2015 (8) TMI 776 - AT - Companies Law

Violation of continual disclosures Vide impugned order monetary penalty was imposed for violation of Regulations 30(2) and 30(3) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 Held that - appellants were required to make relevant disclosures under provisions of SAST Regulations, 2011 within seven working days from end of each financial year to concerned Stock Exchange as well as to target company Appellants admittedly failed to do so and were liable to pay penalty as there was delay of 147 days in making mandatory disclosures Obligation to make disclosures was mandatory irrespective of declaration under Regulation 8(2) When there was no plausible explanation for violation, impugned order was liable to be upheld Principle of proportionality would come to rescue only when penalty imposed by SEBI was highly disproportionate Appeal dismissed Decided against Appellant.

Summary

Issues:
Violation of Regulations 30(2) and 30(3) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

Analysis:
The case involved an appeal by five appellants against a monetary penalty imposed on them for violating Regulations 30(2) and 30(3) of the SEBI Regulations. The appellants failed to make mandatory disclosures within the stipulated time frame, leading to the penalty. The appellants argued that a Share Purchase Agreement was entered into, and disclosures were made after the advice of the Merchant Banker, but the delay in disclosure was 147 days. The regulations required disclosures within seven working days from the end of each financial year to the stock exchange and the target company. The appellants' failure to comply rendered them liable for the penalty. The appellants contended that the penalty was improper due to technical irregularity and absence of trading in shares during the relevant period. However, the tribunal found no merit in these arguments, stating that the obligation to make disclosures was mandatory, regardless of other declarations or share trading activities. The tribunal upheld the penalty, emphasizing that the principle of proportionality would apply only in cases where the penalty imposed is disproportionately severe compared to the violation's gravity and impact on investors.

The tribunal dismissed the appeal, upholding the penalty imposed on the appellants. The decision was based on the mandatory nature of the disclosure requirements under the regulations, the absence of a plausible explanation for the delay, and the principle of proportionality in determining penalties. The appellants' arguments regarding technical irregularities and lack of share trading during the period were deemed insufficient to invalidate the penalty. The tribunal's decision highlighted the importance of timely and accurate disclosures in the securities market to ensure transparency and protect investor interests.