Penalties and Procedures

Power of the Board to order investigation

22.(1) The Board may, suo-motu or upon information received by it, cause an investigation to be made in respect of the conduct and affairs of any person associated with the process of buy back, by appointing an officer of the Board. Provided that no such investigation shall be made except for the purposes specified in sub-regulation (2)

(2) The purposes referred to in sub-regulation (1) are the following, namely:-

(a) to ascertain whether there are any circumstances which would render anyperson guilty of having contravened any of these regulations or any directions issued thereunder;

(b) to investigate into any complaint of any contravention of the regulation, received from any investor, intermediary or any other person;

(3) An order passed under the sub-regulation (1) shall be sufficient authority for the Investigating Officer to undertake the investigation and on production of an authenticated copy of the order, the person concerned shall be bound to carry out the duty imposed in regulation 23.

Duty to produce records, etc.

23.(1) It shall be the duty of every person in respect of whom an investigation has been ordered under regulation 22, to produce before the Investigating Officer such book, accounts and other documents in his custody or control and furnish him with such statements and information as the said officer may require from the purposes of the investigation.

(2) Without prejudice to the generality of the provisions of sub-regulation (1), such person shall -

(a) Extend to the Investigating Officer reasonable facilities for examining any books, accounts and other documents in his custody or control (whether kept manually or in computer or in any other form) reasonably required for the purposes of the investigation;

(b) To provide such Investigating Officer copies of such books, accounts and records which, in opinion of the Investigating Officer, are relevant to the investigation or, as the case may be, allow him to take out computer printouts thereof.

(c) To provide such assistance and co-operation as may be required in connection with the investigation and to furnish information relevant to such investigation as may be sought by such officer.

(3) The Investigating Officer shall for the purpose of investigation, have the full powers;

(a) Of summoning and enforcing the attendance of persons;

(b) To examine orally and to record on oath the statement of the persons concerned, any director, partner, member or employee of such person.

Submission of Report to the Board

24(1). The Investigating Officer shall, on completion of the investigation, after taking into account all relevant facts and circumstances, submit a report to the Board.

(2) On the receipt of report under sub-regulation (I ), the Board may initiate such action as may be empowered to do so in the interests of investors and the securities market.

Power of the Board to issue directions

25(1). The Board may in the interests of the securities market and without prejudice to its right to initiate action including criminal prosecution by the Board under section 24 of the Act and give such directions as it deems fit including:

(a) Directing the person concerned not to further deal in securities in any particular manner;

(b) Prohibiting the person concerned from cancelling any of the securities bought back in violation of the Companies Act;

(c) Directing the person concerned to sell or divest the shares acquired in violation of the provisions of these Regulations or any other law or regulations;

(d) Taking action against the intermediaries registered with Board in accordance with the Regulations applicable to it;

(e) Prohibiting the persons concerned, its directors, partners, members, employee and associates of such persons, from accessing the securities market;

(f) Disgorgement of any ill-gotten gains or profit or avoidance of loss.

(g) Restraining the company from making a further offer for buy back. (2) In case any person is guilty of insider trading or market manipulation the person concerned shall be dealt with in accordance with the provisions of Securities and Exchange Board of India (Insider Trading) Regulations, 1992 and Securities and Exchange Board of India ( Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market ) Regulations, 1995.

Source : Sebi