BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI
Appeal No.111/2003
Date of Hearing: 28th June, 2004
Date of decision: 30th June, 2004
In the matter of
- Mr. Asgar Mun
- Mr. siraj Mun
- Mrs. Khatija Mun
- Mr. Akbar Mun
- Mrs. Fehmida Mun
- Mrs. Nafisa Mun
- Mrs. Sakina Mun
- Mrs. Tasneem Mun
- Mr. Shabbir Mun
- M/s. Hertz Chemical Limitd Appellants – Represented by
Mr. P. Colawalla , Advocate
Mr. Devesh Juvekar, Advocate
Versus
Securities and Exchange Board
of India Respondent – Represented by
Mr. Shaunak Satpute, Advocate
Coram:
Justice Shri Kumar Rajaratnam, Presiding Officer
Dr. B. Samal, Member
Shri N. L. Lakhanpal, Member
Per : Dr. B. Samal, Member
The appeal is against the order of the Adjudicating Officer dated 14th July, 2003 imposing a penalty of Rs. 2,00,000/- in terms of section 15 (1) of the Act and Rule 5 of the Rules read with section 15A of the Act. The Adjudicating Officer was appointed vide order dated 4th March, 2002 in terms of Rule 5 of SEBI (Procedure for Holding Enquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 read with section 15(1) of the Securities and Exchange Board of India Act, 1992, Securities and Exchange Board of India to enquire into and adjudge the alleged contravention of section 15A of the Act read with Regulation 7 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Regulations) by Shri Asgar Mun and the persons acting in concert with him viz. (a) Siraj Mun (b) Khatija Mun (c) Akbar Mun (d) Fehmida Mun (e) Nafisa Mun (f) Sakina Mun (g) Tasneem Mun (h) Shabbir Mun (i) Hertz Chemicals Ltd., in the matter of acquisition of shares of Vakrangee Software Ltd., (VSL). The relevant provisions of the regulations and Act indicates as under:
Regulation 7
7.(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 per cent or ten per cent, or fourteen per cent, shares or voting rights in a company, in any manner whatsoever, shall disclose at every stage the aggregate of his shareholding or voting rights in that company to the company and to the stock exchanges where shares of the target company are listed.
(1A) Any acquirer who has acquired shares or voting rights of a company under sub-regulation (1) of regulation 11, shall disclose purchase or sale aggregating two per cent, or more of the share capital of the target company to the target company, and the stock exchanges where shares of the target company are listed within two days of such purchase of sale along with the aggregate shareholding after such acquisition or sale.
[Explanation – for the purpose of sub-regulations (1) and (1A), the term ‘acquirer’ shall include a pledge, other than a bank or a financial institution and such pledge shall make disclosure to the target company and the stock exchange within two days of creation of pledge]
(2) The disclosures mentioned in sub-regulations (1) and (1A) shall be made within two days,--
(a) the receipt of intimation of allotment of shares; or
(b) the acquisition of shares or voting rights, as the case may be.
(2A) The stock exchange shall immediately display the information received from the acquirer under sub-regulation (1) and (1A) on the trading screen, the notice board and also on its website.
(3) Every company, whose shares are acquired in a manner referred to in sub-regulation (1) and (1A) shall disclose to all the stock exchanges on which the shares of the said company are listed the aggregate number of shares held by each of such persons referred above within seven days of receipt of information under sub-regulation (1) and (1A).
Regulation 25.
"45. (1) Any person violating any provisions of the Regulations shall be liable for action in terms of the Regulations and the Act. –
…………."
Section 15A of the Act
"15A. If any person, who is required under this Act or any rules or regulations made thereunder, --
………………..
(b) 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 therefore in the regulations, he shall be liable to penalty not exceeding five thousand rupees for every day during which such failure continues."
