Enterprise International Limited vs Sebi

Date of Decision: 31.01.2018

Appeal No. 344 of 2017

Enterprise International Limited Malayalay, Unit No. 2A(S), 2nd Floor, 3, Woodburn Park, Kolkata- 700 020 ...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

Mr. Naveen Mohta, Chartered Accountant for the Appellant.

Mr. Karan Bhosale, Advocate with Mr. Rupesh Geete and Mr. Anuj Athalye, Advocates i/b Legasis Partners for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member 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 ("AO" for short) of Securities and Exchange Board

of India ("SEBI" for short) on September 27, 2017. By the said order

penalty of ` 4 lac is imposed on the appellant under Section 23E of the

Securities Contracts (Regulation) Act, 1956 ("1956 Act" for

convenience) for violating clause 35 of Listing Agreement read with

Section 21 of the 1956 Act.

2

2. By the impugned order the AO has held that on receiving a

complaint in SCORES, SEBI noticed that during the period December

2010 to December 2013 the appellant had failed to disclose details of

partly paid-up equity and had wrongly declared that all shares (30 lac)

were fully paid-up shares. Since the above failure was in gross violation

of clause 35 of the Listing Agreement read with Section 21 of the 1956

Act, proceedings were initiated against the appellant and by the

impugned order penalty of ` 4 lac has been imposed under Section 23E

of the 1956 Act.

3. Authorised Representative of the appellant fairly submitted that

there was failure to disclose correct facts during the aforesaid period.

However, he submitted that the said failure was unintentional and

inadvertent typographical error because there has been complete and

truthful disclosure in the Audited Accounts of the company for all the

preceding years and even during the period from December 2010 to

December 2013, the appellant had submitted its quarterly shareholding

pattern in tabular form correctly. However, inadvertently and due to

oversight in the format prescribed under clause 35 of Listing Agreement,

inadvertently and due to oversight it was erroneously declared that all

shares were fully paid up. In these circumstances, it is submitted that

since correct facts were already in the public domain the inadvertent

particulars given in the format deserves to be condoned. Authorised

Representative of the appellant further submitted that since the error was

bonafide and since no benefit has accrued to the company or its

promoters and no financial loss is caused to the investors the AO ought

not to have imposed penalty on the appellant. 3

4. We see no merit in the above contentions.

5. Admittedly, the particulars disclosed in the years in question were

wrong. Fact that correct particulars were in the quarterly reports cannot

be a ground for the appellant to escape penal liability for furnishing

wrong information in the format prescribed under clause 35 of Listing

Agreement. Very fact that mutually inconsistent particulars were

furnished by the appellant clearly shows that the investors were mislead

during the period in question. Fact that the company and its promoters

have not been benefitted from the error committed and the fact that the

investors have not suffered any financial loss cannot be a ground to

escape liability for furnishing wrong information during the period from

December 2010 to December 2013.

6. In any event, penalty imposable under Section 23E of 1956 Act for

violating clause 35 of Listing Agreement read with Section 21 of 1956

Act is up to ` 25 crore. However, the AO after considering all mitigating

factors has imposed penalty of ` 4 lac as against the imposable penalty of

` 25 crore. In these circumstances, the penalty imposed on the appellant

cannot be said to be unreasonable or excessive.

7. In the result, we see no merit in the appeal and the same is hereby

dismissed with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member Sd/-

Dr. C.K.G. Nair Member 31.01.2018 Prepared & Compared By: PK