BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

(ADJUDICATION ORDER NO: IVD-ID-4/EAD-3/AO/DRK-VB/-727/52-2015)

_____________________________________________________________
UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF
INDIA ACT,

1992 READ WITH

RULE

5(1)

OF

SECURITIES AND

EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY

AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES,1995
In respect of
Shri Mahendra P Rathod
D-6,VI-2,
Shahibagh Shyam Apartments,
Ahmedabad, Gujarat 380004
PAN No. AIHPR1630A
In the matter of SEL Manufacturing Co Ltd.
_____________________________________________________________
FACTS IN BRIEF
1. Securities and Exchange Board of India ( hereinafter referred to as 'SEBI')
has conducted an investigation into the alleged irregularity in the trading of
the

shares of SEL Manufacturing Co. Ltd. (hereinafter referred to as

'Company / SEL'). The shares are listed at the National Stock Exchange of
India Limited (hereinafter referred to as 'NSE') and at BSE Ltd. (hereinafter
referred to as 'BSE') and the period of investigation is from August 21, 2007
to August 27, 2007 (hereinafter referred to as the `Investigation Period /
IP').
APPOINTMENT OF ADJUDICATING OFFICER
2. I was appointed as Adjudicating Officer under Section 15 I of the Securities
and Exchange Board of India Act, 1992 (hereinafter referred to as SEBI
Act) read with Rule 3 of Securities and Exchange Board of India (Procedure
for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules,
1995 (hereinafter referred to as Adjudication Rules) to inquire into and
adjudge under Section 15A (a) of the SEBI Act the alleged non compliance
of summonses by Shri Mahendra P Rathod (hereinafter referred to as the
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'Mahendra / noticee') and the same was communicated vide proceedings

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of the Whole Time Member appointing Adjudicating Officer dated

10.05.2013.
SHOW CAUSE NOTICE, REPLY AND HEARING
3. A

Show Cause

Notice

No.EAD-3/DRK/DS/28630/2012

dated

the

December 20, 2012 (hereinafter referred to as 'SCN') was served on the

Noticee by Registered Post Acknowledgement Due (hereinafter
referred to as 'RPAD') to show cause as to why an inquiry should not be
held against the Noticee and penalty be not imposed on the Noticee in
respect of the violations alleged to have been committed by the
Noticee under S ection 15A(a) of t h e SEBI Act,1992. The said SCN was
duly served by RPAD under Rule 4 (1) of the Adjudication Rules on the
Noticee and the proof of service is on record.
4. Summonses dated 20.07.2011, 10.08.2011 and 05.09.2011 were issued /
served on the Noticee under Sections 11C (3) and (5) of the SEBI Act
seeking personal appearance and furnish information / documents. The
following was sought from the Noticee vide the aforesaid summonses:

State your relationship with SEL Manufacturing Company Ltd. (SEL)

and/or its promoters/Directors.

Details of your trading in the shares of SEL during the period August 21,
2007 to August 27, 2007. Also state the reason for trading in the shares of
SEL.

Copy of your bank statement for the period July 01, 2007 to September
30, 2007 explaining the transactions having value

` 2,00,000 or more.

Explanation should include details of counterparty (name and contact

details) and reason thereof.

Copy of your demat statement for the period July 01, 2007 to September
30, 2007.

PAN in original.

