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2015 (11) TMI 1493
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....(2) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Regulations 2011" for short). Hence all these appeals are heard together and disposed of by this common decision. 2. In all these appeals, except in Appeal No. 385 of 2014, various Adjudicating Officers ("AO" for short) of Securities and Exchange Board of India ("SEBI" for short) have held that the obligation to make yearly disclosure under regulation 8(2)/30(2) as the case may be, is on each and every promoter and not on the promoter group and in case of failure to make such disclosure, each and every promoter is liable to pay penalty. However, in Appeal No. 385 of 2014 (Gopichand Idandas & Ors. vs. SEBI) it is held by the AO that where the shares are held by the promoter group, the obligation to make disclosure is on the promoter group and in case of failure to discharge that obligation, penalty is imposable on the promoter group and is recoverable from the promoters in the promoter group jointly and severally. It is not in dispute that in several other cases also, the AO's of SEBI have held that under regulation 8(2)/30(2) as the case may be, the obliga....
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.... were closed. Moreover, due to non-compliance of the listing agreement, Takeover Regulations and nonpayment of listing fees, the trading in the shares of the company were suspended in the year 2002. The shares of the company were reinstated for trading in November 2012 after the company complied with all the clauses of listing agreement. e) After the Takeover Regulations, 1997 came into force, it was obligatory on part of promoters/promoter group to make annual disclosures under regulation 8(2) of Takeover Regulations, 1997 disclosing their shareholding in the company within the stipulated time. However, such disclosures were not made under the Takeover Regulations, 1997. Even after the Takeover Regulations 1997 were repealed and replaced by Takeover Regulations 2011, no disclosures were made under the Takeover Regulations, 2011 for the financial year ending on March 31, 2012 within the time stipulated therein. f) It is only when Tigerstone Trading Pvt. Ltd. evinced interest in acquiring shares of Inland Printers Ltd. from the promoter/promoter group it was realized that the appellants as promoters/promoter group of Inland Printers have not made yearly disclosures as provided....
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....g a single offence is on the promoter group and penalty cannot be imposed depending on the number of constituents in the promoter group. In other words, it is submitted that the unitary penalty for the unitary obligation cannot be divided across the constituents of the promoter group. b) If the contention of SEBI that each and every individual, body corporate or other entity falling within the definition of "promoter" is obliged to make disclosures under the Takeover Regulations is accepted, then, it would lead to absurd consequences, because, once a declaration in relation to a promoter group is made by a constituent of the promoter group, then requiring each member of the promoter group to make same disclosures, independently, would serve no purpose but only multiply the disclosures inspite of the fact that the said disclosures are already made by one of the promoters in the promoter group. c) Alternatively it is submitted that the term "promoter" defined under regulation 2(1)(h) of the Takeover Regulations, 1997 includes the promoter group as mentioned in Explanation-I to regulation 2(1)(h). Since the expression 'promoter' includes a 'promoter group', obligation to make di....
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....ts against the appellants in Appeal no. 385 of 2014, in the year 2013 when the appellants as an independent promoter group had sought to sell the shares of the company held by them. c) Appellants in Appeal No. 385 o 2014, in reply to the show cause notice, had individually replied that they formed an independent promoter group. However, without considering that plea, penalty of Rs. 15 lac is imposed on all the promoters (including the appellants) with a direction that the said penalty be recovered jointly and severally. Thus SEBI has considered all the promoters of the company as one promoter group, even though the appellants in Appeal No. 385 of 2014 had specifically pleaded that they form a separate promoter group. As a result, appellants in Appeal No. 385 of 2014 are required to pay penalty imposed on all the promoter/ promoter group, even though the appellants herein form an independent promoter group. d) Since the AO has failed to consider the plea that the appellants formed an independent promoter group, it is submitted that the order impugned in Appeal No. 385 of 2014 be quashed and set aside with a direction to SEBI to impose such penalty as it deems fit on each promo....
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....promoter is an individual. e) The expression 'promoter' defined under the regulations framed by SEBI, does not include PAC within the meaning of promoter and the shareholding of a PAC who is not a promoter has to be disclosed alongwith the shareholding of the promoter. f) Under the regulations framed by SEBI, if the obligation to make disclosure is on the individual, then, the liability to pay the penalty for non-disclosure would be on the individual. If the obligation to make disclosure is joint then the liability to pay the penalty would be joint. If the obligation to make disclosure is joint and several, then the liability to pay penalty would be joint and several. Thus, the question as to whether the liability to make disclosure is individual or joint or joint and several depends on facts of each case. g) Under regulation 8(2) of Takeover Regulations, 1997 a promoter or every person having control over a company (who may be a promoter or a person other than a promoter for example CEO, COO, CFO etc.) is required to disclose the number and percentage of shares or voting rights held by him and by persons acting in concert with him in the company, to the company within 21 ....
