a result of default. However, I am of the view that
making incorrect statement before the IA hampers the investigation. Further,
any delay or hurdle in investigation due to non-cooperation by any entity is
detrimental to the interest of investors in securities market and the same
deserves to be viewed seriously.

ORDER
28. After taking into consideration all the facts and circumstances of the case,I, in
exercise of the powers conferred upon me under Section 15I (2) of the SEBI
Act read with Rule 5 of the Adjudication Rules, hereby impose a penalty of
`1,00,000/- (RupeesOne Lakh Only) on the Noticeei.e. Pramod Jain.
29. 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
The Division Chief (Enforcement Department - DRA-II), Securities and
Exchange Board of India, SEBI Bhavan, Plot No. C 4 A, G Block, Bandra
Kurla Complex, Bandra (E), Mumbai 400 051.

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30. In terms of rule 6 of the Rules, copies of this order are sent to the Noticee and
also to the Securities and Exchange Board of India.

Date: March 23, 2016

Place: Mumbai

S. V. Krishnamohan
Chief General Manager &
Adjudicating Officer

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