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2014 (2) TMI 1312 - SECURITIES APPELLATE TRIBUNAL, MUMBAIMisleading information for IPO - Inadequacy of disclosures in the offer document - violation of provisions of SEBI (Disclosure and Investor Protection) Guidelines, 2000 - Held that:- In this case, there is no material before us to show that the appellant had taken any proactive step at all to find out the correct information or to independently verify the information available. No specific query in this respect was made from the right sources of such information namely the target company and the stock exchanges though it was known that information about the listing of the shares of the target company in each stock exchange was specifically required to be disclosed in the letter of offer. Instead, the appellant made a presumption that all shares were listed in the four stock exchanges of Chennai, Mumbai, Delhi and Ahmedabad and left it to others to point out if that was not the fact. This is certainly no way to exercise due diligence and we cannot but agree with the Whole Time Member of the Board that the appellant had violated regulation 24(4) of the Takeover Code and clauses 1, 2 and 7 of the code of conduct for merchant bankers.” From the foregoing, it is no doubt that Appellant had failed to exercise due diligence which resulted in lack in veracity and inadequacy of disclosures in the offer document, which did not provide investors with a reliable document did mis-lead investors to invest in shares of ESL and hence such non-disclosure had the potential to disturb securities market equilibrium and hence Respondent has rightly held Appellant to failed to comply with clauses 5.1 (5.1.1 and 5.1.2), 5.3.3.2(ii) under chapter V of SEBI (DIP) Guidelines, 2000 read with Regulation 111 of SEBI (ICDR) Regulations, 2009. Regarding quantum of penalty provisions of section 15J of SEBI Act were applied by Respondents and are of the view that investigation report has not quantified profit/loss for the nature of violations committed by Appellant and no quantifiable figures are made available on record to assess the disproportionate gain or unfair advantage and amount of loss caused to an investor or group of investors, and hence penalty of ₹ 10,00,000/- has been imposed considering failure to comply with SEBI (DIP) Guidelines read with SEBI (ICDR) Regulations, 2009. From the above paragraph, it is seen that loss caused to an investor or to a group of investors cannot be quantified but it is certain that investors, as a whole, incurred huge losses as a result of IPO, yet, though Appellant is not wholly responsible for the losses to investors, since there are others who played their role in causing loss to investors, the responsibility of Appellant was major, since he plays the coordinating role in bringing out IPO and is conceived to be the one who certifies veracity and adequacy of all disclosures and had the responsibility of bringing out all relevant fact and to ensure that no material information/fact is withheld is under obligation and has authority to call for all relevant information from company seeking IPO and is expected to carry out due diligence to bring our truth and adequacy of information in IPO at all stages. The penalty is, therefore, upheld and appeal against the impugned order is dismissed. No costs.
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