5. It was, inter alia, stipulated in the summons that " Please take notice that, in
default of your appearance on the above-mentioned date, investigation
proceedings would be continued in your absence. Further, take notice that
without prejudice to the provisions of any other law for the time being in

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force, if you omit to attend and give evidence or to produce the books of
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accounts and / or documents as required, SEBI will initiate adjudication

proceedings against you under which you could be levied a penalty of one
lakh rupees for each day during which such failure continues, or one crore
rupees, whichever is less, as provided under section 15A of SEBI Act,1992.
Further, criminal prosecution may also be launched against you under
Section 11C(6) which provides for a punishment with imprisonment for a
term which may extend to one year or with fine which may extend to rupees
one crore, or with both, and also with a further fine which may extend to five
lakh rupees for each day after the first, during which the failure or refusal
continues."
6. Based on the investigation report (hereinafter referred to as 'IR'), it was
alleged in the SCN that the Noticee had neither appeared before the
Investigating Authority (hereinafter referred to as 'IA') nor provided books of
accounts / documents / reports / information / records as sought during the
investigation within the stipulated timeline. The IA had issued / served
summonses on the Noticee to appear before him and submit books of
accounts / documents / reports / information / records. However, the Noticee
failed to comply with the same. The said non-appearance before the IA and
non furnishing of the books of accounts / documents / reports / information /
records resulted in violation of the provisions of Section 11C(3) and Section
11C(5) of the SEBI Act,1992.
7. No reply was received from Noticee to the SCN dated December 20,2012
nor did he seek any personal hearing in the matter. Since there was no reply
from the noticee, vide personal hearing notice dated January 18, 2013,
noticee was granted an opportunity to submit reply to the SCN on or before
January 31, 2013 and an opportunity of hearing was granted to the noticee
to appear on February 15, 2013 at SEBI Bhavan, Mumbai. The noticee
failed to appear for the said hearing without furnishing any reason.
Thereafter, vide personal hearing notice dated August 08,2013, an
opportunity of hearing was granted to the noticee to appear on August 23,
2013 at SEBI Bhavan, Mumbai. The noticee again failed to appear for the
said hearing without furnishing any reason.
8. Subsequently, vide final hearing notice dated the December 23,2014, the
Noticee was granted final opportunity of personal hearing on January 23,
2015 at SEBI Bhavan, Mumbai. This hearing notice was served on the
Noticee by RPAD and proof of service of the same is on record. However,

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the noticee again failed to appear for this hearing as well without furnishing
any reasons.
9. From the records it is noted that the noticee has neither replied to the SCN
nor has attended any of the personal hearings granted to him inspite of
service of the notices as stated above. In the light of this fact, I am
convinced that the Principles of Natural Justice have been complied with
and I am compelled to pass an ex-parte order against the noticee
CONSIDERATION OF EVIDENCE AND FINDINGS
10. I have taken into consideration the facts and circumstances of the case and
the material made available on record. The allegations against the noticee
were that the noticee had failed to appear before the IA and failed to
produce the books of accounts / documents / reports / information / records
as sought by the IA.
11. From the records made available, it is noted that summonses dated July 20,
2011 and September 05,2011 were served on the noticee and the proof of
service is on record and summons dated August 10,2011 was sent to the
noticee.
12. From the records, it is also noted that the summons dated July 20, 2011 was
served on the noticee through his stock broker Shriram Insight share brokers
Ltd. on July 23, 2011. The noticee neither appeared before the IA nor
produced the books of accounts / documents / reports / information /
records. Summons dated the September 05, 2011 was served on the
noticee for personal appearance before the IA on September 12, 2011 and
also to produce books of accounts / documents / reports /information /
records on the same day. The said summons was served by SEBI Western
Regional Office, Ahmedabad on 05.09.2011.
13. It is also noted from the material made available on record that even though
these two summonses were served on the Noticee, the Noticee neither
appeared before the IA nor produced books of accounts / documents /
reports / information / records to the IA which resulted in violation of the
provisions of Section 11C(3) and Section 11C(5) of the SEBI Act. Inspite of
service of summonses the noticee failed to co-operate with the IA.
14. At this juncture, I would like to quote the judgment of the Hon'ble Securities

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Appellate Tribunal in the matter of Asian Films Production and Distribution

