2015 (6) TMI 791 - AT - Companies Law

SEBI penalty appeal dismissed for failure to disclose yearly information under regulations.

Comfort Fincap Limited Versus Securities and Exchange Board of India

The Tribunal dismissed the appeal challenging a penalty imposed by SEBI on the appellant for failing to make yearly disclosures under regulation 8(3) of ... Penalty for violation of regulation 8(3) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (SAST) - Whether intention , suspension of trading in exchange and reporting is only for academic purpose, have any impact on the penalty amount imposed by SEBI - Held that:- Obligation to make disclosures under regulation 8(3) of SAST Regulations, 1997 is mandatory and that obligation is not dependent upon any of the circumstances set out hereinabove. Penalty for not making disclosures under regulation 8(3) SAST Regulations, 1997 for the respective year as per section 15A(b) of SEBI Act, 1992 is ₹ 1 lac per day or ₹ 1 crore whichever is lower. In the present case, penalty at the rate of ₹ 1 lac per day for the years 1998 to 2010 would be ₹ 1 crore per year, whereas, the adjudicating officer after considering all mitigating factors set out under section 15J of the SEBI Act, 1992 has imposed composite penalty of ₹ 10 lac for all the years which comes to less than ₹ 1 lac per year. In these circumstances, decision to impose penalty of ₹ 10 lac for all the years cannot be said to be unreasonable or excessive. - Decided against the appellant. Issues:Challenge to penalty imposed for violating regulation 8(3) of SAST Regulations, 1997.Analysis:The appeal was filed to challenge a penalty imposed by SEBI on the appellant for failing to make yearly disclosures under regulation 8(3) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997. The appellant argued that the penalty of Rs. 10 lac was arbitrary, excessive, and violated Section 15J of the SEBI Act, 1992. The appellant contended that there was no intention to hide the transaction by not making the required disclosures, and trading in the appellant's equity shares was suspended on the Delhi Stock Exchange for a period, which, according to the appellant, justified not imposing the penalty. Additionally, the appellant claimed that disclosures under regulation 8(3) were not disseminated by the stock exchanges and were only for academic purposes, and there were no investor complaints against the appellant for non-disclosure.The Tribunal rejected the appellant's contentions, emphasizing that the obligation to make disclosures under regulation 8(3) of SAST Regulations, 1997 is mandatory, irrespective of the circumstances. The penalty for not making such disclosures is prescribed under section 15A(b) of the SEBI Act, 1992, which is Rs. 1 lac per day or Rs. 1 crore per year, whichever is lower. In this case, the penalty imposed by the adjudicating officer was Rs. 10 lac for all the years combined, amounting to less than Rs. 1 lac per year. The Tribunal concluded that the decision to impose the penalty was not unreasonable or excessive, considering the mitigating factors under section 15J of the SEBI Act, 1992. Therefore, the appeal was dismissed, and no costs were awarded to either party.