SEBI Takeover Regulations: Joint Promoter Group Disclosure Obligation & Penalties

The Tribunal held that the obligation to make yearly disclosures under the SEBI Takeover Regulations falls on the promoter group as a whole, not on individual promoters within the group. Penalties for non-disclosure should be imposed on the promoter group and recovered jointly from promoters holding shares or voting rights. The Tribunal criticized SEBI for inconsistent implementation of regulations and remanded the appeals for fresh consideration, emphasizing the importance of SEBI ensuring consistency in its regulatory approach.

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Issues Involved:
1. Obligation to make yearly disclosure under Regulation 8(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and Regulation 30(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
2. Interpretation of the term "promoter" and whether it includes "promoter group".
3. Imposition of penalty for non-disclosure and whether it should be on individual promoters or the promoter group.
4. Consistency in the implementation of regulations by SEBI.

Detailed Analysis:

1. Obligation to Make Yearly Disclosure:
The core dispute in these appeals revolves around whether the obligation to make yearly disclosure under Regulation 8(2) of the 1997 Takeover Regulations and Regulation 30(2) of the 2011 Takeover Regulations falls on each individual promoter or on the promoter group as a whole. The Tribunal noted that both regulations use the term "promoter," which includes any person belonging to the promoter group as per the definitions provided in the respective regulations. Consequently, the obligation to make yearly disclosure should be interpreted as being on the promoter group, not on each individual promoter within the group.

2. Interpretation of the Term "Promoter":
The Tribunal emphasized that the term "promoter" as defined in both the 1997 and 2011 Takeover Regulations includes the "promoter group." This means that any obligation cast on the promoter is also cast on the promoter group. The Tribunal rejected SEBI's argument that the word "promoter" should be interpreted to mean each individual promoter, stating that such an interpretation would lead to absurd consequences, such as requiring disclosures from entities that do not hold any shares in the target company.

3. Imposition of Penalty:
The Tribunal addressed the issue of whether penalties for non-disclosure should be imposed on individual promoters or the promoter group. It was held that if the promoter group fails to make the required disclosures, the penalty should be imposed on the promoter group and recovered jointly and severally from the promoters within the group who hold shares or voting rights. The Tribunal criticized SEBI for the inconsistency in its approach, where in some cases penalties were imposed on individual promoters and in others on the promoter group.

4. Consistency in SEBI's Implementation:
The Tribunal expressed concern over SEBI's inconsistent implementation of the regulations and its failure to take a clear stand on the issue. The Tribunal highlighted that SEBI's indifferent attitude resulted in conflicting views among its Adjudicating Officers (AOs), which led to uncertainty and inconsistency in the application of the regulations. The Tribunal stressed the importance of SEBI ensuring consistency in the implementation of its regulations.

Conclusion:
The Tribunal concluded that the obligation to make yearly disclosures under Regulation 8(2) of the 1997 Takeover Regulations and Regulation 30(2) of the 2011 Takeover Regulations is on the promoter group. If the promoter group fails to make the disclosures, the penalty should be imposed on the promoter group and recovered jointly and severally from the promoters within the group who hold shares or voting rights. The Tribunal set aside the orders passed by SEBI's AOs and remanded the appeals back to SEBI for fresh consideration on merits, emphasizing the need for SEBI to ensure consistency in its regulatory approach.

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