SECURITIES AND EXCHANGE BOARD OF INDIA
ADJUDICATION ORDER
UNDER RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING OFFICER) RULES, 1995
READ WITH SECTION 15A(b) & 15H(ii) OF THE SEBI ACT, 1992
AGAINST
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1
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SHRI VIJAY MALLYA
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2
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UNITED BREWERIES LIMITED
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3
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Mc DOWELL & Co LIMITED
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4
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VITTAL INVESTMENTS LIMITED
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5
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DEVI INVESTMENTS LIMITED
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6
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MATUNGA INVESTMENTS LIMITED
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7
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STAR INVESTMENTS LIMITED
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8
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SHRI VISHNU BHAGAT OBEROI
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9
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SHRI M K DIWANJI
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10
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SHRI P S GANDHI
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11
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SHRI S V GANDHI
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12
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SHRI S D LALLA
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13
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SHRI DAR P LALLA
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14
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SHRI PHIROSE D LALLA
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15
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SHRI RATI P LALLA
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16
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SHRI V K REKHI
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17
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SHRI A R VADIA
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18
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SMT INGRID M VADIA
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19
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SHRI BRINDAR PAL SINGH
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20
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PRASAM TRADING AND FINANCE LIMITED
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FOR VIOLATION OF REGULATION 6(1) & 8(1), 9(3) AND 10(2) OF SEBI (SAST) REGULATIONS, 1994 AND REGULATION 6(1) & (3) AND 8(1) & (2) OF SEBI OF SEBI (SAST) REGULATIONS, 1997
1.0 I was appointed as the Adjudicating Officer by SEBI to enquire into and adjudge under Sections 15A(b) and 15H(ii) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’), the alleged violation of Regulation 6(1) & 8(1), 9(3) AND 10(2) OF SEBI (SAST) REGULATIONS, 1994 AND REGULATION 6(1) & (3) AND 8(1) & (2) OF SEBI OF SEBI (SAST) REGULATIONS, 1997 (hereinafter referred to as the ‘said Regulations’) by
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1
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SHRI VIJAY MALLYA
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2
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UNITED BREWERIS LIMITED
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3
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Mc DOWELL & Co LIMITED
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4
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VITTAL INVESTMENTS LIMITED
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5
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DEVI INVESTMENTS LIMITED
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6
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MATUNGA INVESTMENTS LIMITED
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7
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STAR INVESTMENTS LIMITED
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8
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SHRI VISHNU BHAGAT OBEROI
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9
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SHRI M K DIWANJI
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10
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SHRI P S GANDHI
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11
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SHRI S V GANDHI
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12
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SHRI S D LALLA
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13
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SHRI DAR P LALLA
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14
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SHRI PHIROSE D LALLA
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15
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SHRI RATI P LALLA
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16
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SHRI V K REKHI
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17
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SHRI A R VADIA
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18
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SMT INGRID M VADIA
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19
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SHRI BRINDAR PAL SINGH
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20
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PRASAM TRADING AND FINANCE LIMITED
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(hereinafter referred to as the ‘acquirers and persons acting in concert’) for the acquisition of the shares of Herbertsons Ltd (hereinafter referred to as the ‘target company’).
2.0 SHOW CAUSE NOTICE
Accordingly, a Show Cause Notice dated January 28, 2003 was issued to the acquirers and persons acting concert. It is alleged that the acquirers and persons acting in concert who already held 2215800 shares of the target company which constituted 25.66% of the paid-up capital on November 4, 1994 as detailed in the show cause notice had further acquired 249950 shares constituting 2.26 % of the post conversion equity through United Breweries Limited on August 11, 1995 as detailed in the Show Cause Notice . It is alleged that the aforesaid acquisition was not preceded by a Public Announcement to acquire further shares in terms of Regulation 9(3) & 10(2) of SEBI (SAST) Regulations, 1994.
Subsequent Acquisitons
It is alleged that further acquisitions of 2.06% share capital of the target company was made through Prasam in 1995 and that the funding for this purchase was made by UBL for Rs.1.25 crores, again without making Public Announcement in terms of SEBI(SAST) Regulations,1994 .
