2004 (8) TMI 757 - AT - SEBI

Summary

Issues:
Violation of SEBI (SAST) Regulation, 1997 - Disclosure of shareholding beyond 5% to target company.
Penalty imposed under Section 15A of the SEBI Act, 1992 - Calculation based on unamended section.

Analysis:

Issue 1: Violation of SEBI (SAST) Regulation, 1997
The appellants were penalized jointly and severally for not informing the target company about the acquisition of shares exceeding 5%, violating Regulation 7 of SEBI (SAST) Regulation, 1997. The shares were transferred without informing the target company, leading to SEBI initiating proceedings. The Adjudicating Officer imposed a penalty of Rs. 50,000 on each appellant, considering the factors under Section 15J.

Issue 2: Penalty imposed under Section 15A of the SEBI Act, 1992
The appellants argued that the penalty was misdirected as the amended Section 15A, allowing a higher penalty, was not in force at the time of the violation. The unamended Section 15A was applicable, which stipulated a penalty not exceeding Rs. 5,000 per day for non-compliance. The respondent mistakenly referred to the amended section, causing confusion in the penalty calculation.

The counsel for the respondent contended that despite mentioning the amended regulation, the penalty calculated fell within the unamended section's scope. The delay in compliance was considered, and at Rs. 5,000 per day for six months, the penalty exceeded Rs. 50,000, justifying the original order.

Conclusion:
The Tribunal found that the Adjudicating Officer did not consider the relevant section in force at the time of the violation while imposing the penalty. Although the appellants informed the Managing Director of the target company on the same day, it was deemed insufficient as the information was not directly provided to the company. The penalty was reduced to Rs. 15,000 for each appellant, to be paid within four weeks. The appeals were partly allowed, and no costs were awarded.

This judgment highlights the importance of complying with disclosure regulations and ensuring correct application of penalty provisions in securities law violations.