Abhimanu Exports Limited vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision: 30.10.2017

Appeal No. 261 of 2017

Abhimanu Exports Limited D-3/2, Okhla Industrial Area, Phase II, New Delhi- 110 020 ...Appellant

Versus

Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051 ...Respondent

Ms. Stuti Shah, Advocate i/b J. Sagar Associates for the Appellant.

Mr. Mustafa Doctor, Senior Advocate with Ms. Aastha Vidhi and Ms. Disha Saxena, Advocates i/b Dave & Girish & Co. for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Dr. C.K.G. Nair, Member

Per: Justice J.P. Devadhar (Oral)

1.

This appeal is filed to challenge the order passed by the

Adjudicating Officer of Securities and Exchange Board of India ("SEBI"

for short) on August 08, 2017. By the said order penalty of ` 10 lac is

imposed on the appellant for violating regulation 8(3) of the SEBI

(Substantial Acquisition of Shares and Takeover) Regulations, 1997

("Takeover Regulations, 1997" for short) read with regulation 35 of the

SEBI (Substantial Acquisition of Shares and Takeover) Regulations,

2011 ("Takeover Regulations, 2011" for short). 2

2. It is not in dispute that during the period from 1998-2009 the

appellant was required to make annual disclosures to all the Stock

Exchanges on which the shares of the appellant-company were listed

under regulation 8(3) of the Takeover Regulations, 1997. It is also not in

dispute that the disclosures under regulation 8(3) of the Takeover

Regulations, 1997 were made by the appellant belatedly on April 23,

2010.

3. Sometime in February 2012 appellant had made suo moto consent

application in relation to the delay in complying with regulation 8(3) of

the Takeover Regulations, 1997. However, the said application was

rejected on the ground that the appellant has failed to furnish the requisite

documents sought by SEBI.

4. Thereafter, proceedings were initiated against the appellant and by

the impugned order penalty of ` 10 lac is imposed under Section 15A(b)

of the SEBI Act for violating regulation 8(3) of the Takeover

Regulations, 1997.

5. Ms. Stuti Shah, learned counsel appearing on behalf of the

appellant submitted that the impugned order is unsustainable, because,

firstly, the impugned order is passed on the basis of facts set out in the

consent application filed by the appellant and as per SEBI (Settlement of

Administrative and Civil Proceedings) Regulations, 2014 ("Settlement

Regulations, 2014" for convenience) SEBI cannot rely upon the

representation contained in the consent application in the proceedings

initiated after rejection of the consent application. Secondly, by way of 3

an alternate argument it is submitted that since the appellant company is

in deep financial crisis with no staff, the exorbitant penalty imposed

against the appellant be quashed or reduced to the extent as this Tribunal

deems fit and proper.

6. We see no merit in the above contentions.

7. Fact that the appellant, in the present case, was obliged to make

yearly disclosures under regulation 8(3) of the Takeover Regulations,

1997 is not in dispute and the fact that the appellant in fact has made

disclosures belatedly on April 23, 2010 is also not in dispute. In such a

case, mere fact that the appellant had filed a suo moto consent application

and the said application has been rejected by SEBI cannot be a ground

for the appellant to contend that no action can be taken for the violations

committed by the appellant. When a consent application is rejected SEBI

would obviously be entitled to take action for the violations committed.

8. Reliance placed by counsel for the appellant on regulation 21(2) of

the Settlement Regulations, 2014 is wholly misplaced. What that

regulation provides is that, where the consent application is rejected,

SEBI cannot make use of any proposal made or information furnished by

the applicant in the proceedings initiated after the rejection of the consent

application. It obviously means that the restriction is only in relation to

the proposal or information which are exclusively within the knowledge

of the applicant and the restriction is not applicable to uncontroverted

facts set out in the consent application. In other words, uncontroverted

facts set out in the consent application which are easily ascertainable 4

could be relied upon by SEBI in the proceedings initiated after rejection

of the consent application. Therefore, argument of the appellant that the

uncontroverted facts set out in the consent application could not relied

upon by SEBI in the proceedings initiated after rejection of the consent

application is without any merit.

9. Argument advanced on behalf of the appellant that the penalty

imposed against the appellant deserves to be deleted or reduced is

without any merit, because, in the present case, failure of the appellant to

make annual disclosures relate to 12 financial years. Thus, 12 violations

have been committed by the appellant and in view of inordinate delay in

complying with the provisions contained in regulation 8(3) of the

Takeover Regulations, 1997 the penalty imposable under Section 15A(b)

of SEBI Act was ` 1 crore for each year. Thus, as against the penalty of

` 12 crore imposable in relation to 12 violations, the AO after

considering all mitigating factors has imposed a penalty of `10 lac which

cannot be said to be excessive or exorbitant.

10. In these circumstances, we see no reason to interfere with the

impugned order. Accordingly, the appeal is dismissed with no order as to

costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Dr. C.K.G. Nair Member 30.10.2017 Prepared & Compared By: PK