1999 (5) TMI 479 - HC - Companies Law

Summary

Issues:
- Compliance with SEBI regulations for bankers to an issue
- Imposition of penalty by Adjudicating Officer
- Legal status of rules and regulations
- Specific findings in each case of public issue

Compliance with SEBI regulations for bankers to an issue:
The appellant, a public sector bank, held a certificate of registration from SEBI as a Banker to an Issue. Upon seeking renewal, the respondent found the appellant had not fulfilled the condition of entering into agreements with issuer companies as required by regulations. The appellant argued that they had followed the regulations by providing documentation of agreements and compliance in various public issues. However, the respondent contended that the appellant had not met the requirements, leading to the penalty imposition.

Imposition of penalty by Adjudicating Officer:
The Adjudicating Officer imposed a penalty of Rs. 25,000 on the appellant for non-compliance with SEBI regulations. The appellant claimed the penalty was arbitrary and not in accordance with the factors provided in the relevant Act. The respondent justified the penalty, stating that the appellant had failed to fulfill the conditions of the registration, and the penalty amount was within the statutory limits.

Legal status of rules and regulations:
The appellant argued that SEBI rules and regulations were guiding principles and not mandatory. However, the court clarified that these regulations were mandatory and non-compliance constituted penal offenses. The court also emphasized that agreements could be formed through exchange of letters if the terms were clearly understood by both parties.

Specific findings in each case of public issue:
The Adjudicating Officer's order focused on three specific public issues involving the appellant. The court noted discrepancies in compliance with regulations in each case and emphasized the need for specific examination of relevant documents rather than relying on specimen letters or agreements. Consequently, the court set aside the impugned order and remanded the matter for further adjudication to ensure specific findings in each case.

In conclusion, the court allowed the appeal by way of remand, highlighting the importance of detailed examination and specific findings in cases of non-compliance with SEBI regulations by bankers to an issue.