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TMI Blog2013 (11) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 7 of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 ('SAST Regulations, 1997'). 2. Briefly stated the facts of the case are that the appellant, namely, SPS Share Brokers Pvt. Ltd. is a company incorporated under the Companies Act, 1956 having its registered office in Mumbai. The appellant is a registered stock broker with membership of Bombay Stock Exchange Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE). 3. A Show Cause Notice (SCN) dated February 27, 2007 came to be issued to the appellant by the respondent pursuant to certain investigations undertaken into the trading in the scrip of Prudential Pharmaceuticals Limited ('PPL'). It is alleged in the SCN that the appellant failed to comply with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisition at various stages to the company as well as the concerned stock exchanges. The earlier requirement under Regulation 7 of SAST Regulations, 1997 was restricted only to providing information to the company. The case of the appellant is that not only did it duly inform the company, but by way of abundant precaution it also informed the ASE of the acquisition in question. 6. The respondent did not find this reply convincing and as such instituted and commenced adjudication proceedings against the appellant as per the procedure enshrined in the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995. After conducting and finalizing the proceedings in question, the learned Adjudicating Officer (' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1A) Any acquirer who has acquired shares or voting rights of a company, under sub-regulation (1) of regulation 11, shall make disclosures of such acquisition as well as the aggregate of his pre and post acquisition of shareholding and voting rights to the company when such acquisition aggregates to 5% and 10% of the voting rights. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2001, w.e.f. 24-10-2001." Amended Regulation 7 of the SAST Regulations, 1997 "Acquisition of 5 per cent and more shares or voting rights of a company. 7. (1) Any acquirer, who acquires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. No retrospective effect is given to the amended Regulation 7 of the SAST Regulations, 1997. In fact it appears that the 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. Therefore, this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant and Dr. Mrs. Poornima Advani, learned counsel for the respondent at length and have also minutely gone through the pleadings, impugned order and certain judgments pointed out by both the parties at the hearing. It is an admitted position that the appellant purchased 2,50,000 shares of PPL on April 9, 2001. The requirement of making disclosure under Regulation 7 of SAST Regulations, 1997 was not attracted at that time because the said acquisition was within the prescribed threshold limit of 5%. However, on May 8, 2001 when the appellant acquired another 3,50,000 shares of the same company i.e., PPL, the statutory requirement to make disclosure to the company got triggered as per the provisions of Regulation 7 of the SAST Regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection, it may be pertinently noted that a broker is rightfully entitled to trade on his client's behalf as well as on behalf of himself. The point to be borne in mind is that there is a marked distinction between the trades executed by a broker for his own purposes, and those executed by him on behalf of his clients, albeit in the scrip of the same Company. Therefore, for the purposes of acquisition under Regulation 7 or any other similar provision in other regulations, the two aforementioned transactions have to be treated separately unless it is proved that the client and the broker acted in league with each other, and the client funded the broker's own transactions as well. 12. It is worthwhile to note that reliance placed by the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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