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2021 (1) TMI 390 - AT - SEBIViolation of Equity Listing Agreement clauses - whether the information relating to signing of a Binding Implementation Agreement ('Binding Agreement' for short) by an Authorized Executive Director of the appellant with the dominant Shareholders of the Bank of Rajasthan was liable to be disclosed on an immediate basis under clause 36 of the Listing Agreement and Regulation 12(2) of the PIT Regulations, 1992? - Penalty imposed of ₹ 5 lakh each on the appellant - contentions of the appellant on the inordinate delay in issuing the show cause notice and in passing the impugned order by respondent SEBI - HELD THAT:- The signed Binding Agreement in question was price sensitive and admittedly material to the performance of the appellant and needed to be disclosed on an immediate basis which was not done. On the basis of interpretation given in the impugned order itself the finding that signing of the Binding Agreement was a material and price sensitive information and hence there was a delay of a trading day in making the disclosure to the Stock Exchanges cannot be faulted. It was a PSI is also clear from the fact that the investigation revealed insider trading by entities connected with the dominant Shareholders in the shares of Bank of Rajasthan on the day of the Binding Agreement. Submission that insider trading did not happen in the shares of the Appellant does not dilute the issue since it is the same Binding Agreement which triggered the alleged violation of insider trading. Therefore, the appeal fails on merit. We agree with the contentions of the learned Senior Counsel for the appellant on the inordinate delay in issuing the show cause notice and in passing the impugned order by respondent SEBI. After all the charge against the appellant is one trading day's delay in disclosure, but the delay on the part of SEBI to show cause is 2955 days from the date of the event and about 2130 days from the date of the preliminary investigation report, which is too wide a gap to be ignored. Several years' delay in show-causing and concluding proceedings in such known incidence of violation/alleged violations is a failure in effectively performing the behavior modification function of a market regulator. Laches is a mixed question of fact and law. The facts in the instant case indicate delay in issuing the show cause notice. However, the plea of laches though not raised before the AO was specifically raised in the appeal before this Tribunal. We however, find that undue delay in initiating the proceedings by the respondent by itself causes prejudice and would ultimately attach a stigma pursuant to any adverse order that may be passed. Thus, in the instant case, though there are laches, that by itself in the peculiar circumstances of the case, will not vitiate the proceedings but definitely the penalty amount of ₹ 10 lakh imposed on the appellant cannot be sustained and deserves to be substituted by a lesser penalty. In the result, while upholding the impugned order on merits, we modify the penalty imposed on the appellant to only a warning which will meet the ends of justice in the given facts and circumstances of the matter. Appeal is thereby partly allowed.
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