Adjudication Order in respect of New India Retailing and Investment Ltd

SCORES registration no. SEBIP/WB15/0000555/1 pending against it regarding deletion of names, issue of duplicate shares and non-payment of dividend and thus has allegedly violated the provisions of Section 15C of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act').

APPOINTMENT OF ADJUDICATING OFFICER

3. The undersigned was appointed as Adjudicating Officer (AO), vide communique dated July 28, 2017, under Section 15-I of the SEBI Act read with Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 (hereinafter referred to as ‘Rules’) to inquire into and adjudge under the provisions of Section 15C of the SEBI Act for the alleged failure on the part of the Noticee to redress the pending complaint received against it.

SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

4. Show Cause Notice No. SEBI HO/A&E/EAD/KS/SM/18242/1/2017 dated August 02, 2017 (hereinafter referred to as ‘SCN’) was issued to the Noticee under the provisions of Rule 4 (1) of the Rules, to show cause as to why an inquiry should not be held against the Noticee and why penalty, if any, should not be imposed on the Noticee under the provisions of Section 15C of the SEBI Act, for the alleged failure on the part of the Noticee to redress the pending complaint received against it. The SCN issued to the Noticee inter alia mentioned the following :

(a) SEBI received one investor complaint in SCORES against Noticee on October 30, 2015 from one Shri L R Singh (hereinafter referred to as ‘investor / complainant’) with regard to deletion of names, issue of duplicate shares and non-payment of dividend, having SCORES registration no. SEBIP/WB15/0000555/1. The said complaint was forwarded to Noticee on the same date in SCORES for necessary redressal.

It was however observed that till July 05, 2016 i.e. the date of Action History in SCORES, the Noticee had not submitted the ATR in SCORES and not redressed the aforesaid investor complaint. It was alleged in the SCN that the Noticee has failed to submit ATR within 30 days of date of receipt of the complaint and also failed to resolve the complaint in accordance with the SEBI Circular no CIR/OIAE/1/2014 dated December 18, 2014.

5. Vide letter dated August 14, 2018, the Noticee requested for additional time of four weeks to submit its reply to the SCN. The same was granted to the Noticee and vide letter dated August 22, 2017, the Noticee was advised to file its reply to the SCN latest by September 12, 2017.

6. Subsequently, vide letter dated September 08, 2017, the Noticee submitted its reply to the SCN. The main submissions made therein are reproduced as follows

Our humble submissions in relation to the SEBI Notice are as under:

1. There was an investor complaint from Shri L R Singh against New India Retailing And Investment Limited ("NIRIL") on 30 October 2015 in the SEBI Complaints Redress System ("SCORES"). As you are aware, the investor complaint (having SCORES registration no. SEBIP/WB15/0000555/1) was in respect of:

(i) payment of dividend which was unpaid / un-claimed; and

(ii) deletion of names and issue of duplicate shares.

2. Due to unavoidable reasons, we had failed to submit Action Taken Report (hereinafter referred to as "ATR") within 30 days of receipt of the complaint and were unable to resolve the complaint in accordance with SEBI Circular no. CIRIOIAE/1/2014 dated 18 December 2014. We would like to state that the ATR for this complaint was updated by us on 3 July 2017- prior to receipt of t:1e SEBI Notice. A copy of the ATR as of 9 August 2017 reflecting the same is annexed hereto as Annexure – 1

3. The reasons for which we were unable to upload the ATR and respond to the complaint in a timely manner are as follows:

a. We were not provided with the complete information in relation to the complaint, which made it difficult for us to resolve the complaint. Further, at the time of filing of the complaint, the complainant had requested for issuance of duplicate share certificates. However, subsequently, the complainant changed the request to change of names in the share certificates and not issuance of duplicate share certificates; and

b. Due to internal re-assignment of portfolios, this issue and its follow-up was inadvertently left unresolved.

4. We would like to update you that, upon of the complete and correct information from the complainant, we have now duly addressed the investor complaint. Please find attached following documents evidencing the same:

a. Copy of letter from Link lntime India Private Limited (our registrar and share transfer agent) to the investor enclosing demand drafts in favour of the investor, which have been issued in lieu of dividend warrants that were issued against old folio no. R0064 and have remained un-paid I un-claimed. A copy of the said letter is annexed hereto as Annexure - 2 and copies of the demand drafts are annexed hereto as Annexure - 3.

b. Copy of letter from Link lntime India Private Limited (our registrar and share transfer agent) to the investor enclosing t:1e share certificates of NIRIL after name deletion along with the details of such shares. A copy of the said letter is annexed hereto as Annexure - 4.

c. An extract of the Action Taken Report as of 6 September 2017 reflecting the updated status of the complaint is annexed hereto as Annexure - 5.

