Narayan Sethuramon vs Sebi

Date of Hearing : 25.06.2019 Date of Decision : 02.07.2019

Appeal No. 363 of 2017

Murali Srinivasan Venkatraman Old No. 80, New No. 126, Dr. Radhakrishnan Salai, Chennai 600 004. ..... Appellant

Versus

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

With Appeal No. 364 of 2017

Suchitra Murali Balakrishnan Old No. 80, New No. 126, Dr. Radhakrishnan Salai, Chennai 600 004. ..... Appellant

Versus

Securities & Exchange Board of India Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Respondent 2

With Appeal No. 366 of 2017

Narayan Sethuramon Old No. 2, New No. 3, Sathyanarayan Avenue, R. A. Puram, Chennai - 600 004. ..... Appellant

Versus

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

Mr. Vinay Chauhan, Advocate with Mr. K. C. Jacob, Advocate i/b Corporate Law Chambers India for the Appellants. Mr. Kumar Desai, Advocate with Mr. Vivek Shah, Advocate i/b ELP for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C. K. G. Nair, Member Justice M. T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer

1.

These three appeals have been filed against a common order

and, therefore, all three appeals are being decided together.

2. A show cause notice was issued to the appellants to show cause

as to why a penalty should not be imposed for not complying with 3

the relevant provisions of the Securities & Exchange Board of India

(Substantial Acquisition of Shares and Takeovers) Regulations, 1997

(hereinafter referred to as, Takeover Regulations) as well as with the

Securities & Exchange Board of India (Substantial Acquisition of

Shares and Takeovers) Regulations, 2011 (hereinafter referred to as,

Takeover Regulations, 2011). During the pendency of the

adjudication proceedings, a supplementary show cause notice was

issued to show cause as to why the appellants should not be

penalized for violating the provisions of the Securities & Exchange

Board of India (Prohibition of Insider Trading) Regulations, 1992

(hereinafter referred to as, PIT Regulations). SEBI vide an order

dated October 29, 2015 found that the charges were proved and

accordingly, imposed a penalty, against which the appellants filed an

appeal which were allowed by an order dated March 17, 2016 and

the order of the adjudicating officer was set aside. The matter was

again remitted to SEBI to pass a fresh order on merits.

3. By the impugned order, the appellants have been found to have

violated Regulations 29(2) and 29(3) of the Takeover Regulations as

well as Regulation 13(3) read with Regulation 13(5) and Regulation

13(4A) read with Regulation 13(5) of the PIT Regulations.

Accordingly, the penalties were imposed upon the appellants. 4

4. The charges against the appellants were that the scrips sold by

them were not disclosed within the stipulated period and the same

was disclosed at a later stage and, therefore, the provisions of

Regulation 29(2) read with Regulation 29(3) have been violated.

The second charge was that the appellants had inter se transferred the

shares amongst the promoters and the same was not disclosed in

'Form D' to the company as well as to the stock exchange and,

therefore, there was a violation of Regulations 13(3) and 13(4A) of

the PIT Regulations.

5. We have heard Shri Vinay Chauhan with Shri K. C. Jacob, the

learned counsel for the appellants and Shri Kumar Desai with

Mr. Vivek Shah, the learned counsel for the respondent.

6. Admittedly, the disclosure of the sale of the shares was not made

by the appellants within the stipulated period as provided under

Regulations 29(3) of the Takeover Regulations. However, no

penalty could be imposed in view of the decisions of this Tribunal in

Mr. Ravi Mohan and Ors. vs. SEBI in Appeal No. 97 of 2014 and

other companion appeals decided on December 16, 2015 and in

Appeal No. 7 of 2016, Mr. Rakesh Kathotia & Ors. vs. SEBI

decided on May 27, 2019. In our view, the controversy involved in

the present case is squarely covered by the aforesaid decisions. 5

7. The learned counsel for the respondent however, placed

reliance upon the decision of this Tribunal in Mr. Shashwat

Agarwal vs. SEBI in Appeal No. 92 of 2018 decided on June 27,

2018. In our view, the said decision is distinguishable and the

decisions in Ravi Mohan and Mr. Rakesh Kathotia (supra) are

squarely applicable.

8. Consequently, we hold that no penalty could be imposed under

Regulations 29(2) and 29(3) of the Takeover Regulations, 2011.

9. On the second charge, admittedly, the change in the shareholding

pattern of the appellants was disclosed under Regulation 13(3) which

has not been disclosed within the stipulated period, though it was

disclosed belatedly. Thus, there was a violation of the provisions of

the Regulations 13(3) and 13(4A) read with Regulation 13(5) of the

PIT Regulations. We accordingly, do not find any justification for

reduction of the amount of penalties imposed.

10. For the reasons stated aforesaid, the appeals are allowed in

part. The imposition of penalties under Regulation 29(2) read with

Regulation 29(3) of the Takeover Regulations, 2011 upon the

appellants are quashed and set aside. The imposition of penalties

upon the appellants under Regulations 13(3) and 13(4A) read with

Regulation 13(5) of the PIT Regulations is affirmed. In view of the 6

partial success, parties shall bear their own costs. Penalty amount

shall be paid by the appellants within six weeks from today.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member

02.07.2019 Prepared & Compared by PTM