Sebi sends defaulter to six months in jail

In the first instance of a sectoral regulator assuming judicial powers, the Securities and Exchange Board of India (Sebi) has ordered civil imprisonment of Vinod Hingorani for failing to pay dues to the tune Rs1.64 crore along with interest in connection with various fraudulent activities in securities market.

The Sebi action is in connection with non-payment of fines by companies, including Adam Comsof Ltd and Kolar Biotech Ltd, where Hingorani was non-executive chairman.

This is the first direct civil imprisonment order by Sebi on any entity for non-payment of dues in time after amendments to the Sebi Act in February that gave the capital markets regulator powers to take such action.

Sebi said Hingorani neither paid the said amount nor responded to the notice of demand sent by Sebi on 3 November 2014. Subsequently, Sebi directed him to appear before its recovery officer.

On 11 November, Hingorani replied to Sebi that he is unable to attend the hearing and he was non-executive chairman of Adam Comsof and Kolar Biotech and had no role in the matter.

Sebi did not elaborate on the matter in its order.

Sebi cited three earlier orders against Hingorani in April and June 2010, as part of which monetary penalties of Rs25 lakh, Rs30 lakh and Rs55 lakh were imposed on him for various fraudulent activities in the securities market.

''The said orders have become final....In spite of repeated reminders, he failed to pay any of the dues either in full or part,'' said Sebi.

On Thursday, Hingorani appeared before Sebi but could not furnish any substantial proposal for payment of dues. ''No substantial cause has been established or shown by the defaulter as to why he should not be committed to civil prison in the present recovery proceedings.

Therefore, the defaulter has been detained at Sebi Bhavan, Mumbai and directed to come out with a proposal towards payment of dues to Sebi, failing which he will be arrested and committed to civil prison.

''In spite of detention, the defaulter did not come out with any proposal for repayment of dues. I am. Therefore, satisfied that the defaulter shall be arrested and commit to civil prison,'' said DV Sekhar, recovery officer, Sebi, while passing the order. Sebi directed the jailor of Byculla District Prison, Mumbai to take Hingorani into civil prison and keep him imprisoned for a maximum period of six months or until the dues with interest are paid.