9911796707
TMI Blog2016 (7) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... AO of SEBI has imposed penalty against each appellant u/s. 15A(b) of Securities and Exchange Board of India Act, 1992 ('SEBI Act' for short) for violating the provisions contained in the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ('1997 Regulations' for short) read with Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ('2011 Regulations' for short) and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 ('PIT Regulations' for short). Penalty is also imposed against each appellant u/s. 15A(a) of SEBI Act for violating Section 11C(3) and Section 11C( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had applied for convertible equity warrants received 1,69,50,000 shares. Balance 5,15,00,000 shares were issued by MIL to the remaining convertible equity warrant holders sometime in May 2010; (f) According to SEBI, on issuance of 24,85,00,000 shares on February 20, 2010, total shares issued by MIL stood at 32,00,00,000 shares and since the appellant on February 20, 2010 received 1,69,50,000 shares of MIL, the shareholding of the appellant in MIL exceeded 5% and hence disclosure obligation under Regulation 7(1) and 7(1A) read with Regulation 7(2) of 1997 Regulations and also under Regulation 13(1) of PIT Regulations got triggered. Admittedly, the appellant made no disclosure under any of the aforesaid regulations; (g) During the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for violating regulation 7(1) of the 1997 Regulations and penalty of Rs. 2,50,000 imposed under section 15A(b) of SEBI Act for violating Regulation 13(1) of PIT Regulations, it is submitted by counsel for appellant that in the present case, the controversy has arisen on account of MIL issuing 30,00,00,000 shares in two tranches i.e. initially issuing 24,85,00,000 shares on February 20, 2010 and thereafter issuing the balance 5,15,00,000 shares in May, 2010. If the entire 30,00,00,000 shares were issued at a time, the shareholding of the appellant would have been less than 5% and hence disclosure obligation would not have arisen. Therefore, if on account of MIL issuing shares in two tranches on account of which the shareholding of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convertible equity warrants of MIL it was known that as and when the warrants were converted into shares, the shareholding of the appellant would be below 5% and as such the appellant would not be required to make disclosure either under the 1997 Regulations or under the PIT Regulations. Therefore, on February 20, 2010 when the appellant received 1,69,50,000 shares from MIL, there was no reason for the appellant to believe that its shareholding in MIL would exceed 5%. Fact that as per notice dated November 5, 2009 MIL could issue shares in tranches does not mean that the appellant was given to understand that on account of MIL issuing shares in tranches, the shareholding of the appellant may exceed 5%. Apart from the above, there is no mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eded 5% and hence, the appellant was required to make disclosures under the 1997 Regulations and PIT Regulations. 8. In these circumstances, in the facts of present case, in our opinion, failure to make disclosure during the period from February 20, 2010 till May 2010 cannot be attributed to the appellant and, therefore, the appellant cannot be held guilty of violating the 1997 Regulations and PIT Regulations. Consequently, penalty imposed under section 15A(b) of SEBI Act on ground that the appellant has violated the 1997 Regulations and PIT Regulations cannot be sustained. 9. As regards the penalty of Rs. 2,00,000 imposed for violating section 11C(3) and Rs. 2,00,000 for violating section 11C(5) of the SEBI Act it is not in dispute that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 15A(b) of SEBI Act for allegedly violating the 1997 Regulations and PIT Regulations is quashed and set aside. However, penalty under section 15A(a) of SEBI Act for violating section 11C(3) and section 11C(5) of SEBI Act respectively is upheld. Each appellant is directed to pay the penalty imposed by the AO of SEBI for violating section 11C(3) and penalty imposed for violating section 11C(5) of SEBI Act, within a period of six weeks from today. If the appellants pay the said amount within six weeks from today, then, SEBI shall accept the same in full and final settlement of the claim under the impugned order. If the appellants fail to pay the aforesaid penalty within six weeks from today, then, SEBI shall be entitled to recover that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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