2014 (1) TMI 1658 - AT - Companies Law

Penalty under section 15H(ii) of SEBI Act, 1992 - Violation of the provisions of regulation 10 of the SEBI (Takeover Regulations), 1997 - Aspect of common objective - Held that - The element of common objective is clearly established by the learned AO in the impugned order. It is evident from the records that the same person namely, Shri. Dhiren Shukla, sold shares to all the eight entities including the three appellants before us at the rate of ₹ 2 each in the off market. It is vividly brought on record that at that time the price of the scrip of AIL in the market was in the range of ₹ 67 to ₹ 70. Therefore, transfer of bulk shares, that too at the same rate of ₹ 2 per share and in almost equal numbers to all the eight entities within two days is a clear indicator of the appellants having acted in concert with each other to acquire the shares/voting rights of AIL. The factual details of commonality of management and control of these eight entities are convincingly proved by the learned AO. Judgment of this Tribunal dated February 9, 2010 passed in Appeal No. 183 of 2009 in the case of Triumph International Finance India Ltd. vs SEBI 2010 (2) TMI 1127 - SECURITIES APPELLATE TRIBUNAL MUMBAI is clearly distinguishable and does not advance the case of the appellants in any manner. - Decided against the appellants.

Summary

Issues Involved:
1. Violation of Regulation 10 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
2. Determination of "persons acting in concert" (PAC) under Regulation 2(1)(e) of the Takeover Regulations, 1997.
3. Imposition of penalty under Section 15H(ii) of the SEBI Act, 1992.

Issue-wise Detailed Analysis:

1. Violation of Regulation 10 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997:
The appellants were found to have acquired 32.02% shares/voting rights of Axon InfoTech Ltd. (AIL) on April 5, 2006, without making a public announcement as required under Regulation 10 of the Takeover Regulations, 1997. The investigation revealed that eight entities, including the appellants, acted in concert to acquire these shares, thereby crossing the threshold limit of 15%. The Adjudicating Officer (AO) concluded that the appellants violated Regulation 10 by failing to make the necessary public announcement, thus attracting a penalty under Section 15H(ii) of the SEBI Act, 1992.

2. Determination of "persons acting in concert" (PAC) under Regulation 2(1)(e) of the Takeover Regulations, 1997:
The appellants contested the finding, arguing that the element of a "common objective" was not established. They claimed that their acquisition of shares was individual and not concerted. However, the AO provided substantial evidence demonstrating a coordinated effort among the entities. The AO highlighted that shares were transferred from the same individual, Dhiren Shukla, to all eight entities at the same rate and in a similar quantity, indicating a common objective. Additionally, the AO detailed the interconnected relationships and shared management among the entities, further establishing that they acted in concert.

3. Imposition of penalty under Section 15H(ii) of the SEBI Act, 1992:
The AO imposed a penalty of Rs. 12,57,500 on each of the eight entities for the violation. The appellants argued that the evidence was insufficient to prove a common objective. However, the Tribunal upheld the AO's findings, noting that the detailed factual matrix and the relationships among the entities convincingly demonstrated that they acted in concert. The Tribunal found no legal infirmity in the AO's order and upheld the penalty imposed.

Conclusion:
The Tribunal dismissed the appeal, affirming the AO's findings and the imposed penalties. The Tribunal emphasized that the appellants acted in concert with a common objective to acquire shares of AIL, thereby violating Regulation 10 of the Takeover Regulations, 1997. The judgment in the case of Triumph International Finance India Ltd. was distinguished, as the facts and evidence in the present case clearly established the appellants' concerted actions. The appeal was found to be without merit and was dismissed with no order as to costs.