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....sible that all promoters and persons acting in concert have authorized one individual who may be one of the promoters to act as their authorized signatory to file the necessary declarations under Regulation 8(2) of Takeover Regulations, 1997 on their behalf. In such a case the said authorized signatory would be required to make declaration after obtaining the information from each of the promoter as to the number and percentage of their respective shareholdings as on the relevant date. For example, in case of a company having four promoters, out of which two promoters are directors of the company and each promoter is acting in concert and/or is deemed to be acting in concert with his wife and children who are also shareholders of the company along with others, then, each promoter would be required to give a declaration giving the number and percentage of shares or voting rights held by each promoter (that will include his wife and children) along with the names of the other persons acting in concert with him within 21 days from the financial year ending on 31st March of every year. m) The obligation to make disclosures under Chapter II of the Takeover Regulations, 1997 and the o....
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....ions, 2011, the obligation is on each promoter to make a disclosure of the shares and voting rights together with PAC with him. Therefore, it is the individual liability of each promoter and not joint and several as sought to be contended by the appellants. s) Intention, motive, mens-rea are irrelevant for the purpose of considering penalty to be levied for breach of disclosure requirement. Relying on the decision of the Apex Court in case of Swedish Match v/s SEBI reported in (2004) 11 SCC 641 and in case of Chairman SEBI v/s Shriram Mutual Fund reported in (2006) 5 SCC 361 it is submitted that penalty is attracted as soon as there is contravention of the regulations framed by SEBI. t) There is material difference between regulation 8(2) of Takeover Regulations, 1997 and regulation 30(2) of Takeover Regulations, 2011. Under regulation 8(2), a promoter or every person having control over a company is required to make disclosure whereas, under regulation 30(2) the promoter together with persons acting in concert with him is required to make disclosure. Under regulation 8(2) what is to be disclosed by the promoter is the number and percentage of shares or voting rights held by ....
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....equirements) Regulations, 2009 ('ICDR Regulations, 2009' for short) and includes a member of the promoter group. Thus, both under the Takeover Regulations, 1997 and under the Takeover Regulations, 2011, wherever the expression 'promoter' is used, that expression would include any person/member belonging to the promoter group. 11. Since regulation 8(2) of the Takeover Regulations, 1997 and regulation 30(2) & 30(3) of the Takeover Regulations, 2011, use the expression 'promoter', we quote those regulations which read thus:- 8(2) A promoter or every person having control over a company shall, within 21 days from the financial year ending March 31, as well as the record date of the company for the purposes of declaration of dividend, disclose the number and percentage of shares or voting rights held by him and by persons acting in concert with him, in that company to the company. 30(2) The promoter of every target company shall together with persons acting in concert with him, disclose their aggregate shareholding and voting rights as of the thirty-first day of March, in such target company in such form as may be specified. 30(3) The disclosures required under sub-regulatio....
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....y promoter in the promoter group and not on the promoter group. 15. In this context it would be relevant to refer to regulation 2(1)(h) of the Takeover Regulations, 1997 which defines the expression 'promoter'. The said definition to the extent relevant reads thus:- "Definitions 2(1) In these regulations, unless the context otherwise requires:- a to g.... (h) "Promoter" means - (a) any person who is in control of the target company; (b) any person named as promoter in any offer document of the target company or any shareholding pattern filed by the target company with the stock exchanges pursuant to the Listing Agreement, whichever is later; and includes any person belonging to the promoter group as mentioned in Explanation I: Provided that a director or officer of the target company or any other person shall not be a promoter, if he is acting as such merely in his professional capacity. Explanation I: For the purpose of this clause, "promoter group" shall include: (a) in case promoter is a body corporate - (i) a subsidiary or holding company of that body corporate; (ii) any company in which the promoter holds 10 ....
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....included within the meaning of 'promoter' should make yearly disclosure. If the argument of SEBI is accepted it would mean that every entity which is considered to be a promoter under the Takeover Regulations would be required to make yearly disclosure even if that entity does not hold any shares of the Target Company. Therefore, such an argument of SEBI which leads to absurd consequences cannot be accepted. 17. Under the Takeover Regulations if it was intended that every promoter of a listed company must make yearly disclosure, then, regulation 8(2) or regulation 30(2) would have commenced with the words 'Each promoter' or with the words 'Every promoter'. It is relevant to note that in case of a person having control over the company, regulation 8(2) specifically provides that 'every' person having control over the company shall make yearly disclosure. Very fact that the word 'every promoter' is not used in case of a promoter and the fact that the expression 'promoter' is defined to include 'promoter group', it becomes clear that the obligation to make yearly disclosure under the Takeover Regulations is on the promoter/promoter group and not on every promoter in the promoter gr....
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....ares of the Target Company and in that case, if contention of SEBI is accepted it would mean the every promoter covered under the Takeover Regulations must make yearly disclosure even though some of the promoters never held any shares of the Target Company. Having included persons/members of the promoter group within the meaning of 'promoter' under the Takeover Regulations, SEBI cannot now contend that it would be difficult for a promoter in the promoter group to know the shares held by other promoters in the promoter group and their PAC before making disclosure and therefore, every promoter must be directed to make yearly disclosure. Therefore, it is just and reasonable to hold that under the Takeover Regulations the obligation to make yearly disclosure is on the promoter or the promoter group as the case may be. 21. Various decisions relied on by counsel for SEBI in support of contention that the regulations in question have to be read as it is and not by adding words to it have no relevance to the facts of present case, because, in the Takeover Regulations the expression 'promoter' includes the 'promoter group' and consequently there is no question of adding 'promoter group' ....