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TMI Blog2012 (11) TMI 1230X X X X Extracts X X X X X X X X Extracts X X X X ..... dia (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (for short takeover code) and imposing a penalty of ₹ 50 lacs under Section 15H(ii) of the Securities and Exchange Board of India Act, 1992 (the Act). 2. Appellant no. 1 is a public limited company carrying on business of manufacture of pharmaceutical preparations and of their marketing and distribution. It is also stated to be a major shareholder of ZIM Laboratories Ltd. (the target company). Appellant no. 2 is the promoter and shareholder of the target company. Appellant no. 3 is the managing director and also a shareholder of the target company. It is alleged that the target company made preferential allotment of shares to appellants on December 7, 2001, March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de within 30 days from the date of the corrigendum referred in (I) above for withdrawal of the Open offer made vide Public Announcement dated April 21, 2009. III. In addition to parameters specified for determination of floor price for the delisting offer of an infrequently traded shares as per regulation 15(3)(b) of SEBI (Delisting of Equity Shares) Regulations, 2009, you are directed to include the price of ₹ 35.22/- per share i.e. the price disclosed by you in your letter dated May 22, 2009 as one of the parameters. The aforesaid directions of SEBI, is without prejudice to any action which might be initiated by SEBI for violation of the provisions of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 with reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion of a practicing company secretary pointing out that public announcement in respect of the acquisition in question should have been made. These facts are not disputed by learned counsel for the appellants. However, he strenuously argued that the scrip of the target company is listed only on Over The Counter Exchange of India (OTCEI), which is a defunct exchange and the scrip has not been traded. The 46,90,590 preferentially allotted shares were not listed till February 3, 2011. Only 13,19,311 shares were listed till February 3, 2011 since the initial public offering in 1994. According to learned counsel for the appellants, the provisions of the takeover code cannot apply to a scrip in letter and spirit. The appellants had made a public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, vide letter dated December 3, 2009, the appellants were directed to withdraw the public announcement by making a delisting offer under the delisting regulations. This direction, by any stretch of imagination, cannot be said to regularize the breach of provisions of the takeover code by the appellants. Therefore, the letter itself made it clear that the direction in the letter is without prejudice to any action which might be taken by the Board under the takeover code. The adjudication proceedings were initiated against the acquirers (appellants) for violation of the provisions of regulations 10 and 11 read with regulation 14(2) of the takeover code. Learned counsel for the Board further submitted that the target company is a listed compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... takeover code were violated, as alleged. We are unable to accept the argument of learned counsel for the appellants that since shares of the target company were not traded since 1998 or that there is no allegation of market manipulation, the penalty proceedings cannot be initiated. We are also unable to agree with him that in view of the direction of the respondent Board in the letter dated December 3, 2009 to provide an exit opportunity to the shareholders of the target company under the delisting regulations, penalty proceedings cannot be initiated. Direction to provide exit opportunity to the shareholders was on the facts and circumstances of the case and not with a view to condone the violation of the takeover code. This was made clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acs only which is quite justified. 9. We have given our thoughtful consideration to this aspect. Simply, because law empowers imposition of a severe penalty it does not mean that the adjudicating officer should impose a higher penalty. While considering the factors enumerated in Section 15J of the Act, the competent authority should also give due weightage to aim and object of the Act, the impact of the violation and other mitigating factors. No exhaustive list of such mitigating factors can be given. It will depend on the facts and circumstances of each case. Examined in that perspective, in the case in hand, we find that learned counsel for the appellants has rightly argued that in the facts and circumstances of the present case, the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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