2015 (7) TMI 338 - AT - Companies Law

Penalty u/s 15A(b) of the SEBI Act, 1992 - Non-disclosure of acquisition and/or sale of shares - Violation of Regulation 13(4) read with 13(5) of SEBI (PIT) Regulations, 1992 - Violation of Regulations 7(1) and 7(2) of SAST Regulations, 1997 - Held that - Penalty cannot be considered unreasonable in the facts and circumstances of the present case. The principle of proportionality would come to the rescue of an appellant only when the penalty sought to be imposed by SEBI is highly, and rather shockingly, disproportionate to the gravity, nature and extent of the violation involved in a given case, including any illegal profits which might have been earned by a person as a result of such violation or any loss which might have been caused to the innocent investors directly due to such violation. Similarly, penalty of ₹ 5 lac each on the 5 promoters is justified and not unreasonable considering the nature of violation and maximum penalty of ₹ 1 crore imposable under law on each of them. Appellants in Appeal No. 167 of 2014, and Appeal No. 170 of 2014, namely, Mr. P V Ravi Kumar and P Leela Madhuri Devi are husband and wife and they undertook sale and purchase of 4,51,750 shares between themselves. None of them made any disclosure as required by Regulation 13(1) read with 13(5) of PIT Regulations as also under Regulation 7(1) and 7(2) of SAST Regulations, 1997 in as much it led to change in their shareholding pattern by 2%. Even in case of appellant in Appeal No. 174 of 2014, namely, Mr. P Suresh Gandhi, he did not make any disclosure in respect of sale of 2,83,500 shares of the company in violation of PIT Regulations in question. He being a public investor, the learned AO has imposed a penalty of ₹ 3 lac only as against ₹ 1 crore imposable under law. Therefore, the imposition of above said penalties can neither to be termed as discriminatory nor disproportionate to the admitted violation, particularly in the facts and circumstances of the case as enumerated above. - Decided against the appellants.

Summary

Issues:
1. Imposition of penalties by SEBI on multiple appellants for violations of securities regulations.

Analysis:
The judgment involves nine appeals arising from a common order issued by SEBI against the appellants for various violations of securities regulations. The penalties imposed range from Rs. 3 lac to Rs. 10 lac based on the nature and extent of the violations. The violations primarily relate to non-disclosure of acquisition and sale of shares, with specific references to Regulations under the PIT Regulations, 1992, and SAST Regulations, 1997.

The primary issue addressed in the judgment is the imposition of penalties by SEBI on the appellants for the violations. The appellants argued that the violations occurred due to ignorance of the law and requested leniency in the penalties imposed. However, the respondent contended that penalties were imposed after considering the degree and nature of the violations committed by each appellant and their respective positions in the company.

The judgment highlighted specific instances where penalties were justified based on the severity of the violations. For example, the appellant who was a Promoter, Director, and Compliance Officer of the company was penalized Rs. 10 lac for not disclosing acquisition and sale of shares on two occasions. Similarly, other appellants, including promoters and public shareholders, were penalized based on the violations committed by them, with penalties ranging from Rs. 3 lac to Rs. 5 lac.

The judgment emphasized the principle of proportionality in imposing penalties, stating that penalties should be commensurate with the gravity, nature, and extent of the violations. It was concluded that the penalties imposed on the appellants were justified and not unreasonable considering the specific violations and the maximum penalties prescribed by the relevant securities regulations.

In conclusion, all the appeals were dismissed, and no costs were awarded. The judgment underscores the importance of compliance with securities regulations and the need for appropriate penalties to deter violations and protect the interests of investors in the securities market.