TMI Blog2020 (3) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... ation sought by SEBI from October 2012 till July 2015. As explained in the aforesaid paragraphs, the contention of the appellants that substantive compliance of Clause 36 of the Listing Agreement has been made cannot be accepted since important / material information relating to transferee entity (IKAB), a related party, its affiliation to the appellants as a group entity, the detailed consideration of the transactions, etc. were either not disclosed or disclosed after considerable time. Therefore, the finding in the impugned order that the appellants have violated the true spirit of Clause 36 cannot be faulted. Similarly, the submission that Clause 50 is not violated because SEBI has no mandate on the accounting standards has no merit. A reading of Clause 50 makes it clear that the stated accounting standards have to be mandatorily followed by a listed entity. Accordingly, we uphold the finding in the impugned order that the appellants have violated Clause 36 and Clause 50, alongwith the stated accounting standards. While upholding the impugned order partially, we are also of the considered view that the penalty imposed on the appellants needs to be reduced. Therefore, some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the National Stock Exchange of India Ltd. ( NSE for short) and BSE for the sale / transfer of the broking and depository participants business. 3. On October 30, 2012 SEBI sought certain details from Appellant No. 1, Oasis. Based on further information collected by SEBI over a period of time a show cause notice dated January 1, 2018 was issued to the appellants alleging violations of Clauses 36, 41 and 50 of the Listing Agreement read with Section 21 of the SCRA and calling upon why an enquiry should not be initiated against them and penalty not imposed under Section 23A and 23E of the SCRA. The show cause notice specifically alleged noncompliance of Section 36 of the Listing Agreement in Appellant No. 1 s sale of its broking and depository participants business. While discontinuation and sale of these businesses were material events for Appellant No. 1, Oasis, adequate disclosure of the same was not made. Rather, it was alleged that only selective / partial disclosure was made without even mentioning the name of the transferee entity, IKAB nor affiliation of the transferee entity that it is a group company of Oasis. In addition, material facts relating to the amount of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court on November 15, 2019, copy of which was also produced on record. 7. Further, on merits the learned counsel for the appellant contended that all the material on record show that the proposed transfer, regulatory compliance, board approval and eventual transfer were available in public domain and hence all material information was disclosed as required under Clause 36 of the Listing Agreement. Moreover, notice for shareholders meeting was issued to be held on December 20, 2008. Therefore substantial compliance has been made and hence allegations cannot be made with inordinate and unexplained delay on an issue which SEBI was fully aware of and in any case given the undue and unexplained delay in initiating proceedings no penalty should have been imposed on a matter where substantial compliance have been made. 8. As regards alleged violation of Clause 41 of the Listing Agreement it was contended by the learned counsel that small variations in reported profits around ₹ 30 lakh attributable to bonafide error in treating an item as an expenses etc. should not be used to invoke penalty provisions particularly when the appellant is currently an RBI regulated NBFC. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inordinate delay in issuing the show cause notice, we propose to deal with the same in the facts of this matter. From the records the following dates are noted since the chronology of events is important in deciding the factum of delay. October 30, 2012 SEBI wrote to the Chairman, Audit Committee of the appellant company seeking number of information on the subject examination in the matter of Oasis . The said information was sought under the relevant sub-section of section 11 of SEBI Act and advising appellant to furnish the information at the earliest, but not later than the 15 days from the date of the letter. November 16, 2012 Part reply by the appellant. December 17, 2012 Another letter to the Chairman, Audit Committee of the appellant referring to October 30, 2012 letter of SEBI and the November 16, 2012 reply by the appellant and seeking part of the information which was not furnished and / or seeking further details. The appellant advised to furnish the said information / details within five working days from December 17, 2012. Decem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant and seeking the remaining information by October 5, 2013. December 7, 2013 Reply from appellant, again giving part of the information stating that detailed information relating to two years (2008-09 and 2009-10) are not available in excel format etc. April 3, 2014 Letter from SEBI seeking further clarifications and additional information and directing the appellant to provide the same within 15 days from the date of the receipt of this letter. April 25, 2014 Appellant s letter furnishing purportedly the information sought. May 19, 2014 E-mail from SEBI to appellant Anil Kumar Bagri seeking further clarifications on the information provided seeking the said clarifications within 7 days. May 26, 2014 Reply from appellant stating that since he was travelling requesting two weeks more time to furnish the reply. May 27, 2014 E-mail from SEBI seeking the reply latest by June 4, 2014. Multiple dates Var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the transfer and its details, etc. were not disclosed as held in the impugned order. Those were all material facts to be disclosed particularly given the fact that at the relevant time the broking and depository business of the appellant was the predominant business of the appellant. Only in its disclosure to BSE on July 14, 2010 appellant informed the name of the transferee entity and its affiliation to the appellant and even that disclosure was made after five weeks from the date of effecting the transfer on Jun 7, 2010. Therefore, given these undisputed facts we find no deficiency in the impugned order that the appellant did not make full disclosure of the transfer of its business to a group company as required under Clause 36 of the Listing Agreement. The reach of Clause 36 is clear from the provision itself which reads as follows :- The Company will also immediately inform the Exchange of all the events, which will have bearing on the performance / operations of the company as well as price sensitive information . Given the wide nature of this clause, it is evident that complete details relating to sale / transfer of its broking and depository business had to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2012 till July 2015. As explained in the aforesaid paragraphs, the contention of the appellants that substantive compliance of Clause 36 of the Listing Agreement has been made cannot be accepted since important / material information relating to transferee entity (IKAB), a related party, its affiliation to the appellants as a group entity, the detailed consideration of the transactions, etc. were either not disclosed or disclosed after considerable time. Therefore, the finding in the impugned order that the appellants have violated the true spirit of Clause 36 cannot be faulted. Similarly, the submission that Clause 50 is not violated because SEBI has no mandate on the accounting standards has no merit. A reading of Clause 50 makes it clear that the stated accounting standards have to be mandatorily followed by a listed entity. Accordingly, we uphold the finding in the impugned order that the appellants have violated Clause 36 and Clause 50, alongwith the stated accounting standards. 19. While upholding the impugned order partially, we are also of the considered view that the penalty imposed on the appellants needs to be reduced. Therefore, taking into account all the facts pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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