2002 (10) TMI 814 - AT - Companies Law

Tribunal rules in favor of appellants in reporting violations appeals, upholds penalty for deliberate non-reporting.

The Tribunal found in favor of the appellants in Appeals Nos. 27/2002, 28/2002, and 30/2002, setting aside the penalties imposed for unintentional and ... - Issues Involved:1. Violation of reporting requirements under Regulation 7 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.2. Imposition of monetary penalties by the Adjudicating Officer.3. Determination of whether the violations were intentional or technical.4. Consideration of the principles laid down by the Supreme Court regarding the imposition of penalties.5. Specific factual circumstances of each appeal.Detailed Analysis:1. Violation of Reporting Requirements:The core issue in these appeals is the violation of Regulation 7(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, which mandates that any acquirer who acquires shares or voting rights exceeding 5% in a company must disclose their aggregate shareholding to the company within four working days. The Adjudicating Officer found the appellants guilty of failing to comply with this requirement.2. Imposition of Monetary Penalties:The Adjudicating Officer imposed penalties ranging from Rs. 1 lakh to Rs. 2 lakhs on the appellants for their failure to report the acquisitions. The penalties were imposed under Section 15A(b) of the SEBI Act, which prescribes a penalty not exceeding Rs. 5,000 for every day during which such failure continues.3. Intentional or Technical Violations:The appellants argued that their violations were not intentional but were technical breaches due to the short duration of their holdings exceeding the 5% threshold. They contended that they had no intention to acquire control over the investee companies and that their failure to report did not cause any harm or defeat the purpose of the regulation.4. Supreme Court Principles on Penalties:The appellants cited the Supreme Court's principles in Hindustan Steel Ltd. v. State of Orissa, which state that penalties should not be imposed for technical or venial breaches or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. The Tribunal considered these principles and found that the Adjudicating Officer had not taken them into account while imposing the penalties.5. Specific Factual Circumstances:- Appeal No. 27/2002: The appellant acquired shares of Shonkh Technologies International Ltd., exceeding 5% on multiple occasions but held them for short periods, divesting within a few days.- Appeal No. 28/2002: The appellant acquired shares of Mascon Global Ltd., exceeding 5% but similarly held them for brief periods before divesting.- Appeal No. 30/2002: The appellant acquired shares of Aftek Infosys Ltd., exceeding 5% but sold the entire holding within two days.- Appeal No. 31/2002: The appellant contracted to purchase shares of DSQ Biotech Ltd., but claimed not to have received delivery of the shares despite paying the purchase consideration.Tribunal's Findings:- For Appeals Nos. 27/2002, 28/2002, and 30/2002, the Tribunal found that the appellants' violations were technical and unintentional, with no evidence of deliberate defiance of law or dishonest conduct. The penalties were set aside, considering the principles laid down by the Supreme Court.- For Appeal No. 31/2002, the Tribunal upheld the penalty, finding that the appellant had acquired shares and failed to report the acquisition, despite knowing the requirement. The failure was deemed deliberate, and the penalty of Rs. 1 lakh was considered reasonable.Conclusion:- Appeals Nos. 27/2002, 28/2002, and 30/2002 were allowed, and the penalties were set aside.- Appeal No. 31/2002 was dismissed, and the penalty was upheld.