2019 (9) TMI 1562 - SCH - SEBI

Compounding of offence - violation of Regulation 7(1) and (2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 - HELD THAT - As appellants states that the appellants have already deposited a sum of ₹ 1,50,000/- (Rupees one lakh fifty thousand) on 2nd May, 2019 and that the interest amount due till the date of deposit @ 12% p.a. would be deposited within two weeks. Respondents state if the said amount is so deposited, the respondents would have no objection, in the given facts of the case, to compounding of the offence subject to any penalty which may be imposed under Section 24(2) of the said Act. In view of the facts set out herein and the age of the directors, despite the earlier reservation expressed by the respondents in the counter affidavit on account of the conduct of the appellants, we are inclined to compound the offence on the aforesaid amount being paid as assured before us by learned counsel for the appellants, subject to the penalty amount of ₹ 2,00,000/- (Rupees two lakhs). This amount should also be deposited with the Securities and Exchange Board of India within the same period of two weeks.

Summary

Issues: Violation of SEBI regulations, compounding of offense, penalty imposition, deposition of penalty amount.

In the present case, the Supreme Court examined the violation of Regulation 7(1) and (2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, along with Section 15(A)(b) of the Securities and Exchange Board of India Act, 1992. The appellants were found to be in violation, leading to the imposition of a penalty of ?1,50,000. Despite this, the penalty amount was not paid, resulting in the initiation of prosecution proceedings under Section 24(2) of the SEBI Act on 14th January, 2013. The appellants subsequently sought compounding before the Special Court, SEBI, which was denied on 27th December, 2017, and their appeal against this decision was dismissed by the Bombay High Court on 30th October, 2018.

Regarding the penalty amount, a notice of demand was served on the appellants, indicating a total amount due of ?4,10,693, including the penalty, interest, and recovery costs. The appellants claimed to have deposited ?1,50,000 on 2nd May, 2019, and assured the court that the remaining interest amount would be paid within two weeks. The respondents agreed to compound the offense if the full amount, including a penalty of ?2,00,000, was deposited within the specified time frame.

Considering the circumstances and the age of the directors involved, the court decided to compound the offense upon the payment of the specified amount by the appellants. It was clarified that this decision did not address any broader legal issues raised by the appellants. The appeal was disposed of with the condition that the penalty amount of ?2,00,000 should be deposited with the Securities and Exchange Board of India within two weeks.