TMI Blog2015 (4) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... closure made by promoter/ promoter group, SEBI is not justified in directing the listed Company to disclose to the Stock Exchanges details of shares which are ‘otherwise encumbered’ by the promoter/ promoter group. Secondly, as per the press release issued by SEBI on January 21, 2009, clause 35 of the Listing Agreement was to be amended so that details of pledged shares and release/sale of shares are first made by promoter/promoter group to the listed Company and in turn, the listed Company would disclose the same to the public through the Stock Exchanges. Since the promoter/ promoter group are not obliged to disclose to the listed Company details of shares that are otherwise encumbered by them, SEBI is not justified in directing the listed Company to disclose to the Stock Exchange details of ‘otherwise encumbered’ shares which are not furnished to it by the promoter/promoter group. Thirdly, when an Adjudicating Officer of SEBI has already construed the words ‘shares pledged or otherwise encumbered’ and held that the said words would cover particulars relating to pledged shares only, the Adjudicating Officer in the present case is not justified in taking a contrary view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation cast upon the promoter/ promoter group to make such disclosures to the listed Company? 3. For convenience, facts in Appeal No. 183 of 2013 are set out herein. Counsel for parties state that the decision in Appeal No. 183 of 2013 would equally apply to Appeal No. 181 of 2013. 4. Facts relevant for Appeal No. 183 of 2013 are as follows:- a) Appellant is a listed Company duly incorporated under Companies Act, 1956. b) By a show cause notice issued on November 30, 2010, SEBI called upon the appellant to show cause as to why an inquiry should not be held and why penalty, if any, should not be imposed on the appellant under Section 23E of SCRA and Section 15HA of SEBI Act, as the appellant failed to disclose to the Stock Exchange under clause 35 of the amended Listing Agreement that by an arbitration order dated July 23, 2009, nine promoter entities of appellant have been restrained from selling, transferring or creating third party interest in any manner in the shares of appellant Company held by the said promoters as more particularly set out therein. According to SEBI aforesaid restraint order passed in respect of 32,93,000 shares of appellant held by nine promoters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant in Appeal No. 183 of 2013 and Mr, Modi, learned Senior Advocate appearing on behalf of appellant in Appeal No. 181 of 2013 have advanced following arguments:- a) Prior to February 3, 2009, listed Companies were not required to give details of the pledged shares in their quarterly reports filed in compliance with clause 35 of the Listing Agreement. By two circulars both dated February 3, 2009 SEBI called upon the Stock Exchanges to bring to the notice of the Companies regarding the disclosures to be made under regulation 8A(1),8A(2),8A(3) 8A(4) introduced to the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ( Takeover Regulations, 1997 for short) with effect from 28.01.2009 as per the format annexed thereto and further advised all the Stock exchanges to amend clause 35 of the Listing Agreement interalia relating to disclosure of shareholding pattern of promoters and promoter groups as per the format annexed to the said circular. Since both the circulars refer to disclosure of details of the pledge it is contended that the format appended to the circular dated February 3, 2009 should relate to the details r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2009, Bombay Stock Exchange ( BSE for short) has intimated to all the listed Companies regarding the obligation arising from the amendment to clause 35 of the Listing Agreement. Similar circular is issued by National Stock Exchange ( NSE for short) on February 6, 2009. Hence, there is no merit in the contention of the appellants that clause 35 of the Listing Agreement has not in fact been amended by the Stock Exchanges. b) SEBI in its circular dated February 3, 2009 has specifically recorded that the format for reporting the shareholding pattern is required to be changed and that the details of shares pledged by promoters and promoter entities shall have to be reported as per the amended format appended to the said circular. Thus, the SEBI circular dated February 3, 2009, requires every listed Company to disclose the shareholding pattern of the promoter/promoter group as per the format which includes obligation to make disclosure not only of shares pledged but also shares which are otherwise encumbered by the promoters or promoter group. Since the format annexed to the SEBI circular dated February 3, 2009 duly published by the Stock Exchanges forms part of the circular and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Listing Agreement as well as PFUTP Regulations is justified. Accordingly, counsel for the respondent submitted that there being no merit in the contentions raised by the appellants, the appeals be dismissed with costs. 7. We have carefully considered rival submissions. 