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2020 (1) TMI 368 - AT - SEBINon-disclosure of the 'rejection' of Forest Clearance ("FC" for convenience) by the Ministry of Environment and Forests ("MoEF" for convenience) on an application for iron ore mining filed by ECL was material to an Initial Public Offer ("IPO" for convenience) made by ESL and for disclosure under Clause 36 of the Listing Agreement for ECL - HELD THAT:- In the row relating to Environmental Clearance what is indicated in the above table is that the approving authority for both in respect of coking coal mining and iron ore mining is the MoEF; approval in respect of coking coal mining has been received and approval in respect of iron ore has been received, but applicable once forest clearance is received. When this statement was published as part of the prospectus the 04.10/11.2008 rejection letter of the FAC as well as the rejection letter dated January 16, 2009 of the MoEF and the subsequent efforts made by the appellants for reconsideration were all in the knowledge of the appellants. Therefore, great effort has been made to put such facts in a compact statement like "received, but applicable once forest clearance is received"; a clear case of not only partial/inadequate disclosure but also to the effect of concealment. Instead of disclosing a rejection everything else has been disclosed. The emphasis made by the learned counsel for the appellants also on various correspondences by different authorities seeking approval for the project from MoEF including the letter from the Prime Minister's Office ("PMO") to the MoEF also does not absolve the appellants from the required disclosures in the prospectus/under the Listing Agreement. The PMO letter is a reply to a VIP reference with a copy to MoEF clearly stating that "forwarded for its consideration and appropriate action most expeditiously". Appropriate action could be another rejection by the MoEF; approval cannot be assumed. We do not propose to deal with the contention of the learned senior counsel for ESL that ESL has undergone a CIRP and all claims relating to penalties etc. have been permanently extinguished and so on under the approved Resolution Plan. We would just state that those issues would be addressed by the appropriate authorities under applicable laws. In the interest of justice we tend to agree with the submissions of the appellants in Appeal No. 202 of 2016 and in 223 of 2016 that non-disclosure of the initial round rejection of the mining project proposal in the Prospectus is not in the category where maximum penalty is imposable. Here, we consider the continued efforts of these appellants (ESL and ECL) in pursuing the matter further for reconsideration etc. as well as in detailing the risk factors with possibilities of not getting the final approval etc. as disclosed in the prospectus as mitigating factors. Accordingly we would reduce the amount of penalty of ₹ 1 crore each imposed on ESL under Section 15HB of the SEBI Act to ₹ 50 lakhs. A similar penalty of ₹ 50 lakh on the three Merchant Bankers jointly is sufficient to meet the ends of justice. However, as far as the appeal of ECL is concerned, the penalty imposable under the provisions of 23A(a) and 23E of the SCRA is a maximum of ₹ 1 crore and ₹ 25 crore respectively. Therefore, the penalty of ₹ 50 lakh each imposed under the said provisions cannot be termed as excessive or harsh. Therefore, no interference is needed. The contention of the appellant ECL that sub-section 23E of SCRA, 1956 is not applicable to the appellant-company since it is applicable only to persons managing CIS or mutual funds is an incorrect reading of the sub-section. Sub-section would make it abundantly clear that a company failing to comply with listing conditions or delisting conditions etc. shall be liable to a penalty not exceeding ₹ 25 crores. Such listing/delisting conditions are relevant to a company rather than persons managing CIS or mutual funds. Reducing the penalty amount from ₹ 1 crore each to ₹ 50 lakh each. The penalty of ₹ 50 lakhs imposed on the appellants shall be paid jointly and severally by the appellants.
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