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Issues involved: Violation of regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.
Issue 1: Alleged misleading disclosures regarding promoter shareholding The appeals were filed against the orders imposing a monetary penalty under Section 15HA of the Securities and Exchange Board of India Act for violating regulations 3 and 4 of the FUTP Regulations. The appellant, a stockbroker registered with the Board, was accused of misleading shareholders and investors by making inaccurate disclosures to the National Stock Exchange regarding promoters' shareholding. The adjudicating officer found the appellant guilty of violating the regulations based on the misleading disclosures made to the public through NSE. Issue 2: Disputed promoter shareholding disclosures The Tribunal analyzed the discrepancies in the disclosures made by the appellant regarding promoter shareholding. The appellant's explanation that the variance in figures was due to pledged shares not being taken into account was rejected. It was established that the shares were transferred by the bank and sold to other persons before the disclosures were made. The misleading disclosures were deemed to create a false impression for investors, leading to a violation of FUTP Regulations. The imposition of a penalty was upheld based on the inaccurate and inflated promoter shareholding disclosures. Issue 3: Liability of directors and company The Tribunal addressed the argument that the appellant, as a director of the company, should not be held liable for the violations. It was noted that the appellant, being responsible for the conduct of the company's business, could not evade liability. The company, acting through its directors, was deemed responsible for the violations under Section 27 of the Act. The Tribunal upheld the findings of the adjudicating officer, dismissing the appeals and affirming the penalty imposed.
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