It is alleged that the acquirers and persons acting in concert have also violated the disclosure requirements in violation of Regulation 6(1) for the year 1995 and 8(1) for the period ending on 31st March and 30th September 1995-96 of SEBI (SAST) Regulatiuoins,1994 and Regulations 6(1) and (3) for the year 1997 and 8(1) a& (2) for the year 1998 of SEBI(SAST) Regulations, 1997.
PROCEEDINGS
Shri R.A. Shah Advocate, Crawford Bailey appered for Shri Vijay Mallya.
Shri J.A Munim , Advocate, Bachbhai Munim & Co represented notices 2 to 5
Shri Bharath Shah, Advocate appeared for the remaining noticees excepting notice No.9 M K Diwanji
Shri Ruzbh JS Mistri , Advocate appeared for Mrs M.K Diwanji
Shri R.A.Shah, Learned Counsel appearing for Dr. Vijay Mallya has submitted that in view of the order dated 1.8.03 by SAT in Appeal No.15/2002 on the question of finding of fact and law, there is no violation of Regulation 9 & 10 of SEBI (SAST) Regulations, 1994 by his client and consequently no penalty can be imposed under Section 15H(ii) of SEBI Act, 1992.
On the question of acquisition of shares of the target company pursuant to the conversion of fully convertible debentures upon approval of the scheme of arrangement by the Hon’ble High Court, the findings by SAT that this acquisition is exempt under Regulation 3(1)(e) and therefore the question of making a public announcement does not arise.
On the question of acquisition of shares by Prasam, it was submitted that the Hon’ble SAT had found that there was no evidence of concerted action in the said acquisition. On the question of compliance with Regulation 6 & 8 of SEBI (SAST) Regulations, 1994 it was submitted that SEBI Regularisation Scheme, 2002 was availed of by filing the necessary declarations and payment of Rs.1.3 lakhs.
Shri Munium, Learned Counsel submitted that acquisition of shares by UBL in the target company subsequent to conversion of fully convertible debentures into equity on 11.8.95 did not cast an obligation to make a public announcement. The Learned Counsel referred to pages 38, 39 and 43-64 of the order of the Tribunal. With regard to the acquisition of the shares by Prasam, the Learned Counsel referred to the order of the Tribunal in pages 42-52 to state that there was no concerted action or common understanding in such acquisition. Shri Bharat Shah submitted that many of his clients like V.B.Oberoi, S.P.Reiki and Prasam sold their holdings and their acquisition was not related with the acquisition of other persons.
Shri Ruzbeh J S Mistry, Advocate appearing for Mrs.M.K.Diwanji submitted that his client is 90 year old blind woman it was represented that their client’s holding in Herbertsons Ltd was 1300 shares which represented .02% of the capital of the company. Since their client did not hold more than 5% of shares in Herbertsons Ltd. it was submitted that she was not required to disclose her shareholding either to the company or to the stock exchanges as alleged. It was denied that their client was acting in concert with Dr.Vijay Mallya or other entities as alleged in the notice. It was further submitted that their client has not acquired any further shares since the coming into force of SEBI(SAST)Regulations, 1994 and she is not required to make any public announcement as alleged since she is not acting in concert with any person as alleged in the show cause notice.
APPRECIATION OF EVIDENCE AND FINDINGS
As regards acquisition of 249950 shares of the target company on 11.8.1995 by way of conversion of compulsorily convertible debentures, the Hon’ble SAT in Appeal No.15/2002 dated 1st August, 2003 has held that the said acquisition is exempted in terms of Regulation 3(e) and the shares so received cannot be considered as acqusion warranting a Public Announcement.
