Economy Sales Pvt. Ltd. vs Sebi
- CitationAppeal No. 358 of 2022
Ratio decidendi
The rule this decision rests on
Where a listed company's promoters fail to make the disclosures required under Regulation 13(2A) of the PIT Regulations upon allotment of shares, and the admitted default establishes the contravention, the imposition of penalty is justified on that admitted non-compliance alone. Where promoters sell shares so as to change the shareholding pattern and fail to disclose that change within two days as required by Regulation 13(4A) of the PIT Regulations, the contravention of Regulations 13(4A) and 13(5) is established by the admitted non-disclosure, and penalty follows. Where penalties are imposed per instance of a single violation under a given regulatory head, and the facts do not justify multiple penalties, the imposition of a separate penalty for each instance is unjustified and harsh; only one penalty may be imposed under each head of contravention, and the penalty is reduced accordingly to fifty per cent of the amount computed by the Adjudicating Officer.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision : 08.07.2022 Misc. Application No. 490 of 2022 And Appeal No. 358 of 2022 Brijdham Dealcom Pvt. Ltd. 52, Canning Street, Ground Floor, Kolkata, West Bengal - 700 001. ......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 With Misc. Application No. 491 of 2022 And Appeal No. 359 of 2022 Conquer Barter Pvt. Ltd. 42, Sir Hari Ram Goenka Street, Kolkata, West Bengal - 700 001. ......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 2 With Misc. Application No. 492 of 2022 And Appeal No. 360 of 2022 Compass Distributors Pvt. Ltd. Brijudal Street, 3rd Floor, Kolkata, West Bengal - 700 001. ......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 With Misc. Application No. 493 of 2022 And Appeal No. 361 of 2022 Miracle Tradecom Pvt. Ltd. 194, Rabindra Sani, Kolkata, West Bengal - 700 001. ......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 With Misc. Application No. 494 of 2022 And Appeal No. 362 of 2022 Economy Sales Pvt. Ltd. 3 52, Canning Street, Ground Floor, Kolkata, West Bengal - 700 001. ......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 With Misc. Application No. 495 of 2022 And Appeal No. 363 of 2022 Narayan Suppliers Pvt. Ltd. 138, Canning Street, Ground Floor, Kolkata, West Bengal - 700 001. ......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 With Misc. Application No. 496 of 2022 And Appeal No. 364 of 2022 Mayurpankh Vincom Pvt. Ltd. 66, Salkia School Road, Kolkata, West Bengal - 700 001. ......Appellant Versus 4 Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ...... Respondent Ms. Rinku Valanju, Advocate with Mr. Sumit Yadav, Mr. Himanshu Agarwal, Advocates i/b Bellator Legal Services LLP for the Appellants.
Mr. Vyom Shah, Advocate with Ms. Shefali Shankar, Ms. Meghna Arvind, Advocates i/b MDP & Partners for the Respondent. CORAM : Justice Tarun Agarwala, Presiding Officer Justice M. T. Joshi, Judicial Member Ms. Meera Swarup, Technical Member Per : Justice Tarun Agarwala, Presiding Officer (Oral) 1. All the aforesaid appeals are filed against a common order dated July 21, 2020 passed by the Adjudicating Officer (hereinafter referred to as 'AO') of Securities and Exchange Board of India (hereinafter referred to as 'SEBI') imposing penalties. Since the issue is common, all the appeals are taken up together. 2. There is a delay in the filing of the appeals. For the reasons stated in the applications and in view of the order of the Hon'ble Supreme Court in Suo Moto Writ Petition (Civil) Nos. 3 of 2020 5 dated March 23, 2020, March 8, 2021, April 27, 2021 and January 10, 2022, the delay is condoned. The Misc. Applications are allowed. 3. Pursuant to an amalgamation / arrangement involving merger of Crescent Digital Technologies Ltd. and Swift IT Infrastructure and Services Ltd. with PS IT Infrastructure and Services Ltd. on June 5, 2013, 4,25,20,000 equity shares were issued on account of which there was a resultant change in the shareholding pattern of all the eight new promoters, namely, the appellants.
Upon verification by SEBI, it was found that the appellants did not make the required disclosure in terms of Regulation 13(2A) of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (hereinafter referred to as 'PIT Regulations') and Regulation 13(4A) read with Regulation 13(5) of the PIT Regulations. 4. Accordingly, a show cause notice was issued alleging as under:- 5. The AO after considering the material evidence on record found that the appellants had violated the provisions of Regulations 13(2A), 13(4A) and 13(5) of the PIT Regulations and accordingly imposed penalties. 6. We have heard Ms. Rinku Valanju, the learned counsel with Mr. Sumit Yadav, Mr. Himanshu Agarwal, the learned counsel for 7 the appellants and Mr. Vyom Shah, the learned counsel with Ms. Shefali Shankar, Ms. Meghna Arvind, the learned counsel for the respondent and have perused the record. 7. For facility, the provisions of Regulations 13(2A), 13(4A) and 13(5) of the PIT Regulations are extracted hereunder :- 8. Upon hearing the learned counsel for the appellants and upon perusal of the record, we find that admittedly the appellants failed to make disclosures to the stock exchange upon allotment of the shares within the stipulated period.
This fact is admitted. Consequently, the imposition of penalties is justified. 9. Similarly, the appellants sold number of shares on several occasions between 2013 and 2014 which resulted in change in the shareholding pattern. Such change is required to be disclosed within two days under Regulation 13(4A) of the PIT Regulations which admittedly was not done and consequently, the appellants violated the provisions of Regulation 13(4A) and 13(5) of the PIT Regulations. 10. The AO has imposed penalties of Rs. 1 lac for each instance of violations under the PIT Regulations. In our opinion, the imposition of Rs. 1 lac each for every instance of violation, in the facts and circumstances of the present case appears to be unjustified and harsh. The violation is of Regulation 13(2A), 13(4A) and consequently, only one penalty could be imposed under each head. 9 11. While affirming the violation committed by the appellants, we however reduce the penalties to 50% of the amount computed by the AO to be paid by the appellants within four weeks from today. The appeals are partly allowed. 12. This order will be 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.
Certified copy of this order is also available from the Registry on payment of usual charges. Justice Tarun Agarwala Presiding Officer Justice M. T. Joshi Judicial Member Ms. Meera Swarup RAJALA Digitally signed Technical Member by RAJALAKSHMI 08.07.2022 KSHMI HDate:
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