Proportionality in disclosure-violation penalties: SAT upheld penalties as justified and non-discriminatory on the facts found.

For admitted non-disclosure of share acquisition and sale transactions under insider trading and takeover regulations, the SAT held that penalties are not to be interfered with unless they are shockingly disproportionate to the gravity and extent of the breach. The adjudicating authority was entitled to assess the nature of each violation, the role of each appellant, the number of defaults, and the statutory maximum penalty, and the penalties were found justified. The SAT also held that different penalty amounts were permissible because the appellants were not similarly placed; the differentiation reflected relevant factual distinctions and the degree of violation, not arbitrary or discriminatory treatment. The appeals therefore failed and the penalties were sustained.

---

---

Issues: (i) Whether the monetary penalties imposed for non-disclosure of share transactions under the insider trading and takeover regulations were disproportionate to the violations proved. (ii) Whether the adjudicating authority applied an impermissible or discriminatory yardstick in fixing different penalties for different appellants.

Issue (i): Whether the monetary penalties imposed for non-disclosure of share transactions under the insider trading and takeover regulations were disproportionate to the violations proved.

Analysis: The penalties were imposed for admitted failures to make mandatory disclosures concerning acquisition and sale of shares. The quantum of penalty was measured against the nature of each violation, the role of the appellant concerned, the number of defaults, and the statutory maximum penalty prescribed. The principle of proportionality was held to apply only where the penalty is shockingly disproportionate to the gravity and extent of the breach, which was not the position on the facts found.

Conclusion: The penalties were held to be justified and not disproportionate.

Issue (ii): Whether the adjudicating authority applied an impermissible or discriminatory yardstick in fixing different penalties for different appellants.

Analysis: Different amounts were imposed because the appellants were not identically placed. The promoter director and compliance officer committed repeated defaults, the promoters were penalised having regard to their respective obligations, and the public shareholders were dealt with according to the scale and effect of their transactions. The differentiation was based on relevant factual distinctions and the degree of violation, not on arbitrary classification.

Conclusion: The penalty structure was held to be neither discriminatory nor arbitrary.

Final Conclusion: The appeals failed and the penalties imposed by the adjudicating authority were sustained.

Ratio Decidendi: A penalty imposed for admitted disclosure violations under SEBI law will not be interfered with unless it is shown to be shockingly disproportionate or arbitrary, and differentiation in quantum is permissible where it is based on the nature, extent, and frequency of the breach.

---