Mega Resources Ltd. vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI

Date : 07.09.2017

Appeal No. 438 of 2015 Mega Resources Limited, 10, Clive Row, Kolkata 700 001. ...Appellant

Versus

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

Mr. Zal Andhyarujina, Advocate with Mr. Neerav B. Merchant and Ravity Urilumuri, Advocates i/b Khaitan and Co. for the Appellant. Mr. Kumar Desai, Advocate with Mr. Rajdeep Lahini and Mihir Gupte, Advocates i/b Singhania Legal Services for the Respondent.

With Appeal No. 439 of 2015

1.

Hooghly Mills Project Limited

2. Hooghly Stocks and Bonds Project Limited 70, Garden Reach Road, Kolkata - 700 043. ....Appellants

Versus

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

Mr. Zal Andhyarujina, Advocate with Mr. Neerav B. Merchant and Ravity Urilumuri, Advocates i/b. Khaitan and Co. for the Appellant.

Mr. Kumar Desai, Advocate with Mr. RajdeepLahini and Mihir Gupte, Advocates i/b. Singhania Legal Services for the Respondent.

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

Per : Shri Jog Singh, Member (Oral) 2

1. Since the dispute in these two appeals relates to imposition of

penalty for violating the Securities and Exchange Board of India

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

[hereinafter referred to as 'SAST Regulations'] both these appeals are heard

together and disposed of by this common decision with the consent of all

the parties involved.

2. In Appeal no. 438 of 2015, the Adjudicating Officer of Securities

Exchange Board of India [hereinafter referred to as 'SEBI'] by his order

dated August 13, 2014 has imposed a penalty of Rs. 2,00,000/- on the

appellant under section 15A(b) of Securities and Exchange Board of India

Act, 1992 (SEBI Act for short) and Rs.50,00,000/- under Section 15H(ii) of

the SEBI Act for failure on the part of the appellant to comply with the

provisions of Regulation 7(1) read with Regulation 7(2) and Regulation

11(1) read with Regulation 14(1) of the Securities and Exchange Board of

India (Substantial Acquisition of Shares and Takeover) Regulations, 1997.

3. In Appeal no. 439 of 2015, the Adjudicating Officer of SEBI by his

order dated August 13, 2014 has imposed penalty of Rs.50,00,000 on the

appellants, namely Hooghly Mills Project Limited and Hooghly Stocks &

Bonds Pvt. Ltd., under section 15H(ii) of SEBI Act for failure to comply

with the provisions of Regulation 11(2) read with Regulation 14(1) of the

Securities and Exchange Board of India (Substantial Acquisition of Shares

and Takeover) Regulations, 1997.

4. The facts of Appeal No. 438 of 2015 have been taken as the lead

case. The Appellant, Mega Resources Limited, is aggrieved by the order

dated 13.08.2014 passed by the Adjudicating Officer, Securities and

Exchange Board of India [hereinafter referred to as "SEBI"] imposing a 3

penalty of Rs. 2,00,000/- under Section 15A(b) of the SEBI Act and

Rs. 50,00,000/- under Section 15 H(ii) of the SEBI Act for failure on the

part of the appellant to comply with the provisions of Regulation 7(1) read

with Regulation 7(2) and Regulation 11(1) read with Regulation 14(1) of

the Securities and Exchange Board of India (Substantial Acquisition of

Shares and Takeovers) Regulations, 1997.

5. Brief facts of the case are that Waverly Investments Limited ["the

Company/" "WIL"], originally incorporated under the Indian Companies

Act, 1913, was a listed public company, which was delisted from the

official list of the Calcutta Stock Exchange w.e.f. 08.11.2013.

6. Till 1986 the Company was controlled by McLeod & Co. Ltd. and

its other group companies, namely - McLeod & Co. Ltd., Gielle

Investments Limited, Bajoria Properties Limited, Devenport & Co. Pvt.

