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2015 (12) TMI 1246 - SECURITIES APPELLATE TRIBUNAL MUMBAI

2015 (12) TMI 1246 - SECURITIES APPELLATE TRIBUNAL MUMBAI - TMI - Penalty imposed on under section 15A(b) of SEBI Act for failing to make annual disclosures under Regulation 8(3) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (‘Takeover Regulations, 1997’ for short) during the financial years ended March 31, 2002 to 31st March, 2011 - Held that:- Every listed company has to make yearly disclosures to the stock exchanges disclosing .....

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ters set out under Regulations 8(1) and 8(2) of Takeover Regulations, 1997.

Various alternative contentions raised by 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 liab .....

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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 Appellant : Mr. Sanjay Shringarpure, Company Secretary For The Respondent : Mr. Mihir Mody, Advocate with Ms. Shruti Chintwar and Mr. Saurabh Bachhawat, Advocate i/b K. Ashar and Co. Per .....

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cial years ended March 31, 2002 to 31st March, 2011. 2. Facts relevant for the present appeal are as follows: (a) Appellant is a company listed on various stock exchanges. Trading in the shares of the said company were suspended by the Bombay Stock Exchange (BSE for short) on January 7, 2002 due to non compliance of various clauses in the Listing Agreement and for nonpayment of listing fees. (b) On April 10, 2012 the appellant made disclosures under Regulation 8(3) of the Takeover Regulations, 1 .....

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a share purchase agreement with the promoters of the appellant company for acquiring the shares of the appellant company. Since the shares sought to be acquired by the acquirer were in excess of the threshold limit, public announcement for the open offer were made as contemplated in the Takeover Regulations, 2011. On successful completion of the open offer the shares were transferred to the acquirer. (e) On 27th January, 2014 a show cause notice was issued by SEBI calling upon the appellant to .....

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ancial 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 th .....

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the Takeover Regulations, 1997. (b) From the format prescribed for making disclosures under Regulation 8(3) of the Takeover Regulations, 1997 it becomes clear that the object of making disclosures under Regulation 8(3) is to bring to the notice of the investors through the stock exchanges, any change in the shareholding of promoter/promoter group of the appellant company. Since there were no changes in the shareholding of promoter/promoter group in the years in question, appellant was not oblig .....

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s, 1997. (d) Obligation to make disclosure under Regulation 8(3) and obligation to maintain a register in the specified format under Regulation 8(4) of the Takeover Regulation, 1997 are obligations consequential to Regulation 8(1) and 8(2). It is only when information is received under Regulation 8(1) and 8(2), obligation is cast on the target company to make disclosures under Regulation 8(3). Since no information was received, there was no obligation cast on the appellant to make disclosures un .....

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of regulation 8(3) would mean that if there is no change in the shareholding of promoter/promoter group, then, there is no obligation cast on the target company to make annual disclosures under Regulations 8(3) of the Takeover Regulations,1997. (f) Alternatively, 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 .....

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ed 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. 4. We see no merit in the above contentions. 5. Befor .....

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a company shall, within 21 days from the financial year ending March31, as well as the record date of the company for the purposes of declaration of dividend, disclose the number and percentage of shares or voting rights held by him and by persons acting in concert with him, in that company to the company. (3) Every company whose shares are listed on a stock exchange, shall within 30 days from the financial year ending March 31, as well as the record date of the company for the purposes of decla .....

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ub-regulation (1) of Regulation 7 and subregulation (2) of Regulation 8 . 6 6. Regulation 8(1) and 8(2) deal with the obligation cast on the persons holding shares of the Target company in excess of the prescribed limits and by promoters/persons holding control over the company to make annual disclosures regarding their shareholding in the Target Company to the Target Company within the time stipulated therein. Regulation 8(3) deals with the obligation cast on the Target Company to make annual d .....

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d 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 sto .....

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ormat prescribed for making disclosures under Regulation 8(3). As per the prescribed format, a listed company is required to give details of shareholding/voting rights (in number and percentage) as on 31st March of the financial year in question, as on 31st March of the previous financial year and the changes if any, between the above two financial years. From the format it becomes abundantly clear that every listed company is required to make yearly disclosures to the stock exchanges disclosing .....

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de by the company to the stock exchanges, it would not be proper to hold that under Regulation 8(3) disclosures have to be made only if there are changes in the shareholding of the persons/promoters set out under Regulations 8(1) and 8(2). Accepting such a contention advanced on behalf of the appellant would be contrary to the words expressly used under Regulation 8(3). 9. It is relevant to note that the obligation to make yearly disclosures is a continual obligation and not a conditional obliga .....

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nges so that the investors are made aware about the change in the shareholding of the company, if any. Fact that there are no changes in the shareholding cannot be a ground for the Company not to make disclosures under Regulation 8(3). Therefore, the expression the changes, if any in Regulation 8(3) simply means that not merely the shareholding as on the last day of the financial year but also the changes if any between the current and previous financial year has to be disclosed. Therefore, the .....

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