2013 (11) TMI 1033 - AT - Companies Law

Penalty u/s 15A(b) of the SEBI Act, 1992 read with Regulation 7 of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 - Whether the acquisition of shares of PPL by the appellant on April 9, 2001 and May 8, 2001 would attract the provisions of the unamended Regulation 7 of the SAST Regulations, 1997 or the amended provisions brought into force w.e.f. September 9, 2002 - Held that - case of the appellant, as far as substantive provisions are concerned, would be governed by the unamended provisions of SAST Regulations, 1997 which were in vogue on the relevant dates i.e. April 9, 2001 and May 8, 2001 when the appellant admittedly acquired 2,50,000 shares and 3,50,000 shares, respectively of PPL. Undoubtedly, the amended Regulations which brought into existence the requirement of intimating to the stock exchange regarding the acquisition was also introduced in addition to the earlier requisite of making such disclosure to the concerned company whose shares were sought to be acquired by a person. It is, therefore, clear that the appellant cannot be held guilty of violating a substantive provision which came into force on September 9, 2002 for an alleged violation which took place on April 9, 2001 and May 8, 2001 - passing of the impugned order relying on a provision clearly inserted post the happening of the alleged violation exhibits a sort of pre-conceived inclination on the respondent s part to impose a penalty on the appellant without really considering whether or not such an act of the respondent might be sustained in law - Decided in favour of appellant.

Summary

Issues:
- Challenge to penalty imposed under SEBI Act, 1992
- Compliance with Regulation 7 of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997
- Applicability of unamended and amended provisions of Regulation 7
- Disclosure requirements for acquisitions of shares
- Distinction between broker's personal trades and client transactions
- Reliance on previous judgments for communication authenticity

Analysis:

The appellant challenged a penalty imposed under the SEBI Act, 1992 for alleged non-compliance with Regulation 7 of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. The appellant, a stockbroker, acquired shares of a company and argued that it had made necessary disclosures to the company and the stock exchange. The respondent initiated adjudication proceedings and imposed a penalty, prompting the appellant to appeal.

The key issue revolved around the applicability of unamended and amended provisions of Regulation 7. The Tribunal analyzed the Regulations and determined that the appellant's actions were governed by the unamended provisions in force at the time of acquisition. The amended provisions, requiring disclosure to stock exchanges, were introduced later and could not be retrospectively applied. The Tribunal criticized the respondent for relying on post-violation regulations, indicating a bias towards penalizing the appellant.

The Tribunal emphasized the importance of disclosure requirements for acquisitions of shares, noting that such information is vital for regulatory investigations and investor protection. While acknowledging the procedural nature of Regulation 7, the Tribunal stressed the significance of timely and accurate disclosures to stock exchanges. It highlighted the retrospective applicability of procedural rules and the necessity for SEBI to monitor share acquisitions diligently.

Regarding the distinction between a broker's personal trades and client transactions, the Tribunal clarified that separate treatment is warranted unless collusion between the broker and client is proven. It dismissed the respondent's reliance on a previous judgment concerning communication authenticity, emphasizing the lack of doubt regarding the appellant's disclosure documents' genuineness.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the adherence to regulatory provisions applicable at the time of the transactions. The appeal was allowed, with no costs imposed, highlighting the importance of accurate disclosures and the need for regulatory bodies to act promptly in cases of potential violations.