2010 (9) TMI 1284 - AT - SEBI

Summary

Issues involved:
The judgment involves issues related to violation of Regulation 10 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 by the appellant, leading to the imposition of a monetary penalty under Section 15H (ii) of the Securities and Exchange Board of India Act, 1992.

Details of the Judgment:

Issue 1: Violation of Regulation 10 of the takeover code
The appellant, a promoter group company, acquired 18.74% shares of the target company from another promoter group company in an off-market transaction. The Securities and Exchange Board of India (SEBI) found that this acquisition triggered the requirement for a public announcement under Regulation 10 of the takeover code. Despite the transfer not changing control over the target company, the appellant was penalized for not making the necessary public announcement.

Issue 2: Adjudication proceedings and penalty imposition
The appellant was issued a show cause notice for the violation of Regulation 10 of the takeover code. The appellant contended that the share transfer was an inter se transfer within the promoter group and that they were unaware of the need for an exemption from the takeover code provisions. After a personal hearing, a monetary penalty of &8377; 72,14,000 was imposed on the appellant under Section 15H (ii) of the Act. The appellant challenged this penalty through an appeal.

Issue 3: Appellate Tribunal's decision
The Securities Appellate Tribunal noted that the transfer of shares was between promoters and could have been exempted under Regulation 3 of the takeover code if certain conditions were met, which were not fulfilled in this case. While acknowledging the violation of Regulation 10, the Tribunal found that the interest of the shareholders was not prejudiced, and there was no change in control or management of the target company. Citing precedents, the Tribunal reduced the penalty imposed on the appellant from &8377; 72,14,000 to &8377; 5 lacs, stating that the reduced amount would meet the ends of justice.

The appeal was disposed of with no order as to costs.