TMI Blog2015 (12) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant for the delay in making disclosures under Regulations 8(3) as also various mitigating factors pointed out on behalf of the appellant do not exonerate the appellant from the obligation to make disclosures under Regulation 8(3), because the obligation under Regulation 8(3) is mandatory and the company failing to discharge that obligation is statutorily liable to pay penalty under section 15A(b) of SEBI Act. The penalty imposable under section 15A(b) of the SEBI Act for violating Regulation 8(3) at the relevant time was Rs. One Lakh for each day during which such failure continues or One Crore rupees whichever is less. In the present case, penalty imposable for failure to make yearly disclosures for the financial years ended March 31, 2002 to March 31, 2011 at the rate of Rs. One Lakh per day would run into several crores of rupees. However, after taking into consideration all the mitigating factors set out under Section 15J of SEBI Act, the Adjudicating Officer of SEBI has imposed penalty of ₹ 5 Lakh which cannot be said to be unreasonable or excessively harsh. - Appeal No. 199 of 2014 - - - Dated:- 20-10-2015 - J.P. Devadhar and Jog Singh, JJ. For The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On receiving reply, personal hearing was granted to the appellant and by the impugned order dated 30th April, 2014, the Adjudicating Officer of SEBI has imposed penalty of ₹ 5 lac under section 15A(b) of the SEBI Act for failing to make disclosures under Regulations 8(3) of the Takeover Regulations, 1997 for financial years ending 31st March, 2002 to 31st March, 2011. Challenging the aforesaid order present appeal is filed. 3. Mr. Shringarpure authorized representative of the appellant submitted as follows:- (a) Obligation to make disclosures under Regulation 8(3) of the Takeover Regulations, 1997 arises only when there is change in the shareholding of the promoter/promoter group of the target company. The words changes if any and the words in respect of appearing in Regulation 8(3) clearly indicate that the obligation to make disclosures therein is only when there is change in shareholding of the promoter/promoters group of the target company. In the present case, during the relevant years, neither there was any change in the shareholding of the promoter and promoter group nor the promoter/promoter group had made disclosures under Regulation 8(2) of the Takeover Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tively, it is submitted that the delay in making disclosures is not deliberate or in defiance of law. The breach flows from a bonafide belief that the target company is required to comply with Regulation 8(3) only when there is a change in the shareholding of the promoters. Admittedly no disclosures were received from the promoters of the company under Regulation 8(2) of the Takeover Regulations, 1997 during the relevant years and therefore, no fault could be found with the appellant under Regulation 8(3). (g) The Adjudicating Officer of SEBI has not considered all mitigating factors as contemplated under Section 15J of the SEBI Act. (h) Relying on a decision of Apex Court in case of Hindustan Steel Ltd. vs. The State of Orissa reported in AIR 1970 sc 253 it is submitted that the breach if any, in the present case is a technical or venial breach and the breach flows from a bonafide belief that the appellant is liable to disclose under Regulation 8(3) only when information regarding change in shareholding is received under Regulations 8(1) and 8(2) of the Takeover Regulations, 1997. Therefore, the Adjudicating Officer was not justified in imposing penalty on the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondly, disclosure to be made at each record date fixed by the company for the purposes of dividend. Very fact that multiple disclosures are required to be made especially by dividend paying listed companies under Regulation 8(3) clearly shows that the obligation to make disclosure under Regulation 8(3) is not dependent on the yearly disclosures to be made by the shareholders/promoters under Regulations 8(1) and 8(2) to the company. In other words, while the shareholders/promoters of the company are obliged to make annual disclosures to the Company under Regulations 8(1) and 8(2) of the Takeover Regulations, 1997, the company is obliged to make annual disclosures to the stock exchanges under Regulation 8(3) of the Takeover Regulations, 1997. To put it simply, if the shareholders/promoters fail to make annual disclosures under Regulations 8(1) and 8(2) they are liable for penal action under Section 15A(b) of SEBI Act and if the Company fails to make annual disclosures to the stock exchanges within the time stipulated under Regulation 8(3), the Company is liable for penal action under Section 15A(b) of the SEBI Act. 8. Above reasoning is further fortified from the format prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any between the current and previous financial year has to be disclosed. Therefore, the argument of the appellant that the disclosure under Regulation 8(3) has to be made only if there is change in the shareholding cannot be accepted. 10. Reliance placed by the representative of the appellant on the decision of the Apex Court in case of RBI (supra) is misplaced because as noted above, without adding any word and without omitting any word if Regulation 8(3) is read, it would mean that every listed company has to make yearly disclosures to the stock exchanges disclosing the shares held by the persons/promoters set out under Regulations 8(1) and 8(2) as on the last day of the financial year including the change in the shareholding, if any, compared to the shareholding on the last day of the previous financial year. In other words whether there is any change in the shareholding or not, the listed company is obliged to make disclosures under Regulation 8(3) and cannot avoid such obligation on ground that there is no change in the shareholding of the persons/promoters set out under Regulations 8(1) and 8(2) of Takeover Regulations, 1997. 11. Various alternative contentions raise ..... 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