M/S. Virtual Global Education Limited vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision : 20.10.2015

Appeal No. 21 of 2015

M/s. Virtual Global Education Limited 104, Palco House, 2162/T-10, Main Patel Road, New Delhi - 110008 ...... Appellant

Versus

Securities and Exchange Board of India SEBI Bhawan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ...... Respondent

Ms. Rinku Valanju, Advocate with Mr. Rohit Sharma, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Tomu Francis, Advocate i/b K. Ashar & Co. for the Respondent.

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

Per: Justice J.P. Devadhar

1.

Whether the Adjudicating Officer ('AO' for short) of Securities and

Exchange Board of India (SEBI for short) by order dated October 30, 2014 is

justified in imposing penalty of Rs.12 lakh under section 15A(b) of Securities and

Exchange Board of India Act, 1992 (SEBI Act for short) for failing to make

disclosures under Regulation 8(3) of the Securities and Exchange Board of India

(Substantial Acquisition of Shares and Takeover) Regulations, 1997 ('Takeover

Regulations, 1997' for short) is the question raised in this appeal.

2. It is not in dispute that the appellant had failed to make disclosures under

Regulation 8(3) of the Takeover Regulations, 1997 to the stock exchanges on

which the shares of the appellant company were listed, in the financial years ended

31st March, 1998 to 31st March, 2009.

2

3. This Tribunal in the Appeal no.199 of 2014 (Inland Printers Ltd vs. SEBI)

decided today i.e. on October 20, 2015 has held that obligation to make disclosures

by a listed company to the stock exchanges under Regulation 8(3) of the Takeover

Regulations, 1997 is mandatory. A listed company failing to make disclosures

under Regulation 8(3) is statutorily liable to pay penalty under Section 15A(b) of

SEBI Act. Penalty imposable under Section 15A(b) is Rs. One lakh per day during

which the failure continues or Rs. One crore whichever is less.

4. In the present case, for failure to make disclosures for the financial year

ended March 31, 1998 to March 31, 2009, penalty imposable on the appellant

calculated at Rs. One lakh per day would run into several crores of rupees.

However, after taking into consideration all mitigating factors, the Adjudicating

Officer has imposed penalty of Rs.12 lakh which cannot be said to be unreasonable

on excessively harsh.

5. Counsel for the appellant submitted before us, that various mitigating

factors pointed out by the appellant have not been properly appreciated by the

A.O. We are not impressed by the argument, because, it is only after considering

all mitigating factors, the A.O. of SEBI has imposed penalty of Rs.12 lakh as

against the penalty of several crores of rupees imposable on the appellant under

section 15A(b) of SEBI Act.

6. However, in our opinion, one argument advanced on behalf of appellant is

worth considering. Argument is that the failure to make disclosures under

Regulation 8(3) for the financial years in question was an inadvertent error and as

soon as the error was noticed, the appellant had addressed a letter to SEBI on

November 27, 2009 stating therein that the failure to make disclosures was an

inadvertent error and called upon SEBI to condone the said non compliance.

7. It is the case of the appellant, that inspite of receipt of the said letter, SEBI

like the appellant was also not diligent in taking prompt action in the matter. Since

SEBI after several years on February 25, 2013 called for status report in relation to 3

non compliances and thereafter initiated proceedings against the appellant, it is

submitted that SEBI itself being not diligent ought to have been little more

considerate while penalizing the appellant for not being diligent in making

disclosures. It is brought to our notice that in several other cases for similar

violations SEBI has imposed penalty between Rs.4 lakh to Rs.14 lakh. Apart from

the above, during the interregnum the Takeover Regulations, 1997 has been

replaced by Takeover Regulations, 2011 wherein obligation of the company to

make disclosures to the stock exchanges in respect of its shareholding as on 31st

March of every financial year has been dispensed with and that obligation has been

cast on the promoters and persons having control over the company. In these

circumstances, we deem it proper that the appellant deserves some reduction in

penalty.

8. Accordingly, while upholding the order impugned in the present appeal, we

reduce the penalty imposed on the appellant from Rs.12 lakh to Rs. 8 lakh.

Appellant is directed to pay the said penalty amount of Rs.8 lakh to SEBI within a

period of six weeks from today. If the appellant fails to pay the penalty amount of

Rs.8 lakh within six weeks from today, SEBI would be entitled to recover the

entire penalty amount of Rs.12 lakh as per the impugned order with interest at the

rate of 6 percent per annum on Rs.12 lakh from the date of Adjudication order till

payment.

9. 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

20.10.2015 Prepared and compared by RHN