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TMI Blog2018 (7) TMI 1683X X X X Extracts X X X X X X X X Extracts X X X X ..... in the range of ₹ 60.30 to ₹ 42.70 and in October 2009 between ₹ 51.70 to 39. However, it declined to ₹ 39.50 and ₹ 26.20 in November and further down in December 2009. The average price reckoned by the appellants for valuing the shares still being held by Appellant No. 1 was ₹ 45. We are not convinced by the argument that the journal vouchers 231 to 233 were entered in the books on or about October 30, 2009 given their sequential character. Even assuming that the tally software facilitated the same during those times taking the October sales for crystallizing the amount of loss as on September 30 was a huge jump beyond both the requirement for crystallizing the value of loss and from the spirit of AS 4. It is in the affidavit of the appellants itself (dated March 6, 2017) that they crystallized the value of their investment in the securities of its parent company by “ascribing a value of ₹ 45 per share considering the average trading price as of October 30, 2009” in respect of 80,36,235 shares which Appellant No. 1 continued to hold as on that date. Therefore, for crystallizing the value of the loss as on September 30, 2009 it was not n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o was the CMD of Appellant No. 1 cannot be absolved of the responsibility. We also note that the penalty imposable under Section 15A(b) shall not be less than 1 lakh rupees for each day of such failure subject to a maximum of 1 crore rupees. Since the non-disclosure relates to four occasions and continued open ended and transactions involved were a total of about 15% of the shares of the Appellant No. 1, we hold that the penalty of ₹ 15 lakh each imposed on the appellants cannot be considered harsh or disproportionate. In Appeal No. 357 of 2015 penalty of ₹ 15 lakh each imposed on both the appellants under Regulation 7(1A) of SAST Regulations 1997 is set aside and penalty of ₹ 15 crore imposed on Appellant No. 2 in Appeal No. 357 of 2015 is reduced to ₹ 5 crore while retaining the penalty of ₹ 15 crore imposed on Appellant No. 1 in the same appeal. - Appeal No. 356 of 2015 With Appeal No. 357 of 2015 - - - Dated:- 20-6-2018 - Mr. J. P. Devadhar, Presiding Officer And Dr. C. K.G. Nair, Member For The Appellants : Mr. Somasekhar Sundaresan, Advocate with Ms. Yugandhara Khanwilkar, Ms. Kirti Sasnur, Mr. Paras Parekh and Ms. Stuti Shah, Advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 25, 2008 PVP Global held 3,54,53,587 shares of PVP Ventures . On July 15, 2009 the audited consolidated financial results of PVP Ventures for the year 2008-09 was published. From September 4, 2009 PVP Global, through its Director Shri Prasad Potluri, started selling shares of PVP Ventures in the market in large chunks on different dates. On October 30, 2009 the unaudited financial results for the quarter ended September 2009 of PVP Ventures was published. In this quarterly result it was disclosed that the company had provided for reduction in the value of investment it held in PVP Global to the tune of ₹ 593.65 crore (Rs. 542.06 on account of diminution in the value of investment in shares and debentures and ₹ 51 crore in advances written off). Since this information relating to diminution in the value of the assets of the listed parent company was disclosed to the public on October 30, 2009 while the entry to that effect in terms of the journal voucher was made on September 30, 2009 it is held in the impugned order that the Unpublished Price Sensitive Information (UPSI) came into existence with effect from September 30, 2009. Therefore, the sales of the shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any, held by him) would entitle him to more than five per cent or ten per cent or fourteen per cent [or fifty four per cent or seventy four per cent shares or voting rights in a company, in any manner whatsoever, shall disclose at every stage the aggregate of his shareholding or voting rights in that company to the company and to the stock exchanges where shares of the target company are listed. ( 1A) Any acquirer who has acquired shares or voting rights of a company under sub-regulation (1) of regulation 11, or under second proviso to sub-regulation (2) of regulation 11 shall disclose purchase or sale aggregating two per cent or more of the share capital of the target company to the target company, and the stock exchanges where shares of the target company are listed within two days of such purchase or sale along with the aggregate shareholding after such acquisition or sale. Explanation.-For the purposes of sub-regulations (1) and (1A), the term acquirer shall include a pledgee, other than a bank or a financial institution and such pledgee shall make disclosure to the target company and the stock exchange within two days of creation of pledge. ( 2) The disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only during October 1 to October 21, 2009 but it is on record that appellants sold shares prior to and post the alleged UPSI period. Even on the date of finalizing the September quarter account on October 30, 2009 Appellant No. 1 was holding 80,36,235 shares which were sold subsequently. Therefore, the allegation that appellant was taking advantage of an alleged UPSI is not correct. (d) On the issue of how crystallization of the diminution of value as on September 30, 2009 could take into account sale of shares effected during October, the learned counsel submitted that the journal entries posted on September 30, 2009 were actually passed on October 30, 2009 by the Board while finalizing the quarterly audit report for September 2009. The tally software available during that time facilitated entries in the ledger for a prior date on subsequent dates. (e) The corporate announcements by PVP Ventures that the board is meeting on October 30, 2009 to consider the unaudited financial results for PVP Ventures for the quarter ending September 30, 2009 was made on October 21, 2009 at 6:12 pm. After October 21, 2009 there was no trade done by the appellants prior to disclosure of the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expected. (vii) Therefore, there is no question of the sale of shares effected in the month of October, 2009 being tainted by the possession of unpublished price sensitive information ( UPSI ), which is alleged, but the crystallization of the amount written-off, which in turn, took place after the completion of the sales and in fact, based on such sales. (h) As far as the alleged violation relating to Regulation 7(1A) of SAST Regulations 1997 the learned counsel submitted that there is no violation in view of the order of this Appellate Tribunal in the matter of Mr. Ravi Mohan