BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

(ADJUDICATION ORDER NO: OIAE/EAD-3/AO/DRK-ASR/714/39-2015)
___________________________________________________________________
UNDER SECTION 15 -I OF THE SECURITIES AND EXCHANGE BOARD OF
INDIA ACT, 1992 READ WITH RULE 5 OF THE SECURITIES AND EXCHANGE
BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING
PENALTIES BY ADJUDICATING OFFICER) RULES, 1995.
In respect of:

Varun Shipping Company Limited.

Laxmi Building,
6, Shoorji Vallabhdas Marg,
Ballard Estate,
Mumbai - 400 001
___________________________________________________________________
FACTS IN BRIEF:
1. Securities and Exchange Board of India (hereinafter referred to as SEBI)
observed that Varun Shipping Company Limited (hereinafter referred to as 'the
Noticee / the Company") had not redressed 34 investor grievances pending in
SEBI Complaints Redress System (hereinafter referred to as SCORES) out of
which one investor grievance was pending for more than two years.
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 known as 'SEBI Act') read with
Rule 3 of the SEBI (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 15C of the SEBI Act for the
alleged violation of non-redressal of 34 investor grievances by the Noticee and
the order of appointment of Adjudicating Officer was communicated vide
communiqu dated May 10, 2013.
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SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING:

3. A Show Cause Notice No. A&E/EAD-3/DRK-BM/18784/2013 dated July 30,
2013 (hereinafter referred to as SCN) was served on the Noticee on August 06,
2013 through Hand Delivery Acknowledgment Due (hereinafter referred to as
HDAD) under Rule 4 (1) of the Adjudication 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 Section 15C of the SEBI Act, for the
alleged violation of non redressal of 34 investor grievances. The allegations
against the Noticee as levelled in the SCN, are as under;
a. Vide letter dated January 22, 2013 issued to the Noticee, SEBI had observed
that 2 (two) investor grievances were pending against the Noticee in
SCORES. It was also mentioned in the said letter that if the Noticee fails to
redress the complaints, SEBI may take action against the Noticee under
Section 15C and Section 24 of the SEBI Act.
b. SEBI vide letter dated February 15, 2013 reminded the Noticee to redress the
5 (five) investor grievances pending on that date against the Noticee and
submit the Action Taken Report (hereinafter referred to as ATR) through
SCORES, at the earliest, failing which SEBI may initiate regulatory action
against the Noticee which includes debarring from Securities Market and/or
imposing penalty.
c. Thereafter, SEBI sent one more letter dated March 08, 2013 to the Noticee
stating that if Noticee fails to redress the 9 (nine) investor grievances pending
as on that date then SEBI may initiate regulatory action against the Noticee
which includes debarring from Securities Market and/or imposing penalty.
d. It was alleged in the SCN that Noticee had neither replied to the aforesaid
letters dated January 22, 2013, February 15, 2013 and March 8, 2013 nor
redressed all the investor grievances within the stipulated time inspite of being
called upon by SEBI in writing to do so. Further, it is observed that as on May
24, 2013 there were 34 investor grievances pending against the Noticee in
SCORES.

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e. In view of the above, it was alleged that the Noticee had failed to resolve 34
investor grievances within the time specified by the Board, which is in violation
of Section 15C of the SEBI Act. The provisions of Section 15C of the SEBI Act
are produced hereunder;
Penalty for failure to redress investor grievances
15C. If any listed company or any person who is registered as an intermediary, after
having been called upon by the Board in writing, to redress the grievances of
investors, fails to redress such grievances within the time specified by the Board, such
company or intermediary 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.
4. The Noticee vide its letter dated August 19, 2013 submitted its reply to the
aforesaid SCN and made following submissions:
a. The Noticee provided details of action taken by it on the 34 complaints
pending on SCORES. Out of these 34 complaints, 32 complaints were for
non-receipt of dividend announced for the year 2011-12 filed by different
investors. One complaint was for non-receipt of dividend announced for the
year 2008-09 and was filed by Shri S. B. S. Lal (hereinafter referred to as
"Lal"). Remaining one complaint was filed by Shri Pankaj K. Damania
(hereinafter referred to as "Pankaj") for non-receipt of shares after transfer.
b. The Board of Directors of the Noticee declared a dividend of 5%, i.e. 0.50
paise per share for the financial year 2011-12. The Noticee has initiated steps
towards disbursement of dividend and opened Equity Dividend account 201112 with IDBI bank.
c. The company is passing through difficult business and operating environment
due to adverse global situation.
d. With respect to the 32 complaints of non-payment of dividend for the year
2011-12, the Noticee submitted that it will pay the aforementioned dividend to
its investors before the end of September 2013 which will resolve 32 pending
complaints related to non-payment of dividend.