The following is extracted from the said order :
“It is noticed from the material available on record that pursuant to an order dated 22.7.1992, passed by the Hon’ble Bombay High Court under section 391/394 of the Companies Act, 1956, Sona Distilleries Ltd., (Sona) was amalgamated with the Target Company. Pursuant to the said amalgamation the shareholders of Sona, which included Golden, Endeavour, East Coast and Consolidated, were issued 5 equity shares in the Target Company at a premium of Rs.5/- per share and 10 FCDs of Rs.75/- each to be automatically converted into 5 equity shares of Rs.10 each at a premium of Rs.5/- per share for every one equity share held in Sona. These FCDs were to be converted to shares by 11.8.1995. On 11.8.1992, pursuant to the said Scheme of Amalgamation the Target Company allotted equity shares at a premium of Rs.5/- together with FCDs to the said four companies as follows:
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No. of shares allotted
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No. of CDS allotted
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Endeavour
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4,995
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9,990
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East Coast
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10,000
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20,000
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Golden
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5,000
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10,000
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Consolidated
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5,000
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10,000
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Total
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24,995
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49,990
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It is noticed that pursuant to orders passed by the Hon’ble High Court, Karnataka and Hon’ble High Court, Madras (28.7.1995 and 23.3.1995 respectively), the said four companies in terms of a Scheme of Amalgamation, merged with UBL, under section 391/394 of the Companies Act. These four companies amalgamated before the FCDs were converted to shares. FCDs were due to be converted to shares only by 11.8.95. The 49,990 FCDs allotted to the aforesaid four companies vested in UBL pursuant to their amalgamation with it were got converted into 249950 shares on 11.8.1995, and accordingly the shares were issued to UBL.
According to regulation 3(e) of the 1994 Regulations "Nothing contained in Chapter III of these regulations shall apply to acquisition of shares pursuant to a Scheme of Arrangement or Amalgamation under section 391 and 394 of the Companies Act, 1956". Regulation 10 is one of the regulations coming under the said Chapter III. According to regulation 10(2) an acquirer who on the date of the commencement of the 1994 Regulations holds shares which carry more than ten per cent voting rights in the capital of the company, shall not acquire any further shares in the company from the open market unless such acquirer makes a public announcement of intention to acquire shares in the open market in accordance with the regulations. According to the Respondent since the Appellant was holding 21.38% shares in the Target Company, any further acquisition of shares by the Appellant warranted compliance of the requirement of making public announcement. It is not disputed that the Appellant was holding 21.38% shares in the capital of the Target Company
According to the Respondent regulation 3(e) refers to acquisition of shares of target company as a result of merger or amalgamation of target company with other company, that in this case prior to the stipulated date of conversion of FCDs i.e. 11.8.1995, the four companies only merged with UBL, and not the Target Company, that since in the Scheme of Amalgamation referred to in the instant case the Target Company is not involved, acquisition of 2,49,950 shares by the Appellant acting in concert with UBL did not come under the exemption provided in regulation 3(e). In the order it has been stated that "although the acquisition is said to be on account of operation of law, the acquirer ought to have sought exemption from the Board or complied with the Regulations, but has not done so. As the acquisition has been made through the said four companies (by the Appellant along with persons acting in concert) the provisions of regulation 10(2) and 9(3) are attracted. Thus the acquisition is in contravention of regulation 10(2) and 9(3) of the Takeover Regulations, 1994."
On a careful reading of the provisions of regulation 3(e) it is difficult to subscribe to the Respondent’s contention that the exemption is available only in the event of the amalgamation of the target company. In my view, in the case of amalgamation of a company (transferor company) with another company (transferee company) the shares allotted by the transferee company to the shareholders of the transferor company pursuant to the Scheme of Amalgamation sanctioned by the Court, can not be treated as acquisition of shares by those shareholders. Those shares are in effect devolved on the shareholders of the transferor company. On a perusal of the scheme of the 1994 Regulations it appears that the obligation to make public announcement to purchase not less than 20% of the paid up capital of the target company is on the acquirer. Acquirer means, as per the definition "any person who acquires or agrees to acquire shares in a company either by himself or with any person acting in concert with the acquirer." To "acquire"according to Blacks Law Dictionary means to gain any means usually by ones own exertions." According to Websters Dictionary ‘acquire’ means "to gain for oneself through ones action or efforts." Hon’ble Supreme Court in Devidas V State of Punjab (AIR 1967 1895) had held that "Acquisition is the act by which a person acquires property in a thing." "Acquire" is to become the owner of the property. One can, therefore, acquire a property either by voluntary or involuntary transfer". The question to be considered is that any type of acquisition irrespective of whether it is voluntary or involuntary would be subject to the 1994 Regulations ? On a perusal of the scheme of the Regulations in my view involuntary acquisition of shares, as a result of amalgamation of companies, is outside the purview of the Regulations. Normally voluntary acquisitions attract compliance of the Regulations. This view is fortified from the wording of the definition of the expression "acquirer" and "persons acting in concert" in the 1994 Regulations. Regulation 14 of the 1994 Regulation also supports the view that only voluntary acquisitions are governed by the Regulations. According to the said regulation. "A public announcement of intention to acquire shares referred to in regulation 10 shall be made either immediately before the acquisition of any shares which would increase the existing shareholdings of the person making the announcement beyond ten percent or in case his existing shareholding is already beyond ten per cent, any time before the person seeks to acquire any shares in order to increase his existing shareholding."
