2014 (6) TMI 898 - AT - Companies Law

Penalty u/s 15A(b) of the SEBI Act, 1992 - Violation of regulation 7(1A) & 7(2) of the SAST Regulations, 1997 - Failure to disclose the transaction of sale of shares - Transfer within the promoter group - Held that - As rightly contended by counsel for the respondent and also held by the AO, obligation to make disclosure under regulation 7(1A) read with regulation 7(2) of SAST Regulations, 1997 is applicable to both purchase and sale whether effected within the promoter group or not and, therefore, disclosure made by Shri Anand Arya as purchaser does not obliterate the obligation cast upon the appellant to make disclosure as a seller of the shares in question. Similarly, fact that the appellant had made disclosures under PIT Regulations, 1992 does not absolve appellants obligation to make disclosure under regulation 7(1A) of SAST Regulations, 1997. Reliance placed on decision of this Tribunal in the case of Vitro Commodities Pvt. Ltd. 2015 (7) TMI 36 - SECURITIES APPELLATE TRIBUNAL MUMBAI has been rightly distinguished by the AO by recording that the acquisition therein was not on account of sale or purchase of shares but as a result of issuance of bonus shares. In the present case, admittedly appellant had sold shares which attracted disclosure requirements under regulation 7(1A) read with regulation 7(2) of SAST Regulations, 1997 and hence decision of this Tribunal in case of Vitro Commodities 2015 (7) TMI 36 - SECURITIES APPELLATE TRIBUNAL MUMBAI -does not support the case of the appellant. - Decided against the appellant.

Summary

Issues:
Whether the Adjudicating Officer of SEBI was justified in imposing a penalty for failure to make disclosures under SAST Regulations, 1997.

Analysis:
The judgment involves the issue of whether the Adjudicating Officer of SEBI was justified in imposing a penalty on the appellant for failure to make disclosures under the Securities and Exchange Board of India Act, 1992. The appellant, a promoter of a company, sold shares constituting more than 2% of the share capital without making the required disclosure within the stipulated time frame. The appellant argued that since the shares were sold to another promoter within the group, disclosure obligations did not apply. Additionally, the appellant claimed to have made disclosures under other regulations. However, the respondent contended that disclosure obligations apply to both purchase and sale transactions, regardless of being within the promoter group. The Adjudicating Officer upheld the penalty, citing similar decisions by the Tribunal in other cases.

The Tribunal analyzed the contentions of both parties and held that the obligation to make disclosures under SAST Regulations, 1997 applies to both purchase and sale transactions, irrespective of being within the promoter group. The Tribunal rejected the appellant's argument that disclosures made under other regulations absolved them of the obligation to disclose under SAST Regulations, 1997. The Tribunal distinguished a previous case where bonus shares were involved, stating that in the present case, the appellant had sold shares triggering disclosure requirements. Therefore, the Tribunal dismissed the appeals, finding no merit in the appellant's arguments and upholding the penalty imposed by the Adjudicating Officer.

In conclusion, the Tribunal's judgment affirms the importance of complying with disclosure obligations under relevant regulations, emphasizing that such obligations apply to both purchase and sale transactions, regardless of the parties involved. The judgment serves as a reminder to market participants to adhere to regulatory requirements to ensure transparency and investor protection.