2010 (1) TMI 1251 - AT - Companies Law

Tribunal overturns FUTP violation, upholds IT breach penalties. Reduced fines for non-disclosure.

Rajendra G. Parikh Versus Securities and Exchange Board of India

The Tribunal set aside findings of violation of the FUTP Regulations due to procedural irregularities. However, upheld the findings of violation of IT ... - Issues Involved:1. Violation of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (FUTP Regulations).2. Violation of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (IT Regulations).Summary:1. Violation of FUTP Regulations:The Appellants, including the promoter and managing director of JIK Industries Limited, were accused of offloading shares in off-market transactions to conceal their identity and escape the surveillance net of the exchanges. The adjudicating officer found them guilty of violating Regulations 3(a), 3(c), and 4(1) of the FUTP Regulations. However, the Tribunal noted that the adjudicating officer recorded findings beyond the show cause notice and relied on documents not furnished to the Appellants, thus violating principles of natural justice. Consequently, the findings regarding the violation of FUTP Regulations were set aside.2. Violation of IT Regulations:The Appellant and his wife were also accused of failing to disclose changes in their shareholding as required u/s 13(3) and 13(4) of the IT Regulations. The adjudicating officer found them guilty based on their initial admission to the investigating officer that they had not made the necessary disclosures. Despite the Appellants' later claim that they had made the disclosures, the Tribunal upheld the adjudicating officer's findings due to the inconsistency in their statements.Penalty:The adjudicating officer had imposed a monetary penalty of Rs. 15 lacs on each of the two Appellants for violating both the FUTP and IT Regulations. Since the Tribunal set aside the findings related to the FUTP Regulations, it reduced the penalty to Rs. 3 lacs each for the violation of the IT Regulations.Conclusion:Appeals No. 43, 265, 267, and 279 of 2009 were allowed, and the impugned orders were set aside. Appeals No. 44 and 45 were partly allowed, with the penalty reduced to Rs. 3 lacs each. The Appellants in Appeals No. 44 and 45 were given six weeks to pay the penalty amount.