If an interpretation is given that even involuntary acquisition is also covered under the Regulations, that would create certain anomalous situations. Take the case like the instant one where a person gets 20% shares consequential to amalgamation of two companies. He can not be expected to acquire another twenty percent of the company’s share capital spending out of his pocket as the acquisition of shares was not made by him willfully. He only received the shares as a result of an order of the court sanctioning the amalgamation. He as an individual had little say in the matter as the scheme of amalgamation was approved by the majority of the shareholders. It is possible that the person might have even voted against the resolution. But when the court sanctioned the amalgamation and as a result the shares are issued to him-- even though he had voted against the resolution – he has no choice but to accept the shares so issued. But if SEBI’s interpretation is accepted still he will be required to make a public announcement. Acquisition of 20% shares from the other share holders requires funds. In case he fails to make public announcement to acquire 20% of the company’s shares, he could be penalised. So to escape the penal consequences would be to refuse to accept the shares legally so devolved on him and suffer the consequential loss as a result of such refusal. This is not investor protection. It is just the opposite. Certainly this is not the objective of the Regulation. This is not what the Regulation envisages. Who ever voluntarily acquires shares - by one’s action or effort - alone are required to make public announcements to acquire shares and not those persons who without any involvement in any manner receives shares as in the case of amalgamations or mergers made on the basis of the schemes approved by the shareholders and sanctioned by the Court. For the reasons stated above, in my view 2,49,950 shares received by UBL as a result of the amalgamation of the four companies with it is exempted in terms of regulation 3(e) and the shares so received can not be considered as acquisition warranting a public announcement to acquire shares from the other shareholders of the Target Company.”(underlining supplied)
In view of the aforesaid finding of the Tribunal on a question of fact, it cannot be said that the acquisition of 249950 shares by UBL as a result of amalgamation of the four companies with itself warrants the PUBLIC ANNOUNCEMENT in view of the exemption of such acquisitions under regulation 3(e).
ACQUSITION BY PRASAM
In so far as the allegations of acquisition of 2.06% share capital through Prasam in the year 1995 which is allegedly funded by UBL for an amount of Rs.1.25 crores, and that the same was not preceded by a PUBLIC ANNOUNCEMENT as required under the Regulations, the Hon’ble SAT in this regard in Appeal Bo.15/2002 dated 1st Aug 2003 has found that there is no evidence that the appellants had acted in concert with Prasam .
The following is extracted from the aforesaid order.
