IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

Appeal No. 375 of 2004

Date of Decision      15.11.2006

Present :  Mr. Zal T. Andhyarujina & Ms. Ruchira Gupta, Advocates for the      appellant

                  Mr. Ravi Hegde, Advocate for the respondent

Coram:

          Justice N.K. Sodhi, Presiding Officer

            C. Bhattacharya, Member

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

            This order will dispose of Appeals nos. 375 and 376 of 2004 in which common questions of law and fact arise.  Since arguments have been advanced in Appeal no. 375 of 2004 the facts are being taken from this case.  The learned counsel for the parties are agreed that the decision in this case will govern the other Appeal as well.

   2.            Classic Credit Ltd. – an investment company is the appellant before us.  It was served with a show cause notice dated 24.2.2004 alleging therein that it had acquired on 31.12.1999 25 lac shares of Padmini Technologies Ltd. (for short the target company) which amounts to 10.08% of the total share capital of the target company and since it failed to make a public announcement it had violated the provisions of Regulation 10 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (for short the Regulations).  Subsequently by letter dated 31.5.2004 the appellant was informed that in the show cause notice dated 24.2.2004 it was inadvertently mentioned that Regulation 10 of the Regulations had been violated.  It was clarified that the appellant had failed to comply with Regulation 7 of the Regulations and it was called upon to show cause why monetary penalty under Section 15A of the Securities and Exchange Board of India Act, 1992 (for short the Act) be not imposed.  The appellant filed its reply denying the allegations.  It was specifically denied that it had acquired 25 lac shares of the target company on 31.12.1999.  On a consideration of the reply filed by the appellant the adjudicating officer came to the conclusion that the appellant while acting in concert with M/s. Panther Fincap and Management Services Ltd. (for short Panther) which is the appellant in the connected appeal had together acquired 25 lac shares each of the target company on 31.12.1999 and thereby violated Regulation 7 of the Regulations.  While dealing with the material in possession of the respondent board, the adjudicating officer referred to a chart in which the date of purchase of shares by the appellant and Panther was given as 12.10.1999.  The learned counsel for the appellant strenuously urged before us that the adjudicating officer has referred to the said date without there being any material in as much as neither the appellant nor Panther had acquired 25 lac shares of the target company on 12.10.1999.  In view of this incongruity, we asked the learned counsel for the Board to show us the records and he expressed his inability to produce the same.  This is rather unfortunate.  When we look at the show cause notice and the chart referred to by the adjudicating officer in the impugned order we find that the date of acquisition as mentioned in the show cause notice and the chart are different.  The learned counsel for the respondent then pointed out to the reply filed by the appellant before the adjudicating officer to the show cause notice and contended that the appellant had admitted that 25 lac shares had been purchased by it on 24.12.1999 (wrongly mentioned as 21.12.1999 in the reply).  We have perused the reply filed by the appellant particularly paragraph 5 thereof and find that there is some admission made by the appellant but it is not clear whether all the shares were acquired before some were sold on 24.12.1999.  It is clear from the chart referred to by the adjudicating officer that the appellant had acquired 25 lac shares in three different lots.  Whether the shares sold by the appellant were after the purchase or some of the purchases were made after the shares had been sold is not clear from the impugned order and this in our opinion will make a world of difference.  If these shares were acquired first and the sale took place later it could be said that the appellant had violated Regulation 7(1) by not making the necessary disclosure.  But, if the sale was made in between the purchases the position would be otherwise.  The adjudicating officer has not made this clear in the impugned order.  As already noticed, the date of acquisition as referred to in the show cause notice is different from the one mentioned in the impugned order by the adjudicating officer.  In this view of the matter we are of the opinion that it would be in the interest of justice if the impugned order is set aside and the case is remanded to the adjudicating officer to proceed afresh against the appellant in accordance with law.  Accordingly, the appeals are allowed.  The impugned orders dated 23.8.2004 and 24.8.2004 are set aside and the cases remanded to the adjudicating officer for a fresh decision in accordance with law.  The appellants in the two cases through their counsel are directed to appear before the adjudicating officer on 11.12.2006 for further proceedings.  No costs.

Justice N.K. Sodhi
Presiding Officer

 
C. Bhattacharya
Member