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e. With respect to the investor complaint of Lal, Noticee informed that there is no
such investor in records of the company. The Company has already
responded to Lal and it has not received any reply from him.
f. With respect to the investor complaint of Pankaj for non-receipt of Share
certificates after transfer, Noticee submitted that Pankaj purchased shares in
October 1996 but the seller Shri Kiritkumar C. Shah (hereinafter referred to as
"Kiritkumar") had informed the "Stop Transfer" after the sale transaction and
lodged the FIR for loss of Share certificates in March 2005. Since the original
seller, i.e. Kiritkumar had informed the "Stop Transfer" the transfer of shares
could not be affected unless NOC is received from Kiritkumar. This was
communicated to Pankaj by the Noticee and he is following the NOC from
Kiritkumar.
5. For the purpose of inquiry, an opportunity of hearing was granted to the Noticee
on November 28, 2013 at SEBI Bhavan, Mumbai vide hearing notice dated
November 13, 2013. The said notice of hearing was served upon the Noticee on
November 18, 2013 through Hand Delivery Acknowledgement Due.
6. In response to the said notice of hearing, the Noticee vide its letter dated
November 22, 2013 submitted that Shri Yudhishthir D. Khatau, Chairman and
Managing Director of the Noticee will appear for personal hearing on November
28, 2013.
7. The hearing on November 28, 2013 was attended by Shri Yudhishthir D.
Khatau, Shri Vipul Acharya (Vice President of the Noticee) and Armin Fali
Padriwala (Counsel of the Noticee) (hereinafter collectively referred to as
"ARs"). During the hearing, ARs reiterated the submissions made by the
Noticee vide its letter dated August 19, 2013 and further stated that the Noticee
would endeavour to resolve the complaints of the investors relating to nonreceipt of dividend and non-receipt of shares after transfer. Further, the ARs
submitted that the Noticee will file a detailed reply with respect to the complaints
other than non-receipt of dividends within one week.

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8. Vide letter dated December 04, 2013, Noticee made additional submissions with
respect to the hearing held on November 28, 2013
a. The company is passing through difficult business and operating environment
due to adverse global situation. All the efforts are being made to bring the
company out of this difficult situation and the Company will definitely pay the
dividend announced in last financial year. The Promoter shareholders of the
company have agreed to receive dividend only after dividend is made to public
shareholders.
b. With respect to the complaint of Pankaj for non-receipt of share certificates
after transfer, the Noticee submitted that once Kiritkumar and Pankaj resolve
the dispute between themselves, the Noticee will transfer the shares.
9. Since, no response was received from the Noticee for almost one year, Noticee
was advised vide letter dated January 16, 2015 to provide an update on the
payment of dividend to public shareholders and the complaint of Pankaj.
10. Noticee vide its letter dated March 14, 2015 submitted that it has transferred
` 4,66,58,106/- (Rupees Four Crore Sixty Six Lakh Fifty Eight Thousand and
One Hundred and Six) into the dividend account for payment of dividend to nonpromoter shareholders of the company.
CONSIDERATION OF EVIDENCE AND FINDINGS:
11. I have taken into consideration the facts and circumstances of the case and the
material available on record.
12. In respect of the complaints of non-receipt of dividend for the year 2011-12, it is
noted that the first complaint for non-receipt of dividend was filed in SCORES on
February 11, 2013. Thereafter, 31 more complaints were filed for the same
matter. The Noticee had deposited ` 10,00,000/- (Rupees Ten Lakh) into the
'equity dividend account 2011-12' on August 06, 2013. It is noted from the
records submitted by the Noticee vide its letter dated March 14, 2015 that the
Noticee transferred

