Appellants penalized for share acquisition violations under SAST Regulations; penalty reduced on appeal.

The appellants were found to have violated Regulation 3(1) and Regulation 3(2) of the SAST Regulations by acquiring shares without making required public announcements, leading to penalties. They argued for exemption under Regulation 10 but were denied due to late disclosures and lack of 'persons acting in concert.' The Adjudicating Officer imposed a penalty of Rs. 15 lacs, reduced by the Tribunal to Rs. 5 lacs considering technical breach. The appeal was partly allowed, setting aside the original penalty amount and directing payment of the revised penalty of Rs. 5 lacs.

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Issues Involved:
1. Violation of Regulation 3(1) read with Regulation 13(1) of the SAST Regulations, 2011.
2. Violation of Regulation 3(2) read with Regulation 13(1) of the SAST Regulations, 2011.
3. Applicability of exemption under Regulation 10 of the SAST Regulations, 2011.
4. Quantum of penalty imposed by the Adjudicating Officer.

Detailed Analysis:

1. Violation of Regulation 3(1) read with Regulation 13(1) of the SAST Regulations, 2011:
The appellant No. 1 acquired 31,680 shares of the company, increasing his shareholding from 0.35% to 31.68%. This acquisition was made without making the required public announcement, thereby violating Regulation 3(1) read with Regulation 13(1) of the SAST Regulations, 2011. A penalty of Rs. 15 lacs was imposed on appellant No. 1, which he challenged but later withdrew the appeal with permission to pay the penalty.

2. Violation of Regulation 3(2) read with Regulation 13(1) of the SAST Regulations, 2011:
The acquisition by appellant No. 1 also increased the collective shareholding of all the appellants from 29.42% to 61.10%, exceeding the threshold limit of 5%. This required a public announcement under Regulation 3(2) read with Regulation 13(1) of the SAST Regulations, 2011. However, no public announcement was made, leading to an additional violation. The AO imposed a penalty of Rs. 15 lacs for this violation as well, which was challenged by the appellants and remanded for a fresh order.

3. Applicability of exemption under Regulation 10 of the SAST Regulations, 2011:
The appellants contended that the acquisition was exempt from making a public announcement as it was an inter se transfer between promoters, as provided by Regulation 10 of the SAST Regulations. However, the AO rejected this contention, stating that the two entities who transferred the shares to appellant No. 1 were not 'persons acting in concert' as their objectives differed. Additionally, the AO noted that the required disclosures were made on the 7th day instead of within two working days as mandated, thereby disqualifying the appellants from the exemption.

4. Quantum of penalty imposed by the Adjudicating Officer:
The AO considered Section 15J of the SEBI Act, 1992, which includes factors like disproportionate gain, loss to investors, and repetitive nature of the default. The AO acknowledged that the shareholders' interests were not jeopardized and imposed a penalty of Rs. 15 lacs. However, the Tribunal noted that the appellants made the disclosures, albeit late by five days, and considered it a technical breach. Consequently, the Tribunal reduced the penalty to Rs. 5 lacs, deeming it just and sufficient.

Order:
1. The appeal is partly allowed.
2. The order of the AO regarding the quantum of penalty is set aside.
3. The appellants are directed to pay a penalty of Rs. 5 lacs as per the revised order.

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