2015 (7) TMI 36 - AT - Companies Law

Penalty of ₹ 10 Lacs under Section 15A(b) of SEBI Act - Non disclosures under Regulation 7(1) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and Regulation 13(1) of SEBI (Prohibition of Insider Trading) Regulations, 1992 - Not an active action, shares increased due to bonus shares - Held that - It is seen that no effort to quantify disproportionate form or unfair advantage, wherever quantifiable, made as result of default of disclosure under Regulation 7(1) of Takeover Regulations, 1997 or 13(1) of PIT Regulations, 1992 has been made; but it is admitted that it is difficult to make such quantification. It is noticed that no effort has been made to even prove that any unfair advantage or disproportionate gain has come to appellant on a result of non-disclosure of acquisition of 5.36% stake in GEE by appellant. Similarly, no mention of any loss caused to an investor or group of investors as a result of default exists. Hence no cause for any harm to any investors due to non-disclosure has been made. In absence of such mention, it is seen that no such gain or advantage has occurred to appellants or any loss caused to an investor or a group of investors due to acquisition of 5.36% shares or voting rights by appellant in GEE. This is also to be seen from admission of appellant that acquisition of 5.36% of stake by appellant and its non-disclosure was due to their ignorance or non-appreciation of requirement of disclosure, since same occurred mostly by not as active action by appellant but as on result of bonus shares, shares allotted due to amalgamation and again by issue of bonus shares. It may be noticed that provisions of Regulations 7(1) of Takeover Regulations, 1997 and Regulation 13(1) of PIT Regulations, 1992 are not substantially different, since violation of first automatically triggers violation of second and hence there is no justification for imposition of penalty for second violation when penalty for first violation has been imposed. It may be seen that Regulation 7(1) of Takeover Regulations, 1997 and Regulation 13(1) of PIT Regulations, 1992 are not stand alone Regulations and one is corollary of other. - Penalty reduced to ₹ 1 Lacs.

Summary

Issues:
Violation of disclosure requirements under Regulation 7(1) of Takeover Regulations, 1997 and Regulation 13(1) of PIT Regulations, 1992. Imposition of monetary penalty by adjudicating officer under Section 15I of SEBI Act.

Analysis:
1. The appellant was penalized for not making requisite disclosures under Regulation 7(1) of Takeover Regulations, 1997 and Regulation 13(1) of PIT Regulations, 1992. The appellant admitted acquiring 5.36% shares of a company without proper disclosure, attributing it to ignorance rather than willful intent.

2. The respondent contended that the appellant failed to disclose subsequent share acquisitions, leading to a violation of the regulations. Efforts were made to serve notices for hearings, but the appellant did not cooperate, resulting in an ex-parte order against them.

3. The adjudicating officer imposed a penalty based on factors such as disproportionate gain, loss to investors, and the repetitive nature of the default. However, it was noted that quantifying unfair advantage or loss was challenging in this case.

4. The Tribunal acknowledged the technical and inadvertent nature of the violation, considering the appellant's explanation and the absence of evidence showing any unfair advantage or harm to investors. The interrelation of the two regulations was highlighted, leading to a reduction in the penalty to a token amount of Rs. 1 lac.

5. Ultimately, the appeal was dismissed, upholding the imposition of a reduced penalty of Rs. 1 lac for the violations of Regulation 7(1) of Takeover Regulations, 1997 and Regulation 13(1) of PIT Regulations, 1992. The original order imposing the penalty was upheld with no additional costs awarded.