The appellants appeared through advocate for initial hearings. Show cause notice has also been issued on 31st October, 2001 to the appellants to submit their written replies as to why action should not be taken against them by way of levy of penalty in accordance with section 15A(b) of the Securities and Exchange Board of India Act, 1992 read with Rule 5 of Securities and Exchange Board of India (Appointment of Adjudicating Officer) Rules and a time of 15 days was given to submit their reply. The details of shares purchased by Shri Asgar Munim and his family members are as under:
|
Name
|
|
Purchase
|
|
Sale
|
|
Net Quantity
|
|
|
Shabbir Mun
|
|
72500
|
|
0
|
|
72500
|
|
|
Tasneem Mun
|
|
24000
|
|
0
|
|
24000
|
|
|
Nafiasa Mun
|
|
19000
|
|
0
|
|
19000
|
|
|
Sakina Mun
|
|
29000
|
|
0
|
|
29000
|
|
|
Fehmida Mun
|
|
19000
|
|
0
|
|
19000
|
|
|
Siraj Mun
|
|
62500
|
|
0
|
|
62500
|
|
|
Akbar Mun
|
|
62500
|
|
0
|
|
62500
|
|
|
Asgar Mun
|
|
67500
|
|
0
|
|
67500
|
|
|
Khatija Mun
|
|
26000
|
|
0
|
|
26000
|
|
|
Hertz Chemicals Ltd.,
|
|
96100
|
|
0
|
|
96100
|
|
|
Total
|
|
478100
|
|
0
|
|
478100
|
|
The shares of VSL were purchased from the brokers viz. JHP Securities Pvt. Ltd., Sanghvi Brothers, RBK Share Brokers, Mangal Keshav Securities, PNG Securities, Grow Well Consultants and Shri Dinesh Nandwana.
Instructions were given by the appellant to the brokers to purchase an amount of shares ranging from 20,000 to 25,000 at a time irrespective of the price or price limit.
A purchase of 1,00,000 shares of VSL from the broker Sanghvi Brothers were delivered by a third party Shri Deven Mehta without any contract note and bill
Large quantity of shares of VSL were purchased by Shri Mun from Shri Deven Mehta in off market transactions.
The report mentioned that the total paid up equity capital of VSL comprised of 74,46,165 shares and 5% of the same is equal to a total of 3,72,309 shares. The investigation report indicated that the members of Shri Mun family cumulatively purchased 4,78,100 shares of VSL which was in excess of 5% of the paid up equity capital of VSL and failed to disclose the same to the target company as well as the Stock Exchange under the relevant statutes and, therefore, have violated regulation 7(1) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
The learned counsel for the appellants submitted that Shri Mun had exceeded the 5% only by a extent of 0.45%. It was admitted that this is a technical breach and a lenient view may be taken as they had no intention to take over the control or management of the target company. Moreover none of the persons had individually acquired more than 5% of the paid up equity capital of the company at any time. The shares purchased were for purely investment purpose and in fact the appellant has incurred huge loss from the investment in the shares of VSL.
Learned Counsel for the respondent submitted that the appellants have not only violated the relevant regulations but also so far not informed the target company and the stock exchange about acquisition of shares exceeding 5% of the target company in compliance of regulation 7.
As per section 15 J of the Act and sub rule 2 of Rule 5 of the rules the Adjudicating Officer shall have due regard to the following factors while adjudging the quantum of penalty:
-
- 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.
- The repetitive nature of the default.
The appellant has admitted the violation of the regulations. It was also submitted that it is his first technical breach. However, the Adjudicating Officer has noted that Shri Mun and his family members did not gain any unfair advantage and the records made available to him did not suggest that Shri Mun and his family have indulged in any repetitive violations. The Adjudicating Officer has also mentioned that it is difficult to measure the quantum of loss that has been caused to the investors.
Taking into consideration the relevant factors and the submission of the learned counsels for the appellant and the respondent we are inclined to take a lenient view. In our view a penalty of Rs.50,000/- on Shri Mun and his family members for contravention of Regulation 7 would serve the purpose.
In view of the above the impugned order stands modified to the above extent. Penalty of Rs.50,000/- will be deposited with the Respondent within six weeks from the date of receipt of this order.
(Pronounced in Court)
|
(Justice Kumar Rajaratnam)
Presiding Officer
|
|
|
(Dr. B. Samal)
Member
|
|
(N.L. Lakhanpal)
Member
|
|
Place: Mumbai
Date: 30th June, 2004