Ltd., Presidency Exports & Industries Limited and members of Bajoria

family - namely - Shobha Bajoria, Rekha Bajoria and Devendra Bajoria,

which also formed the Promoter Group. In the year 1986, McLeod Group

and their companies were managed and controlled by Mr. C.L. Bajoria, Mr.

S. L. Bajoria, Mr. B. P. Bajoria and their sons, namely - Mr. K. K. Bajoria,

Mr. Rajendra Prasad Bajoria and Mr. Devendra Prasad Bajoria.

7. An agreement was entered into by and between (i) The Kevin Jute

Co. Ltd. and Hasimara Industries Ltd., jointly and/or severally called 'The

Vendors', (ii) The Hooghly Mills Co. Ltd. called 'The Purchaser' and (iii)

The Company called the 'Confirming Party' for sale of assets of the

company along with the land. The Hooghly Group of Late A. K. Bajoria

negotiated with Mr. Rajendra Prasad Bajoria and Mr. Devendra Prasad

Bajoria who were sons of Mr. CL Bajoria, for purchase of shares of the

Company and they entered into an oral agreement/arrangement with AK 4

Bajoria for transfer of their entire shareholding which was held by them in

companies and individuals at Rs. 4/- and Rs. 4.50 per share. It is stated by

the appellant that the transaction contemplated in the oral agreement took

place in the year 1986 and 2001.

8. In 1986, the Meenakshi Projects Limited and Hooghly Mills

Company Limited which were both promoted and controlled by A. K.

Bajoria group, acquired 1,26,146 equity shares of the Company, which

amounted to 50.46% of the paid up share capital of the Company. The

aforesaid shares were acquired from various entities forming part of the

McLeod Group, pursuant to an understanding/arrangement. Consequent to

the purchase, the A. K. Bajoria group became the main promotor group in

the Company. The Appellant is part of the AK Bajoria group. However,

about 25000 shares of the Company were still retained by the McLeod

Group, which were sold to the Appellant by Presidency Exports and

Industries Limited (controlled by the McLeod group) at Rs. 4/- per share

through off market transactions due to non-trading/suspension of shares at

the Calcutta Stock Exchange Limited. Acquisition of 25000 shares of the

Company resulted in the shareholding of A. K. Bajoria group being

increased from 50.46% to 60.46%.

9. SEBI observed that the Appellant being one of the

promoters/promoter Group of the Company had acquired 25,000 equity

shares (10%) on February 12, 2001 and due to the said acquisition

promoter/promoter group shareholding increased from 50.46% to 60.46%,

without making an open offer, which was in violation of regulation 11(1)

read with 14(1) of the SAST Regulations. SEBI also noticed that the

Appellant had failed to make disclosure under regulation 7(1) read with

7(2) of the SAST Regulations. Accordingly, SEBI issued show cause 5

notice dated 16.05.2014 to the Appellant, being one of the promoters of the

Company, to show cause as to why an enquiry should not be held against

the Appellant in terms of Rule 4 of SEBI (Procedure for Holding Inquiry

and Imposing Penalties by Adjudicating Officer) Rules, 1995 read with

Section 15-I of SEBI Act and penalty be not imposed under Section 15A

(b) and 15(H)(ii) of the SEBI Act for the alleged violation of regulations

7(1) read with regulation 7(2), 11(1) read with regulation 14(1) of the

SAST Regulations.

10. In response to the said SCN dated May 16, 2014, the appellant vide

letter dated June 14, 2014 submitted that the violation was unintentional

and had occurred due to lack of proper interpretation of the erstwhile

regulations. The appellant also requested SEBI not to levy any penalty as

the violation was technical in nature and without any mala fide intention as

there was no change in control. The respondent after considering the reply

to the SCN and the submissions of the authorized representative of the

Appellant in the personal hearing, passed the impugned order dated

13.08.2014 imposing a penalty of Rs. 2 lac under Section 15 A(b) of the

SEBI Act and Rs. 50 lac under Section 15(H)(ii) of the SEBI Act on the

appellant.

