2015 (7) TMI 579 - AT - Companies Law

Penalty u/s 15H(ii) of SEBI Act, 1992 - Violation of Regulation 14(1) of SAST Regulations, 1997 - Failure to make public announcement of offer within stipulated time - Serving of notice by speed post - Held that - Learned counsel for respondent stated that speed post is not one of modes as per Regulation 3 of these Regulations, but vehemently argued that service of notices on appellant has been proper and speed post is advantageous mode of transmission, since same can be tracked and that service of notice on appellant was at his residence, which has been acknowledged by appellant or his authorised agent and proof of service of all notices is available with respondent and hence appellant cannot deny that notices were not received by him. As per Regulation 3(b) of Manner of Service of Summons and Notices issued by Board Amendment Regulations, 2007 (MSSNB Regulations 2007), transmitting a copy of notices by registered post with acknowledgement due, addressed to that person or his duly authorised agent, or by speed post or by such courier service, as may be approved by the Board or by any other means of transmission of documents including Fax message or electronic mail service, which affords a record of delivery, is a proper service and hence contention of appellant that he did not received copies of any of the notices, in connection with the case, is not acceptable. - Decided against the appellant.

Summary

Issues:
1. Challenge to ex parte orders passed by adjudicating officer of SEBI
2. Proper service of show cause notices
3. Violation of Regulation 14(1) of SAST Regulations, 1997
4. Imposition of penalty under Section 15H(ii) of SEBI Act, 1992

Issue 1: Challenge to ex parte orders
The appellants filed two appeals to challenge the ex parte orders passed by the adjudicating officer of SEBI imposing penalties of Rs. 5 lac and Rs. 15 lac respectively under the SEBI Act, 1992. The authorised representative of the appellants raised a grievance regarding the lack of proper service of show cause notices. In response, the counsel for the respondent agreed that the impugned orders should be set aside and restored to the adjudicating officer for fresh orders on merits and in accordance with the law.

Issue 2: Proper service of show cause notices
The Tribunal quashed and set aside the impugned orders dated January 20, 2014, directing SEBI to issue show cause notices to the appellants at the addresses provided in the appeals and to pass appropriate orders on merits after giving the appellants an opportunity of hearing. The notices were to be served afresh to ensure due process and compliance with legal requirements.

Issue 3: Violation of Regulation 14(1) of SAST Regulations, 1997
An appeal was filed against the order imposing a penalty of Rs. 5,00,000 for the violation of Regulation 14(1) of SAST Regulations, 1997, under Section 15H(ii) of the SEBI Act, 1992. The appellant had entered into a shares Purchase Agreement (SPA) with promoters, resulting in a delay of 32 days in making a public announcement of the offer, contrary to the regulatory provisions. The appellant, along with the promoters, was required to make a public announcement within four working days from the date of the SPA, but the delay led to the imposition of the penalty.

Issue 4: Imposition of penalty under Section 15H(ii) of SEBI Act, 1992
The Tribunal upheld the imposition of the penalty as the delay in making the public announcement of the offer was not contested by the appellant. Despite the appellant's claim of not receiving show cause notices, it was deemed unacceptable as all notices were sent by speed post to the residential address of the appellant, in accordance with the SEBI regulations. The mode of transmission via speed post was considered proper, and the proof of delivery was available with the respondent, leading to the dismissal of the appeal and the affirmation of the penalty imposed.