5. In addition to the above, we would like to submit that:

a. NIRIL is a law abiding corporate entity and at no point of time was there any intention on its part to contravene any provision of SEBI regulations. Further, NIRIL has a good track record and does not have a history of non-compliance with the SEBI regulations;

b. No loss has been caused to any· authority or the public at large as a result of the above delay; and

c. The aforesaid delay was not deliberate and was completely unintentional and was caused due to contrary instructions from the complainant's end.

7. Subsequently, an opportunity of personal hearing was granted to the Noticee on September 22, 2017. Mr. Tanish Gupta, and Mr. Moin Ladha, advocates, Khaitan & Co., the authorized representatives (ARs) of the Noticee appeared for the said hearing and reiterated the submissions which had been made earlier by the Noticee vide its letter dated September 08, 2017. Pursuant to the above hearing, the ARs vide their email dated September 26, 2017 submitted the following information –

a. Noticee’s letter dated July 03, 2017 to the complainant.

b. Copy of email dated August 30, 2017 from the complainant confirming receipt of share certificates by him.

c. ATR reflecting resolution of complaint.

8. Vide the aforementioned email dated September 26, 2017, the ARs of the Noticee also stated inter alia that they were desirous of settling the adjudication proceedings through the consent mechanism and would be filing settlement application in this regard. From the material on record, it is however noted that no settlement application on behalf of the Noticee was filed with SEBI. The Settlement Division of SEBI vide their email dated September 17, 20120 also confirmed that no settlement application of the Noticee is pending with SEBI. Accordingly, vide email dated September 18, 2020, the Noticee was granted final opportunity of personal hearing on September 23, 2020 through video conference on the webex platform due to pandemic. The ARs of the Noticee appeared for the hearing and reiterated the submissions made by the Noticee vide its letter dated September 08, 2017 and email dated September 26, 2017. Further, the ARs vide their email dated September 23, 2020 stated that “With respect to not filing the settlement application, it was subsequently decided not to proceed with the filing. We learnt about this position only recently when we received your email and sincerely and unconditionally apologize for not following up and keeping you updated”. Vide the aforesaid email dated September 23, 2020, the following submissions were inter alia made -

“We further apologize for the inconvenience caused to your good self and sincerely request you to take a lenient view in this matter considering that:

a. NIRIL is a law abiding corporate entity and at no point of time was there any intention on their part to contravene any provision of SEBI regulations. Further, NIRIL has a good track record and does not have a history of non-compliance with the SEBI regulations;

b. No loss has been caused to any authority or the public at large as a result of the above delay; and

c. The aforesaid delay in resolving the shareholders complaint was not deliberate and was completely unintentional and caused to conflicting requests from the complainant’s end.”

Further, copies of the Adjudication Order dated March 31, 2015 in the matter of Vital Communications Limited, and Hon’ble SAT’s order dated August 07, 2014 in the matter of R.M. Shares Trading Private Limited, sought to be relied upon by the ARs was also submitted vide their email dated September 23, 2020.

CONSIDERATION OF ISSUES AND FINDINGS

9. 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 Noticee had failed to redress the investor complaint and violated the provisions of SEBI Circular dated December 18, 2014?

(b) Does the violation, if any, attract monetary penalty under Section 15C of the SEBI Act, 1992?

(c) If yes, what should be the quantum of penalty?

10. Before moving forward, it is pertinent to refer to the relevant provisions of SEBI Circular CIR/OIAE/1/2014 dated December 18, 2014 issued to all Companies whose securities are listed on SEBI recognized Stock Exchanges (through the Stock Exchanges), all Intermediaries registered with SEBI (through the Stock Exchanges for Stock Brokers and Sub Brokers, Depositories for Depository Participants, AMFI for Mutual Funds and Asset Management Companies), all recognized Stock Exchanges, all Depositories and Association of Mutual Funds in India (AMFI) regarding redressal of investor grievances through SEBI Complaints Redress System (SCORES) platform:

SEBI Circular No. CIR/OIAE/1/2014 dated December 18, 2014:

9. All listed companies and SEBI registered intermediaries shall review their investor’s grievances redressal mechanism so as to further strengthen it and correct the existing shortcomings, if any. The listed companies and SEBI registered intermediaries to whom complaints are forwarded through SCORES, shall take immediate efforts on receipt of a complaint, for its resolution, within thirty days. The listed companies and SEBI registered intermediaries shall keep the complainant duly informed of the action taken thereon.