“Next lot involves acquisition of 2,50,000 shares (2.52%) (196300 shares - 2.06% - according to the Appellant) by Prasam. According to the show cause notice UBL gave interest free loan of Rs.1.25 crores in the year 1995 to Prasam which remained outstanding even in June, 1998, that Prasam utilised these monies for acquiring around 2.5 lakh shares of the Target Company. According to the Respondent the Appellant acting in concert and in collusion with UBL acquired the said shares adopting a stratagem of granting interest free loan to Prasam. Prasam, according to the Respondent is a company belonging to LKP Shares and Securities Ltd., which has got long standing relationship with the Appellant, that in view of the " business relationship existed between the Appellant and Prasam through LKP Shares and Securities Ltd., they are deemed to be persons acting in concert in terms of regulation 2(d) of the 1994 Regulations." It is noted that the Appellant had denied giving any loan or advance to Prasam. Even according to the Respondent, it was UBL which had given Rs.1.25 crores to Prasam. It is in the said context the Appellant’s version gains credibility. According to the Appellant LKP Group had long standing business with UBL and LKP Group as brokers had over a number of years bought and sold shares for UBL in various companies, that in respect of such transactions amounts had been from time to time debited and credited to an open running account maintained by LKP Group, that the amounts referred to by SEBI as a loan were in fact the amounts standing in such a running account with LKP, that the outstandings in the running account by their very nature do not bear interest. The Appellant had submitted that the Appellant and Prasam can not be considered as persons acting in concert, that during the relevant period Prasam had in fact sold 1,57,200 shares of the Target Company, that the Respondent has not dealt with any of these facts in its order.
The Respondent in its order has stated that:
"In view of the business relationship existed between VM (Appellant) (through UBL) and PTFL (Prasam) (through LKP Shares and Securities Ltd., ) they will be deemed to be PAC in terms of 2 (d) of the 1994 Regulations.
In my view this is an erroneous conclusion. According to regulation 2(d) ‘person acting in concert’ comprises persons who, pursuant to an agreement or understanding acquires or agrees to acquire shares in a company for a common objective or purpose of substantial acquisition of shares and includes:
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- a company, its holding company, or subsidiaries or such companies or companies under the same management either individually or all with each other;
- a company with any of its directors, or any person entrusted with the management of the funds of the company;
- directors of companies referred to in sub-clause (i) and his associates; and
- mutual fund, financial institution, merchant banker, portfolio manager and any investment company in which any person has an interest as director, fund manager, trustee, or as a shareholder having not less than 2% of the paid up capital of that company.
……………"
There is nothing on record to show that there existed an agreement or understanding by Prasam with the Appellant to acquire shares of the Target Company for a common objective or purpose of substantial acquisition of shares. On the contrary the factual position as noted by the Respondent in its order indicates that when the Appellant was allegedly acquiring shares. Prasam was selling the Target Company’s shares. It had sold 1,57,200 shares. Respondent in its order has not dealt with this aspect. All those persons buying and selling shares are not to be considered as persons acting in concert. "Commonality of objective and community of interest" is the relevant factor which decides as to whether the person while acquiring shares was acting in concert with any other person. SEBI has totally ignored this crucial aspect in arriving at the conclusion that the Appellant and Prasam were acting in concert. The basis on which SEBI has come to the conclusion that the Appellant and Prasam acted in concert is that in view of the "business relationship existed between the Appellant and Prasam through LKP Shares and Securities Ltd., they are deemed to be persons acting in concert in terms of regulation 2 (d) of the 1994 Regulations." Regulation 2(d) does not give any scope for such an interpretation. It is not the business relation that matters. It is the common objective of acquiring substantial shares that matters. Further the Appellant’s submission on the nature of the transactions UBL had with LKP group, put forth before the Respondent does not appear to have been examined by the Respondent. In any case in the order there is no indication of having considered those submissions.
It is to be noted that the definition of the expression acquirer provided in regulation 2(1)(b) does not stipulate that the acquirer and the person acting in concert should acquire shares simultaneously. Acquisition can be in different spells. But nexus of the acquirer and the person acting in concert is relevant. That nexus as Bhagwati Committee put is "the commonality of objective and community of interest". If it is established that two or more persons with a common objective are acquiring shares in a company, it can be safely concluded that they are acting in concert. But in the instant case the Respondent has failed to establish that the Appellant and Prasam had common objective of making substantial acquisition of shares of the Target Company. In fact Prasam had contested the Respondent’s version that it was acting in concert with the Appellant. The Respondent has also failed to establish its contention that Prasam was acquiring shares of the Target Company at the behest of the Appellant.
