1998 (4) TMI 577 - AT - SEBI

Summary

Issues Involved:
1. Contravention of regulations 6 and 9 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994.
2. Applicability of the Takeover Regulations to unregistered shares.
3. Adequacy of the penalty imposed by the Adjudicating Officer.

Issue-wise Detailed Analysis:

1. Contravention of Regulations 6 and 9 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994:
The appellant, Shri Sharad Doshi, was penalized for violating regulations 6 and 9 of the SEBI Takeover Regulations, 1994, by acquiring shares of M/s Ancient Traders Ltd. (ATL) without making the requisite disclosures and public announcements. Regulation 6 mandates that an acquirer holding more than 5% of shares must disclose their aggregate holding to the stock exchange within four days of acquisition. The appellant failed to make this disclosure. Regulation 9(1) requires an acquirer holding more than 10% of voting rights to make a public announcement to acquire shares from other shareholders. The appellant did not comply with this requirement either, despite acquiring a substantial number of shares, raising his holding to about 78.22% of ATL's capital.

2. Applicability of the Takeover Regulations to Unregistered Shares:
The appellant argued that the shares acquired were not registered in his name and hence did not carry voting rights, which should exempt them from the Takeover Regulations. However, the tribunal found this argument legally untenable. The tribunal noted that the acquisition of shares, regardless of their registration status, triggered the Takeover Regulations. The appellant's contention that the transaction was conditional and subject to SEBI's approval was also dismissed, as the Takeover Regulations do not exempt such 'adhoc' acquisitions. The tribunal emphasized that the obligation to comply with the regulations is cast on the acquirer and that the time limit for public announcements is related to the finalization of negotiations or agreements, not the registration of shares.

3. Adequacy of the Penalty Imposed by the Adjudicating Officer:
The appellant contended that the non-compliance was a technical lapse and the penalty of one lakh rupees was disproportionate. The tribunal rejected this argument, stating that non-compliance cannot be considered a mere technical lapse given the stringent penal consequences provided under the SEBI Act. The tribunal upheld the Adjudicating Officer's decision, noting that the penalty was reasonable and within the statutory limit of five lakh rupees. The tribunal found that the Adjudicating Officer had taken into account the nature of the offense, various factors, and the provisions of Section 15J of the SEBI Act while determining the penalty.

Conclusion:
The tribunal dismissed the appeal, affirming the penalty imposed for the contravention of regulations 6 and 9 of the SEBI Takeover Regulations. The tribunal concluded that the appellant's arguments lacked legal support and that the penalty was justified given the gravity of the offense and the need to ensure compliance with the regulations to protect investor interests.