BEFORE THE SECURITIES
APPELLATE TRIBUNAL MUMBAI ����������������������������������������������� Date
of Hearing: ����������������������������������������������� Date
of decision: Appeal No.143/2003 In the matter of Shri Deven Mehta �������������������������� Appellant �
Represented by ����������������������������������������������� Ms.
Prarthana Awasti, Advocate ��������� Versus G. S. Reddy, Adjudicating Officer, SEBI������������ Respondent � Represented by ����������������������������������������������� Shri� Subhash Jha, Advocate And Appeal No.144/2003 In the matter of S. J. Impex ������������������������������������� Appellant
� Represented by ����������������������������������������������� Ms.
Prarthana Awasti, Advocate ��������� Versus G. S. Reddy, Adjudicating Officer, SEBI������������ Respondent � Represented by ����������������������������������������������� Shri� Subhash Jha, Advocate Coram: ��������� Justice
Shri Kumar Rajaratnam, Presiding� Officer ��������� Dr. B. Samal, Member Per :� Dr.
B. Samal, Member The above two appeals were taken up
together for hearing with the consent of both the parties. 2.�������� The
appeals are against the impugned order dated 2.�������� There
has been allegation that Shri Deven
Mehta (the first appellant) as an acquirer along with S. J. Impex
(second appellant) and Eden Mercantile Pvt. Ltd., had acquired shares in excess
of 5% of the paid up equity capital of VSL but they did not disclose the same
to the company i.e. VSL.� As the required
information was not disclosed to VSL the same in turn was not disclosed to the
stock exchanges or to the investors by VSL as per the provisions of SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997 which
indicates that the acquirer is required to disclose his holding in excess of 5%
of the paid up equity capital of the company.�
The investigation reports stated that Shri Deven Mehta had acquired 7,55,100 shares� to VSL along with persons acting in concert
i.e. S. J. Impex and Eden Mercantile Pvt. Ltd., which
was in excess of 5% of the paid up equity capital of the company. 3.�������� The
findings in the investigation report has been
indicated as under: (i)������� The report did not substantiate any
material or fact or data to show that Shri Deven Mehta (the appellant) is the person who acted in
concert with (ii) As regards� the issue of Shri
Deven Mehta acting in concert with S. J. Impex the investigation report has mentioned that they are
associate companies which was refuted by Shri Deven Mehta on the basis that Shri
S. J. Mehta, proprietor of S. J. Impex being father
of Shri Deven Mehta or Shri Deven Mehta appearing on
behalf of his father Shri S. J. Mehta should not� be construed as evidence to show that Shri Deven Mehta acted in concert
with S. J. Impex.�
The definition of �person acting in concert is: �any investment company with any person who has an interest as director,
fund manager, trustee, or as a shareholder having not less than 2% of the
paid-up capital of that company or with any other investment company in which
such person or his associate holds not less than 2% of the paid up capital of
the latter company.� Note: For the purposes of this clause
�associate� means: (a) Any relative of that person within
the meaning of section 6 of the Companies Act, 1956 (I of 1956); and (b) Family trusts and Hindu Undivided
Families Having the word �Relative�� been included for
the purpose of defining an associate, now it is required to verify the word
�relative as per Companies Act, 1956.�
The Section 6 of the companies Act has defined the word �Relative�,
which is as under: Meaning of �relative�.�A person shall be deemed to be a relative of another if, and only if,
-- (a) they are members of a Hindu undivided
family; or (b) they are husband and wife; or (c) the one is related to the other in
the manner indicated in Schedule I-A SCHEDULE I-A List of Relatives 1.
Father�������������������������������������������� ����������� 12. Son�s daughter 2.
Mother (including step-mother)� ����������� 13. Son�s daughter�s husband 3.
Son (including step-son)������������� ����������� 14. Daughter�s husband 4.
Son�s wife.������������������������ ����������� 15. Daughter�s son 5.
Daughter (including (step-daughter) ����� 16.
Daughter�s son�s wife 6.
Father�s father������������������������������ ����������� 17. Daughter�s daughter 7.
Father�s mother���������������������������� ����������� 18. Daughter�s daughter�s husband). 8. Mother�s mother������������ ����������� ����������� 19.Brother (including step-brother).
9.
Mother�s father���������������������������� ����������� 20. Brother�s wife 10.
Son�s son������������������������ ����������� ����������� 21.
Sister (including step-sister) 11.
Son�s son�s wife������������������������� ����������� 22. Sister�s busband The respondent found that shri Deven Mehta being the son of
Shri S. J. Mehta, the companies promoted by both
these persons would fall in the definition of associate companies. 5.�������� The
respondent had found that Shri Deven
Mehta had acquired 3,91,000 shares� by
the end of Settlement No.47 which is in excess of 5% equity of VSL,� while taking into account that the total
equity capital of VSL comprised of 74,46,165 shares of Rs.10/- each amounting
to Rs.7,44,61,650/- and 5% would equal to 3,72,308 shares of Rs.10/- each.� The appellants have not contested nor did
they dispute the acquisition of shares as shown in the investigation
report.� It is therefore accepted that Shri Deven Mehta had crossed the
5% limit at the end of Settlement No.47 itself and hence he is bound to
disclose the same as required under the relevant regulations, SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations 1997,at
the very first instance of crossing the 5% limit.� The subsequent acquisition of 3,00,000 shares
by S. J.Impex also needs to be taken into for
calculation of the total number of shares acquired by Shri
Deven Mehta as S. J. Impex
is an associate company.� The
Adjudicating Officer� found that Shri Deven Mehta had acted in
concert with S. J. Impex and acquired 7,55,100 shares
which is very much in excess of 5% equity capital of VSL.. 6.�������� Heard
the representatives of both the parties.�
It is a fact that the appellants had purchased shares ������������ which
had enabled them to cross the 5% limit.��
�By �not disclosing this information to the
concerned Stock Exchange and the company,�
they have violated the said Act.�
Hence we uphold the order of the Respondent.� However, perusing section 15J of the Act and
sub rule 2 of Rule 5 of the SEBI (Procedure for holding enquiry and imposing
penalties by adjudicating officer) Rules, 1995 �we observe that the appellants did not
gain unfair advantage and had not indulged in any repetitive� violations.�
It is not possible to quantify the loss incurred by other investors. We,
therefore� �reduce the penalty from a total of Rs.5 lakhs in two appeals �to Rs.50,000/- which will be paid by
the appellants �within six weeks from the
date of receipt of this order.� The
impugned order is modified to this extent. ����������� The
appeal is disposed of accordingly. ����������� No
order as to costs.� � ����������� (Pronounced in Court) Justice Kumar Rajaratnam ��������� Presiding
officer ����������������������������������������������� Dr. B. Samal, Member Place: Mumbai Date: � |