BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA [ADJUDICATION ORDER NO. AO/SM-LS/ERO/10/2016]

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1 BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA [ADJUDICATION ORDER NO. AO/SM-LS/ERO/10/2016] 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, 1995 In respect of Chamong Tea Company Ltd. (PAN: AAACT9153C) In the matter of Non obtaining of SCORES Authentication FACTS OF THE CASE IN BRIEF 1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") vide Circulars No. CIR/OIAE/1/2012 dated August 13, 2012 and CIR/OIAE/1/2013 dated April 17, 2013 (hereinafter referred to as SEBI Circulars ) had directed all listed companies to obtain SEBI Complaints Redressal System (SCORES) authentication within the stipulated time period as prescribed by SEBI and also redress any pending investor grievances within the stipulated time period. 2. It was observed that certain companies including Chamong Tea Company Ltd. (hereinafter referred to as the Noticee/the Company ) had failed to obtain the SCORES authentication and therefore, had failed to comply with the aforesaid SEBI Circulars. 3. Thereafter, a letter dated December 02, 2013, was issued to the aforesaid companies, including the Noticee, whereby the companies were once again advised to submit the requisite information regarding SCORES authentication by December 18, However, the Noticee failed to submit the requisite information. APPOINTMENT OF ADJUDICATION OFFICER 4. Shri S V Krishanmohan was appointed as the Adjudicating Officer vide order dated May 07, 2014, to inquire and adjudge under section 15-I of SEBI Act and rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as Rules ) to enquire into and adjudge under section 15HB Page 1 of 5

2 of SEBI Act for the alleged violation of SEBI Circulars by the Noticee. Pursuant to the transfer of Shri S V Krishanmohan, the undersigned was appointed as Adjudicating Officer vide Order dated June 22, SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING 5. A Show Cause Notice No. SEBI/ERO/SVK/ADJ/M-558/2015 dated March 06, 2015 (herein after referred to as SCN ) was issued to the Noticee under rule 4 of the Rules to show cause as to why an inquiry be not held against them in terms of rule 4 of the Rules read with section 15-I of SEBI Act and penalty be not imposed under Section 15HB of SEBI Act for the violations alleged to have been committed by the Noticee. The Noticee submitted a reply to the SCN vide its letter dated March 23, 2015, wherein interalia it has made the following submissions:- a. The paid up share capital of the company is Rs. 25,19,100 consisting of equity shares of Rs. 10/- each. b. The total membership strength of the company is 82. c. The shares of the company was last traded on at a price of Rs paise per share. Further, the shares are very unfrequently traded. d. The company has written letters to the Calcutta Stock Exchange Limited from time to time for delisting of shares. e. The company has not received any investor complaints. 6. Thereafter, the Noticee was granted an opportunity of personal hearing on December 02, 2015, which was rescheduled to December 14, 2015 based on a request received form the Noticee. On December 14, 2015, Mr. Vishnu Agarwal (Authorized Representatives) of the Noticee appeared and submitted that the Noticee has now obtained SCORES authentication in compliance with the SEBI circulars. CONSIDERATION OF ISSUES AND FINDINGS 7. I have examined the SCN, the reply and the submissions of the Noticee, and other information and documents available on record. The issues that arise for consideration in the present case are : a) Whether the Noticee by failing to obtain SCORES authentication has failed to comply with SEBI Circular No. CIR/OIAE/1/2012 dated August 13, 2012 and CIR/OIAE/1/2013 dated April 17, 2013? Page 2 of 5

