2015 (8) TMI 670 - AT - Companies Law

Violation to make disclosures of shareholding SEBI imposed monetary penalty upon appellants for violating Regulation 8 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 r/w Regulation 30 of SAST Regulations, 2011 Held that - Appellant no. 1 made disclosure after delay of ten days, whereas appellant no. 3 after delay of 38 and 5 days during years 2003 and 2005 and appellant no. 1 after delay of 30 days Penalty imposed cannot be said to be unreasonable on ground of proportionality as this principle was applicable when penalty imposed was rather disproportionate to gravity of loss caused to investors Appeal dismissed Decided against Appellant.

Summary

Issues:
Violation of SEBI regulations - Regulations 8(1), 8(2), 8(3), 30(1), 30(2), and 30(3) of SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997 and 2011.

Analysis:
The appeal was filed against an order imposing penalties for violations of SEBI regulations. The appellants failed to comply with various disclosure requirements under SEBI regulations, leading to penalties. The violations included delays in making disclosures regarding shareholdings and voting rights by the company and its promoters, as mandated by Regulations 8(1), 8(2), 8(3), 30(1), 30(2), and 30(3) of the SEBI regulations. Adjudication proceedings were initiated, and a common show cause notice was issued to the appellants. The appellants responded to the notice, but the adjudicating officer found them guilty and imposed penalties. The appeal challenged this order dated April 30, 2014.

The violations were specifically related to the failure to make timely disclosures as required by the SEBI regulations. Appellant no. 2 did not comply with Regulations 30(1) and 30(2) of SAST Regulations, 2011 for the financial year ending March 31, 2012. Appellant no. 3 failed to comply with Regulations 8(1) and 8(2) of SAST Regulations, 1997 for the years ending March 31, 2003, and March 31, 2005. The company also failed to comply with Regulation 8(3) of SAST Regulations, 1997 for the year 2003. The penalties imposed were challenged on the grounds of proportionality and inadvertence, but the Tribunal upheld the penalties considering the importance of timely disclosures for transparency in the capital market.

The Tribunal dismissed the appeal, emphasizing the significance of timely and accurate disclosures in maintaining transparency and enabling informed decision-making by investors. The penalties imposed by SEBI were deemed reasonable and not disproportionate to the violations committed by the appellants. The principle of proportionality was discussed, stating that penalties should align with the gravity and extent of the violations. The Tribunal rejected the argument of inadvertence or unintentional lapses, highlighting the crucial role of disclosures in ensuring market integrity and investor protection. The appeal was dismissed, and no costs were awarded.

In conclusion, the judgment upheld the penalties imposed by SEBI for violations of SEBI regulations regarding disclosure requirements. The importance of timely and accurate disclosures for market transparency and investor protection was emphasized, leading to the dismissal of the appeal challenging the penalties.