additional ` 4,56,58,106/- (Rupees Four Crore Fifty Six

Lakh Fifty Eight Thousand and One Hundred and Six) on March 13, 2015 into
the 'equity dividend account 2011-12' for payment of dividend to non-promoter
shareholders of the company. Noticee also initiated other process of payment of
dividend to its public shareholders in March 2015. It is relevant to mention that
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efforts were made by the Noticee to redress the said investor grievances from
August 06, 2013 i.e. almost six months after first complaint was filed in SCORES
in this regard.
13. It is noted from the available records / SCORES printout as provided by the
concerned department of SEBI that the complaint of Pankaj was forwarded by
the concerned department of SEBI to the Noticee for redressal of grievance on
March 14, 2013. In this regard, Noticee has claimed that it can take no action on
the complaint of Pankaj due to the dispute between Kiritkumar and Pankaj on
sale of shares. Noticee has not updated this information in the ATR and
therefore the aforesaid complaint is still unresolved in SCORES.
14. With regard to the complaint of Lal, it is noted from the available records /
SCORES printout as provided by the concerned department of SEBI that the
complaint of Lal was forwarded by the concerned department of SEBI to the
Noticee for redressal of grievance on July 17, 2010. It is relevant to mention that
efforts were made by the noticee to redress the said grievance only from April
19, 2012 (as shown in SCORES printout) i.e. after considerable lapse of time.
Noticee vide its remark dated April 19, 2012 in ATR informed SEBI that the
name of Lal is not reflecting as an investor in their records. As per the ATR,
Noticee sent three letters dated November 26, 2012, December 24, 2012 and
January 15, 2013 to Lal seeking information about his holding in the company
but did not receive any response from Lal. The Noticee provided copies of
aforesaid letters along with the proof of dispatch of its letter dated January 15,
2013. The aforesaid complaint is still unresolved in SCORES.
15. It is noted that as per SEBI circular dated August 13, 2012, all companies
against whom complaints are pending on SCORES, shall take appropriate
necessary steps within 7 days of receipt of complaint by the concerned company
through SCORES, so as to resolve the complaint within 30 days of receipt of
complaint and also keep the complainant duly informed of the action taken
thereon. Therefore, the allegation that the noticee failed to redress the grievance
of its investors within the specified period of 30 days as alleged in the SCN is
established against the Noticee.
16. In view of the aforesaid observations, I am of the opinion that the noticee has
delayed in taking steps to resolve the investor grievances and therefore has
failed to redress the investor grievances within the stipulated time. Hence the
noticee has violated Section 15C of the SEBI Act.
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17. For determining the quantum of penalty under Section 15C of the SEBI Act, the
factors stipulated in section 15J of the SEBI Act, have been taken into
consideration.
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.

18. 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 delay on
the part of the Noticee to redress the investor grievances are not available on
record.
19. Having considered the facts and circumstances of the case, submissions made
by the Noticee and after taking into account the factors under Section 15J of the
SEBI Act, 1992, I find that a penalty of ` 5,00,000/- (Rupees Five Lakh Only)
under Section 15C of the SEBI Act on the Noticee would commensurate for non
redressal of investor grievances within the prescribed time period.
Order:
20. 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 penalty of ` 5,00,000/(Rupees Five Lakh Only) upon the Noticee under the provisions of Section 15C
of the SEBI Act for non redressal of investor grievances within the prescribed
time period. Therefore, I am of the view that the said penalty is commensurate
with the aforesaid failure committed by the noticee.

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21. In terms of the provisions of Rule 6 of the Adjudication Rules, copy of this order
is being sent to the Noticee - Varun Shipping Company Limited, Laxmi
Building,6, Shoorji Vallabhdas Marg, Ballard Estate, Mumbai - 400 001, and
also to the Securities and Exchange Board of India, Mumbai.

Place: Mumbai

D. RAVI KUMAR

Date: March 25, 2015

CHIEF GENERAL MANAGER &

ADJUDICATING OFFICER

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