Mr. Ratanlal Tamakhuwala & Ors. vs Sebi

4. M/s. Shri Hanuman Investments Pvt. Ltd. 32, Ezra Street, Todi Mansion, Room No.1060, 10th Floor, Kolkata - 700001. ...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. Ramesh Mishra, Practising Company Secretary for the Appellants.

Mr. Kumar Desai, Advocate with Mr. Manish Acharya, Advocate i/b. Vigil Juris for the Respondent.

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

Per : J.P. Devadhar

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

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

30th May, 2014. By the said order penalty under section 15A(b) of the

Securities and Exchange Board of India Act, 1992 (SEBI Act for short) is

imposed on the appellants for violating Regulation 7(1A) read with

Regulation 7(2) of Securities and Exchange Board of India (Substantial 2

Acquisition of Shares and Takeovers) Regulations, 1997 ('1997

Regulations' for short) read with Regulation 35 of Securities and Exchange

Board of India (Substantial Acquisition of Shares and Takeovers)

Regulations, 2011 ('2011 Regulations' for short)

2. Appellants as the promoters of Greenearth Resources and Projects

Limited (target company) held approximately 63% shares of the target

company. Appellants had sold shares of the target company during the year

2009-10 in excess of the limits prescribed under Regulation 7(1A) of the

1997 Regulations.

3. Since the appellants failed to disclose the said sales as provided under

Regulation 7(1A) read with Regulation 7(2) of the 1997 Regulations,

proceedings were initiated against the appellants and by the impugned order

penalty is imposed on each appellant.

4. Basic argument of the appellants is that since the appellants as

promoters of the target company since inception held approximately 63%

shares of the target company, which was more than the threshold limits

prescribed under Regulation 11(1), the sales effected by the appellants could

not be said to have been covered under Regulation 7(1A) of the 1997

Regulations and consequently no penalty could be imposed on the

appellants for failing to make disclosure of the sales effected during the year

2009-10.

5. In the case of Mr. Ravi Mohan and Others vs. SEBI, Appeal no.97 of

2014 decided on 16.12.2015 this Tribunal has held as follows:-

"a) Under regulation 7(1A) of the Takeover Regulations, 1997,

an acquirer who, together with persons acting in concert with

him has acquired 15% or more but less than 55% shares of the

target company when purchases or sells shares of the target

company together with the persons acting in concert with the 3

acquirer, aggregating 2% or more of the share capital of the

target company, then the said acquirer is required to make

disclosure of such purchase or sale 39 within two days of

purchase or sale under regulation 7(1A) read with regulation

7(2) of the Takeover Regulations, 1997.

b) Disclosure obligation under regulation 7(1A) has to be

discharged in accordance with regulation 7(1A) read with

regulation 7(2). Since regulation 7(2) does not contemplate for

disclosure relating to sale of shares in excess of the limits set

out under regulation 7(1A), appellants herein cannot be said to

have failed to comply with regulation 7(1A) within the time

stipulated under regulation 7(1A) read with regulation 7(2).

Consequently penalty imposed on the appellants cannot be

sustained."

6. In view of the aforesaid decision of this Tribunal, it is clear that,

assuming that the appellants were covered under Regulation 7(1A), no

penalty could be imposed on appellants for failure to disclose the sales

effected by the appellants.

7. Counsel for SEBI submitted that challenging the decision of this

Tribunal in case of Ravi Mohan (supra) SEBI has filed an appeal and the

said appeal is pending before the Apex Court.

8. Fact that the appeal against an order passed by this Tribunal is

pending before the Apex Court cannot be a ground not to follow the

decision of this Tribunal.

9. In this view of the matter, without going into the question as to

whether the appellants were covered under Regulation 7(1A) or not, we hold

that in the facts of the present case assuming that the appellants were

covered under Regulation 7(1A), for failure on the part of the appellants 4

covered under Regulation 7(1A) to make disclosure of the sales effected

during the investigation period, no penalty could be imposed against the

appellants.

10. Accordingly the impugned order in so far as it purports to impose

penalty on the appellants is quashed as set aside.

11. Appeal is allowed in the aforesaid terms with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member

1.7.2016 Prepared and compared by RHN