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Ltd. (earlier known as K.C. Bokadia Films) Vs. SEBI decided on 19.01.2011
wherein it was held that :
"...Non-compliance with the summons is, indeed, a serious matter and
cannot be viewed lightly. The respondent Board is the market regulator
and has to regulate the securities market and the law provides that every
person associated with the market in any manner should cooperate in the
matter of carrying out investigations. In the year 2002, the provisions of the
Act were amended and penalty for non-compliance with summons was
enhanced considerably to make it more deterrent. Market players who do
not cooperate with the regulator in the matter of investigations commit a
serious wrong which can have serious repercussions in the market."
15. In my opinion non compliance of summonses and consequent non
furnishing of information hampers investigation by the IA and it acts as a
severe handicap in arriving at just and reasonable conclusion by the IA
within a reasonable period of time.
16. In view of the above facts / records, it can be concluded that the noticee has
failed to comply with the provisions of Sections 11C(3) and 11C(5) of the
SEBI Act. The text of the provisions of Sections 11C(3) and 11C(5) of the
SEBI Act is reproduced as below :
SEBI Act
Section 11C
...
(3) The Investigating Authority may require any intermediary or any persons
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 him in this behalf as he 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.
...
(5) Any person, directed to make an investigation under sub-section (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.

17. The aforesaid violations by the noticee attract penalty under Section 15A(a)
of the SEBI Act which provides that:

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Penalty for failure to furnish information, return, etc.

15A. If any person, who is required under this Act or any rules or regulations made
thereunder; (a) to furnish any document, return or report to the Board, fails to furnish the same,
he 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;

18. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of
the Rules require that while adjudging the quantum of penalty, 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
19. With regard to the above factors to be considered while determining the
quantum of penalty, it is noted that the disproportionate gain or unfair
advantage made by the noticee or loss caused to the investor as a result of
the default of the noticee is not available on record. Further, it may also be
added that it is difficult to quantify the unfair advantage made by the noticee
or the loss caused to the investor by not co-operating with Investigation
Authority. It is further observed from the records that the noticee has also
not co-operated in the current Adjudication proceedings.

20. Having considered the facts and circumstances of the case and after taking
into account the factors under Section 15J of the SEBI Act,1992, I find that a
penalty of ` 50,00,000/- (Rupees Fifty Lakh only) on the Noticee for violation
of Section 11C(3) and also a penalty of ` 50,00,000/- (Rupees Fifty Lakh
only) for violation of Section 11C(5) of the SEBI Act,1992 would be
commensurate with the violations committed by the noticee in terms of the
provisions of Section 15A(a) of the Securities and Exchange Board of India
Act, 1992.
ORDER
21. In exercise of the powers conferred under Section 15-I of the Securities and
Exchange Board of India Act, 1992, and Rule 5 of Securities and Exchange
Board of India (Procedure for Holding Inquiry and Imposing Penalties by
Adjudicating Officer) Rules, 1995, I hereby impose a consolidated penalty of

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` 1,00,00,000 /-(Rupees One Crore only) on the noticee Shri Mahendra P

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Rathod (PAN No AIHPR1630A) in terms of the provisions of Section 15A(a)

of the Securities and Exchange Board of India Act, 1992 for violation of
provisions of Section 11C(3) and Section 11C(5) of the Securities and
Exchange Board of India Act,1992.
22. 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
Chief General Manager, Enforcement Department, Securities and Exchange
Board of India, SEBI Bhavan, Plot No. C4-A, G Block, Bandra Kurla
Complex, Bandra (E), Mumbai 400 051.
23. In terms of the provisions of Rule 6 of the Securities and Exchange Board of
India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating
Officer) Rules 1995, copies of this order are being sent to Shri Mahendra P
Rathod residing at D-6,VI-2, Shahibagh Shyam Apartments, Ahmedabad,
Gujarat 380004 and also to the Securities and Exchange Board of India,
Mumbai.

Place: Mumbai
Date : 31.03.2015

D. RAVI KUMAR
CHIEF GENERAL MANAGER&
ADJUDICATING OFFICER

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