11. Facts of Appeal No. 439 of 2015 are different from Appeal No. 438

of 2015 to the following limited extent. On 12th February, 2001, the A. K.

Bajoria group acquired 25,000 equity shares of the Company increasing its

shareholding in the Company from 50.46% to 60.46%. Subsequently, on

15th April 2009, the appellants in Appeal 439/2015 (both companies

controlled by the A. K. Bajoria Group) purchased 20,000 equity shares and

12,300 equity shares equivalent to 4% and 2.46% of the paid up share

capital, respectively of the Company. These transactions were off market 6

transactions due to non-trading/suspension of trading at the Calcutta Stock

Exchange Limited. After such acquisition, the holding of A. K. Bajoria

group went up to 66.92%. SEBI observed that the Appellants being the part

of the promoters/promoter Group of the Company had acquired 20,000

equity shares (4%) and 12,300 equity shares (2.46%) of the company on

15th April, 2009 and due to the said acquisitions, the promoter/promoter

group shareholding increased from 60.46% to 66.92%, without making an

open offer, which was in violation of regulation 11(2) read with 14(1) of

the SAST Regulations.

12. We shall now deal with the Appellant's submissions in brief. The

Appellant submits that Franktech Enterprises Pvt. Ltd. and Goodfaith

Commercial Pvt. Ltd. were interested in acquiring 20% shares of the

Company. Necessary disclosures were made by them with the Respondent.

At the time of filing the open offer document with the Respondent by

Franktech Enterprises Pvt. Ltd. and Goodfaith Commercial Pvt. Ltd., the

acquisition of shares by the Appellant in 2001 was incorrectly mentioned as

to be acquired from a Non Promoter.

13. It is submitted by the appellant that at the time of sale of shares, the

McLeod Group was a declared promoter of the Company. Upon acquisition

of shares by the A. K. Bajoria group led companies in 1986, the A.K.

Bajoria Group became the new promoter of the Company. At the time of

the impugned transfer of shares in 2001, the A. K. Bajoria Group,

comprised of the three following companies : Hooghly Mills Projects

Limited, Meenakshi Projects Limited, Mega Resources Limited.

14. Therefore, the Appellant submits that the impugned

transfer/acquisition of shares in 2001 is an inter se transfer of shares

between different corporates in the promoter group. Consequently, there 7

was no requirement of making an open offer under Regulation 11 read with

14 or disclosures under Regulation 7 of the SAST Regulations, 1997.

15. The appellant contends that no prejudice was ever caused to the

other shareholders of the company or any one else as there had been no

trade of shares of the Company at the Calcutta Stock Exchange since

January 01, 1999. As the shares of the Company were suspended from

trading on the CSE no open offer could be made or could be directed to be

made. It is submitted by the Appellant that the Company having been

delisted w.e.f. November 8, 2013, SEBI has no jurisdiction to issue the

impugned show cause notice. It is further submitted that on the date of

adjudication and passing of the impugned order by the Respondent, the

Company was no longer a listed Company and, therefore, was outside the

purview of the Respondent.

16. The Appellant further submits that the Adjudicating Officer has

erred gravely in interpreting and exercising the application of Section

15H(ii) (failure to make a public announcement to acquire shares at a

minimum price), which is to be read with the provisions of Section 15J of

the SEBI Act. It is submitted by the appellant that the Adjudicating Officer,

while quantifying the penalty, has to exercise discretion after considering

the factors provided in Section 15J of the SEBI Act.

17. The appellant has, therefore, prayed for quashing and setting aside of

the impugned order dated August 13, 2014.

