2015 (8) TMI 139 - AT - Companies Law

Violation of Disclosure of shareholding Penalty was imposed for violating of regulation 7(1) & 7(2) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 and regulation 29(2) & 29(3) SAST Regulations, 2011 Held that - making disclosures under SAST Regulations, 1997 and SAST Regulations, 2011 was mandatory In 2011 there was delay of two days, while in 2012 there was delay of six days in compliance after due date Default was repetitive in nature and evident that appellants instead of being more careful were more carefree Appellants who were seeking to acquire control over company ought to have been vigilant about their mandatory obligation Penalty imposed by AO cannot be said to be harsh or unreasonable, especially when default was repetitive Appeal hereby dismissed Decided against Appellant.

Summary

Issues:
Violation of Securities and Exchange Board of India regulations regarding disclosure requirements leading to imposition of penalties.

Analysis:

1. Issue 1: Violation of SEBI Regulations
The appellants challenged an adjudication order imposing a composite penalty of Rs. 5 lac for violating regulations 7(1) and 7(2) of SAST Regulations, 1997, and regulations 29(2) and 29(3) of SAST Regulations, 2011. The appellants admitted the delay in making disclosures as required by the regulations. However, they argued that the delay was minimal and no unfair gain or loss to investors occurred due to the non-disclosure. The appellants contended that the penalty should be revoked due to the marginal delay and lack of malicious intent.

2. Issue 2: Mandatory Nature of Disclosures
The tribunal noted that making disclosures under the SEBI regulations is mandatory. The penalty for non-disclosure is prescribed under Section 15A(b) of the SEBI Act, 1992, at the rate of Rs. 1 lac per day. In the case at hand, the first transaction involved a delay of two days in compliance, while the second transaction had a delay of six days. The tribunal emphasized that the repetitive nature of the default indicated a lack of vigilance on the part of the appellants, especially considering their public announcement to acquire a significant stake in the company.

3. Issue 3: Imposition of Penalty
Despite the appellants' argument that the penalty was excessive, the tribunal upheld the imposition of a composite penalty of Rs. 5 lac. The tribunal highlighted that the liability to make disclosures was joint and several. Considering all mitigating factors, the adjudicating officer had imposed a penalty lower than the maximum imposable amount of Rs. 8 lac. The tribunal concluded that the penalty was justified given the repetitive nature of the default and the appellants' objective of gaining control over the company.

4. Conclusion
The tribunal dismissed the appeal, finding no merit in the appellants' contentions. The penalty was upheld, emphasizing the mandatory nature of disclosures under the SEBI regulations and the appellants' failure to comply with the same. The tribunal deemed the penalty imposed as reasonable and justified in the circumstances of the case.