In the absence of reasonably convincing evidence to support the Respondent’s contention that the Appellant had acted in concert with Prasam, it is not possible to take into consideration the shares acquired by Prasam also as an acquisition of shares by a person acting in concert with the Appellant.”(underlineing supplied)
In view of the above, and having regard to the finding by the SAT which is final in respect of facts, it cannot be said that there is violation of Regulation 9(3) & 10(2) of SEBI (SAST) Regulations, 1994 warranting imposition of penalty under Section 15H(ii) of SEBI Act, 1992 .
As per Reg.6(1) of 1994 Regulations any acquirer who holds five per cent or less than five per cent shares in a company and acquires more than five per cent shares in the manner provided therein shall disclose the aggregate of his shareholding to the target company and also to the stock exchanges where the shares are listed.
In so far as the alleged non-compliance with Regulation 6(1) of 1994 Regulations is concerned, it is seen that the said regulation applies to the acquirers who hold 5% and less shares in the target company but acquire more than 5% shares. In the instant case, the impugned acquisition is related to 2.62% share capital acquired by UBL on 11.8.95 pursuant to conversion of compulsorily convertible debentures. In as much as the same is less than 5% of the paid-up capital, Regulation 6(1) of 1994 Regulations is not attracted. For the acquisition of 2.06% shares by Prasam, it was held by the Hon’ble SAT vide its order dated 1.8.03 that there is no evidence to suggest that it was acting in concert with others. Since the definition of acquirer would also include the persons acting in concert and in the absence of any material to suggest that Prasam was acting in concert as held by SAT for the impugned acquisition and as the acquisition of Prasam itself being less than 2.05% of the paid-up capital, it is difficult to conclude that Regulation 6(1) of 1994 Regulations is violated in the matter of acquisition of shares by Prasam..
As per Reg.8(1) of 1994 Regulations every acquirer who holds more than ten per cent shares in a company shall make half yearly disclosures to the stock exchanges where the shares are listed.
It is seen that Regulation 8(1) of 1994 Regulations has not been complied with for the halr-year ended 31st March and 30th September, 1995-96. The said Regulation requires every acquirer which includes the PAC as per the definition of the said term who holds more than 10% shares in the company to make half-yearly disclosures to the stock exchange in which the shares are listed. UBL, individually was holding more than 10% shares in the target company.
Regulation 6(1) of 1997 Regs. reads as under :
Transitional Provision
‘Any person, who holds more than 5% shares or voting rights in any company shall within 2 months of notification of these Regulations shall disclose his aggregate share holding in that company to the company.’
Regulation 8(1) of 1997 Regs. reads as under :
Continuous Disclosures
“Every person including a person mentioned in Regulation 6 who holds more than 15% shares or voting rights in any company shall within 21 days from the financial year ending March 31st make yearly disclosures to thee company in respect of his holding as on 31 March”
In so far as the alleged violation of Regulation 6(1) & (3) and 8(1) & (2) of the 1997 Regulations is concerned for the year 1997-98, it is noticed that for the alleged violation of Regulations 6(3) & 8(2) of 1997 Regulations, the Regularization Scheme of 2002 was availed by paying Rs.1.3 lakhs. In as much as disclosure under Regulation 6(3) is related to a promoter or any person having control over the company and persons acting in concert with him, the compliance of Regulation 6(3) may be broadly taken as compliance of Regulation 6(1) which is a one time requirement of disclosure when the Regulations came into force on 20.2.97. In the clarification communicated to BSE vide SEBI’s letter No.TO/AS/22832/02 dated November 25, 2002, it was clarified that if an individual or a company which is required to make disclosures under Regulation 6(1) and (3) by reason of it being a promoter and holding more than 5%, the penalty needs to be paid as per Reg. 6(1) or 6(3) whichever is higher as the person in default is one and the same. It is also seen that except for UBL, no other noticee was individually holding more than 5% of the paid-up capital requiring compliance with Regulation 6(1).
