2015 (7) TMI 540 - AT - Companies Law

Penalty u/s 15A(b) of the SEBI Act, 1992 - Contravention of Regulation 29(2) & 29(3) of the SAST Regulations, 2011 and Regulation 13(3) & 13(5) of the Prevention of Insider Trading Regulations, 1992 - Non disclosure of acquisition of shares - Ignorance of law is not an excuse- Held that - The main contention of the appellant, who has appeared in person before us, is that he was not aware about the requirement of law in making disclosure as a part of SAST Regulations, 2011 and PIT Regulations, 1992. We note that ignorance of law is not an excuse. It seems to be an afterthought in as much as the appellant had undergone inquiry before the SEBI for similar type of violation in the recent past when he had increased his shareholding to the tune of 5.6% of the total shares of RPIL on September 5, 2012. It is, therefore evident that appellant was aware about the requirement of law as regards disclosures on acquiring 2% or more shares of the company. t is also noteworthy that the appellant, on his own showing, could inform the company about the acquisition of shares in question with a request to the company, in turn, to inform the Stock Exchange. This also makes it abundantly clear that the appellant was aware about the requirement of law to make disclosures about acquisition of shares in question at or above 2% to the company as well the to the Stock Exchange but he chose not to do it. It is thus clear a case of repetitive violation of law for which no leniency can be shown even in the matter of quantum of penalty. - Decided against the appellant.

Summary

Issues:
Challenge to SEBI order imposing monetary penalty for non-disclosures under SEBI Act, 1992 and relevant regulations.

Analysis:
1. The appellant challenged the SEBI order imposing a monetary penalty of Rs. 10 lac for non-disclosures related to the acquisition of shares of a company under specific regulations. The appellant was found to have violated SAST Regulations, 2011 and PIT Regulations, 1992 by failing to disclose acquisitions made on two occasions. The relevant provisions of the regulations were cited to highlight the disclosure requirements for substantial shareholders and acquirers holding specific percentages of shares or voting rights.

2. The appellant, an individual investor, held equity shares of the company but was not part of the promoter group. SEBI's investigation revealed that the appellant had acquired shares on specific dates without making the required disclosures, leading to the violation of regulations. A Show Cause Notice was issued, and the appellant provided a reply and attended a personal hearing.

3. The appellant claimed ignorance of the disclosure requirements, stating that he had informed the company about the share acquisitions but was provided with incorrect disclosure formats. The appellant argued that the delay in disclosures was unintentional and that the changes in holdings were reflected in the company's quarterly filings. The appellant maintained that there was no malicious intent and no personal gain from the delayed disclosures.

4. The respondent defended the penalty, citing a previous violation by the appellant and emphasizing the importance of upholding penalties proportionate to the offense. The Tribunal reviewed the case, considering the appellant's past violation and the argument of ignorance of the law. The Tribunal noted that ignorance of the law is not a valid excuse and highlighted the appellant's previous inquiry for a similar violation.

5. The Tribunal found that the appellant had prior knowledge of the disclosure requirements based on past inquiries and the ability to inform the company about share acquisitions. The repetitive nature of the violation and the appellant's awareness of the legal obligations led to the dismissal of the appeal. The Tribunal concluded that no leniency could be granted, even regarding the quantum of the penalty. The appeal was dismissed, and no costs were awarded.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the dismissal of the appeal.