IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

Appeal No. 154 of 2005

 

Date of Decision

1.3.2006

 

 

Dr. Vijay Mallya & Ors.	……	Appellants
Versus
Securities & Exchange Board of India	……	Respondent

 

Present :  Mr.  N.H. Seervai, Sr. Advocate with Mr. J.A. Munim & Mr. R.

                  Desoura, Advocates for the appellants

                  Mr. Paras Parekh, Advocate for the respondent          

Coram:

          Justice N.K. Sodhi, Presiding Officer

            C. Bhattacharya, Member

            R. N. Bhardwaj, Member

 

Per:  Justice N.K. Sodhi, Presiding Officer (oral)

 

            This appeal under Section 15T of the Securities and Exchange Board of India Act, 1992 (for short “the Act”) is directed against the order dated August 24, 2005 passed by the adjudicating officer imposing a monetary penalty of Rs. 15,000/- on the appellants on the ground that they have violated the provisions of Regulation 8(1) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1994 (hereinafter referred to as “the Regulations”).  They have been made liable jointly and severely.

   2.            Whether the appellants have violated the provisions of Regulation 8(1) of the Regulations is the short question that arises for our consideration in this appeal.  Before we deal with this issue, it is necessary to state the brief facts which are necessary for its disposal.   A notice dated 8.1.1999 was issued by the Securities and Exchange Board of India ((for short “the Board”) to Dr. Vijay Mallya, the first appellant herein calling upon him to show cause why action be not taken against him for having violated the provisions of the Regulations.  It was alleged that he had acquired shares in Hebertsons Ltd. (for short “the target company”) in excess of 10% of its share capital and that he had failed to make necessary disclosures under the Regulations.  It was further alleged that he acted in concert with some other persons in acquiring the shares.  A reply was filed by the first appellant denying having purchased any shares in the target company.  He also denied the allegation that some other persons who held shares in the target company had acted in concert with him while acquiring those shares.  On a consideration of the reply filed by the first appellant and the relevant material on record, the Board by its order dated 19.2.2002 came to the conclusion that the first appellant had acquired shares in the target company while acting in concert with others and since he had failed to make the necessary disclosures he had violated the Regulations and also the listing agreement of the target company with different stock exchanges.  The Board also came to the conclusion that the first appellant was required to make a public announcement which he had failed to do so and therefore directed that the shares held by him in excess of 10% be disinvested.  The Board ordered adjudicating proceeding against the first appellant and others with whom he was alleged to have acted in concert while acquiring the shares in the target company.  Feeling aggrieved by this order the first appellant filed an appeal before the Securities Appellate tribunal.  While the appeal was pending the adjudicating officer was appointed on 24.10.2002 who issued notice to all the appellants herein calling upon them to show cause why action be not taken against them for violating the Regulations in as much as they had acquired shares in excess of the requisite percentage without making the statutory disclosures and without making the public announcement.  Some of the appellants including appellant no. 1 filed a detailed reply while the others filed a short reply.

   3.            The appeal filed by appellant no. 1 against the order dated 19.2.2002 was heard and disposed of by the Tribunal on 1.8.2003 when the proceedings before the adjudicating officer were pending.  The Tribunal found that there was no material on record to show that the first appellant had acquired any shares in the target company or that he acted in concert with others and that the finding of the Board in that regard was unsustainable.  It may be mentioned that the Board in its show cause notice to the fist appellant had alleged that the latter had acquired shares in the target company in 3 lots and that the total acquisition exceeded the requisite percentage and therefore it was incumbent upon him to have made a public announcement and also to have made statutory disclosures in terms of the Regulations.  The findings recorded by the Board in this regard were set aside and the appeal was allowed.  The categoric finding recorded by the Tribunal was that the first appellant had not acquired any shares in the target company and the shares held by some others in their own names had not been purchased in concert with the first appellant.  This finding was in regard to all the three lots of shares alleged to have been acquired by the first appellant.  It is common case of the parties that the order of the Tribunal has become final.

   4.            Despite the finding recorded by the Tribunal that appellant no. 1 had not acquired any shares in the target company nor had he acted in concert with others, the adjudicating officer has by his order dated 24.8.2005 while taking note of the appellate order held that the appellants had violated Regulation 8(1) of the Regulations in as much as they did not make half yearly disclosure of their holdings to the stock exchange.  He has imposed a penalty of Rs. 15,000/- on them making them jointly and severely liable.  Hence this appeal.

   5.            We have heard the learned senior counsel appearing for  the appellant and also the learned counsel appearing for the Board and are of the view that the appeal deserves to be allowed.  There is no gainsaying the fact that the Tribunal in its order dated 1.8.2003 while setting aside the order of the Board dated 19.2.2002 had recorded a firm finding that the first appellant had not acquired any shares in the target company nor had he acted in concert with others.  The learned counsel for the appellant submitted before us that United Breweries Ltd. was the only entity which had acquired the shares in the target company and it made the necessary disclosures and that no other person had acquired shares in excess of the requisite percentage which would require compliance with Regulation 8(1).  The adjudicating officer in the impugned order has noticed in detail the findings recorded by the appellate Tribunal in favour of the appellants that they have not acquired shares in the target company nor had they acted in concert with each other.  If it is so, the question of their making any disclosure to the stock exchange would not arise.  Regulation 8(1) requires that every acquirer who holds more than 10% of the shares in any company shall make half yearly disclosures to the stock exchange of his holdings as on March 31 and September 30 each year.  As per the finding of the appellate Tribunal which is final between the parties, no shares had been acquired by appellant no. 1 and that he had not acted in concert with others.  In view of this finding it was not necessary for them to comply with Regulation 8(1) and that the adjudicating officer was in error in imposing the monetary penalty.  United Breweries Ltd. which held shares in excess of the requisite percentage had made the necessary disclosures which fact is not disputed by the Board. 

   6.            In the result, the appeal is allowed and the impugned order dated 24.8.2005 set aside with no order as to costs.  The Board will refund the amount deposited by the appellants in pursuance to the impugned order.

 

Justice N.K. Sodhi Presiding Officer

C. Bhattacharya Member

R.N. Bhardwaj Member

 

 

 

 

 

 

 

 

 

1.3.2006