8. First question to be considered herein is, whether the Stock exchanges have in fact amended clause 35 of the Listing Agreement as suggested by SEBI in its circular dated February 3, 2009. From the letter addressed by NSE to SEBI on January 24, 2014 (page 57 of affidavit in reply) it appears that NSE had amended clause 35 of the Listing Agreement as per SEBI circular dated February 3, 2009 and amended Equity Listing Agreement was duly published by NSE on its website on February 6, 2009. Similarly, from the e-mail sent by BSE to SEBI on January 13, 2014 it is seen that the authorized officer of BSE had amended the Listing Agreement and issued a circular on February 24, 2009 informing all the listed Companies that the Listing Agreement has been amended. By the said BSE circular dated February 24, 2009, public was informed that clause 35 of the Listing Agreement has been amended by SEBI vide circular dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade as and when the shares are pledged as also by way of periodic disclosures and that necessary steps to amend the relevant regulation and the Listing Agreement are being taken. As per the press release, details of pledge of shares and release/sale of pledged shares were to be furnished by the promoters to the Company and the Company was in turn to inform the same to the public through the Stock Exchanges. 11. Immediately after taking the above policy decision, SEBI introduced regulation 8A to SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ( Takeover Regulations, 1997 for short) with effect from 28.01.2009. As per regulation 8A(1) 8A(2) it is mandatory for a promoter or every person forming part of the promoter group to disclose to the Company details of shares of that Company held by them that are pledged. Similarly, under regulation 8A(3) a promoter or every person forming part of the promoter group is required to disclose to the Company details of invocation of pledge of shares of that Company which are pledged by the promoter/promoter group. Regulation 8A(4) requires every listed Company to disclose the above information received from the promot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares that are otherwise encumbered by the promoter/promoter group, without making corresponding obligation on the promoter/ promoter group to make such disclosures to the listed Company. As noted earlier, as per the press release issued by SEBI on January 21, 2009, and as per regulation 8A of Takeover Regulations, 1997, what is to be disclosed by the listed Companies to the Stock Exchanges is the information received by the listed Company from the promoter/promoter group. As per regulation 8A(1)/8A(2) what is to be disclosed by the promoter/promoter group to the listed Company is only details of shares that are pledged/revoked/invoked and there is no obligation cast upon promoter/ promoter group to disclose shares that are otherwise encumbered. It is not even the case of SEBI that under regulation 8A or under any other provision, the promoter/promoter group are required to furnish to the listed Company details of shares that are otherwise encumbered. If promoter/promoter group are not obliged to give to the listed Company details of shares that are otherwise encumbered under any provision framed by SEBI, then, making it mandatory for the listed Companies to disclose to the Stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be disregarded by another Adjudication order without assigning any reasons. It is high time that SEBI takes remedial measures and ensure that its Adjudicating Officers respect orders passed by each other. We make it clear, that respecting each others order does not mean that even an erroneously order, passed by the Adjudicating Officer must be followed blindly. In such a case, contrary view could be taken by recording reasons for taking such contrary view. 16. In the present case, the Adjudicating Officer, without assigning any reason has taken a view contrary to the view taken in case of Dewan Housing Finance Corporation Ltd. (Supra). No doubt, that the expression shares pledged or otherwise encumbered in the format appended to clause 35 of the Listing Agreement, would ordinarily cover not only shares encumbered by creation of pledge, but also cover shares which are encumbered otherwise than by creation of pledge. Details of shares that are pledged or otherwise encumbered by the promoter/promoter group could be furnished by the listed Company to the Stock Exchange only if such details are made available to the listed Companies by the respective promoter/promoter group. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany would disclose the same to the public through the Stock Exchanges. Since the promoter/ promoter group are not obliged to disclose to the listed Company details of shares that are otherwise encumbered by them, SEBI is not justified in directing the listed Company to disclose to the Stock Exchange details of otherwise encumbered shares which are not furnished to it by the promoter/promoter group. Thirdly, when an Adjudicating Officer of SEBI has already construed the words shares pledged or otherwise encumbered and held that the said words would cover particulars relating to pledged shares only, the Adjudicating Officer in the present case is not justified in taking a contrary view that too without assigning any reasons. Such a conduct on part of the Adjudicating Officer is highly objectionable. We hope that the officers of SEBI shall henceforth ensure that no orders are passed by them which are mutually contradictory to each other. 19. For the reasons stated hereinabove, we set aside penalty of ₹ 1crore and ₹ 1.25 crore imposed on each appellant by SEBI on ground that the appellants have failed to disclose to the Stock Exchanges, fact that the shares of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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