Anila Jalan vs Sebi

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Near Bank of India, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra -400051. ...Respondent

Mr. Rohit Gupta, Advocates i/b. Interjuris for the Appellant.

Mr. Akshay Patil, Advocate with Mr. Chirag Bhavsar, Ms. Vidhi Shah and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.343 of 2019

Sanjay Jalan Flat No.102, "Avatara", Wheat Croft Road, Nungambakkam, Chennai-600034. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Near Bank of India, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra -400051. ...Respondent

Mr. Rohit Gupta, Advocates i/b. Interjuris for the Appellant.

Mr. Akshay Patil, Advocate with Mr. Chirag Bhavsar, Ms. Vidhi Shah and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent. 3

With Appeal No.399 of 2019

Mr. R.K. Jalan Flat No.102, E 1, Harrington Court, #99, Harrington Road, Chepet, Chennai-600 031. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Near Bank of India, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra -400051. ...Respondent

Mr. Rohit Gupta, Advocates i/b. Interjuris for the Appellant.

Mr. Akshay Patil, Advocate with Mr. Chirag Bhavsar, Ms. Vidhi Shah and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.400 of 2019

Anila Jalan Flat No.102, E 1, Harrington Court, #99, Harrington Road, Chetput, Chennai. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 4

G Block, Near Bank of India, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra -400051. ...Respondent

Mr. Rohit Gupta, Advocates i/b. Interjuris for the Appellant.

Mr. Akshay Patil, Advocate with Mr. Chirag Bhavsar, Ms. Vidhi Shah and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.540 of 2019

Kamlesh Shantilal Jain The Lattice, 4th Floor, No.20, Waddels Road, Kilpauk, Chennai - 600010. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Near Bank of India, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra -400051. ...Respondent

Mr. Hara Kar, Advocates i/b. Interjuris for the Appellant.

Mr. Akshay Patil, Advocate with Mr. Chirag Bhavsar, Ms. Vidhi Shah and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Justice M.T. Joshi, Judicial Member 5

Per: Justice Tarun Agarwala, Presiding Officer

1.

All the appeals have been filed against a common

order and are accordingly being taken up together. The

appellants have challenged the order dated 20th March,

2019 passed by the Adjudicating Officer („AO‟ for

short) imposing penalties for violation of Regulation 7

of the Securities and Exchange Board of India

(Substantial Acquisition of Shares and Takeovers)

Regulations, 1997 (hereinafter referred to as „SAST

Regulations, 1997‟) and Regulation 13 of the

Securities and Exchange Board of India (Prohibition of

Insider Trading) Regulations, 1992 (hereinafter

referred to as „SAST Regulations, 1992‟).

2. The facts leading to the filing of the present appeal

is, that on 13th December, 2010 Mr. R.K. Jalan

appellant transferred 17,21,945 shares of Le Waterina

Resorts & Hotels Ltd. to his son Mr. Sanjay Jalan. By

virtue of this acquisition there was a change in the

shareholding pattern of the promoter entities, namely, 6

Mr. R.K. Jalan and Mr. Sanjay Jalan. This triggered

the requirement of making necessary disclosures under

the SAST Regulations, 1997 and the PIT Regulations,

1992 which apparently was not made by them. Mr.

R.K. Jalan was required to disclose the change in the

shareholding under Regulation 7(1A) and 7(2) of the

SAST Regulations, 1997 and Regulation 13(3) read

with 13(5) of the PIT Regulations, 1992. Similarly,

Mr. Sanjay Jalan was also required to make disclosure

under Regulation 7(1A) and 7(2) of the SAST

Regulations, 1997 and Regulation 13(4) and 13(5) of

the PIT Regulations, 1992.

3. Another appellant Anila Jalan was holding

12,35,855 shares on 1st October, 2010 and transferred

shares in off market during the investigation period on

four occasions and thereby failed to make the

disclosure under Regulation 7(1A) and 7(2) of the

SAST Regulations, 1997 and Regulation 13(3) of the

PIT Regulations, 1992.

7

4. Similarly Rinku Jalan who is a non-promoter entity

acquired shares during the investigation period and

also failed to make the necessary disclosure under

Regulation 7(1A) and 7(2) of the SAST Regulations,

1997 and Regulation 13(1) and 13(3) of the PIT

Regulations, 1992.