18. Per contra, the respondent submits that the appellant has not

produced any evidence of the alleged oral agreement of 1986. It is also

submitted by SEBI that the schedule at Exhibit-C to the appeal is inaccurate

as the date of said acquisition is shown in the schedule as 16.04.2001 8

whereas the appellant has admitted in the reply dated 14.06.2014 to SCN

that the said shares were purchased on 12.02.2001. The respondent submits

that prior to acquisition of shares on 12.02.2001, the appellant was not the

promoter of the Company but only a part of the A. K. Bajoria group of

companies which controlled the Company and the companies forming part

of the Bajoria Group which held shares of the Company were shown as

promoters of the Company. The appellant became promoter of the Target

Company upon acquisition of shares on 12.02.2001 and, therefore, the said

acquisition by the appellant was not an inter se transfer of shares between

different entities forming part of promoter group, as claimed by the

appellant. The respondent, therefore, submits that the appellant is not

entitled to any exemption from making any open offer as it has not

complied with any condition pursuant to which any exemption would be

available.

19. It is further denied by the respondent that the appellant had been

wrongly mentioned as a non-promoter in the Open Offer document of 2011.

The respondent submits that although the appellant was aware of the fact

that it was shown as non-promoter in the said offer document of 2011, the

appellant took no steps to rectify the said alleged error. The said contention

of the appellant in this regard is, therefore, clearly an after-thought.

20. The respondent submits that since the appellant has violated the

statutory provisions of the regulations, the penalty has to follow. In support

of their contention, the respondents relied on the judgment of the Hon'ble

Supreme Court in the case of SEBI Vs. Shri Ram Mutual Fund [AIR

2006 SC 2287] wherein it has been held that once the violation of the

statutory regulations is established, imposition of penalty becomes sine qua 9

non of violation and the intention of parties committing such violation

becomes totally irrelevant.

21. The shares of the Company (WIL) were suspended from trading on

the Calcutta Stock Exchange since 1999, i.e., after the takeover of the

Company by A. K. Bajoria Group and the same was due to non-payment of

the listing fees by A. K. Bajoria group, which is apparent from the letter

dated January 09, 2012 received by the Company from the CSE whereby

the CSE had called upon the Company WIL to pay the listing fees.

22. The respondent submits that the Adjudicating Officer has

appropriately imposed the penalty of Rs. 2,00,000/- under Section 15A(b)

of the SEBI Act and Rs. 50,00,000/- under Section 15H(ii) of the SEBI Act,

1992, which is commensurate with the violations of the provisions of the

SAST Regulations, 1997. It is submitted that the provisions relating to

making of an open offer and disclosures are mandatory provisions and

penalty is leviable once it is shown that there has been a failure to make

disclosure or when there is breach of the Regulation 11(1). The respondent

has relied on the decision of this Tribunal in Komal Nahata Vs. SEBI

[Appeal No. 5/2014] decided on 27.01.2014 wherein it is held that the

"argument that no investor has suffered on account of non disclosure and

that the Adjudicating Officer has not considered the mitigating factors set

out under Section 15J of SEBI Act, 1992, is without any merit because the

penalty for non compliance of SAST Regulations, 1997 is not dependent

upon the investors actually suffering on account of such non disclosures.

23. The respondent, therefore, prays that the appeal be dismissed with

cost.

10

24. Heard the Learned counsel for both the parties at length and perused

the pleadings along with the documents produced by the parties.

25. Before dealing with the issues raised in these Appeals, the relevant

provisions of the SAST Regulations, 1997 are reproduced herein below :

"7. 1 [(1) Any acquirer, who acquires shares or voting rights which (taken together with shares or voting rights, if any, held by him) would entitle him to more than five per cent or ten per cent or fourteen per cent 2 [or fifty four per cent or seventy four per cent] shares or voting rights in a company, in any manner whatsoever, shall disclose at every stage the aggregate of his shareholding or voting rights in that company to the company and to the stock exchanges where shares of the target company are listed.

7. (2) The disclosures mentioned in sub-regulations (1) and (1A) shall be made within two days of,--

(a) the receipt of intimation of allotment of shares; or

(b) the acquisition of shares or voting rights, as the case may be.