Ors. vs. SEBI (Appeal No. 97 of 2014 decided on December 16, 2015), since there is no acquisition, only sale of shares is involved. In addition, appellants also relied on this Appellate Tribunal s decision in the matter of Mrs. Chandrakala vs SEBI (Appeal No. 209 of 2011 decided on January 31, 2012) which held that an insider buys if the UPSI is positive and sells if the UPSI is negative; there is no insider trading if the trading is in the opposite direction. In the instant matter, the price sensitive information disclosed to the public was a negative hit of ₹ 850.51 crore while the actual hit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t did not bring the argument relating to AS 4 before the AO of SEBI nor the appellant in their reply in response to the SCN stated that October sales were considered for finalizing the September 30 quarterly accounts. Journal voucher No. 231, which the appellant is relying on is dated September 30, 2009. All journal vouchers are serial numbered; for instance voucher produced in the affidavit ranging from serial numbers 216 to 233 are all dated September 30, 2009 while serial number 234 is dated October 1, 2009. Therefore, in case the appellant had to make an entry as on September 30, 2009 many days thereafter like 30th October one page had to be left blank, which is not the argument of the appellant. 8. Learned Senior Counsel for SEBI further submitted that the benefit of the ratio of Ravi Mohan (supra) is not available to the appellant because Regulation 7(2) is not invoked in the instant matter. As such the violation of SAST Regulation 7(1A) is also sustainable. The argument of the appellant that punishing both the company and its Director for the same set of transactions which Appellant No. 2 as Director had carried out only on instructions from the Board of Appellant No. 1 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further down in December 2009. The average price reckoned by the appellants for valuing the shares still being held by Appellant No. 1 was ₹ 45. 11. We are not convinced by the argument that the journal vouchers 231 to 233 were entered in the books on or about October 30, 2009 given their sequential character. Even assuming that the tally software facilitated the same during those times taking the October sales for crystallizing the amount of loss as on September 30 was a huge jump beyond both the requirement for crystallizing the value of loss and from the spirit of AS 4. It is in the affidavit of the appellants itself (dated March 6, 2017) that they crystallized the value of their investment in the securities of its parent company by ascribing a value of ₹ 45 per share considering the average trading price as of October 30, 2009 in respect of 80,36,235 shares which Appellant No. 1 continued to hold as on that date. Therefore, for crystallizing the value of the loss as on September 30, 2009 it was not necessary that the shares had to be actually sold and the actual sale price had to be taken; the books could have been valued using what was actually sold and the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 10,94,12,571 to the company because of the insider trading done by the company and its authorized director. There is nothing on record to show that the Director himself has sold any shares which he held. Therefore while both are liable for the said violation both need not be punished on equal measure when only the company has actually benefited of about ₹ 11 crore. Appeal No. 356 of 2015:- 16. The limited question raised in this appeal is whether the appellants have in fact made the disclosures required under Regulation 13(6) of PIT Regulations 1992 because through the impugned order dated March 27, 2015 the appellants have been penalized with a penalty of ₹ 15 lakh each under section 15A(b) of SEBI Act for violation of the said regulation. 17. In addition to the related facts stated in Appeal No. 357 of 2015 the additional facts relevant to this appeal are the following:- (a) The Appellant No. 1 i.e. PVP Ventures, the listed parent company had to disclose changes in its shareholding structure exceeding 2% to the Exchange within two working days on receipt of such information from its shareholders. Appellant No. 1 s 100% owned subsidiary PVP Gl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sy reference, full Regulation 13 is reproduced as below:- Disclosure of interest or holding by directors and officers and substantial shareholders in a listed companies - Initial Disclosure. 13. (1) Any person who holds more than 5% shares or voting rights in any listed company shall disclose to the company in Form A, the number of shares or voting rights held by such person, on becoming such holder, within 2 working days of:- ( a) the receipt of intimation of allotment of shares; or ( b) the acquisition of shares or voting rights, as the case may be. ( 2) Any person who is a director or officer of a listed company shall disclose to the company in Form B the number of shares or voting rights held and positions taken in derivatives by such person and his dependents (as defined by the company), within two working days of becoming a director or officer of the company. Continual disclosure. ( 3) Any person who holds more than 5% shares for voting rights in any listed company shall disclose to the company in Form C the number of shares or voting rights held and change in shareholding or voting rights, even if such change results in shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding non-disclosure of the relevant information under Regulation 13(6) of the PIT Regulations 1992 because no motive can be attributed for such statements from both the stock exchanges particularly when they are first line regulators. Fact that copy of a fax call report is reproduced is not a sufficient evidence to support the appellants arguments because we are not sure whether the two pages of fax as recorded in the fax call reports were in fact the two pages of disclosures under section 13(6) of the PIT Regulations 1992. 21. It is on record in the appeal paper book page nos. 398 and 402 that in the letter dated November 15, 2013 Appellant No. 2, Chairman and Managing Director of Appellant No. 1, stated that while inadvertently the company did not make the requisite Insider Trading Disclosures which was an unintended result of the company being under the impression that such filings had already been made. Therefore, the said non-disclosure was neither willful nor wanton . Therefore, we hold that the appellants subsequent argument that fax messages were sent to BSE and NSE whereby disclosures required under Regulation 13(6) of PIT Regulations 1992 had been made is an afte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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