May 18, 2004
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Orders :
Orders of SAT
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 86/2002
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Date of Hearing
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15.4.2004
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Date of Decision
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18.5.2004
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In the matter of:
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The Industrial & Prudential
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Appellant – Represented by
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Investment Co. Ltd.
New Holding & Trading Co. Ltd.
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Mahendra C. Bhuta, CS
Mayur A. Mehta
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Versus
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Securities & Exchange Board
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Respondent – Represented by
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of India
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Kumar Desai, Advocate
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Coram:
Justice Shri Kumar Rajaratnam, Presiding Officer
Dr. B. Samal, Member
N.L. Lakhanpal, Member
Per: Justice Kumar Rajaratnam, Presiding Officer
1. This appeal is taken up with the consent of parties. The appeal is directed only against the quantum of consolidated penalty of Rs.1,50,000/- imposed on the appellants.
2. The allegation against the appellants was that the appellant companies did not make necessary disclosure of their shareholding in KSB pumps as required under the SEBI (Substantial Acquisition of Shares and Takeover) Regulation, 1997. Regulation 6(1) and 6(3) reads as follows.
6(1) “Any person who holds more than 5 % shares or voting rights in any company shall within 2 months of notification of these Regulations disclose his aggregate shareholding in that company to the company”
6(3) A promoter or any person having control over a company shall within two months of notification of these Regulations disclose the number and percentage of shares or voting rights held by him and by person(s) acting in concert with him in that company, to the company.”
3. There was a delay on the part of the appellant in complying with the requirement of Regulation 6(1) and 6(3). The adjudicating officer while imposing penalty did not apply his mind on the quantum of penalty with respect to the mitigating circumstances.
4. Regulation 5(2) of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 reads as follows:
“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”
None of the above factors have been considered while imposing the penalty. At any rate it does not find a place in the order.
5. On the close scrutiny of the materials before us, it cannot be said that there was unfair advantage or disproportionate gain. Nor can it be said that there were any previous such violations. The regulation in its wisdom has mandated the authority to consider the mitigating circumstances as set out in Section 15-I of the Regulation. When there is such a mandate the respondent ought to have noticed as required in Regulation 15 that there were no antecedents and the disclosure of the delay was brought to the notice of the respondent by the appellant himself.
6. Taking into account that the misconduct was of a technical nature and the disclosure was made voluntarily by the appellant, it would be appropriate in the facts and circumstances of this case to take a lenient view with regard to the penalty. We accordingly confirm that there is a violation of Regulation 6(1) and 6(3). However, we impose a consolidated penalty of Rs. 75,000/- in lieu of Rs. 1,50,000/- imposed by the respondent.
7. With this modification, the appeal is disposed of.
Justice Kumar Rajaratnam
Presiding Officer
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N.L. Lakhanpal
Member
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B.Samal
Member
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Place: Mumbai
Date: 18th May, 2004
//sr04518
It is brought to our notice by the counsel for the appellant that the amount mentioned in the impugned order has been paid. If so, any amount paid in excess of the amount stipulated in this order shall be refunded to the appellant within 4 weeks from the date of receipt of the order.
Justice Kumar Rajaratnam
Presiding Officer
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N.L. Lakhanpal
Member
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B.Samal
Member
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