Tribunal partially upholds appeal on takeover regulation violations, quashing some penalties but affirming others.

The Tribunal partly allowed the appeal in a case involving violations of takeover regulations. Penalties for breaches of Regulation 7(1) and 7(2) were quashed due to unreasonable delay and reliance on legal precedents. However, penalties for breaches of Regulation 3(3) and 3(4) regarding inter-se transfers and Regulation 8(3) for delayed disclosure of promoter holdings were upheld. The appellants were directed to pay affirmed penalties within six weeks, with each party bearing its own costs.

---

---

Issues Involved:
1. Violation of Regulation 7(1) and 7(2) of the Takeover Regulations.
2. Violation of Regulation 7(1A) read with Regulation 7(2) regarding the sale of shares from 2005 to 2011.
3. Violation of Regulation 3(3) and 3(4) concerning inter-se transfer of shares.
4. Violation of Regulation 8(3) for non-disclosure of promoter holding for the financial year 2010-2011.

Detailed Analysis:

1. Violation of Regulation 7(1) and 7(2) of the Takeover Regulations:
The appellants contended that they had complied with the rigorous disclosure requirements under Chapter III of the Takeover Regulations when they acquired the target company in 1999. They argued that this compliance should suffice, negating the need for additional disclosures under Regulation 7. However, the Tribunal held that the disclosure obligations under Chapter II (Regulation 7) and Chapter III are separate and distinct. Despite the appellants' compliance with Chapter III, they failed to make the necessary disclosures under Regulation 7. Nevertheless, the Tribunal found that the delay in initiating proceedings (over 11 years) was unreasonable. Given the substantial compliance under Chapter III and the inordinate delay, the Tribunal quashed the penalty of Rs. 15 lakhs imposed for this violation.

2. Violation of Regulation 7(1A) read with Regulation 7(2) regarding the sale of shares from 2005 to 2011:
The appellants argued that there was no time limit for disclosure of share sales under Regulation 7(1A) read with Regulation 7(2), citing the Tribunal's decision in Ravi Mohan and others vs. SEBI. The Tribunal, however, interpreted Regulation 7(1A) and 7(2) to require disclosure within two days of the sale of shares aggregating to two percent or more of the share capital. Despite this interpretation, the Tribunal acknowledged that the appellants could not be penalized due to the existing precedent in Ravi Mohan's case, which SEBI had accepted. Consequently, the penalties of Rs. 3 lakhs, Rs. 2 lakhs, and Rs. 6 lakhs imposed on Appellant Nos. 1, 2, and 6, respectively, were quashed.

3. Violation of Regulation 3(3) and 3(4) concerning inter-se transfer of shares:
The Tribunal upheld the penalty for the inter-se transfer of shares between Appellant No. 6 and Appellant No. 7, which was not disclosed as required under Regulations 3(3) and 3(4). These regulations mandate notification to the stock exchange and SEBI even for exempted transactions like inter-se transfers if they exceed five percent of the voting share capital. The Tribunal found that the appellants failed to comply with these notification requirements, justifying the penalties imposed.

4. Violation of Regulation 8(3) for non-disclosure of promoter holding for the financial year 2010-2011:
The Tribunal confirmed the penalty of Rs. 2 lakhs imposed on Appellant No. 8 for the delay in disclosing promoter holdings in the annual return for the financial year 2010-2011. The appellants argued that the delay was due to an inadvertent error, which was corrected shortly thereafter. However, the Tribunal noted that the penalty was for the delay in disclosure, not for the erroneous disclosure, and thus upheld the penalty.

Conclusion:
The appeal was partly allowed. The penalties for violations of Regulation 7(1) and 7(2) and Regulation 7(1A) read with Regulation 7(2) were quashed due to the unreasonable delay in proceedings and reliance on existing legal precedents. However, the penalties for violations of Regulation 3(3) and 3(4) concerning inter-se transfers and Regulation 8(3) for delayed disclosure of promoter holdings were upheld. The appellants were directed to deposit the affirmed penalties within six weeks. Each party was ordered to bear its own costs.

---