Regency Hospital Limited vs Sebi

Order Reserved on: 13.12.2019 Date of Decision: 3.1.2020

Appeal No.312 of 2019

Regency Hospital Limited A-2, Sarvodaya Nagar, Kanpur - 208005. ... Appellant

Versus

1.

Ld. Adjudicating Officer Securities & Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400051.

2. BSE Limited Phirozee Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001. ... Respondents

Mr. Prakash Shah, Advocate with Mr. Chinmay Paradkar, Advocate i/b. Prakash Shah & Associates for the appellant.

Mr. Kaushal Parsekar, Advocate i/b. Legasis Partners for the Respondent No.1.

Mr. Anubhav Ghosh, Advocate i/b. The Law Point for the Respondent No.2.

CORAM: Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member

Per : Justice M.T. Joshi

1. Aggrieved by the direction of the respondent

Securities and Exchange Board of India (hereinafter referred

to as 'SEBI') dated 28th September, 2018 vide the impugned 2

order to pay a penalty of Rs.5 lakhs for non disclosure of

pledged shares to the stock exchange against the provisions

of Regulation 8A of the Securities and Exchange Board of

India (Substantial Acquisition of Shares and Takeovers)

Regulations, 1997 (hereinafter referred to as 'SAST

Regulations') the present appeal is preferred by the original

notice no.1 the present appellant.

2. From the record it appears that the original notice nos. 2

and 3 i.e. Dr. Atul Kapoor and Dr. Rashmi Kapoort had made

transaction of pledging of shares of the present appellant on

26th November, 2010 and 30th November, 2010 as detailed in

the show cause notice. SEBI alleged that neither notice nos.2

and 3 disclosed the pledging of shares to notice no.1 i.e. the

present appellant nor the appellant disclosed the same to the

Bombay Stock Exchange as required by Regulation 8A of the

SAST Regulations which reads as under:-

8A. Disclosure of pledged shares:

(2) A promoter or every person forming part of the promoter group of any company shall, within 7 working days from the date of creation of pledge on shares of that company held by him, inform the details of such pledge of shares to that company. (4) The company shall disclose the information received under sub-

regulations (1), (2) and (3) to all the stock exchanges, on which the shares of company are listed, within 7 working days of the receipt thereof, if, during any quarter ending March, June, September and December 3

of any year,─ (a) aggregate number of pledged shares of a promoter or every person forming part of promoter group taken together with shares already pledged during that quarter by such promoter or persons exceeds twenty five thousand; or (b) aggregate of total pledged shares of the promoter or every person forming part of promoter group along with the shares already pledged during that quarter by such promoter or persons exceeds one percent of total shareholding or voting rights of the company,─ whichever is lower.

3. During the adjudication, respondent SEBI found that

the original notice nos.2 and 3 have in fact made disclosure

to the appellant Company. The plea of the appellant

Company was that it also made the disclosure to the BSE by

sending the same on 4th December, 2010 through First Flight

Couriers Ltd. (Ref. No.J21792056). The copy of the same

was also filed alongwith the written submissions. The

respondent SEBI made enquiry with the BSE in this regard.

The impugned order would show that vide email dated March

18, 2014 BSE replied that such disclosures were not received

to it. The respondent SEBI therefore held that the present

appellant though may have dispatched the disclosure, failed

to prove that the disclosure was received by BSE. It was

therefore held that violation of Regulation 8A of the SAST

Regulations had occurred hence the penalty was imposed.

4. Heard Mr. Prakash Shah, Advocate assisted by Mr.

Chinmay Paradkar, Advocate for the appellant and 4

Mr. Kaushal Parsekar, Advocate for the Respondent No.1

and Mr. Anubhav Ghosh, Advocate for the Respondent No.2.

5. Learned counsel for the appellant submits that the copy

of the receipt from First Flight Courier filed before SEBI as

well as before this Tribunal would show that the appellant

Company had in fact dispatched the disclosure to the BSE.

However, without making any due confirmation with the

BSE the respondent merely relied on the email of BSE and

imposed the penalty.

6. The learned counsel relied on the decision of this

Tribunal in the case of Banas Finance Ltd. in Appeal no.275

of 2018 decided on 26th July, 2019. He submitted that the

receipt of the courier would clearly show that the appellant

had in fact sent the disclosure to the BSE. There might have

been a mistake at the ends of the stock exchange for which

appellant cannot be penalized.

7. The learned counsel for the respondent however

submits that according to the regulations the receipt of the

disclosure has to be proved. Therefore merely dispatch of the

disclosure is not enough.

8. Perused the reasons forwarded in Banas Finance Ltd.

(cited supra) by this Tribunal. The said decisions would 5

show that in another case respondent SEBI had in fact

examined an Officer of the BSE concerning the disclosure

who in cross examination had accepted that some mistake

might have occurred in non receipt of the disclosure in the

listing department. At the relevant time the disclosure in

physical form were accepted. In that view of the matter, in

the case of Banas Finance Ltd. the appeal was allowed on the

similar ground.

9. Here in the present case, we find that original noticee

nos.2 and 3 had admittedly made disclosure to the appellant

Company of the pledging of the shares. The record would

show that the appellant Company had also dispatched the

information to the BSE through courier. Considering all

these fact on record, in our view, the impugned order cannot

be sustained. Hence the following order.

The appeal is hereby allowed. The impugned order of

SEBI is hereby quashed and set aside.

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member 3.1.2020 Prepared and compared by RHN