2023 (2) TMI 442 - SCH - SEBI

Buyback offer made by the company in violation of regulatory provisions - role of the Company Secretary, compliance officer - WTM proceeded to hold the respondent liable on the ground that he was a Company Secretary during the Financial Year 2010-11 when a buyback offer worth Rupees 270 crores was made by the company in violation of regulatory provisions - Tribunal held that the role of the respondent, who was a Company Secretary, compliance officer, was limited to redressing the grievances of investors - HELD THAT - Regulation 19(3) of the SEBI (Buyback of Securities) Regulations 1998 requires the company to nominate a compliance officer and an investors service centre. The purpose of the nomination is twofold, namely (i) to ensure compliance with the buyback Regulations; and (ii) to redress the grievances of investors. There is a patent error on the part of the Tribunal in interpreting the Regulations. The Tribunal held that the role of the respondent, who was a Company Secretary, compliance officer, was limited to redressing the grievances of investors. In arriving at the finding, the Tribunal has relied upon the latter part of Regulation 19(3) which deals with redressal of the grievances of investors. The crucial point which has been missed by the Tribunal is that the compliance officer is also required to ensure compliance with the buyback regulations. Regulation 19(3) of the Regulations expressly so stipulates. Since the interpretation which has been placed by the Tribunal on the interpretation of 19(3) is contrary to the plain terms of Regulation 19(3), we set aside the impugned decision and remit the proceedings back to the Tribunal for consideration of the facts afresh in the light of the interpretation which has been placed above on the provisions of Regulation 19(3). For the above reasons, the appeal is allowed and the impugned order of the Tribunal is set aside. Appeal shall stand restored to the file of the Tribunal for a decision afresh.

Summary

Issues:
Appeal by SEBI under Section 15Z of SEBI Act against Tribunal's judgment setting aside penalty on respondent for violating Companies Act and PFUTP Regulations.

Analysis:
1. Violation of Regulatory Provisions: The Tribunal set aside the penalty imposed on the respondent for violating Sections 68 and 77A of the Companies Act 1956 and PFUTP Regulations. The respondent, as a Company Secretary, was held liable for a buyback offer in 2010-11 that violated regulatory provisions, misleading investors.

2. Role of Company Secretary: The WTM found the respondent liable for not verifying buyback offer documents before signing, violating Companies Act and PFUTP Regulations. However, the Tribunal absolved the respondent, stating his duty was limited to authenticating approved documents as per Regulation 19(3) of SEBI Regulations.

3. Interpretation of Regulation 19(3): The appellant argued that the Tribunal's interpretation of Regulation 19(3) was erroneous, emphasizing the Company Secretary's duty to certify statutory compliances. The respondent contended that the Board of Directors, not the Company Secretary, was responsible for ensuring compliance.

4. Remittal of Proceedings: The Supreme Court set aside the Tribunal's decision, remitting the case for fresh consideration. The Court highlighted the Tribunal's error in interpreting Regulation 19(3) and directed a reevaluation of facts in light of the correct interpretation.

5. Relevance of Prior Decisions: The Court allowed parties to rely on prior decisions in the fresh consideration. The case was restored to the Tribunal for a new decision, with a directive to decide within six months from the order's certification.

6. Final Decision: The appeal was allowed, the Tribunal's order was set aside, and the case was remitted for reconsideration. Pending applications were disposed of, and the Tribunal was instructed to expedite the decision-making process.