2015 (10) TMI 267 - AT - Companies Law

Validity of penalty imposed under Section 15A(b) and 15HB of Securities Exchange Board of India Act Appellant contends that there wasn t any intention on his part to suppress purchase and sale of shares Appellant holds that failure to make disclosure has not resulted in any profit for him or loss to the investors and was simply an inadvertent error with no malafide intention - Appellant further contends that violation is not repetitive in nature and the Adjudicating Officer is not justified in imposing the penalty of ₹ 5 lac and ₹ 2 lac under section 15A(b) and 15HB Appellant drafted a compilation to show that the company has been making losses so the penalty should substantially be reduced. Held That - There was seen no merit in the contentions of the Appellant - Disclosures have not at all been made, still the Adjudicating Officer has imposed a penalty of ₹ 5 lac and ₹ 2 lac under Section 15A(b) and Section 15HB instead of ₹ 1crore which cannot be said to be excessively harsh or unreasonable Penalty is imposable irrespective of the fact that the company/promoter-director have been incurring losses or not - Omission on the part of the appellant was detrimental to the interest of the investors and hence no fault can be found with the decision of SEBI Decided in favour of the Respondent.

Issues:
Violation of Regulations 13(4) and 13(4A) of the PIT Regulations and clause 4.2 of the Model Code of Conduct; Imposition of penalties under section 15A(b) and section 15HB of the SEBI Act; Mitigating factors for reducing penalties; Adjudicating officer's discretion in imposing penalties; Compliance with disclosure requirements; Importance of accurate and timely disclosures in the securities market.

Violation of Regulations 13(4) and 13(4A) of the PIT Regulations and clause 4.2 of the Model Code of Conduct:
The appellant, a promoter of a listed company, failed to disclose share purchases within the stipulated time, violating Regulations 13(4) and 13(4A) of the PIT Regulations. Additionally, the appellant engaged in an opposite transaction, selling shares in violation of clause 4.2 of the Model Code of Conduct. The adjudicating officer imposed penalties under section 15A(b) and section 15HB of the SEBI Act for these violations.

Imposition of penalties under section 15A(b) and section 15HB of the SEBI Act:
The penalties were imposed for the appellant's failure to make timely disclosures and for violating the Model Code of Conduct. The penalties were imposed after considering mitigating factors and were within the discretion of the adjudicating officer. The penalties imposed were &8377; 5 lac under section 15A(b) and &8377; 2 lac under section 15HB, which were deemed reasonable and not excessively harsh.

Mitigating factors for reducing penalties:
The appellant argued for a reduction in penalties citing lack of intention to suppress information, inadvertent errors, absence of profit or loss to investors, and non-repetitive nature of the violations. However, the tribunal found no merit in these contentions as the violations were deemed serious breaches of mandatory regulations.

Adjudicating officer's discretion in imposing penalties:
The adjudicating officer's decision to impose penalties was upheld as reasonable, considering the seriousness of the violations and the importance of maintaining the integrity of the securities market through accurate and timely disclosures. The penalties imposed were seen as appropriate given the circumstances of the case.

Compliance with disclosure requirements:
The appellant's failure to make required disclosures within the stipulated time was considered a serious violation of disclosure regulations, which are fundamental for investor protection and market integrity. The penalties imposed were justified to uphold the disclosure-based regime in the securities market.

Importance of accurate and timely disclosures in the securities market:
The tribunal emphasized the significance of accurate and timely disclosures in maintaining the integrity of the securities market. Omissions in making disclosures were deemed detrimental to investor interests, highlighting the importance of strict adherence to disclosure requirements.

In conclusion, the appeal was dismissed, and no costs were awarded. The tribunal upheld the penalties imposed under section 15A(b) and section 15HB of the SEBI Act, emphasizing the importance of compliance with disclosure regulations and the seriousness of the violations committed by the appellant.

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