11. (1) No acquirer who, together with persons acting in concert with him, has acquired, in accordance with the provisions of law, 1 [15 per cent or more but less than 2 [fifty five per cent (55%)]] of the shares or voting rights in a company, shall acquire, either by himself or through or with persons acting in concert with him, additional shares or voting rights entitling him to exercise more than 3 [5% of the voting rights], 4 [ with post acquisition shareholding or voting rights not exceeding fifty five per cent.,] 5 [in any financial year ending on 31st March] unless such acquirer makes a public announcement to acquire shares in accordance with the regulations.

11(2)No acquirer, who together with persons acting in concert with him holds, fifty-five per cent (55%) or more but less than seventy-five per cent (75%) of the shares or voting rights in a target company, shall acquire either by himself or through [or with] persons acting in concert with him any additional shares [entitling him to exercise voting rights] or voting rights therein, unless he makes a public announcement to acquire shares in accordance with these Regulations.

14. (1) The public announcement referred to in regulation 10 or regulation 11 shall be made by the merchant banker not later than four working days of entering into an agreement for acquisition of shares or voting rights or deciding to 11

acquire shares or voting rights exceeding the respective percentage specified therein."

26. Firstly, we deal with the contention of the appellant that the action of

the respondent is without jurisdiction. In this context, the Appellant has

contended that since the company was delisted from the CSE, SEBI does

not have jurisdiction over the appellant. In this connection it is pertinent to

note that on Appellant's own showing, the Company was listed on the

Calcutta Stock Exchange on February 12, 2001, when the appellant

acquired the said shares. Since the Company was listed on the Calcutta

Stock Exchange on February 12, 2001, the appellant was obliged to comply

with the mandatory provisions of Regulation 11(1) read with 14(1) of the

SAST Regulations and to make an open offer and disclosures under

Regulations 7(1) and 7(2) of the SAST Regulations, 1997.

27. It is a fact that the shares of WIL were suspended from trading on

the Calcutta Stock Exchange since 1999, i.e. after the take over of the

Company by AK Bajoria group. It is also a matter of record that this

suspension was a result of the non-payment of the listing fees by A.K.

Bajoria group. Since the suspension was a result of the Appellant's

misconduct in its entirety, werefuseto allow the Appellant to avoid SAST

regulations using its own misconduct as a crutch.

28. It is pertinent to note that the Appellant admits that the company

WIL was delisted from the CSE w.e.f. November 08, 2013. In other words,

it is the submission of the Appellant that the company WIL was listed on

the CSE on February 12, 2001 when the appellant acquired 25000 shares.

Therefore, the appellant had to mandatorily comply with the statutory

provisions of Regulation 11(1) read with Regulation 14(1), to make an open

offer and disclosure under Regulation 7(1) and 7(2) of the SAST 12

Regulations, 1997. The Appellant having failed to comply with the

statutory provisions of the Regulations, becomes liable to pay the penalty.

As stated hereinabove, the appellant admits that the Promotor Group of

which Appellant is a part, had failed to pay the listing fees from 1989-2012.

The appellant also admits that the violation of the statutory provisions was

due to lack of proper interpretation of the erstwhile regulations. The

appellant cannot take advantage of its own wrong as a crutch. The

appellant cannot take advantage of its own wrong.

29. We, therefore, hold that SEBI indubitably has jurisdiction in the

present matter.

30. Next, we turn to the contention of the appellant that the said

acquisition was an inter se transfer amongst the promoters and, therefore,

exempted from the provisions of Regulations 7(1) read with 7(2) and 11(1)

read with 14(1) of the SAST Regulations, 1997. It is pertinent to note that

prior to the acquisition in 2001, the Appellant was not a promoter of the

Company but a part of the A. K. Bajoria Group of companies which

controlled the Company. The companies forming part of the Bajoria Group

which held shares of Target Company were shown as Promoters of Target

Company. It, therefore, follows that the Appellant, not being a shareholder

of the Company prior to the said acquisition, could not be a promoter of the

Company. The appellant became a promotor of the Company only after the

acquisition of 25000 equity shares in question. Therefore, in our considered

opinion, the said acquisition by the Appellant cannot be termed as an 'inter

se' transfer of shares between different entities forming part of promoter

group and therefore cannot be said to be exempt from the requirement of

making a mandatory open offer.

