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TMI Blog2016 (8) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants (in both Appeal Nos. 185 and 192 of 2014) under Section 15-HB of Securities and Exchange Board of India Act, 1992 ("SEBI Act" for short) for violation of certain provisions of SEBI (Prohibition of Insider Trading) Regulations, 1992 (hereinafter referred to as "PIT Regulations). 2. Man Industries Ltd. (Appellant No.1 in Appeal No.185 of 2014) is a manufacturer of Aluminum Extruded products and Saw Pipes in India. It is a leading manufacturer and exporter of Carbon Steel Line Pipes and listed on the Bombay Stock Exchange ("BSE" for short) and National Stock Exchange ("NSE" for short). This Company was promoted by members belonging to the Mansukhani family namely, Shri J.L. Mansukhani, Shri R.C. Mansukhani and Shri J.C. Mnasukhani. The Company and some of the Directors and officials are Appellants in Appeal No.185 of 2014 while Shri J.C. Mansukhani who was the Vice Chairman and Managing Director of the Company during the relevant time preferred a separate Appeal (No.192 of 2014). 3. SEBI conducted an investigation into the dealings of shares of Man Industries for the period from April 15, 2009 to May 14, 2009. It was revealed that the Company and its Board of Directors dela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been disclosed on the day of signing the contract i.e. March 1, 2009 and April 22, 2009. Since they were disclosed only on 29th April, 2009 there was a delay of 59 days in respect of the first order and 7 days in respect of the second order. 7. The relevant provisions of the PIT Regulations are reproduced below:- "PIT Regulations. Regulation 12(1) All listed companies and organizations associated with securities markets including: (a) the intermediaries as mentioned in section 12 of the Act, asset management company and trustees of mutual funds; (b) the self-regulatory organizations recognized or authorized by the Board; (c) the recognized stock exchanges and clearing house or corporations; (d) the public financial institutions as defined in section 4A of the Companies Act, 1956; and (e) the professional firms such as auditors, accountancy firms, law firms, analysts, consultants, etc., assisting or advising listed companies. shall frame a code of internal procedure and conduct as near thereto the Model Code specified in Schedule I of these regulations without diluting it in any manner and ensure compliance of the same. (2) The entities mentioned in sub-r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mencement, is the relevant date. Conditions under Clause 7 of the Contract, inter alia, include receipt of 25% of advance payment by the supplier. Accordingly, it is argued that given the international restrictions on trading with Iran prevailing at the relevant time, it was only on receipt of the advance payment that the contract could be taken as final and which becomes relevant to be disclosed. This advance was received on 28th April, 2009 and disclosure was made on 29th April, 2009. Therefore, the information became price sensitive only when the order was finally confirmed with advance payment and the disclosure was made immediately after that. 10. It was further argued by the Counsel for the Appellants that the contract signed on 1st March, 2009 was not a final contract as several modifications to that contract were made and as is evident on record. These amendments to the contract including changes in the quantities and hence the total value of the contract which are important considerations. There is no dispute on these facts. 11. Though nothing is on record, this Tribunal specifically asked the Counsel for the Appellants whether there is any evidence to show that as on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an entity disclosing information has to be careful about the timing of disclosing the information. 13. The learned Counsel for the Respondent emphasized the contentions in the impugned order. Quoting relevant provisions of the PIT Regulations, he emphasized that disclosures should be made on an immediate and continuous basis. Orders worth Rs. 1340 crore out of total order book of Rs. 2000 crore in the relevant year are not like normal small value orders. There is no reference to any proposed amendments to the Contract on the date of signing the contracts. He further emphasized the point that Clause 7 of the contract relied by the Appellants to distinguish between the effective and commencement date actually reads as follows: "This contract shall become effective and binding upon signing of the contract by the parties." And the first contract was signed on 1st March 2009 and the second on 22nd April, 2009 and therefore the delay of 59 and 7 days respectively in disclosing them. Conditions relating to opening of letter of credit, receipt of advance payment, termination, etc. are part of any standard contract. Sub-clause 7.2 of the contract further provides for additional grace pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en major changes to the contracts, if any, were effected the same also had to be disclosed. Conditions given under Clause 7 of the contract relating to advance payment, commencement of the contract, conditions of cancellation, etc. are part of any standard contract and cannot be taken as ground for delay in disclosure of entering into contract as on the date of signing the contracts. Since the information was liable to be disclosed under PIT Regulations, the argument that they were at best liable to be disclosed under Section 36 of the Listing Agreement only does not stand merit. Accordingly argument set out by the A.O. in the impugned order that the information was price sensitive and liable to be disclosed on the date of signing the contracts cannot be faulted. The contra-position taken by the Appellants that premature disclosure may invite penal action has no merit since it is the responsibility of any entity to prove that they made the right disclosures at the right time and if anything genuinely going wrong subsequently can be proved with evidence to that effect. It is difficult to fine tune the merit of disclosures in a disclosure based regulatory regime and as such the ideal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into such contracts. It is submitted that apart from the fact that the contracts were subjected to further negotiation which resulted in reduction of the quantum of sale and also amendment of the contract disclosures were made immediately on deposit of initial amount of US $ 1.5 million and therefore, in the facts of present case, no penalty ought to have been imposed against the Appellants. 18. We see no merit in the above contentions. As rightly contended by learned Counsel for SEBI, in the present case, the contracts in question (even after amendment) were for Rs. 1340 crores, whereas, the total contracts for which the Company had orders for the entire year were to the extent of Rs. 2,000 crores. Since the value of two contracts in question constituted nearly 65% of the total order book of the Company during the year, it is abundantly clear that entering into such contracts constituted a price sensitive information which ought to have been disclosed under Scheduled II of regulation 12(1) of the PIT Regulations. Apart from the above, in the past, the Company had conceded before SEBI that bagging orders worth about Rs. 1200 crore in that year was a price sensitive information. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed. That decision cannot be applied to the facts of present case, where the two contracts entered into by the company constituted nearly 65% of the total orders received by the company in that year. In other words, every contract for supply of goods manufactured by a company may not be a price sensitive information, however, in the facts of present case, the contracts to supply 65% of the yearly contracts received by the company, constituted price sensitive information which ought to have been disclosed. 20. Strong reliance was also placed by the learned Counsel for the Appellant on the decision of this Tribunal in case of Mr. Anil Harish v/s SEBI (Appeal No. 217 of 2011 decided on 22.06.2012). In that case, it was found that the Appellant therein had followed a consistent practice of informing the stock exchange as and when orders of about Rs. 100 crore are received and the information which not disclosed were less than Rs. 100 crore. In the present case, there is no such practice followed by the Appellants. Moreover, in relation to a similar contract entered into by the Company it is admitted that information of such contract constituted price sensitive information. There ..... 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