In so far as the alleged non-compliance to Regulation 8(1) of SEBI (SAST) Regulations 1997 is concerned, it is seen that SEBI Regularisation Scheme, 2002 is availed for the non-compliance of Regulation 8(2). As the requirement of disclosure under Regulation 8(2) is for promoter and persons having control over the company, to disclose the shareholding including that of persons acting in concert, non-compliance of Regulation 8(1) requiring persons holding 15% or above share capital under the circumstances may not be viewed seriously. It is also seen that except for UBL which held 22.13% of the paid-up capital, no other noticee was holding more than 15% of the shares attracting the disclosure requirement under Regulation 8(1).
Taking into account the submission that for non-compliance of Regulation 6(2) & 8(2) of SEBI(SAST) Regulations, 1997, SEBI Regularisation Scheme, 2002 was availed by paying Rs.1.3 lakhs as penalty, no further penalty is called for.
In this regard, it would also be relevant to refer to the judgement of Division Bench of the Hon’ ble High Court of Bombay in SEBI vs Cabot International Corporation (2004) 51 SCL 307 (BOM)
The following is extracted from the said judgement:
“Though looking to the provisions of the statute, the delinquency of the defaulter may itself expose him to the penalty provision yet, despite, that in the statute minimum penalty is prescribed, the authority may refuse to impose penalty for justifiable reasons like the default occurred due to bonafide belief that he was liable to act in the manner prescribed by the statute or it was too technical or venial breach etc. “
4.2 In the judgment of Supreme Court in Hindustan Steel Limited v State of Orissa, AIR 1970 SC 253, the Hon’ble court held us under;
“An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceeding and penalty will not be ordinarily be imposed unless the party obliged either acted in defiance of the law or acted in conscious disregard of its obligations. Penalty will not also be imposed merely because it is lawful to do so. Where penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judiciously and on a consideration of all the relevant circumstances.”
ORDER
In view of the finding of fact by the Hon’ble SAT in Appeal No.15/2002 dated 1.8.03 that the acquisition of 2,49,950 shares by UBL as a result of amalgamation of four companies is exempt under Reg.3(1)(e) of the Regulations and that there is no evidence of concerted action in the matter of acquisition of 2.06% shareholding through Prasam, it cannot be said that there is violation of Regulations 9(3) & 10(2) of SEBI(SAST) Regulations, 1994 warranting imposition of penalty under Section 15H(ii) of SEBI Act, 1992. In view of the availment of Regularisation Scheme, 2002 and payment of Rs.1.3 lakhs for the alleged violation of Regulation 6(3) & 8(2) of 1997 Regulations, no further penalty is warranted for the reasons discussed earlier.
However, there is no material to suggest that the necessary half-yearly disclosures were made to the stock exchanges for the half year ended 31st March and 30th September, 1995-96 as required under Regulation 8(1) of 1994 Regulations. As already discussed, the term “acquirer” as used in Regulation 8(1) of 1994 Regulations would also include any person acting in concert with the acquirer. Infact, the submissions of non-compliance with Regulations 6 & 8 were limited to the 1997 Regulations only stating that the Regularisation Scheme was availed by paying Rs.1.3 lakhs. Taking into account the penalty of Rs.10,000/- per annum for the similar violation relating to non-disclosure under Regulation 8 of 1997 Regulations under the SEBI Regularisation Scheme, 2002, the facts and circumstances of the case and the submissions made and having regard to the factors contained in Section 15J of SEBI Act, 1992, it would be appropriate to impose a consolidated penalty of Rs.15,000/- for the non-compliance of the disclosure requirement under Regulation 8(1) of SEBI(SAST) Regulations, 1994 for the half year ended 31st March and 30th September, 1995-96. The acquirer and persons acting in concert are jointly and severally liable to pay the penalty which shall be paid through Crossed Demand Draft drawn in favour of “Securities and Exchange Board of India – Penalties remittable to Government of India, payable at Mumbai.” The Draft may be sent to Shri. S.V.Muralidhar Rao, General Manager, CFD, Mittal Court, 1st Floor, “B” Wing, Nariman Point, Mumbai 400 021.
Place: Mumbai S.V. KRISHNA MOHAN
Date : August 24, 2005 ADJUDICATING OFFICER