13

31. In any event, the exemption claimed by the appellant on the basis of

inter se transfer amongst promoters under Regulation 3(1)(e) of the SAST

Regulation, 1997, is not an automatic exemption but is subject to

conditions. One such condition is that both the transferor and the transferee

have to hold at least 5% of the shares in the Company for at least three

years prior to the proposed acquisition. It is a fact that the appellant was not

even a shareholder of the Company prior to the said acquisition. It is noted

from Exhibit-C to the appeal, viz., particulars of share transfers made by

the Appellant on 12.02.2001, that the appellant was not a shareholder of the

Company before the said date. Therefore, it follows that the Appellant

could not have held shares in the Company for three years prior to the

Acquisition. Consequently, the provision of Regulation 3(1)(e)(iii) of SAST

Regulation 1997 cannot said to have been complied with.

32. Another such condition is that a notification/report under regulation

3(3) of the SAST Regulation, 1997 is mandatorily required to be made to

the stock exchange in question. It is a matter of fact that no such

notification was made to the Calcutta Stock Exchange by the Appellant, as

mandated, 4 days prior to the proposed inter se acquisition of shares

between promoters. Thirdly, no disclosures were made by the Appellant

under Regulation 7(1) and 7(2) of the SAST Regulations, 1997 as required

under explanation to the Regulation 3(1)(e) of the SAST Regulation,1997.

Fourth, a report was required to be filed within 21 days of the said

acquisition with SEBI. Since no such report has been filed with SEBI, the

said condition under Regulation 3(4) of the SAST Regulation 1997 has also

not been complied with amongst others. Consequently, the appellant can

seek no exemption from the applicability of Regulation 11 of the SAST

Regulation, 1997.

14

33. Even assuming that the Appellant was a Promoter of the Company

and had acquired the said shares as Promoter of the Company, the appellant

having not complied with the aforesaid conditions, was not entitled to be

exempted from making an Open Offer. As held by this Tribunal in Prem

Chand Shah Vs. SEBI [Appeal No 192 of 2010] decided on 21.02.2011,

even where an acquirer is exempted from making an Open Offer, the said

exemption would not exempt the acquirer from making the necessary

declaration under Regulation 7(1) and 7(2) of the SAST Regulation, 1997,

as disclosures under the latter are mandatory.

34. Further, in the reply dated June 14, 2014 to the SCN dated May 16,

2014 the appellant has admitted that pursuant to the acquisition of 25000

equity shares through off-market transactions the shareholding of the

Promoters/Promoter Group of the Company had increased from 50.46% to

60.46% of the Target Company. This triggered Regulation 11(1) of the

erstwhile SAST Regulations along with the requirement of submission of

certain disclosures under Regulation 7(1) and 7(2) of the erstwhile

Regulations. It is admitted by the appellant that the non compliance with

the disclosure requirements in respect of acquisition of shares and failure to

make an open offer to the shareholders of the Company was due to lack of

awareness of the erstwhile regulations on the part of the Appellant and

purely unintentional and without any malafide intentions. It is trite law that

ignorance of law will not excuse the appellant to escape the liability of

violating the law nor ever absolve the wrongdoer of his crime or

misconduct. This argument of the appellant, therefore, fails in our opinion.

35. Moreover, we agree with SEBI when it rightly puts forth the logic

that when there is an inter se transfer of shares amongst promoters, there is

no question of the total promoter holding changing whatsoever. As a 15

consequence of an inter-se transfer among shareholders, the total

shareholding must remain the same. Whereas, in the case in hand, through

the acquisition of shares in question, by the Appellant, the promoter

holding increased from 50.46% to 60.46%. Hence, no matter the

perspective from which the facts of the present case are perceived, the

inference is always the same viz., that the said acquisition of shares by the

Appellant was not in any manner an inter se transfer of shares amongst

Promoters, as contended by the Appellant.

