TMI Blog2016 (3) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... the trading in the shares of the company were suspended during the relevant period it could not be presumed that the appellants could acquire shares through off market. The language of the second proviso to Regulation 11(2) being clear and unambiguous, the appellants are not justified in contending that in the absence of trading in the shares of the company on the stock exchange, the appellants could acquire shares in the off market. In the instant case, SEBI by misconstruing the provisions contained in Section 15H(ii) of SEBI Act, has erroneously imposed penalty of ₹ 25 lac by treating the above factors as mitigating factors. In view of the decision of the Apex Court in case of SEBI vs. Roofit Industries Ltd. [ 2015 (11) TMI 1387 - SUPREME COURT ] which holds that mitigating factors set out in Section 15J are not applicable to violations covered under Section 15H(ii) as it stood prior to September 8, 2014, we were inclined to remand the matter to enable SEBI to take corrective measures. However, counsel for SEBI was not in favour of remand and sought dismissal of the appeal. Thus, in the facts of present case, where penalty of ₹ 25 lac is imposed as against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e makes a public announcement to acquire shares in accordance with the Takeover Regulations, 1997. However, the second proviso to Regulation 11(2) provides that an acquirer covered under Regulation 11(2) may acquire additional shares, upto 5%, without making a public announcement, provided the acquisition is made through open market purchase in normal segment on the stock exchange. 4. Since the additional shares to the extent of 2.44% were acquired by the appellants in the year 2009 not through the stock exchange but in the off market it is apparent, that the said acquisitions were not covered under the second proviso to Regulation 11(2) of the Takeover Regulations, 1997. 5. Sometime in May 2010, the appellants sought to sell the shares of the company to purchasers which were in excess of the limits prescribed under Regulation 10 of the Takeover Regulations, 1997 and hence offer obligations under the Takeover Regulations, 1997 got triggered. Thereupon, the purchasers made public announcement on May 19, 2010 and the open offer was made on June 29, 2010. 6. On perusal of the documents annexed to the open offer, it was noticed by SEBI that the appellants had acquired shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AO ought not to have held that the appellants have failed to make public announcement. d) Even if it is held that in the facts of present case, acquisition through off market was in violation of Regulation 11(2), the said violation would be technical, procedural and venial breach because, in view of the trading in the shares of the company being suspended, the appellants inadvertently believed that the off market purchases would be covered within the sweep of second proviso to Regulation 11(2) and hence no fault could be found with the appellants. e) The alleged violations are not deliberate and intentional and in contumacious disregard of provisions of law. f) The AO failed to consider the submission of the appellants that at the relevant time the company was in financial shambles and as a result of the financially weak and unviable position, many employees had left the company. Appellants had also to suffer financial difficulties since they were trying to run the company by some means. g) The AO failed to consider that the alleged violations committed by the appellants had no impact on the price of the shares of the company. h) The AO failed to consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed during the relevant period it could not be presumed that the appellants could acquire shares through off market. The language of the second proviso to Regulation 11(2) being clear and unambiguous, the appellants are not justified in contending that in the absence of trading in the shares of the company on the stock exchange, the appellants could acquire shares in the off market. 13. If there was genuine need to purchase the shares, then the appellants could have approached SEBI seeking relaxation of the condition set out under the second proviso to Regulation 11(2). Without seeking relaxation of the conditions set out in the second proviso to Regulation 11(2) appellants could not have acquired shares through off market and still claim that the said acquisitions are in compliance with the second proviso to Regulation 11(2). 14. Argument of the appellants that the proceedings initiated against the appellants suffer from gross delay and laches and, therefore, the impugned order is liable to be quashed and set aside is without any merit, because, firstly, neither the SEBI Act nor the regulations framed thereunder prescribe any time limit for initiating proceedings against th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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