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ORDER UNDER SECTION 15I OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT 1992 READ WITH RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY THE ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF ADJUDICATION PROCEEDINGS AGAINST SHRI. PK TAYAL AND PERSONS ACTING IN CONCERT.
1.
Securities and Exchange Board of India (hereinafter referred to as
�SEBI�) has initiated adjudication proceedings against Shri. P K Tayal and
persons acting in concert namely Sundarshan Kulkarni, Devendra Kumar, Dhirendra
Shukla, Rakesh Agarwal, Raj Rakesh Agarwal, Somprakash Arya, Rohit Gupta,
Deepak Sarupuria, Pravin Kumar, Prashant Ghanekar, Shree Krishna Consultancy
Services Limited, Vandana Tayal, Sanjiv Nagar, S D Joshi, Arvind Sharma, Ganesh
Tambe, Tradewell Eng. Pvt. Limited, Sharad Chavan, Nandkishore Panchal, Sandeep
Murarkar, Sudhir Garg, Rajesh Sharma, D K Verma, Abhay Dhumal (hereinafter
referred to as the �acquirers� ) for the alleged violation of the provisions of
Regulation 7 of SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997 (hereinafter referred to as the �Takeover Regulations�) on
account of failure to make disclosures in respect of their holding in the
company Bank of Rajasthan Limited.
(hereinafter referred to as the target company). 2.
In respect of
the acquisition of shares by the acquirers, SEBI vide order dated 16.1.2002
held that prima facie the acquirers have violated the provisions of Regulation
3(4) and Regulation 7 of the Takeover Regulations. In view of the same,
adjudication proceedings were initiated against the acquirers. Initially, Shri.
P R. Ramesh was appointed as the Adjudicating Officer to conduct the
Adjudication Proceedings. Subsequently, I was appointed as the Adjudicating
Officer in the matter. SHOW CAUSE NOTICE 3.
A show
cause notice under Rule 4(1) of the SEBI (Procedure for Holding Inquiry and
Imposing Penalties by the Adjudicating Officer) Rules, 1995 was issued by the
then adjudicating officer on 6.2. 2002. Initially, in addition to the alleged violation
of Regulation 7 of the Takeover Regulations, violation of Regulation 3(4) was
also referred for adjudication. The acquirers replied to the show cause notice vide their
letter dated 11.2.2002. Subsequently, vide order dated 18.2.2002 the adjudicating
officer imposed a penalty of Rupees one lakh on the acquirers for the violation
of Regulations 3(4) of the Takeover Regulations. It is pertinent to note that
the violation of the provisions of Regulation 7 was not considered by the
Adjudicating officer in the said order. Subsequently, in respect of the violation
of Regulation 7 of the Takeover Regulations, an additional notice was issued by
the Adjudicating Officer on 13.3.2002 to which the acquirers vide their reply
dated 28.3.2002 made additional submissions. 4.
In the present adjudication proceedings, a notice of hearing was issued
to the acquirers on CONSIDERATION OF ISSUES: 5.
I have taken
into consideration the facts and circumstances of the case, the submissions
advanced on behalf of the acquirers, the material available on record including
the documents and the case laws relied upon by the acquirers. 6.
The issue for
consideration in the matter is whether the acquirers have complied with the
disclosure requirements prescribed under Regulation 7 of the Takeover
Regulations. Before addressing the said issue, it is necessary to consider
certain preliminary objections raised by the acquirers. 7.
One of the
preliminary issues raised by the acquirers is that the adjudicating officer has
not been properly appointed. In this regard, it is noted that there has been no
infirmity in the appointment of the then adjudicating officer as he was
appointed by the SEBI Chairman.� � 8.
Another
preliminary submission made by the acquirers is that� after receipt of the reply to the show cause
notice dated 9.
With regard to the
above contentions, it is pertinent to note that initially in the show cause
notice issued by the adjudicating officer, violations of Regulation 3 as well
as Regulation 7 were alleged. In the order dated �18.2.2002 passed by the
adjudicating officer, �a penalty of
Rupees one lakh was imposed on the acquirers for violation of Regulation 3 (4).