3 b) Does the violation, if any, on the part of the Noticee attract monetary penalty under Section 15 HB of the SEBI Act? c) If so, what would be the monetary penalty that can be imposed taking into consideration the factors mentioned in Section 15J of the SEBI Act? 8. The Noticee was required to comply with the SEBI Circulars within the stipulated time period as prescribed by SEBI. Since the Noticee did not comply with the SEBI Circulars, vide letter dated December 02, 2013 the Noticee was advised to obtain SCORES authentication by December 18, It is observed that the Noticee once again failed and neglected to comply. Therefore, SEBI initiated adjudication proceedings against the Noticee, and the erstwhile AO had issued a SCN dated March 06, The Noticee provided a reply SCN vide letter dated March 23, 2015 as elaborated at para 5 above. During the personal hearing the Authorized Representative of the Noticee appeared before me and submitted that the Noticee has now obtained SCORES authentication. 9. On verification from the concerned department I note that the Noticee has obtained SCORES authentication as on December 08, Failure to comply with the directions of SEBI contained in the SEBI circular and thereafter the directions contained in the letter dated December 2, 2013 amounts to repeated violation of the directions given by SEBI. 10. In view of the foregoing, the alleged violation of the provisions of the aforesaid SEBI Circular by the Noticee as alleged in the SCN stands established which in turn attracts imposition of penalty. 11. In this regard, it is pertinent to note that the Hon ble Securities Appellate Tribunal in the matter of Port Shipping Company Ltd. Vs. Securities and Exchange Board of India has held that :- Under Section 15HB, penalty imposable for non compliance of SEBI direction is not less than one lakh rupees but may extend to one crore rupees. In the present case, after considering all mitigating factors the adjudicating officer of SEBI has imposed penalty of Rs. 1,50,000/- as against penalty of Rs. 1 crore imposable under Section 15HB of SEBI Act which cannot be said to be excessive or unreasonable. Argument of the appellant that there was no operating income, no permanent employee, no pending investor grievance, no prejudice caused to any investor and that the shares of the appellant company were not traded for more than six years, cannot be a ground to disobey the directions given by SEBI. Obligation to obtain SCORES authentication was not dependent on there being operating income or pending investor Page 3 of 5

4 grievance or trading of shares on the stock exchanges. Admittedly, the appellant company continues to be a listed company and, therefore, it was obligatory on part of appellant company to obtain SCORES authentication within the time stipulated by SEBI. However, the appellant has consistently failed and neglected to comply with the directions of SEBI and it is only when SEBI initiated penalty proceedings, the appellant chose to comply with the directions of SEBI. Therefore, in the facts of the present case appellant deserved higher penalty. However, after taking all the factors set out by the appellant as mitigating factors, the adjudicating officer of SEBI has imposed nominal penalty of Rs. 1,50,000/- as against the imposable penalty of Rs. 1 crore. In such a case, it cannot be said that the penalty imposed is excessive or unreasonable 12. In view of the aforementioned violation, the Noticee is liable for monetary penalty under Section 15HB of SEBI Act which reads as follows: 15HB.Penalty for contravention where no separate penalty has been provided.- 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. 13. While determining the quantum of penalty under Section 15 HB of SEBI Act it is important to consider the factors stipulated in Section 15J of SEBI Act which reads as under:- 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:- 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. 14. 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 investors as a result of the failure on the part of the Noticee to obtain SCORES authentication are not available on record. Further, it may also be added that it Page 4 of 5

5 is difficult to quantify the unfair advantage made by the Noticee or the loss caused to the investors in a default of this nature. 15. However, lack of due diligence demonstrated by the Noticee is a risk to the securities market and thus loss to the investors to that extent that the Noticee has still not obtained authentication even after three years of issuance of the SEBI Circulars. Failure of the Noticee to obtain SCORES authentication has deprived the investors of an avenue, through which they can seek redressal of their grievance, if any, against the Noticee. ORDER 16. After taking into consideration all the facts and circumstances of the case, I impose a penalty of ` 1,50,000/- (Rupees One lakh and Fifty Thousand only) under Section 15 HB of the SEBI Act against the Noticee which will be commensurate with the violations committed by it. 17. The Noticee shall pay the said amount of penalty by way of demand draft 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 should be forwarded to the Regional Director, SEBI Eastern Regional Office, 16, Camac Street, 3rd. Floor, Unit 301, Kolkata In terms of Rule 6 of the Rules, copy of this order is sent to the Noticee and to the Securities and Exchange Board of India. Date: January 15, 2016 Place: Kolkata S MADHUSUDHANAN ADJUDICATING OFFICER Page 5 of 5