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2013 (11) TMI 631 - AT - Companies LawPenalty on the appellant for violation of the insider trading regulations - Violation of Regulations 13(4) read with 13(5) as required by SEBI (Prohibition of Insider Trading) Regulations, 1992 - Failure to make disclosure - necessary material not brought on record to establish that the appellant was either a director or an officer of the company within the meaning of section 2(30) of the Companies Act, 1956 read with definition of the expression officer as explained in Regulation 2(g) of the Insider Trading Regulations in question - Held that - vital documents like e-mail received from NSE on January 20, 2012 and other connected documents which have been thoroughly relied upon by the learned adjudicating officer to come to the conclusion against the appellant in the impugned order and to hold him guilty of violation of Insider Trading Regulations were admittedly not supplied to the appellant either with show-cause notice or during the course of adjudication proceedings - This is evidently violation of principles of natural justice in as much as the appellant was not given an opportunity to confront these documents and to make his effective and proper defense on the same - Matter remanded back for fresh consideration - Decided in favour of Appellant.
Issues:
Violation of SEBI (Prohibition of Insider Trading) Regulations, 1992 - Penalty imposed on the appellant for failure to disclose under Regulations 13(4) and 13(5) - Alleged violation while dealing in the scrip of a company - Appellant's designation and role within the company under Companies Act, 1956 and Insider Trading Regulations. Detailed Analysis: Issue 1: Violation of SEBI Regulations and Penalty Imposed The appellant was penalized for not making required disclosures under Regulations 13(4) and 13(5) of the SEBI (Prohibition of Insider Trading) Regulations, 1992, in relation to trading activities involving a specific company. The appellant challenged the penalty imposed, arguing that the adjudicating officer failed to establish his role within the company as per the relevant legal definitions. Issue 2: Appellant's Designation and Role The appellant contended that he had resigned as a Director of the company and was only designated as a Compliance Officer and Principal Officer for compliance purposes under the Money Laundering Act, 2002. The appellant's counsel presented documents to support the claim that the appellant did not hold a position that would subject him to the provisions of the Companies Act, 1956, and the Insider Trading Regulations. Issue 3: Respondent's Allegations and Evidence On the other hand, the respondent argued that there was evidence indicating the appellant held a significant position within the company beyond a mere Compliance Officer. The respondent presented an email from the National Stock Exchange and Annual Reports of the company, suggesting that the appellant was the CEO and Executive Director of the company, respectively. Issue 4: Violation of Principles of Natural Justice The Tribunal noted that crucial documents, such as the email from the National Stock Exchange and related evidence, were not provided to the appellant during the adjudication proceedings. This failure to supply essential documents deprived the appellant of the opportunity to defend himself effectively, constituting a violation of natural justice principles. Judgment and Remand In light of the procedural irregularity and the denial of the appellant's right to a fair hearing, the Tribunal remanded the matter back to the respondent for reconsideration. The Tribunal directed the respondent to provide the additional documents to the appellant, allow him to respond, and conduct a fresh adjudication process. The Tribunal emphasized the importance of concluding the proceedings promptly and urged both parties to cooperate for a swift resolution. Conclusion The appeal was allowed, setting aside the impugned order and granting SEBI the liberty to reexamine the matter in compliance with the principles of natural justice. No costs were awarded in this matter.
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