36. Lastly, the Learned Counsel for the Appellant, Mr. Zal, while

arguing on the issue of proportionality in the matter of imposition of

penalty, drew our attention towards the amendment dated October 29, 2002

by which Section 15(H)(ii) of the SEBI Act, 1992, was amended and the

penalty for non-disclosure of acquisition of shares and takeovers was

enhanced from a maximum of Rs. Five Lakh to Rs. Twenty Five crore. It is

argued that since the violation in Appeal 438/2015 was committed in

February, 2001, the appellant would be governed by the erstwhile

provisions of Section 15H(ii) of the SEBI Act, which existed on the date of

violation in question.

37. Before dealing with this contention raised by the Appellant, we feel

it appropriate to reproduce the amended as well as the unamended

provisions of SEBI Act relied upon by Mr. Zal, the Learned Counsel for

appellant.

SEBI Act, 1992 [Before Amendment] "15H. Penalty for non-disclosure of acquisition of shares and takeovers - If any person, who is required under this Act or any rules or regulations made thereunder, fails to,- 16

(ii) make a public announcement to acquire shares at a minimum price;

he shall be liable to a penalty not exceeding five lakh rupees."

SEBI (Amendment) Act, 2002 (w.e.f. 29.10.2002)

"15H.Penalty for non-disclosure of acquisition of shares and take-overs.-If any person, who is required under this Act or any rules or regulations made thereunder, fails to,-

(ii) make a public announcement to acquire shares at a minimum price;

he shall be liable to a penalty of twenty-five crore rupees or three times the amount of profits made out of such failure, whichever is higher."

38. It is true that the maximum monetary penalty imposable for non

disclosure of acquisition of shares and takeovers under the erstwhile SEBI

Act on the date of violation by the Appellant was Rs. Five Lakh and by the

amendment dated October 29, 2002 it is up to Rs. Twenty Five Crore or

three times of the amount of profits made out of such failure, whichever is

higher. However, the moot point in this connection to be noted is that as on

October 29, 2002 the obligation to make disclosure and public

announcement under Regulations 7(1) read with 7(2) and 11(1) read with

14(1) continued. Therefore, because the violation was continued even after

October 29, 2002, the appellant has been rightly imposed penalty under the

amended provisions of Section 15H(ii) of the SEBI Act. Since the

punishment imposable now for such non-disclosure and public

announcement is up to Rs. Twenty Five Crore, we find that the penalty of

Rs. Fifty Lakh is just and reasonable and not disproportionate. The 17

contention of the appellant in this regard is, therefore, liable to be turned

down.

39. We are not oblivious of the fact that the amendment effected in the

SEBI Act on October 29, 2002 in Section 15 H(ii) is a substantive provision

and cannot be given retrospective effect but because of the continuity of the

obligation to make disclosure and public announcement on the part of the

appellant, we have no option but to dismiss this appeal. Therefore, in the

peculiarity of the facts and circumstances of the case and, in particular, the

continuity of the obligation to make disclosure and public announcement,

the penalty of Rs. Fifty Lakh is upheld and the appeal is dismissed.

40. So far as Appeal 439/2015 is concerned, admittedly, the violation

was committed in April 2009, i.e., long after the amendment dated October

29, 2002 had come into existence. We do not feel it appropriate to exercise

our discretion to reduce the penalty of Rs. Fifty Lakh as against Rs. Twenty

Five Crore, which is the maximum penalty imposable under Section

15H(ii) of the SEBI (Amendment) Act, 2002.

41. For the reasons stated hereinabove, both the appeals are 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 07.09.2017 Prepared & Compared by RHN/PTM