It is pertinent to note that the violation of the provisions of Regulation 7
was not considered by the adjudicating officer in the said order. Subsequently,
in respect of the violation of Regulation 7 of the Takeover Regulations, an
additional notice was issued by the adjudicating officer on 13.3.2002 to which
the acquirers vide their reply dated 28.3.2002 made additional
submissions.� In the said reply dated
28.3.2002, the acquirers had submitted that they are agreeable to� adjudication of Regulation 7. 10. As it is noted that vide
order dated 18.2.2002, the adjudicating officer had only considered the
violation of Regulation 3(4), the present adjudication cannot be said to be
barred by the principle of resjudicata on the basis of the said order. In this
regard, the case laws cited by the acquirers i.e, Sulochana Amma Vs.
Narayanan Nair� (1994) 2 SCC 14 and Swamy
Atmananda and Others Vs Sri. Ramakrishna Tapovanam & Others AIR 2005 SC
2392 �do� not�
support the said contentions of the acquirers �in the facts and circumstances of the present
case as it is seen that the issue pertaining to the violation of Regulation 7
was not finally settled so as to be barred by principles of �resjudicata in the present proceedings.
Further, in respect of the subsequent notice dated 13.3.2002, the acquirers
vide their letter dated 28.3.2002 submitted that they are agreeable to
adjudication of Regulation 7 as per the order dated 11. As stated before, the issue
for consideration in the present adjudication proceedings is whether the
acquirers violated the provisions of Regulation 7 of the Takeover Regulations. In this regard, it is pertinent to analyse the
mandate and scope of Regulation 7 (1) and Regulation 7(2) as it stood at the
time of commission of the alleged violations.�
The text �of the said provisions
provided the following :� 1.
Any acquirer who
acquires shares or voting rights which(taken together with shares or voting
rights if any held by him) would entitle him to more than five percent shares
or voting rights in a company in any manner whatsoever shall disclose the
aggregate of his shareholding or voting rights in that company, to the
company.� 2.
The disclosures
mentioned in sub- regulations(1) shall be made within two days of :- (a) the receipt of
information of allotment of shares; or (b) the acquisition of shares
or voting rights as the case may ����� be 12. �While analysing the alleged violation committed
by the acquirers, it is pertinent to note the following� �contentions made by the acquirers vide their
letter dated 13. The acquirers further
submitted that without prejudice to the above contention, it was only due to
the bonafide belief that Regulation 7 is not applicable on the said transfer
and there is no requirement to comply with the said provision, the information
was not provided to the company under Regulation 7. 14. �The acquirers also submitted that no penal
action is required to be taken against the Tayal Group as there has been no
violation on the part of the Tayal Group with regard to Regulation 7 of the
Regulations 1997. It was submitted that that there was no malafide intention on
the part of the Tayal Group and the said breach was purely unintentional. Tayal
Group was under the bonafide belief that the group was not liable to comply
with the said provisions of Regulations, since the pledged shares were
transferred in the names of the nominees of Tayal Group due to the reason that
the transfer deeds were getting time barred / outdated. Thus there was an
honest belief on the part of the Tayal Group that such transfer was only in the
course of business and it was never realized that such a failure would attract
penal provisions of the regulations.� 15. �It is pertinent to note that in the said reply
the acquirers did not state that the pledged shares were transferred prior to
the acquisition of 1.89% shares. In this regard, the then Adjudicating Officer in
the second show cause notice dated March 13, 2002 brought to the notice of the
acquirers that they have not contested that the shares pledged were transferred
prior to the acquisition of 1.89% shares and �further the acquirers have not sought to set
aside the order passed by SEBI on this ground. As stated before, the
adjudication proceedings were initiated against the acquirers pursuant to the
order dated 16. In the subsequent reply dated July 24, 2006 the
acquirers submitted that the acquisition/ transfer/ holding during the relevant
period of time during which the noticee along with the PACs is liable to have
exceeded the threshold limit of 5% as follows:- �
4.11% by way of
transfer prior to �
1.89% acquired
after �
0.59% acquired
by relatives after 17. In this �context,
the acquirers submitted that presuming without admitting that there was a
violation of Regulation 7(1) and7(2), the said violation could have occurred
only once either at the time of acquisition of 1.89% shares or at the time of
acquisition of 4.11%. The violation in respect of Regulation 7(1) and 7(2) were
considered by the Learned Adjudicating Officer and penalties were imposed in
respect of 3(4) alone. Any further imposition of penalty in respect of the same
set of acts would also be hit by the principles of double jeopardy. 18. �In respect of
the said contentions raised by the acquirers it is pertinent to mention here
that as in the case of resjudicata, the principle of double jeopardy is also
not applicable in the present matter since the violation did not result in
prosecution and punishment twice for the same offence. In the present case
there has been no prosecution and punishment for the same offence twice to be barred
by the principle of double jeopardy. The alleged violation of Regulation 7 was
not considered earlier.� The order dated 18.2.2002
passed by the then adjudicating officer dealt with only the violation of
Regulation 3(4) of the Takeover Regulations. As stated before, in respect of
violation of Regulation 7, a supplementary notice was issued by the
Adjudicating Officer to which the acquirers vide their letter dated 28.3.2002 submitted
that they are agreeable for adjudication. 19. The acquirers also contended that the transfer of
4.11% shares was in exercise of the rights as pledgees and as there was no
fresh acquisition of shares, the transferees cannot be termed as acquirers
within the meaning of Regulation 7(1) and Regulation 7(2) as existed then. The acquirers
further contended that Regulation 7(1) and Regulation 7(2) did not cover a case
of transfer in favour of pledgees at the relevant point of time and it was
acknowledged by the SEBI when the provision relating to pledgees was inserted
for the first time by way of explanation to Regulation 7(1) and (1A) in 2002.
