Hrb Floriculture Limited vs Sebi

Date of Decision : 22.02.2018

Appeal No. 3 of 2018

HRB Floriculture Limited A-28, Ramnagar, Shastri Nagar, Jaipur - 302016. ...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. Ajit N. Jakhadi, Advocate with Mr. Amol Chile and Mr. Arun Chile, Advocates for the Appellant.

Mr. Sumit Rai, Advocate with Mr. Chirag Bhavsar, Advocate i/b MDP & Partners for the Respondent.

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

Per : Justice J.P. Devadhar (Oral)

1.

Appellant is aggrieved by the order passed by the Adjudicating

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

for short) on November 27, 2017. By the said order penalty of Rs. 13 Lakh

under Section 15A(b) of Securities and Exchange Board of India, 1992

('SEBI Act' for short) and penalty of Rs. 7 Lakh under Section 23H of

Securities Contracts (Regulation) Act, 1956 ('SCRA' for short) has been

imposed on the appellant.

2. Basic charge held against the appellant is, firstly, that the annual

disclosures for the period from March 1998 to March 2011 required to be 2

made within 30 days from the end of each financial year under regulation

8(3) of SEBI (Substantial Acquisition of Shares and Takeovers)

Regulations, 1997 ('1997 Regulations' for short) have been made belatedly

on January 30, 2012. Similarly, quarterly disclosures for the quarter ended

June 2006 to September 2011 required to be made within 21 days from the

end of each quarter under clause 35 of the erstwhile Listing Agreement have

been made belatedly on January 30, 2012.

3. Shri Ajit Jakhadi, Learned Counsel appearing on behalf of the

appellant submitted that penalty imposed against the appellant in the present

case is wholly unjustified for the following reasons:-

(a) Trading in the shares of the appellant company were

suspended during the period from 2002 to 2012 on account of

non-payment of listing fees. At the time of seeking revocation

of suspension aforesaid obligations were complied with.

Hence, imposition of penalty was not warranted in the present

case.

(b) The shareholding of the persons referred to in regulation 8(3)

of 1997 Regulations has been constant and there has been no

change whatsoever and hence disclosure under regulation 8(3)

was not warranted.

(c) Similarly, non-filing of quarterly disclosures under clause 35

was inconsequential, because, there being insignificant

transfer of shares during the period June 2006 to September

2011, non-filing of quarterly disclosure during the aforesaid 3

period had no bearing on the interest of investors or other

stakeholders of the company.

(d) Net worth of the company was only Rs. 40,27,080/- as on

June 30, 2017 and it is only Rs. 24,66,877/- as on September

30, 2017. Since 2001 till date only 100 shares have been

traded in the market at BSE Ltd. These mitigating factors set

out in Section 15J of the SEBI Act have not been taken into

consideration in the impugned order.

(e) In similar cases nominal penalty of Rs. 1 Lakh / Rs. 2 Lakh

have been imposed, whereas, penalty of Rs. 20 Lakh is

imposed on the appellant which is totally disproportionate,

exorbitant and excessive. Accordingly, Counsel for the

appellant submitted that penalty imposed on the appellant

deserves to be quashed and set aside.

4. We see no merit in the above contentions.

5. As rightly held by the AO, the issues raised in this appeal are

squarely covered by various decisions of this Tribunal. In the case of Ashok

Jain vs SEBI (Appeal No. 79 of 2016 decided on June 9, 2014) this Tribunal

has held that disclosure obligations under the 1997 Regulations have to be

complied with within the stipulated time, irrespective of the fact that there is

trading in the scrip or not. Similarly, this Tribunal in the case of Komal

Nahata vs SEBI (Appeal No. 5 of 2014 decided on January 27, 2014) has

held that penalty for non-compliance of 1997 Regulations is not dependent

upon the investors actually suffering on account of such non-disclosure or

not. Therefore, fact that the trading in the shares of appellant company were

suspended during the years 2002 to 2012 and the fact that there was no 4

change in the shareholding pattern cannot be a ground for escaping penalty

for non-compliance of disclosure obligations.

6. A listed company is mandatorily required not only to pay listing fees

regularly but also required to comply with the annual and quarterly

disclosure obligations contained in the 1997 Regulations and clause 35 of

the listing agreement. Fact that the trading in the scrip of the appellant

company was suspended in the year 2002 for non-payment of listing fees

did not absolve the appellant from its obligation to comply with the annual

and quarterly disclosure obligations contained in regulation 8(3) of 1997

Regulations and clause 35 of the listing agreement. Therefore, the appellant

who apart from being guilty of not paying listing fees is also guilty of

violating regulation 8(3) of the 1997 Regulations and clause 35 of the listing

agreement deserves imposition of penalty prescribed under the SEBI Act

and SCRA.

7. Argument of the appellant that various mitigating factors including

the mitigating factors set out in Section 15J of the SEBI Act have not been

considered by the AO and in similar cases nominal penalty has been

imposed is without any merit. This Tribunal in the case of Abhimanyu

Exports Ltd. vs SEBI (Appeal No. 261 of 2017 decided on October 30,

2017) has held that failure to make annual disclosures under regulation 8(3)

of 1997 Regulations for 12 years constitute 12 violations and penalty under

Section 15A(b) of SEBI Act for each violation being upto Rs. 1 Crore, the

penalty imposable for violating regulation 8(3) would be Rs. 12 Crore. In

that case, this Tribunal has upheld the penalty of Rs. 10 Lakh imposed on

the appellant therein.

5

8. In the present case apart from violating regulation 8(3) for 12 years

the appellant has also violated clause 35 of the listing agreement for the

quarter ended June 2006 to September 2011.Thus, the penalty imposable on

the appellant for violating regulation 8(3) of 1997 Regulations for 12 years

was upto Rs. 12 Crore and penalty imposable under Section 23H of SCRA

for violating the erstwhile clause 35 of the listing agreement for several

quarters would run into several crores of rupees. However, after considering

all mitigating factors the AO has imposed penalty of Rs. 13 Lakh for

violating regulation 8(3) for 12 years and Rs. 7 Lakh for violating clause 35

of the listing agreement for the quarter ended June 2006 to September 2011,

which cannot be said to be unreasonable, excessive or harsh. Fact that in

some cases, SEBI has erroneously shown undue leniency towards the

violators who have consistently violated the disclosure obligations for

several years cannot be a ground to hold that in all cases undue leniency

must be shown to the entities who have consistently violated securities laws

for several years.

9. 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/-

Dr. C.K.G. Nair Member

22.02.2018 Prepared and compared by:msb