Ms. Gargi Dash vs Sebi

Order Reserved On: 27.08.2019 Date of Decision : 04.09.2019

Appeal No. 84 of 2018

Ms. Gargi Dash F-3/13, Ground Floor, DLF Phase-1, Gurugram- 122 002, Haryana ...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. Ajay Dahiya, Advocate for the Appellant.

Mr. Gaurav Joshi, Senior Advocate with Mr. Kaushal Parsekar and Ms. Saloni Vyas, Advocate i/b Legasis Partners for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Justice M. T. Joshi, Judicial Member

Per: Justice Tarun Agarwala

1.

Against the imposition of penalty of ` 4 lakhs for violation

of Regulation 13(4) read with Regulation 13(5) of the Securities

and Exchange Board of India (Prohibition of Insider Trading) 2

Regulations, 1992 ("PIT Regulations" for short) the present

appeal has been filed.

2. The facts leading to the filing of the appeal is that the

appellant contended that she was an employee in ING Vyasya

Bank Limited and was Head of Retail Finance in Finance and

Accounts Division. There was a team of 5 to 6 members under

her as subordinates to whom she was giving directions from

time to time. Thus, the appellant had the authority to give

directions to certain employees of the bank.

3. It transpires that the bank had formulated an employee

stock options schemes for its employees which the appellant

exercised and accordingly acquired 36,000 (thirty six thousand)

shares of the bank between December 05, 2010 and August 05,

2013. Between November 02, 2012 and March 20, 2013 the

appellant sold an aggregate of 18,000 shares of the bank on the

stock exchange and on three occasions the sale of the shares was

more than ` 5 lakhs. Since necessary disclosures was not made

by the appellant under Regulation 13(4) and Regulation 13(5) of

the PIT Regulations a show cause notice was issued and after

granting an opportunity of hearing an order of penalty was

passed.

3

4. We have heard Shri Ajay Dahiya the learned counsel for

the appellant and Shri Gaurav Joshi the learned senior counsel

for the respondent. It was urged by the learned counsel for the

appellant that Regulation 13(4) read with Regulation 13(5) of

the PIT Regulations is not applicable upon the appellant as she

was not a "director" nor a "officer" of a listed company. It was

urged that in organizational structure she was a 'C' Grade

category employee and was not involved in the corporate

functioning of the company and was only involved in the retail

functioning of the company. It was urged that the appellant was

not in the senior management team and thus was not an officer.

It was thus contended that under Regulation 13(4) of the PIT

Regulations only a person who is a director or officer was

required to disclose to the company as well as to the stock

exchange in the prescribed format with regard to the total

number of shares or voting rights held and change in the

shareholding pattern.

5. In the light of the aforesaid submission it would be

necessary to peruse Regulation 13(4) and Regulation 13(5) of

the PIT Regulations which is extracted hereunder:

"13(4) Any person who is a director or officer of a listed company, shall disclose to the company 4

and the stock exchange where the securities are listed in Form D, the total number of shares or voting rights held and change in shareholding or voting rights, if there has been a change in such holdings of such person and his dependents (as defined by the company) from the last disclosure made under sub-regulation (2) or under this sub-regulation, and the change exceeds Rs. 5 lakh in value or 25,000 shares or 1% of total shareholding or voting rights, whichever is lower.

(4A)....

13(5) The disclosure mentioned in sub- regulations (3), (4) and (4A) shall be made within two working days of:

(a) the receipts of intimation of allotment of shares, or

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

6. Admittedly, the appellant is not a director but whether the

appellant is an "officer" or not the same is required to be

considered. The term "officer" has been defined under

Regulation 2(g) of the PIT Regulations as under:

"2(g) "officer of a company" means any person as defined in Section 2(30) of the Companies Act, 1956 and includes an auditor of the company."

5 7. Section 2(30) of the Companies Act, 1956 defines officer

as under:

"2(30) "officer" includes any director, manager or secretary or any person in accordance with whose directions or instructions the Board of directors or any one or more of the directors is or are accustomed to act."

The term 'officer' is a term of wide connotation. As stated in

HALSBURY'S LAWS OF ENGLAND (4th Edn. Reissue Vol.

7(1), para 669, page 479) any person who is regularly employed

as part of their business or occupation in conducting the affairs

of the company may be an 'officer' of the company." In Re, A

Company, (1980) 1 All ER 284 (CA) it was found that an officer

would includes other persons in a managerial position and does

not exclude subordinate officers in lower ranks discharging

managerial functions.

8. Thus, the term 'officer' as defined in Section 2(30) of the

Companies Act, 1956 would include an employee if he has been

vested with the powers of financial control over one or more

fields or control for operation of a company and, therefore, such

employee would be deemed to be falling under the category of

the term 'officer'. According to STROUD'S JUDICIAL 6

DICTIONARY 'officer' means a person under a contract of

service; a servant of a special status holding an appointment to

an officer which carries with it an authority to give directions to

other servants. Thus, an 'officer' as distinct from a mere

employee may be defined as a person who has the power of

directing any other person or persons to do anything. On the

other hand the function of an employee is only to obey.

9. In view of the aforesaid, we find that the appellant was

heading the Retail Finance Department. She had 5 or 6

subordinates working under her to whom she was giving

directions. Thus, she was an "officer" as defined under Section

2(30) of the Companies Act, 1956. Since she was an "officer",

the appellant was required to comply with Regulation 13(4) read

with Regulation 13(5) of the PIT Regulations. Since she failed

to comply, penalty was rightly imposed.

10. The decision of this Tribunal in Shri Mahendra Pandey

Maitri vs. SEBI (Appeal No. 178 of 2011 decided on

22.12.2011) is distinguishable and not applicable in the instant

case. On the other hand, the decision of this Tribunal in

Sundaram Finance Limited vs. SEBI (Appeal No. 69 of 2010

decided on 16.09.2010) is squarely applicable. 7

11. We however find that the Adjudicating Officer of SEBI

while considering the quantum of monetary penalty found that

the amount of disproportionate gain or unfair advantage cannot

be quantified nor was there anything to indicate that any investor

had suffered any loss as a result of the failure of the appellant to

make the disclosure. Thus, in our view the violation, if any, is

only technical for which the minimum penalty should have been

imposed. Considering the overall scenario and to do complete

justice we feel it proper that in the given circumstances a

minimum penalty of ` 1 lakh would be just and fair.

Consequently, the impugned order is affirmed and the quantum

of penalty is modified and is reduced from ` 4 lakhs to ` 1 lakh

which the appellant shall deposit within six weeks from today.

The appeal is accordingly disposed of in the circumstance of the

case. There shall be no order on costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Justice M. T. Joshi Judicial Member 04.09.2019 Prepared & Compared By: PK