2018 (8) TMI 742 - AT - Companies Law

Levy of penalty for violation of SEBI laws - Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ( PFUTP Regulations, 2003 for short). - Held that - The misleading corporate announcements are not in dispute and are found to be violative of the relevant regulations as upheld by this Tribunal. Though, thereafter, Jayesh Shah appeared before the AO and submitted that he would provide details to show that he was not a promoter neither did he provide any details, nor has he appealed against the order which is impugned in these appeals. Such a long period of filing before the stock exchange by a listed company cannot be an oversight or mistake but what is more interesting about the filing is that in some of the filing (for the quarter ending February 31, 2004) these three names i.e. Jayesh Shah, Tushar Shah and Parag Shah were shown both in the promoter and non-promoter category. We do not consider that this is an inadvertent omission or error rather we hold that these are clever steps taken by the company and the promoters, including the appellants herein to deliberately mislead the public. In fact, if the appellants could produce documents relating to how they happened to hold the admitted 40 lakh shares of PCL each that could have been to their advantage. The very fact that they are unwilling to produce any documents relating to the same is sufficient to prove that the appellants are not forthright in their stand. Given the admitted fact that none of the appellants in the matter of PCL, including the appellants herein, has provided details of acquisition cost etc to SEBI, the finding in the impugned order that ₹ 24 lakh profit has been made cannot be faulted. Similarly, as against the maximum of ₹ 25 crore each imposable under Section 15HA of SEBI Act the penalty imposed is only ₹ 72 lakh each which cannot be faulted.

Summary

Issues:
Challenge to SEBI order imposing penalties under SEBI Act and PFUTP Regulations, 2003.

Analysis:
1. The appeals challenged SEBI's order imposing penalties on the appellants under SEBI Act and PFUTP Regulations, 2003 for violating regulations due to offloading shares post positive corporate announcements by the company. The appellants argued they were not promoters of the company and had sold shares before the announcements.

2. The appellants contended they were not promoters of the company, citing correspondence with the company rectifying the promoter status. They also highlighted errors in company filings and early share transfers as evidence of non-promoter status.

3. The appellants argued that penalties imposed were excessive compared to penalties in similar cases, emphasizing their lack of involvement in corporate announcements and the alleged profits. They referenced past tribunal decisions reducing penalties in comparable cases.

4. The respondent argued that the appellants were indeed promoters, supported by company filings and related entities' connections. The respondent presented evidence linking the appellants to the company and fraudulent schemes, justifying the higher penalties imposed.

5. The tribunal rejected the appellants' arguments, affirming the misleading corporate announcements and the appellants' promoter status based on company filings. The tribunal found the appellants' failure to provide acquisition details suspicious and upheld the penalties imposed under SEBI Act.

6. The tribunal dismissed the appeals, upholding the penalties of ?72 lakh each under Section 15HA of SEBI Act, considering the profits made and the appellants' promoter status as per company filings. No costs were awarded in the judgment.