5. Another appellant Mr. Kamlesh Shantilal Jain a non-

promoter acquired 30,00,000 shares and 20,00,000

shares from Ms. Anila Jalan and Ms. Rinku Jalan

during the investigation period and failed to make the

necessary disclosures under Regulation 7(1) and 7(2)

of the SAST Regulations, 1997 and Regulation 13(1)

and 13(3) of the PIT Regulations, 1992.

6. In so far as Le Waterina Resorts and Hotels Limited

is concerned the appellant was charged for non-

compliance of Regulation 13(6) of the PIT

Regulations, 1992 read with Regulation 7(3) of the

SAST Regulations, 1997.

8

7. No plausible defense has been given by the

appellants except Mr. Sanjay Jalan who stated that

proposed acquisition was duly intimated to the stock

exchange under Regulation 3(3) of the SAST

Regulations, 1997.

8. The AO after considering the material evidence

came to the conclusion that there has been a breach

and, therefore, imposed the penalties.

9. We have heard Mr. Rohit Gupta, Advocate assisted

by Mr. Hara Kar, Advocate for the appellants and Mr.

Akshay Patil, Advocate assisted by Mr. Chirag

Bhavsar, Ms. Vidhi Shah and Mr. Harshad Vyas,

Advocates for the respondent.

10. Having heard the learned counsel for the parties we

find that the AO has not considered the judgment of

this Tribunal in Ravi Mohan and other connected

appeals in appeal no.97 of 2014 decided on 16th

December, 2015 wherein it was held that for violation

of Regulation 7(1A) and 7(2) of SAST Regulations, 9

1997 no penalty could be imposed. In Rakesh

Kathotia and Others in appeal no.7 of 2016 decided

on 27th May, 2019 this Tribunal held that the decision

in Ravi Mohan was duly accepted by SEBI and,

therefore, the appellant cannot be penalized for

violation of Regulation 7(1A) and 7(2) of SAST

Regulations, 1997. In another appeal Shilpa Amit

Kotia & Ors. vs. SEBI, Appeal no.308 of 2017

decided on 2nd July, 2019 the same view was taken by

this Tribunal and the imposition of penalty was

quashed. Since the aforesaid decision has not been

considered, we are of the opinion that the impugned

order has to be set aside on this short ground itself

leaving it open to the AO to pass fresh order after

considering the judgment as well as in the light of the

observation made hereunder.

11. We find that the appellant Kamlesh Shantilal Jain

was never served with a show cause notice. This is

admitted by the respondent before this Tribunal. We 10

are of the opinion that if the show cause notice has not

been served the entire proceedings against the said

appellant becomes violative of the principles of natural

justice and cannot be sustained. The contention that

the subsequent summons fixing the date of hearing was

duly served on the last known address of the appellant

is again erroneous in as much as documentary evidence

has been filed to show that the said appellant had sold

off his property prior to the issuance of the summons.

In view of the aforesaid, we are of the opinion that the

proceedings initiated against the appellant Kamlesh

Shantilal Jain being ex-parte cannot be sustained.

12. We are further of the opinion that the AO in the

instant case has imposed penalty without considering

the various factors stipulated under section 15J and

should also take into consideration that the violation, if

any, is of the year 2010 when the alleged transfers

were made and the show cause notice was issued after

a gap of seven years in 2017. Delay in our opinion 11

becomes a mitigating factor for quantifying the penalty

under the relevant provisions.

13. In view of the aforesaid, the impugned order

cannot be sustained and is quashed. All the appeals are

allowed and the matter is remitted to the AO to pass a

fresh order after supplying the show cause notice to

Kamlesh Shantilal Jain and, thereafter, proceeding in

accordance with law and granting all the appellants an

opportunity of hearing. Since the matter is remitted it

would be open to the appellant to file such evidence

and objection in accordance with law. Since the matter

is of 2010 we direct the AO to decide the matter within

six months from today. We also direct the appellants

to appear before the AO on 8th March. 2021.

14. The present matter was heard through video

conference due to Covid-19 pandemic. At this stage it

is not possible to sign a copy of this order nor a

certified copy of this order could be issued by the

registry. In these circumstances, this order will be 12

digitally signed by the Private Secretary on behalf of

the bench and all concerned parties are directed to act

on the digitally signed copy of this order. Parties will

act on production of a digitally signed copy sent by fax

and/or email.

Justice Tarun Agarwala Presiding Officer

Justice M.T. Joshi Judicial Member

23.2.2021 RAJALA Digitally signed by RAJALAKSHMI RHN KSHMI H NAIR Date: 2021.02.24 H NAIR 11:11:23 +05'30'