Thus it is only and from 20. In this regard, it is pertinent to note that in the
letter of offer issued by the target company mentions the mode of acquisition
of shares in the bank by the Shree Krishna Group as follows : 1.
Shree Krishna
Group holds 338950 shares of the Bank which works out to 1.89% of the equity
capital of the Bank and cannot be construed as substantial holding.� The amount invested is also insignificant
considering Rs.1067.50 Crores, the total networth of the Shree Krishna Group as
on 2.
Some of the
Shree Krishna Group�s relatives and friends are also holding 101710 shares of
BoR which works out to 0.57% of the equity capital of the bank, the details of
which are as follows : Shri. Somprakash Arya����������� 58650 Shri. Rohit Gupta��������������������� 39370 Shri. Deepak Saruparia���������� 3690 3.
The Shree 21. It is pertinent to note from the above details that
the exact date on which the shares were transferred to Shree Krishna Group has
not been mentioned in the said disclosures. However, the fact that the shares
were transferred in the names of the nominees of the Shree Krishna Group clearly
indicate that the pledge was no longer subsisting.� Hence the contentions of the acquirers that
the requirement needs to be followed since the amendment in 2002 is not legally
tenable as the shares were already transferred to the acquirers� and no pledge or pledger-pledgee relationship
existed subsequent to the transfer. 22. As stated before, the mandate of Regulation 7 (1) and
Regulation 7(2) of Takeover Regulations require the disclosures to be made
within two days of acquisition of shares. �In view of the said provisions, the acquirer
is bound to make the disclosure within two days of the acquisition. In this
regard, though the acquirers contended that they had acquired 4.11% of the
shares prior to acquisition of 1.89%, the acquirers have not stated the exact
date on which 4.11% of shares were acquired by them. However it is pertinent to
note that when 4.11% is added to 1.89%, the aggregate shareholding is above the
specified limit of 5% and hence the acquirers are bound to make the disclosures
as per the mandate of Regulation 7(1) and (2). In this regard, �the target company vide its letter dated
6.4.2002 informed SEBI that intimation under Regulation 7 (1) was received from
Shri.Tayal on 4.5.2000 vide his letter dated 14.4.2000 and the same was intimated
to all the Stock Exchanges on 11.5.2000.�
On perusal of the information forwarded by the target company, it is
noted that the pledged shares amounting to 4.11% were transferred to the
acquirers on 22.8.97. Further the 0.57% of shares were acquired by friends and
relatives (persons acting in concert) on 10.9.1998. The acquirers also given
the details of the shares owned by it which amounts to 1.89% which was acquired
mainly on 10.9.98. 23. In view of the above details, it is seen that the
acquirer crossed the specified 5% on 10.9.98. Hence the acquirers were bound to
make the disclosures within two days of the said acquisition i.e. by 12.9.1998.
The acquirers have contended that vide their letter dated 24. As stated before, the acquirers were bound to make
the necessary disclosures on 12.9.1998.�
As the acquirers made the disclosures only on 15.2.1999, it is seen that
there has been a delay of approximately 155 days in complying with the
provisions of Regulation 7 of the Takeover Regulations.�� 25. One of the objectives of the Takeover Regulations is
to protect the interests of the investors through mandatory disclosures. The
purpose of making these timely disclosures to the stock exchanges is meant to
ensure transparency in transactions.� Delay
in making necessary disclosures deprived the investors of valuable information.
