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2016 (7) TMI 877 - SECURITIES APPELLATE TRIBUNAL MUMBAI

2016 (7) TMI 877 - SECURITIES APPELLATE TRIBUNAL MUMBAI - TMI - Bonafide public announcements - whether, the WTM of SEBI is justified in holding that some of the unimplemented corporate announcements were made by SIL with the fraudulent intention of influencing the price of SIL scrip and thereby enable the promoter group entities to off load the shares of SIL at the inflated prices and make unlawful gains? - Held that:- There is nothing on record to suggest that any meetings were held with adjoi .....

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e parties. Apart from the above, very fact that proposal to acquire 200 acres of land has been abandoned on ground of unavailability of appropriate tract of land and steep rise in land prices, clearly shows that the public announcements were made without ascertaining the availability of suitable land at suitable prices. Moreover, decision to abandon the project relating to acquisition of land under joint venture was taken belatedly and even BSE was intimated about the abandonment of the proposal .....

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ere taken in that behalf. Argument of the appellants that they were waiting for the right time to act on the proposal is unacceptable because, in the ordinary course, decision to amalgamate companies is taken only if the circumstances as on that date demand amalgamation of companies. In the present case, public announcements relating to amalgamation were made in the year 2007, however, no steps were taken to implement it for several years and it is only on 30.4.2013, after receipt of show cause .....

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of SEBI to arrive at a conclusion that the unimplemented public announcements were made with fraudulent intentions to facilitate the promoter group entities to off load the shares of SIL at inflated prices. In these circumstances no fault can be found with the impugned order. Since the appellants have already undergone the punishment, question of considering any mitigating factor does not arise. - Miscellaneous Application no.89 of 2014 in Appeal No.224 of 2014 & Miscellaneous Application no.91 .....

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f 2014 in Appeal no.226 of 2014 There is delay of 2 days in filing Appeal nos.224 of 2014 and 226 of 2014 respectively. For the reasons stated in the Miscellaneous Applications the delay is condoned. Both the Miscellaneous Applications are disposed of accordingly. Appeal nos.224 of 2014 and 226 of 2014 1. Appellants in these two appeals are aggrieved by the order passed by the Whole Time Member ( WTM for short) of Securities and Exchange Board of India ( SEBI for short) on 21.5.2014. By that ord .....

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der, both these appeals are heard together and disposed of by this common decision. 2. At the outset, it is relevant to note that the appellants have already undergone the punishment in as much as the appellants have not accessed the securities market for two years as stipulated in the impugned order and as such the appeals have become infructuous. However, it is submitted by counsel for the appellants that the appeals be heard and decided on merits, because, according to the appellants, the imp .....

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d from 1.10.2006 to 12.3.2007 and the steps taken by SEBI pursuant to the aforesaid investigation are as follows: a) As on 30.9.2006, the promoters of SIL held 79,78,832 shares of SIL which constituted 45.84% of the entire shares issued by SIL. The said shareholding of the promoters came down to 67,57,677 shares (38.83%) as on December 31, 2006 and further came down to 49,38,010 shares (28.38%) as on March 31, 2007 on account of sale of shares effected by the said promoters. b) During the invest .....

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17,775 shares. d) One month after the investigation period the price of the scrip decreased from ₹ 27.60 on March 13, 2007 to ₹ 15.10 on April 30, 2007 and the scrip was traded with an average daily volume of 5,26,582 shares. e) During the investigation period, SIL had come out with a number of favourable corporate announcements and there was a gradual price rise on the back of those public announcements. f) Out of several corporate announcements made during the investigation period .....

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₹ 30 per share or as per the price as may be decided as per guidelines prescribed for preferential issue of shares. This announcement was not implemented and it is only after SEBI issued show cause notice on 25.2.2008, SIL on 28.2.2008 withdrew its application for inprinciple approval from BSE. ii) On January 24, 2007, SIL announced that Board meeting will be held on February 13, 2007 inter alia to consider acquisition of further 200 acres of land near its 55 acre land bank at Kandla Port, .....

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industrial park, power generation plant for captive consumption, road and telecom infrastructure, building interiors etc. This public announcement was also not implemented by SIL and much after the issuance of show cause notice, SIL informed the stock exchange on 30.4.2013 about the withdrawal of above joint venture proposal. iii) On January 24, 2007, SIL announced that Board meeting will be held on February 13, 2007 to consider, inter alia, amalgamation of other group companies with SIL. On Feb .....

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SIC Stocks & Services Pvt. Ltd. ( SIC for short) and one Mr. Purshotam Khandelwal ( PK for short) as it was noticed that SIL funded PK through SIC for trading in the shares of SIL. It was noticed that PK by his trades created artificial buying pressure in the scrip of SIL by manipulating the order book and indulged in self trades, synchronized trades with promoter group entities with a view to inflate the price of the scrip and thereby enable the promoter group entities to offload substanti .....

