Feb 21, 2007
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Orders :
Orders of SAT
IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No.30 of 2007
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Top Telemedia Ltd.
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...... Appellant
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Versus
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Securities and Exchange Board of India
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..…Respondent
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Shri Pesi Modi, Advocate alongwith Shri Deepak Shah, Advocate for the Appellant
Shri D.P. Desai, Advocate for the Respondent
CORAM
Justice N.K. Sodhi, Presiding Officer
R.N. Bhardwaj, Member
Per: Justice N.K. Sodhi, Presiding Officer (Oral)
This order will dispose of two Appeals nos.30 and 31 of 2007 in which identical issues are involved.
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (for short “the Regulations”) came into force with effect from 20th February, 1997. Regulation 6 is a transitional provision and provides that any person who held more than five percent shares or voting rights in any company was required to disclose his aggregate shareholding in that company to the company within two months of notification of the Regulations. Not only this, every company whose shares were held by persons with more than five percent shares or voting rights was required to disclose to all the stock exchanges on which its shares were listed, the aggregate number of shares held by each person. Regulation 8 provides for continual disclosures by persons and companies. Regulation 8(1) requires every person who holds more than fifteen percent shares or voting rights in a company to disclose his shareholding as on 31st March of each year to the company within 21 days from the end of the financial year. Every company is also required to make yearly disclosures to all stock exchanges on which its shares are listed in respect of the holdings of persons holding more than fifteen percent shares.
The appellant before us in Appeal no.30 of 2007 is a company whose shares are listed on the Bombay Stock Exchange, Pune Stock Exchange, and Ahmedabad Stock Exchange. It was existing at the time when the Regulations came into force and was therefore required to comply with the transitional provisions contained in Regulation 6 and was also required to make yearly disclosures on a continual basis in terms of Regulation 8. Admittedly, the appellant did not comply with the provisions of Regulations 6(2) and 8(3) of the Regulations within the period prescribed by the Regulations. As per the findings recorded by the adjudicating officer, the disclosures were made on 20th November, 2002 and there was a long delay in complying with the statutory provisions. The Securities and Exchange Board of India (for short “the Board”) initiated adjudication proceedings and appointed an adjudicating officer under chapter VI-A of the Securities and Exchange Board of India Act, 1992 (hereinafter called “the Act”). In view of the delay in complying with the statutory provisions the adjudicating officer has by his separate orders dated September 29, 2006 imposed a penalty of Rs.50 lacs on the appellant in Appeal no.30 and Rs.10 lacs in Appeal no.31. It is against these orders that the present appeals have been filed under section 15T of the Act. It was alleged in the show cause notice issued to the appellant that despite the service of summons dated 25.2.2003 at its Ahmedabad office, it failed to make appearance before the investigating officer and produce the documents as required by the said summons. The adjudicating officer found that the summons had not been served on the appellant and, therefore, it was under no obligation to produce the documents/records and the appellant has been absolved of this charge.
We have heard the learned counsel for the parties and having regard to the facts and circumstances of the case are of the view that the penalty imposed is exorbitant and the same needs to be reduced. The fact that the appellant failed to comply with the provisions of Regulations 6(2), 6(4) and 8(3) within the time prescribed by law is admitted. The adjudicating officer has also found that non compliance of these provisions did not result in any undue benefit being caused to the appellant nor did the noncompliance result in any loss or damage being caused to anyone else. The learned counsel for the appellant informs us that the appellant company is lying closed and has been out of business for the last few years. There is no gainsaying the fact that the Board itself had come out with SEBI Regularization Scheme, 2002 for non compliance with Regulations 6 and 8 of the Regulations. This scheme was framed keeping in view the fact that disclosures were not made by several companies and market participants either on account of oversight or lack of knowledge. The scheme which was initially framed for a duration of three to four months was being extended from time to time and eventually expired in June, 2003. When the appellant complied with the statutory provisions on 20.11.2002 the scheme was in operation where under it could have availed the benefit of lesser penalty in terms thereof. The learned counsel for the appellant pointed out and, in our view rightly, that the appellant was not aware of the scheme by then and did not avail of this benefit. Had the appellant availed of the benefit of the provisions of the scheme the total amount of penalty that would have been levied on it would have been much less. We are, therefore, inclined to agree with the learned counsel for the appellant that his clients were not aware of the scheme. Be that as it may, we are of the view that the penalty imposed is very exorbitant and having regard to the facts and circumstances of the case we reduce the same to Rs.5 lacs. The impugned order in Appeal no.30 of 2007 stands modified accordingly. The appellant is directed to deposit this amount within 8 weeks from the date of receipt of a copy of this order failing which the Board will be at liberty to recover it in accordance with law.
In Appeal no.31 of 2007 which has been filed by a group company, the violation is of Regulation 6(2) and 7(3) of the Regulations. It is not disputed that these provisions had not been complied within the time prescribed by the Regulations. The adjudicating officer has imposed a penalty of Rs.10 lacs which again in our opinion appears to be highly excessive. In this case also non compliance of the Regulations did not result in any undue benefit being caused to the appellant nor did the noncompliance result in any loss or damage being caused to anyone else. The company is also in the red and is almost closed. In our opinion, the ends of justice would be adequately met if the amount of penalty is reduced to Rs.2 lacs. We order accordingly.
The Appeals stand disposed of as above with no order as to cost.
Sd/- Justice N.K. Sodhi
Presiding Officer
Sd/-
R.N. Bhardwaj
Member
RRN
21.2.07