2015 (4) TMI 23 - AT - Companies Law

Violation of Regulation 8(3) of SEBI SAST(Substantial Acquisition of Share and Takeovers) Regulations, 1997 - Inadvertent non compliance - Appellant on his own approached SEBI on non compliance Held that - We note that the appellant on his own approached SEBI on becoming aware of the technical violation in question and asked for consent proceedings which, somehow, could not materialize. Be that as it may. We have given our thoughtful consideration to the whole matter and we note that the basic purpose of SAST Regulations, 1997 (now Substantial Acquisition of Share and Takeovers Regulations, 2011) including that of regulation 8(3), is to make a company law abiding and compliant. In the present case, learned counsel for the appellant, Shri Sunil Humbre has stated that the company shall file proper disclosure to the stock exchanges within a period of two weeks although it is claimed that such disclosures have already been made in the past. In addition, we also note the conduct of appellant in approaching SEBI on its own and thereby bringing the violation in question to the notice of SEBI. In the peculiar facts and circumstances of the case, therefore, we are convinced that ends of justice would be met with by disposing of this appeal with a direction to the appellant to make the required disclosure to the stock exchanges in question as per the Regulation 8(3) of the SAST Regulations, 1997 on or before November 17, 2014. On furnishing the required disclosure, the penalty of ₹ 9 lac imposed on the appellant shall stand modified to ₹ 5 lac to be deposited by the appellant with SEBI within a period of one month thereafter. In case the appellant does not make appropriate disclosure by November 17, 2014, the original penalty against the company shall revive.

Summary

Issues Involved:
Violation of Regulation 8(3) of SEBI (Substantial Acquisition of Share and Takeovers) Regulations, 1997 leading to imposition of penalty on the appellant.

Analysis:

Issue 1: Violation of Regulation 8(3) of SEBI Regulations
The appellant, a company, was penalized for non-compliance with Regulation 8(3) of SEBI Regulations due to failure in continual disclosure of shareholding by promoters and persons in control. The respondent issued a show cause notice highlighting the violation from 1998 to 2011. The appellant argued that disclosure was regularly made, with an inadvertent non-compliance in 2001 promptly rectified upon discovery. Despite approaching SEBI for consent proceedings, the matter proceeded to adjudication resulting in the penalty. The Tribunal acknowledged the importance of disclosure requirements for market transparency and investor protection, emphasizing the need for companies to be law-abiding and compliant.

Issue 2: Adjudication and Penalty
The Tribunal, after hearing both parties, recognized the appellant's proactive approach in disclosing the violation voluntarily to SEBI. Considering the purpose of the regulations to ensure companies' compliance and transparency, the Tribunal directed the appellant to make the required disclosures to stock exchanges within a specified timeline. The penalty imposed was reduced from Rs. 9 lac to Rs. 5 lac, to be deposited with SEBI within a month upon compliance. Failure to meet the disclosure deadline would result in the reinstatement of the original penalty. The Tribunal's decision aimed at achieving justice by balancing regulatory compliance with the appellant's proactive measures and ensuring market integrity through timely disclosures.

Conclusion:
The Tribunal's judgment focused on the significance of regulatory compliance, transparency, and investor protection in the securities market. By acknowledging the appellant's efforts to rectify the violation and emphasizing the importance of disclosure requirements, the Tribunal provided a balanced resolution. The decision highlighted the need for companies to adhere to regulatory provisions while also recognizing and encouraging proactive steps towards rectifying inadvertent non-compliance.