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TMI Blog2023 (7) TMI 1440X X X X Extracts X X X X X X X X Extracts X X X X ..... from the preferential issue as per the objects and that subsequent ratification by the shareholders of the company will not make any difference to the violation of the Clause 43 of the Listing Agreement. The AO accordingly imposed the penalties. HELD THAT:- There is an inordinate delay in the issuance of the show cause notice. The preferential issue was made in August 2013 and the show cause notice was issued on January 5, 2023. The issuance of the preferential issue was known to the stock exchange as well as to SEBI and, therefore, there is no justification for issuance of show cause notice at this belated stage. We are of the opinion that the impugned order in so far as it relates to the appellants cannot be sustained. Even otherwise we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed May 23, 2023 wherein the Adjudicating Officer (hereinafter referred to as `AO') of Securities and Exchange Board of India (hereinafter referred to as `SEBI') has imposed a penalty of Rs. 6 lakh on the company Alps Motor Finance Ltd. and a sum of Rs. 20 lakh on Brij Kishore Sabharwal who is a director in the company. 2. The facts leading of the filing of the present appeal is, that the company made six preferential allotments during the period June 2013 to August 2013. Necessary disclosure on the stock exchange platform was made by the company. Subsequently, an investigation was made and the stock exchange submitted the report indicating possibility of the mis-utilization of the proceeds in 2016. Based on this report, SEBI carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k exchange and to SEBI. No action whatsoever was taken. BSE Ltd. itself took cognizance of the alleged violation in 2016 in spite of which it took SEBI another five years to issue a show cause notice in 2023. 7. In our view, there is an inordinate delay in the issuance of the show cause notice. The preferential issue was made in August 2013 and the show cause notice was issued on January 5, 2023. The issuance of the preferential issue was known to the stock exchange as well as to SEBI and, therefore, there is no justification for issuance of show cause notice at this belated stage. 8. In Ashlesh Gunvantbhai Shah vs. SEBI Appeal No. 169 of 2019 alongwith connected appeals decided on January 31, 2020, this Tribunal held :- 12. Having consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d: There are judgments which hold that when the period of limitation is not prescribed, such power must be exercised within a reasonable time. What would be reasonable time, would depend upon the facts and circumstances of the case, nature of the default/statute, prejudice caused, whether the third-party rights had been created etc. 13. Similar view was again relied in Ashok Shivlal Rupani Ors. vs. SEBI (Appeal No. 417 of 2018 along with other connected appeals decided on August 22, 2019) and again in Sanjay Jethalal Soni Ors. vs. SEBI in Appeal No. 102 of 2019 and other connected appeals decided on November 14 2019. 14. We also find that in the case of Ashok Shivlal Rupani (supra) the period of investigation was January 4, 2010 to January ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tradefin Ltd. for the period March 1, 2009 to January 10, 2011 in September 2011. Pursuant thereto, a show cause notice dated April 20, 2012 was issued for the violation found during the investigated period March 1, 2009 to November 30, 2009. The respondents thereafter waited for another five years to issue a second show cause notice dated July 20, 2017 for the investigated period April 1, 2010 to January 10, 2011 which had been investigated in September 2011. We find that the respondents were aware of the alleged violation and thus there is no justification for waiting for more than five years to issue the second show cause notice dated July 20 2017. In our view there is an inordinate delay in initiating the proceedings. 10. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, Hartman v. Hornsby as under: Ratification is the approval by act, word, or conduct, of that which was attempted (of accomplishment), but which was improperly or unauthorisedly performed in the first instance. 13. In view of the aforesaid decision, it is clear that the ratification made by the shareholders of the company validates an act already done and even though the company initially utilized the proceeds of the preferential issue for a different purpose in variance of the objects specified, nonetheless, the variance in the utilization of the proceeds should ratified and became authorized pursuant to the special resolution passed by the shareholders on September 29, 2017. 14. In view of the aforesaid, we are of the view that no penal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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