IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

 

�������� Appeal No.6 of 2003

 

���� �����������Date of Decision : 14.11.2006

 

 

Classic Credit Ltd.

���������������������� ......Appellant

��������������

Versus

 

 

Securities and Exchange Board of India

Mr. S.V. Krishna Mohan

Adjudicating Officer

Securities and Exchange Board of India

 

 

 

������������������� ..�Respondents

 

 

Shri Zal T. Andhyarujina, Advocate alongwith Ms. Ruchira Gupta, Advocate for the Appellant

 

Shri Kumar Desai, Advocate alongwith Ms. Daya Gupta, Advocate for the Respondents

 

 

CORAM

 

����������� Justice N.K. Sodhi, Presiding Officer

����������� C. Bhattacharya, 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 October 31, 2002 passed by the adjudicating officer imposing a penalty of Rs.1,50,000/- on the appellant for violating Regulation 7 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (for short the �Regulations�).Regulation 7 provides that any acquirer who acquires shares which taken together with shares already held by him would entitle him to more than 5% shares in a company shall disclose his shareholding in that company to the company.The appellant was issued a show cause notice dated November 22, 2001 alleging that it had acquired shares of Global Trust Bank (GTB) exceeding five percent of its total issued and paid up share capital. Reliance was placed on a chart referred to in the show cause notice.On the basis of the figures contained in the chart the following allegations were made in the show cause notice.

�From the above mentioned table it is observed that as on November 20, 2000, Classic Credit Ltd. was having a net sell position of 63,32,718 (5.22% of the total paid up capital of GTB).This implies that prior to the first day on which Classic Credit Ltd. transacted during the period, i.e. September 5, 2000, must have been purchased these many shares of GTB.It was observed that purchases were made in the name of Vidyut, Brentfield, Kensington, Kallar Kahar, Credit Suisee, etc.Classic Credit Ltd. has not disclosed to GTB about these purchases as required under the SEBI Takeover Code.�

The table relied upon by the adjudicating officer may not be incorrect but it is incomplete.It does not contain a column showing the net closing balance of the shares of GTB acquired by the appellant.The adjudicating officer should have collected complete data showing the total number of shares acquired by the appellant and the date on which it crossed the five percent limit referred to in Regulation 7.Since the data was incomplete, the adjudicating officer could not even specify the date on which the appellant is alleged to have exceeded the five percent limit referred to in Regulation 7.This was the least that was required before alleging that the appellant had violated Regulation 7.We are of the view that the charge leveled in this regard is vague.

There is yet another charge referred to in the show cause notice which reads as under:

�Further it has been observed that all the shares allotted to Nishkalp Investments & Trading Co. Ltd. in the preferential issue of GTB have been acquired by Classic Credit Ltd. at prices lower than the issue price.Besides this, two companies of Ketan Parekh group, Chitrakut Computers Pvt. Ltd. and Nakshatra Software Pvt. Ltd. acquired 7,19,650 shares and 6,00,000 shares respectively.Thus a total of 72,02,000 shares out of the preferential issue has been acquired by with Classic Credit Ltd., which is 5.93% of the total paid up capital of GTB.�

Here again the allegation is that Nishkalp Investments and Trading Company Ltd was allotted shares of GTB in preferential issue and those were acquired by the appellant herein.Which is the date of acquisition and what is the quantity of shares allotted have not been specified.All that is stated in the show cause notice is that a total of 72,02,000 shares out of the preferential issue had been acquired which is 5.93% of the total paid up capital of GTB.This may or may not be so but the charge definitely is vague.It does not specify the date on which the appellant is alleged to have crossed the five percent limit mentioned in Regulation 7 of the Regulations.

Shri Kumar Desai, Advocate appearing for the respondent Board strenuously contended that on the basis of the calculations referred to in the table contained in the show cause notice the figures arrived at by the adjudicating officer could be sustained.It appears to us that the adjudicating officer has taken a short cut and did not refer to the entire material either in the show cause notice or in the impugned order assuming that he had the same with him.He should have called upon the concerned entities to furnish the details of various allotments and acquisitions and then furnish the said information to the appellant in the show cause notice to enable it to file its reply.He has not dealt with the matter in a satisfactory manner.

We have, therefore, no hesitation in allowing the appeal which we hereby do so and set aside the impugned order.It will, however, be open to the respondent to proceed afresh against the appellant in accordance with law if it so desires.In the circumstances, there is no order as to cost.���������

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����������������������������������������������������������������������������������������������� Justice N.K. Sodhi

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����������������������������������������������������������������������������������������������� C. Bhattacharya

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RRN

14.11.06