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TMI Blog2023 (9) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... isappropriated. The same has been utilitised for the purpose for which the GDR was issued which fact has not been disputed. Thus, it is not a case of defalcation of the funds. Thus, the imposition of penalty upon the appellant after 12 years from date of resigning is excessive. In a large number of cases we have reduced the penalty to Rs. 10 lakh. While affirming the order of the AO for the violations committed by the Company we reduce the penalty from Rs. 1 crore to Rs. 10 lacs. The appeal is partly allowed. In the circumstances of the case, parties shall bear their own costs. - Justice Tarun Agarwala, Presiding Officer And Ms. Meera Swarup, Technical Member For the Appellant : Mr. Amit Mishra, Advocate For the Respondent : Mr. Shyam Mehta, Senior Advocate with Mr. Abhiraj Arora, Mr. Shourya Tanay, Ms. Misbah Dada, Mr. Deepanshu Agarwal, Advocates i/b ELP ORDER PER : JUSTICE TARUN AGARWALA, PRESIDING OFFICER 1. The present appeal has been filed by the ex-managing director of the company Maars Software International Ltd. against the order dated July 28, 2020 passed by the Adjudicating Officer (hereinafter referred to as AO ) of Securities and Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation in the issuance of the GDR and found that Vintage was the sole subscriber to the GDR and that the Company did not disclose this fact with clarity that only one entity had subscribed to the entire GDR and, therefore, misled the investors. Further, the loan agreement and the pledge agreements were not disclosed to the stock exchange or to the shareholders of the Company. 7. Accordingly, a show cause notice dated March 28, 2019 was issued to show cause as to why action should not be taken for the alleged violation of the provisions of Section 12A(a), (b), (c) of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. The show cause notice alleged that the Company had issued the GDRs amounting to USD 17.22 million which was subscribed only by Vintage and that Vintage has paid the subscription amount by obtaining the loan from EURAM Bank. The Company had also executed a pledge agreement by which the GDR proceeds were pledged for the loan taken by Vintage. It was also alleged that the Director had executed the pledge agreement and that the pledge agreement was also an integral part of the loan agreement. The show cause notice further alleged that the Company repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en a finding that no disproportionate gain is attributed to the appellants nor any finding that any loss was caused to the shareholders or investors. 11. Considering the above, the only ground urged by the learned counsel for the appellants was that the penalty imposed by the AO was harsh and excessive. 12. In Excel Corp Care Limited vs. Competition Commission of India Anr. [(2017) 8 SCC 47], the Supreme Court held :- 92. Even the doctrine of proportionality would suggest that the court should lean in favour of relevant turnover . No doubt the objective contained in the Act, viz., to discourage and stop anti-competitive practices has to be achieved and those who are perpetrators of such practices need to be indicted and suitably punished. It is for this reason that the Act contains penal provisions for penalising such offenders. At the same time, the penalty cannot be disproportionate and it should not lead to shocking results. That is the implication of the doctrine of proportionality which is based on equity and rationality. It is, in fact, a constitutionally protected right which can be traced to Article 14 as well as Article 21 of the Constitution. The doctrine o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ordinarily be manifestly arbitrary. There must be a case of substantive unreasonableness in the statute itself for declaring the act ultra vires of Article 14 of the Constitution. (Vide: Ajay Hasia etc. v. Khalid Mujib Sehravardi, Reliance Airport Developers (P) Ltd. v. Airports Authority of India, Bidhannagar (Salt Lake) Welfare Assn. v. Central Valuation Board, Grand Kakatiya Sheraton Hotel and Towers Employees and Workers Union v. Srinivasa Resorts Limited, and State of T.N. v. K. Shyam Sunder.) 15. In matters relating to punitive measures the emphasis has shifted from the wednesbury principle of unreasonable to one of proportionality. A disproportionate punitive measure which does not commensurate with the offence would be violative of Article 14 of the Constitution of India. We are of the opinion that in the rapid growth of administrative law it has become the need and necessity to control possible abuse of discriminatory power by administrative authorities. In this regard, certain principles have been evolved by Courts, namely, that if an action is taken by an authority which is contrary to law or which is improper or where the action taken is unreasonable then the Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18.00 Rs.10,00,000 (Rupees Ten Lakhs) 29th February 2018 7. Sybly Industries Ltd. June 9, 2008 6.99 Vintage Rs.10,30,00,000/- (Rupees Rupees Ten Crore Thirty Lakhs) March 2019 8. Winsome Yarns Ltd. March 29, 2011 13.24 Vintage Rs.11,00,00,000 (Rupees Eleven Crores) 28th March 2021 17. A perusal of the aforesaid table indicates that G.V. Films Ltd. had raised 40 million USD and the Company was only awarded a penalty of Rs. 25,00,000/-. Another Company Syncom Healthcare Ltd., raised 20.74 million USD and was awarded a penalty of Rs. 25 lakhs whereas in the case of the appellant Company who raised 6.99 million USD has been awarded Rs. 10,30,00,000/-. 18. In Sybly Industries Ltd. vs. SEBI, Appeal No. 381 of 2019 and other connected appeals decided on 14th July, 2022 penalties ranging from Rs. 10 lakhs to Rs. 10.30 crores were imposed which were reduced to Rs. 25 lakhs on the Company and Rs. 10 l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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