2015 (7) TMI 494 - AT - Companies Law

Penalty for violation of regulation 7(1A) & 7(2) of SAST Regulations, 1997 - Violation of regulation 8(1) and 8(2) of SAST Regulations, 1997 - Violation of regulation 30(2) & 30(3) of SAST Regulations, 2011 - Non disclosure of sale transaction - Failure to make yearly disclosures - Held that - Under SAST Regulations, 1997 as also under SAST Regulations, 2011 disclosures are liable to be made within specified days irrespective of the scrip being traded on the Exchange or not. Similarly, disclosures have to be made irrespective of whether investors have suffered any loss or not on account of non disclosure within the time stipulated under those regulations. In the present case, violation under regulation 7(1A) read with regulation 7(2) of SAST Regulations, 1997 relates to the sale transaction that took place on April 30, 2004. As against the obligation to make disclosure on May 2, 2004 under regulation 7(1A) read with regulation 7(2) of SAST Regulations, 1997, admittedly, disclosure has been made on January 2, 2013 i.e., after delay of 3167 days. Similarly, as per regulation 8(1) read with regulation 8(2) of SAST Regulations, 1997 appellant holding more than 15% shares of the target company was obliged to make yearly disclosure to the company within the period specified therein. Admittedly, during the period 2002 to 2011 appellant had failed to make yearly disclosures and disclosures were made belatedly on January 2, 2013 for all the years from 2002 to 2011. Since the delay in making disclosures under regulation 8(1) read with regulation 8(2) of SAST Regulations, 1997, ranged from 3909 days to 622 days. Similarly, regulation 30(2) read with regulation 30(3) of SAST Regulations, 2011 requires yearly disclosure to be made by promoters and persons acting in concert to the Stock Exchange within 7 working days from the end of the financial year. Admittedly, disclosure under regulation 30(2) read with regulation 30(3) of SAST Regulations, 2011 was made on January 2, 2013 which was delayed by 265 days. - Decided against the appellant.

Summary

Issues:
1. Imposition of penalties for alleged violations of SEBI regulations.

Analysis:
The primary issue in this case revolves around the imposition of penalties by the Adjudicating Officer (AO) of Securities and Exchange Board of India (SEBI) for violations of various regulations. The appellant was penalized for contravening regulation 7(1A) along with regulation 7(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (SAST Regulations, 1997), regulation 8(1) and 8(2) of SAST Regulations, 1997, and regulation 30(2) read with regulation 30(3) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (SAST Regulations, 2011).

Regarding the violation of regulation 7(1A) and 7(2) of SAST Regulations, 1997, the appellant failed to make timely disclosures related to a sale transaction that occurred on April 30, 2004. The required disclosure was delayed by 3167 days, far exceeding the stipulated timeframe. Despite the potential penalty amounting to a significant sum, the AO exercised discretion and imposed a penalty of Rs. 3 lacs, considering mitigating factors. The Tribunal found this penalty reasonable and not arbitrary.

Similarly, the appellant was found in violation of regulation 8(1) and 8(2) of SAST Regulations, 1997 for failing to make yearly disclosures from 2002 to 2011 within the specified period. The delay in disclosures ranged from 3909 days to 622 days. Despite the substantial penalty that could have been imposed, the AO exercised discretion and levied a penalty of Rs. 13 lacs for all the years. The Tribunal deemed this penalty to be justified, considering the circumstances and mitigating factors.

Furthermore, the appellant was penalized for a delayed disclosure under regulation 30(2) read with regulation 30(3) of SAST Regulations, 2011. The required yearly disclosure was delayed by 265 days, and although a penalty of Rs. 1 lac per day was applicable, the AO imposed a penalty of Rs. 1 lac after considering mitigating factors. The Tribunal upheld this penalty as reasonable and not arbitrary.

In conclusion, the Tribunal found no grounds to interfere with the AO's order and dismissed the appeal without costs. The decision highlights the importance of timely compliance with SEBI regulations and the discretion available to authorities in imposing penalties based on the circumstances of each case.