BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI
Appeal No.106/2002
Date of Hearing: 15th April, 2004
Date of decision: 21st May, 2004
In the matter of
Global Infrastructure Holding Ltd., Appellant – Represented by
Shri Venkatesh Dhond, Advocate
Versus
The Adjudicating & Enquiry Officer, Respondent – Represented by
Securities and Exchange Board Shri Kumar Desai, Advocate
of India
Coram:
Justice Shri Kumar Rajaratnam, Presiding Officer
Dr. B. Samal, Member
Shri N. L. Lakhanpal, Member
Per : Shri N. L. Lakhanpal, Member
This is an appeal against the order dated September 24, 2002 passed by the Respondent imposing penalty of Rs.1,00,000/- on the appellant under section 15A (a) of the SEBI Act, 1992. The charge against the appellant is that they delayed submission of a report to SEBI in respect of their acquisition of shares of Ispat Finance Ltd., by 208 days. The appellant is a company registered in the Isle of Mann whereas Ispat finance Ltd., is an Indian company incorporated under the Companies Act, 1956 and registered with Reserve Bank of India as a non Banking Finance company and its shares are listed on the Calcutta and U.P.Stock Exchanges. The Board of Directors of Ispat Finance Ltd., (IFL) passed a resolution on October 7, 2000 authorising the issue of equity shares of Rs.10/- each on private placement basis to the appellant. On 29th of December, 2000 the Annual General Meeting of IFL accorded its consent to the Board of Directors to issue to overseas body corporates equity shares of Rs.10/- each on private placement basis for cash at a premium to be decided by the Board of Directors for an amount not exceeding Rs.14,25,00,000/-. On January 18, 2001 IFL informed the Calcutta Stock Exchange and the UP Stock Exchange about its intention to allot 8,36,056 equity shares of Rs.10/- each at a premium of Rs.160/- per share to the appellant at its Board Meeting to be held on January 31, 2001. This communication from IFL also contained the information that the proposed acquisition by the appellant would result in the appellant holding/acquiring 39.19% shares in IFL. The shares were accordingly allotted and an application was made to the Calcutta Stock Exchange on May 31, 2001 for listing of these 8,36,065 equity shares. SEBI was informed by IFL on August 18, 2001 when it was noticed that the appellant had delayed the submission of the report and had thereby violated regulation 3(4) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. Adjudication proceedings were initiated culminating in the passing of the impugned order.
2. There is no dispute about the facts in this case. It is a matter of record that there was a delay of 208 days in complying with the requirements of Regulation 3(4). Both during the adjudication proceedings as well as in the appeal proceedings before us, the appellant’s case has been that there was no intention whatsoever of hiding the facts from SEBI and that the enquire acquisition has been on the basis of full transparency wherein Stock Exchanges were kept in the picture at every step.
3. SEBI’s case however, is that there has been a violation of Regulation 3(4) and that this violation has to be visited with the penalty prescribed under section 15A(a) of the SEBI Act, 1992. Both sides have cited case law on the issue whether mens rea is an essential ingredient of the violation or not. We would not like to enter into any detailed discussion on this aspect because we believe that law on the subject is already well settled. The Respondent Adjudicating & Enquiry Officer has held that Section 15(a) imposes absolute liability. However, we find that on the question of quantum of penalty, powers under various sub sections of section 15 of the SEBI Act are subject to rigors of the provisions of section 15J which reads as follows:
15-J. Factors to be taken into account by the adjudicating officer.- “While adjudging the quantum of penalty under Section 15-I, the adjudicating officer shall have due regard to the following factors namely:-
(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
(b) the amount of loss caused to an investor or group of investors as a result of the default;
(c) the repetitive nature of the default.”
4. We find all these factors missing in the present case and, therefore, the quantum of penalty has to be bare minimum. Since the fee prescribed by SEBI for payment at the time of submission of the relevant information under Regulation 3(4) is Rs.10,000/- we believe that, in the absence of any of the factors outlined in section 15J, an equivalent amount by way of penalty should meet the ends of justice.
5. Accordingly we uphold the impugned order but reduce the quantum of penalty to Rs.10,000/-. The appeal is disposed of accordingly.
No order as to costs.
(Pronounced in Court)
Sd/-
Justice Kumar Rajaratnam
Presiding officer
Sd/- Sd/-
Dr. B. Samal, N. L. Lakhanpal,
Member Member
Place: Mumbai
Date: 21st May, 2004.
smn