W.S. Industries (India) Limited vs Sebi

Date of Decision : 19.09.2019

Appeal No. 8 of 2019

W.S. Industries (India) Limited 108, Mount Poonamallee Road, Porur, Chennai - 600 116. ..... Appellant

Versus

1.

BSE Limited Floor 25, P.J. Towers, Dalal Street, Mumbai - 400 001.

2. National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Respondents

Mr. Ankit Lohia, Advocate with Mr. Mehul Jain and Mr. Chirag Chhabra, Advocates i/b Bharucha and Partners for the Appellant.

Mr. Sagar Divekar, Advocate with Mr. Abhimanyu Mhapankar, Advocate for Respondent No. 1.

Mr. Sachin Chandarana, Advocate with Ms. Shreya Anuwal, Advocate i/b Manilal Kher Ambalal for Respondent No. 2.

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member 2

Per : Justice Tarun Agarwala, Presiding Officer

1. For non-compliance of the Regulation 17(1) of the SEBI

(Listing Obligation and Disclosure Requirements)

Regulations, 2015 ('LODR Regulations' for short) BSE

Limited ('BSE' for short) by an order dated October 10, 2018

and National Stock Exchange of India Limited ('NSE' for

short) by an order dated November 5, 2018 have each

imposed a monetary fine of Rs. 5,42,800/-. The appellant

being aggrieved by the aforesaid orders have filed the present

appeal.

2. The aforesaid fine has been imposed for not appointing

a woman director in the Board of Directors of the Company.

3. With regard to the imposition of fine, SEBI had been

issuing Circulars from time to time. By Circular dated May 3,

2018 a uniform structure for imposing a fine was specified for

different violations to be imposed by the Stock Exchanges so

that uniform action is taken by the Stock Exchanges. As per

the Annexure - 1 to the Circular, a fine of Rs. 5000/- per day

has been fixed for violation of Regulation 17(1) of LODR 3

Regulations. In paragraph 4 of the Circular the Stock

Exchanges were directed to take action in case of non-

compliance of the LODR Regulations as per Annexure - 1 to

the Circular i.e. to say that if there was violation of

Regulation 17(1) of the LODR Regulations the Stock

Exchange was to impose a fine @ Rs. 5000/- per day.

Paragraph 4 further states that the Stock Exchange may

deviate from the above if found necessary only after recording

reasons in writing. Thus flexibility was given to the Stock

Exchanges to reduce the quantum of fine for reasons to be

recorded in writing.

4. Based on the aforesaid Circular the learned counsel for

the appellant submitted that appellant had valid reasons for

not appointing a woman director under Regulation 17(1) of

the LODR Regulations and thus contended that even though it

has deposited the fine under protest it may be allowed to

make a representation to the Stock Exchanges for reduction /

waiver of the penalty in the given extenuating circumstances.

This request of making a representation was opposed by the

learned counsel for the Stock Exchanges contending that the

appellant had made a representation for waiver / reduction of

the fine and that the Stock Exchanges considered and found 4

that the fine cannot be reduced or waived. Such decision

however has not been brought on record. It was also

contended that the respondents have carved out a Standard

Operating Procedure (Exhibit - 5 to the reply of BSE)

wherein recommendations for waiver or reduction of fine

could be considered to a certain extent. It was contended that

in the list of events indicated in the said Standard Operating

Procedure the appellant's case was not covered and therefore

no useful purpose would be served in considering the

representation afresh.

5. Having heard the learned counsel for the parties, we find

that the Circular of SEBI dated May 3, 2018 gives unfettered

power to the Stock Exchanges to deviate from the standard

procedure given by SEBI for imposition of fine subject to

recording reasons in writing. The Standard Operating

Procedure carved out by BSE (Exhibit - 5 to the reply of

BSE) only gives the indicative list of events and is not

exhaustive. We somehow get this uncanny feeling that the

BSE is not willing to reconsider the matter on merits and are

approaching the situation with a closed mind. 5

6. There is another aspect which requires consideration.

The violation, if any, made by the appellant is of Regulation

17(1) of LODR Regulations. It is not a Stock Exchange based

violation where each Stock Exchange would be within its

right to impose a fine. Prima facie only one fine could be

imposed and not two sets of fines by the Stock Exchanges.

This aspect of a violation of the LODR Regulations, in our

opinion, is required to be considered by SEBI, namely,

whether one set of fine could be imposed or two sets of fine

could be imposed for the same violation by two Stock

Exchanges. This aspect cannot be considered or decided by

the Stock Exchanges.

7. We accordingly dispose of the matter directing the

appellant to file a representation under Regulation 101 of the

LODR Regulations before SEBI within four weeks from

today giving the grounds for reduction / waiver of the fine

imposed under Regulations 17(1) of the LODR Regulations.

The appellant will also raise a ground as to whether one set of

fine could be imposed for violation of Regulation 17(1) or the

Stock Exchanges can impose separate fines for the same

violation. Upon receipt of the representation SEBI will

consider and decide the issues as stated in the representation 6

after giving an opportunity of hearing within six weeks

thereafter. In the event the penalty is reduced or waived SEBI

would issue appropriate directions to the Stock Exchanges for

refund of the monies within a stipulated period.

8. Appeal is disposed of in the above terms with no order

as to costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member 19.09.2019 Prepared and compared by:msb