Falcon Tyres Limited And Others vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision: 11.02.2016

Appeal No. 131 of 2014

1.

Falcon Tyres Limited

2. Mr. Pawan Kumar Ruia

3. Mr. Sunil Bhansali

4. Mr. Subbarathnam Ravi

5. Mr. Mahaveer Chand Bhansali K.R.S. Road, Metagalli, Mysore- 570 016, India ...Appellants

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. Ashish Kamat, Advocate with Mr. Ankit Lohia, Mr. Pranav Arora and Ms. Shivani Parekh, Advocates i/b Crawford Bayley & Co. for Appellants.

Mr. Shyam Mehta, Senior Advocate with Mr. Mihir Mody and Mr. Saurabh Bachhawat, Advocates i/b K. Ashar & Co. for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member

Per: Justice J.P. Devadhar (Oral)

1. Appellants are aggrieved by the order passed by the Adjudicating

Officer ("AO" for short) of Securities and Exchange Board of India

("SEBI" for short) on February 26, 2014 whereby maximum penalty of

` 1 crore imposable under Section 15HB of the Securities and Exchange

Board of India Act, 1992 ("SEBI Act" for short) is imposed on the

appellants.

2

2. In the impugned order it is held that the appellants have violated

the Securities and Exchange Board of India (Prohibition of Insider

Trading) Regulations, 1992 ("PIT Regulations" for short) because,

firstly, the appellants, initially while claiming that the company had

adopted the code of conduct had furnished to SEBI the code of ethics

instead of furnishing the code of conduct and subsequently the appellants

submitted the code of conduct by stating that the said code of conduct

was adopted in the meeting of the Board of Directors held on December

16, 2008. However, the appellants had failed to furnish the minutes of the

Board meeting allegedly held on December 16, 2008. Secondly, the

appellants initially stated that there is no trading window system in the

company and thereafter changed their stand and submitted that in the

company the trading window had existed and their earlier statement to

the contrary was an inadvertent error. In view of the contradictory stand

taken by the appellants and not furnishing the minutes of the meeting

dated December 16, 2008, the AO has deemed it fit to impose the

maximum penalty imposable under Section 15HB of the SEBI Act.

3. In the impugned order, neither the AO has disbelieved the

statement of the appellants in relation to the minutes of the meeting dated

December 16, 2008 nor recorded a finding that the subsequent statement

of the appellants that their existed a trading window system in the

company was a false statement. If the AO had any doubt relating to the

minutes of the Board meeting dated December 16, 2008, the AO ought to

have called for a copy of the minutes of the Board meeting dated

December 16, 2008 from the appellants. Without even calling upon the

appellants to furnish the minutes, the AO could not have disbelieved the 3

claim of the appellants that in the Board meeting dated December 16,

2008, the code of conduct was adopted and impose maximum penalty

imposable under Section 15HB of the SEBI Act.

4. Similarly, having recorded the submission of the appellants that

their initial statement regarding non-existence of the trading window in

the company was an inadvertent error, without recording a finding that

the altered stand of the appellants was false or incorrect, the AO not have

held that the appellants are guilty of violating the PIT Regulations. The

proper course for AO was to call for such particulars as deemed and if the

claim is found to be false or incorrect then only impose maximum

penalty imposable under the Act.

5. In these circumstances, we deem it proper to quash and set aside

the impugned order and restore the matter to the file of AO for passing

fresh order on merits and in accordance with law. It would be open to

SEBI to call for requisite particulars from the appellants and to issue

supplementary show cause notice, if deemed necessary and thereafter

hear the appellants and pass appropriate order in accordance with law.

6. Appeal is disposed of in the above terms with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member 11.02.2016 Prepared & Compared By: PK