10. The listed companies and SEBI registered intermediaries shall update the ATR along with supporting documents, if any, electronically in SCORES. ATR in physical form need not be sent to SEBI. The proof of dispatch of the reply of the listed company / SEBI registered intermediary to the concerned investor should also be uploaded in SCORES and preserved by the listed company / SEBI registered intermediary, for future reference.

11. Action taken by the listed companies and SEBI registered intermediaries will not be considered as complete if the relevant details/ supporting documents are not uploaded in SCORES and consequently, the complaints will be treated as pending.

12. A complaint shall be treated as resolved/disposed/closed only when SEBI disposes/closes the complaint in SCORES. Hence, mere filing of ATR by a listed company or SEBI registered intermediary with respect to a complaint will not mean that the complaint is not pending against them.

13. Failure by listed companies and SEBI registered intermediaries to file ATR under SCORES within thirty days of date of receipt of the grievance shall not only be treated as failure to furnish information to SEBI but shall also be deemed to constitute non-redressal of investor grievance.

14. The Board of Directors of the listed company or the Board of Directors/ Proprietor/ Partner of the registered intermediary shall be responsible for ensuring compliance with the provisions of this Circular.”

FINDINGS

11. I note that adjudication proceedings were initiated against the Noticee for its failure to redress one complaint having SCORES registration no. SEBIP/WB15/0000555/1 filed by the complainant, Shri L R Singh on October 30, 2015. The said complaint pertained to deletion of names and issuance of duplicate of shares, and payment of dividend which was un-paid / unclaimed.

12. In this regard, the Noticee has submitted that they updated the ATR on SCORES for the aforesaid complaint on July 03, 2017, i.e. prior to SEBI’s SCN. The Noticee has further submitted that it had not received the complete information in relation to the complaint which made it difficult for them to resolve the complaint. The Noticee has further submitted that at the time of filing of the complaint, the complainant had requested for issuance of duplicate share certificates, however, subsequently, the complainant changed the request to change of names in the share certificates instead of not issuance of duplicate share certificates. The Noticee has stated that upon receipt of the complete and correct information from the complainant, they have duly addressed the investor complainant.

13. Upon perusal of the documents submitted by the Noticee, it is noted that Link Intime India Pvt Ltd, the Registrar and Share Transfer Agent (RTA) of the Noticee has vide letter dated August 29, 2017 sent demand drafts (6 nos.) dated August 29, 2017 in favour of the complainant in lieu of dividends for the year ended 31.03.2010 to 31.03.2016 that were issued against the old folio no. R0064 (consisting of 45 shares) and had remained un-paid / un-claimed. It is further noted that the RTA had sent 4 certificates representing 45 shares to the Noticee on August 26, 2017, pursuant to name deletion of the shares. The Noticee has submitted extract of the ATR as of September 06, 2017 reflecting the updated status of the complaint and has submitted that there were no pending complaints. I note from the documents submitted by the Noticee that the complainant vide email dated August 30, 2017 has also confirmed to the RTA that he has received the share certificates.

14. From the above it is noted that in the present matter, one complaint was pending against the Noticee. The Noticee has submitted ATR on SCORES on July 03, 2017 i.e. prior to the issuance of SCN, wherein it is observed that Noticee’s RTA vide its letter dated July 03, 2017 addressed to the complainant has enumerated the procedure to be complied and documents to be submitted for the purpose of deletion of the names of the deceased shareholders and issuance of duplicate share certificates in the names of the surviving shareholders in lieu of the original share certificates lost. Subsequently, the Noticee has resolved the investor complaint and submitted the status report to SEBI. The complainant has also acknowledged the receipt of the share certificates. Considering the facts and circumstances of the present case, I am of the view that necessary action has already been taken by the Noticee for resolving the investor complainant and filing of ATR. Thus, I find that imposition of penalty on the Noticee may not be warranted for the violations of SEBI Circular CIR/OIAE/1/2014 dated December 18, 2014.