TMI Blog2016 (8) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... EBI Act and thereafter imposed a penalty of ₹ 25 lac under Section 15-HB of SEBI Act (maximum penalty provided for under this Section is Rs.One crore), we do not find any merit in the contentions raised on behalf of the Appellants. - Appeal No.192 of 2014, Appeal No.185 of 2014 - - - Dated:- 26-7-2016 - J.P. Devadhar, Jog Singh and Dr. C.K.G. Nair, JJ. For The Appellant : Mr. Sharan Jagtiani a/w Mr. Amit Dey, Advocates i/b Mindspright Legal, Mr. Chirag Balsara a/w Mr. Satyam Israni, Mr. Vinit Mehta and Ms. K. Sovte, Advocates i/b SD Israni Law Chambers For The Respondent : Mr. Kumar Desai a/w Mr. Manish Acharya, Advocates i/b Vigil Juris Per : Dr. C.K.G. Nair 1. Appellants in these two Appeals are aggrieved by a common order passed by the Adjudicating Officer ( AO for short) of Securities and Exchange Board of India ( SEBI for short) on 28th March, 2014. Hence, both theses Appeals are heard and disposed of by this common decision. The impugned order, based on an investigation conducted by SEBI into the dealings in the shares of Man Industries (India Limited) ( Company for convenience) for the period 15/4/2009 to 14/5/2009 imposed a penalty of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitute ( Niroo Gustar for short) and Green Refinement Company ( GRC for short) two Iranian Companies. The contract with Niroo Gustar was signed on March 1, 2009 and with GRC was signed on April 22, 2009. Details of the contract signed with these companies are on record. It is also on record that disclosure relating to bagging of both these contracts was made on April 29, 2009 thereby leading to a delay of 59 days and 7 days respectively from the date of signing the contracts as per interpretation of the provisions of PIT Regulations of immediate and continuous disclosure of price sensitive information. 6. The findings of the AO based on the orders bagged by the Company are as follows: - i. These orders constituted more than 50% of the annual order book of the Company for the relevant year and as such they were not just normal business activity of a manufacturing company. ii. The information relating to such huge orders was price sensitive meaning any information which relates directly or indirectly to a company and which if published is likely to materially affect the price of securities of company . iii. Information becomes price sensitive irrespective of whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board of the listed company. Schedule II of regulation 12(1) of PIT Regulations: Clause 2.1 Price sensitive information shall be given by listed companies to stock exchanges and disseminated on a continuous and immediate basis. 8. Two questions fall for consideration in these two Appeals; they are:- (a) Whether on the facts and in the circumstances of the present case, the AO of SEBI was justified in holding that the contracts for supply of goods entered into by the Company with foreign enterprises on 1/3/2009 and 22/4/2009 were price sensitive information and disclosing the said price sensitive information belatedly on 29/4/2009 was in violation of the PIT Regulations? (b) Assuming that the said contracts dated 1/3/2009 and 22/4/2009 constituted price sensitive information, whether, on the facts of present case, the AO of SEBI was justified in imposing a penalty of ₹ 25 lac against the Company as also on the Directors of the Company? 9. The learned Counsel for the Appellants argued extensively as to when the information relating to bagging of two orders became price sensitive and needed to be disclosed to the Stock Exchanges. On the day of signing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was fructified only on 28th April, 2009 and disclosure was made on 29th April, 2009. The show-cause notice does not distinguish between these two contracts. Specific conditions were incorporated into the contracts because of the restrictive international conditions of trading with Iran which needs to be factored in while examining contracts with entities in Iran over and above other standard contracts. It was further argued by Counsel for the Appellants that in the case of the second contract, a consensus/confirmation from a third party (PEDEC) was required and this was obtained only on 28th April 2009. On the basis of the above arguments, learned Counsel for the Appellants concluded that mere bagging of big sized contracts itself does not make them price sensitive; they become price sensitive only from the date when they become effective; there is a need for the distinguishing between the contract date and effective date of commencement; the contract itself has given provisions (Clause 7) specifying the conditions under which they become effective and, therefore, when the information becomes price sensitive. These factors are to be considered while deciding whether there is any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately and continuously. On the specific issue of a third party involvement in the second contract, Counsel for the Respondent stated that it should have been part of the contract itself, which is, however, not found in the said contract. 14. We find no merit in the arguments advanced by the Counsel for the Appellants. Their contention that the orders bagged by the Company became price sensitive only on the date of receiving the advance cannot be sustained in view of the fact that the orders constituted about 65% of the annual order book of the Company; share prices did increase by 4.74% on the date of announcement i.e. 29th April, 2009; the Company itself felt that the information is important enough to be disclosed and hence it was aware of the fact that this information was price sensitive and liable to be disclosed; the contracts became binding and effective on the date of signing the contracts as stated in the contract itself (Clause 7) irrespective of the other conditions specified under the same clause. There was no evidence about any proposed amendment to the contracts on the date of signing the contracts; third party agreement (of PEDEC) as a condition for fulfil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not liable to be punished. 16. Counsel for the Appellants also cited a few judgments in their contentions. Mr. Jagtiani, learned Counsel appearing on behalf of the appellant in Appeal No. 192 of 2014 fairly stated that in the past (though it was for a violation subsequent to the alleged violation in the present case) the Company has been found guilty of violating the PIT Regulations for not disclosing the contract entered into by the Company. However, it is submitted by the Counsel for the Appellants that the said decision of this Tribunal, namely Man Industries (India) Limited v/s SEBI (Appeal No. 208 of 2011 decided on 30.03.2012) is distinguishable on facts because, in that case the company had conceded that entering into a contract therein for sale of goods manufactured by the company was a price sensitive information under the PIT Regulations. Since the aforesaid decision was based on the consensus made by the company and the said consensus being contrary to various decisions of this Tribunal, the said decision cannot be applied against the Appellants herein. 17. In the context of the present case, Counsel for the Appellants relied on the decisions of this Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a concluded contract. In the present case, the contracts are concluded contracts and the clauses in each contract specifically provide that the respective contract shall be effective and binding from the date of entering into the contract. Thus, it is evident that as in the earlier case, the Appellants were aware that entering into contracts was a price sensitive information, however, the Appellants have failed to disclose the same immediately. 19. Strong reliance was placed by the Counsel for the Appellant on the decision of this Tribunal in case of Gujarat NRE Mineral Resources Ltd. That decision is distinguishable on facts. In that case, the appellant therein, an investment company, decided to acquire coal mining leases in Australia by selling a part of its investments in order to arrange requisite funds. The Appellant therein made corporate announcement regarding the acquisition of coal mines. However, there was no corporate announcement regarding its decision to dispose of its investment. Question raised therein was, whether the information regarding the decision to dispose of its investment was price sensitive. In that context it was held that earning income by an investme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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