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TMI Blog2017 (1) TMI 1416X X X X Extracts X X X X X X X X Extracts X X X X ..... egulations 2011, which is punishable under section 15A(b) of SEBI Act Therefore, whatever shares which have been acquired in excess of 5% in violation of SEBI regulations, in the interest of justice, should be offered for buyback to the company at the market value of the share which was on the date of the presentation of the petition under section 111A(3). Therefore company petition deserves to be allowed. Company petition is hereby allowed and the company is authorised to buyback the shares at the rate which was prevailing on the date of presentation of the petition or market value, whichever is higher. The respondent Nos. 1 and 2 are directed to hand over the share certificate and Share Transfer Form within 30 days of the order to the Company and in response to that petitioner will be liable to pay the buyback price which shall be, the value of shares which was prevailing on the date of the presentation of the petition or market value whichever is higher - Company Application No. 1613/2015 in C.P. No. 177/2013 - - - Dated:- 17-1-2017 - V. P. Singh, Member (J) And S. Vijayaraghavan, Member (T) For the Petitioner : Ratnanko Banerjee (Sr. Adv.), Anirban Ray, Ratnesh Rai, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of Section 111A(3) of the Companies Act, 1956. The en block 3000 shares lodged by the respondent No. 1 has been held by the company for lack of certain material documents. The remaining 500 shares of the petitioner company has not been lodged for transfer by respondent No. 1 till date. The said disclosure was made on the basis of existing holding of the previously acquired shares which were not disclosed and proceeded on the basis as if the said respondent had validly acquired and was holding 7.3% shares in the company. A copy of the said disclosures under Regulation 29(1) and (2) has been annexed with the petition and marked as Annexure A5 . The violations of the SAST Regulations did not come to the light until 12 June 2013 when the petitioner company for the first time noted a complaint filed by the respondent No. 1 in the website of SEBI for investor's complaints, wherein the said respondent No. 1 had complained to SEBI in relation to non-transfer of about 3,000 shares. The matter was referred by the petitioner company to its Advocates, who upon inquiry have found out the non-compliance by the respondents of the SAST Regulations. Various correspondences exchanged in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by the respondents in the Company; b) Injunction restraining the respondents, their men, agents and/or servants from exercising any voting rights or claiming any other rights or benefits in respect of such shares held by the respondents or their men, agents or servants in the Company; c) Injunction restraining the respondents, their men, agents or servants from acquiring any further shares of and in the company pending disposal of the present proceeding. The respondents, among other things, have stated that the petitioner is misleading this Bench by its averments and disclosures as revealed by the acknowledged copies of its disclosure attached to their application. The respondents have also made several bona fide requests to the petitioner, which have been denied. The respondents have stated that they have made necessary compliance as required under the Regulations with the Petitioner and the MCS Ltd., Share Transfer Agent/Registrar of the petitioner. The respondents have further stated that the petitioner's action is deemed to be an act of counter-blast for the participation of the respondents in AGM of the petitioner company and the questions/queries raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . wherein the point raised in CA. will also be discussed. The respondents have denied and disputed that the petitioner is entitled to any relief and stated that the petition is misconceived and has been taken out only to harass the petitioners and have sought for the rejection of the petition. The basis for the present C.P. No. 177/2013 is that disclosures under SEBI SAST Regulations were not made. In this connection, the respondents have enclosed an order of the Adjudicating Officer appointed by the SEBI. The Adjudicating Officer vide order dated August 27, 2014 has passed orders under Rule 6 of SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995. The following issues on which adjudicating order was to be made has been mentioned. a) Whether the Noticees have violated the provisions of Regulation 29(1) of the Takeover Regulations, 2011? b) Whether the Noticees are liable for monetary penalty prescribed under Section 15A(b) of the SEBI Act for the aforesaid violation? c) If so, what should be the quantum of monetary penalty? The Adjudicating Officer has further mentioned as follows in para 12 of the order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. (respondent Nos. 1 2). Ld. Counsel for the petitioner has argued that in 2012, respondents have lodged some of the shares for transfer to petitioner. Only on 12th June, 2013, petitioner came to know from a complaint made by respondent No. 1 to SEBI by way of an Investor's complaint that R-1 to R-6 were all acting in concert and therefore as a result of acquisition of 4,86% shares by R-2, subsequent to acquisition of 2.5% shares by R-1, the said 4.86% shares were acquired in violation of mandatory provisions of regulation 29 of SEBI. Any such acquisition of shares, which is in violation of law, is illegal and the acquirer is not entitled to retain such shares. Section 111A(3) of the Companies Act, 1956 specifically provides remedy for rectification of register of members, if shares have been acquired in contravention of SEBI Regulations. Petitioner claims that this provision is in addition to any other remedy available under any provisions of SEBI or SAST Regulations. The petitioner has further stated that the SEBI (Prohibition of Insider Trading) Regulation requires a specific notice under the Regulation to be issued upon any persons acting in concert in a lis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on acquisition. In my view, in the later situation the acquisition itself is wrongful and is ipso facto invalid and null and void whereas Chapter II provides for penalty only. In case of violation of Chapter II or Chapter III, section 111A(3) empowers the company to apply for rectification. In both the cases the Company Law Board is entitled to properly direct the parties so that the mischief is undone. As in the case of Mega Resources the share ratio was brought down during the pendency of the litigation and as such Company Law Board did not issue any further direction, 'l am unable to conceive of a situation as to how and under what circumstances the Company Law Board could direct forfeiture of the entire shareholding. Even if I hold that there had been violation of Regulation 7 even then it would be absolutely improper for me to sustain order of forfeiture. In course of submission Mr. Sarkar appearing for the company in his usual fairness contended that the appellants were free to dispose of their shares in the market to bring down the mischief mark under Regulation 7. The Company Law Board could have directed so. Instead they ordered forfeiture of the shares and direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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