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ation) Act, 1956. j) Appellants in their affidavit in reply and also during the course of personal hearing denied the allegations made in the show cause notice and submitted that the public announcements were made in the ordinary course of business and some of the public announcements could not be implemented due to bonafide reasons and therefore no adverse inference could be drawn against the appellants. k) Rejecting the aforesaid contentions, the WTM of SEBI has passed the impugned order, wher .....

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nted corporate announcements were made by SIL with the fraudulent intention of influencing the price of SIL scrip and thereby enable the promoter group entities to off load the shares of SIL at the inflated prices and make unlawful gains. 6. Counsel for appellants submitted that all public announcements were made by SIL with bonafide intention of implementing the said announcements and merely because, some of the announcements could not be implemented due to bonafide reasons, the WTM of SEBI oug .....

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l allotment of shares, it is submitted that since SIL was in need of urgent funds to meet the expenses relating to its expansion, power plant etc, the promoters of SIL decided to subscribe to its shares by way of preferential allotment. Accordingly public announcements were made at the proposal stage and also after the proposal was approved by the Board. Immediately after the proposal was approved by the Board, SIL as per SEBI Guidelines, sought in-principle approval from BSE for listing the sha .....

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vide its letter dated 29.5.2007 advised SIL to submit certified copy of the resolution passed under section 81(1A) of the Companies Act, 1956. In the said letter it was also stated that grant of approval under clause 24(a) of the Equity Listing Agreement would be considered only on SIL complying with Regulation 10 of Takeover Regulations, 1997. c) Thereupon EGM of SIL shareholders was convened on 4.6.2007 wherein a resolution was passed for preferential allotment of 30 lac equity shares to the .....

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of exemption application, SIL decided to withdraw the exemption application and the same was communicated to BSE vide letter dated 28.2.2008. f) As the funds could not be raised through preferential allotment, in March, 2008 SIL decided to raise funds to the tune of ₹ 30 crores by issuance of shares through the rights issue. In fact the promoters of SIL subscribed to 1,87,54,611 shares (around 95%) under the rights issue and thereby infused around ₹ 28,13,19,165/- in to SIL. In these .....

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pellants. g) With reference to the public announcement relating to acquisition of 200 acres of land, it is submitted that neither in the public announcement dated 24.1.2007 nor in the public announcement dated 5.2.2007 it was stated that SIL has already acquired 200 acres of land. What was stated in the public announcements was that SIL was in the process of acquiring 200 acres of land for development under a joint venture with Vishwas Infrastructure Ltd. Such an announcement could not be said t .....

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imated the same to BSE. The WTM of SEBI, without verifying the documents furnished by the appellants was not justified in arriving at a conclusion that the decision to acquire 200 acres of land was not a bonafide decision. i) With reference to the announcement relating to amalgamation of companies, it is submitted by the counsel for appellants, that after making public announcements, SIL was waiting for the right time to act on the proposal for amalgamation. Unfortunately, there being no right t .....

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ntions. 9) As rightly contended by counsel for SEBI, various acts committed by SIL during the investigation period led to price rise in the scrip of SIL and during the said period, the promoters and their associates off loaded the shares of SIL at higher prices and made huge profits. In this context it is relevant to note that the promoters and their associates who were intending to pump-in funds amounting to ₹ 30 crores by subscribing to preferential allotment of shares at ₹ 30 per .....

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ions, then, application seeking in-principle approval would have been made after complying with all requisite conditions. Very fact that BSE has repeatedly found that SIL made applications without complying with requisite conditions clearly show that SIL was not sincere in making the application. Initial application made by SIL was rejected by BSE on ground that notice to the shareholders of SIL as required under the SEBI (DIP) Guidelines has not been issued and hence the Auditor s certificate w .....

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ssuming that the appellants came to know about their obligation under the Takeover Regulations, 1997 only on receiving letter from BSE, very fact that the appellants approached SEBI seeking exemption from Takeover Regulations after considerable delay clearly shows that the appellants were not serious in implementing the proposal. Moreover, very fact that the appellants unilaterally chose to abandon the proposal of preferential allotment solely based on the negative recommendations of the takeove .....

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of the public announcements were found to be genuine cannot be a ground not to take any action in respect of public announcements which were found to be not made with bonafide intentions. Thus, in the facts of present case, inference drawn by the WTM of SEBI that the public announcements made by appellants relating to preferential allotment of shares were not bonafide announcements and accordingly imposing penalty on appellants cannot be faulted. 12. Similarly, public announcements relating to .....

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ntended to lure the investors. Board of directors of SIL could approve joint venture only if there existed a blue print of the project. There is nothing on record to suggest that any meetings were held with adjoining land owners and Vishwas Infrastructure Ltd. in connection with the alleged joint venture, before or after the public announcements. Further, the land documents furnished by the appellants related to the year 2009, whereas, the public announcements relating to acquisition of lands we .....

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suitable land at suitable prices. Moreover, decision to abandon the project relating to acquisition of land under joint venture was taken belatedly and even BSE was intimated about the abandonment of the proposal for acquisition of 200 acres of land much after the issuance of show cause notice by SEBI. In these circumstances, the decision of the WTM of SEBI that the public announcements relating to acquisition of 200 acres of land for development under joint venture was not made with bonafide in .....

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