�On account of failure to comply with the
provisions of Regulation 7, the acquirers are liable to the penalty prescribed
under Section 15 A of the SEBI Act. 26. Failure to furnish the information, return etc or
delay to make requisite disclosures attracts monetary penalty as specifically
provided in Section 15A(b) of the SEBI, Act, 1992 which as on the date of� commission of the violation provided the following
: �If any person who is required under this Act, or any
rules or Regulations made there under � a)�������� to file any return or furnish any information, books or
other documents within the time specified therefore in the Regulations, fails
to file return or furnish the same within the time specified thereof in the
Regulations, he shall be liable to a penalty not exceeding five thousand rupee
for every day during which such failure continues; 27. In support of their contention that no penalty is
warranted in the facts and circumstances of the case, the acquirers have emphasised
�the �principle laid down by the Honourable Supreme
Court in the case of Hindustan Steel Ltd vs. State of Orissa and also
the order passed by the Honourable Securities Appellate Tribunal in Appeal
No: 37/2002 Sundaram Finance Ltd & Others Vs SEBI stating that the
acquirers did not act deliberately in defiance of law or was guilty of conduct
contumacious or had acted in conscious disregard of its obligation. In this
regard, it is pertinent to note the judgement of the Honourable Supreme Court in
Shriram Mutual Fund Vs SEBI wherein the Court held that the
violations of the provisions SEBI Act and Regulations attract the penalty
irrespective of the intent. The Honourable Court held that penalty is attracted
as soon as the contravention of the statutory obligation as contemplated by the
Act and the Regulation is established and hence the intention of the parties
committing such violation becomes totally irrelevant. 28. In view of the above, the case laws cited by the
acquirers do not support their contentions in the present case and no case has
been made out by the acquirers for not imposing any penalty in the adjudication
proceedings. Considering the facts and circumstances of the case and
considering the fact that the acquirers were aware of their aggregate holding
in the target company, I am of the view that the facts of the present case
warrant imposition of penalty. 29. Section 15J of the SEBI Act read with Rule 5(2) of
the SEBI (Procedure for holding inquiry and imposing penalty by the Adjudicating
Officer) Rules, 1995, provide the following factors to be taken into account while
determining the quantum of the penalty i.e., the amount of disproportionate
gain or unfair advantage wherever quantifiable made as a result of the default;
the amount of loss caused to an investor or group of investors as a result of
the default and the repetitive nature of the default. 30. �On the basis
of the facts available on record it is not possible to quantify the
disproportionate gain or unfair advantage accrued to the acquirers as a result
of the said default. �With regard to the
exact loss caused to the investors, the same cannot be computed on the basis of
the facts available on record. However the investors were deprived of valuable
information which may have influenced their decisions in respect of investment
in the target company. As stated before, there has been delay in complying with
the provisions of Regulation 7(1) and 7 (2) by the acquirers. 31. In view of the above, in terms of the provisions of
Section 15A(b) of the SEBI Act read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing
Penalties by the Adjudicating Officer) Rules, 1995, I impose a penalty
of Rupees One Lakh (Rs.1,00,000/-) on Shri.
P K Tayal and persons acting in concert for the delay in complying with
the provisions Regulation 7(1) and 7(2) of the Takeover Regulations.� Considering the facts and circumstances of
the case I am of the view that the said penalty is in commensurate to the
violation committed by them. 32. �The penalty amount
shall be paid within a period of 45 days from the date of receipt of this order
through a cross demand draft drawn in favour of �SEBI- Penalties remittable to
the Government of India� and payable at Mumbai.�
The demand draft shall be sent to General Manager, CFD, Securities and
Exchange Board of India, SEBI Bhavan, Plot No.C-4A, G-Block, Bandra Kurla
Complex, Mumbai � 400 051. 33. In terms of the provisions of Rule 6 of the SEBI
(Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer)
Rules 1995, copies of this order are sent to Shri. PK Tayal and to Securities
and Exchange Board of PLACE : MUMBAI������������������������������ ����������� BIJU. S��������
DATE� ��: DECEMER
8, 2006������ ���� ����������� ADJUDICATING
OFFICER
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