TaxTMI 
TaxTMI 
2019 (4) TMI 595
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....of India (referred to hereinafter as 'SEBI') under Section 15-I of the Securities and Exchange Board of India Act, 1992 (referred to hereinafter as 'SEBI Act') read with Rule 5 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 whereby the Adjudicating Officer has imposed penalty of Rs. 8,00,000/- under Section 15HB of the SEBI Act for violation of Regulation 64(1) of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (referred to hereinafter as 'ICDR Regulations') as well as Regulation 13 of Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992 (referred to hereinafter as 'Merc....
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.... of the Merchant Bankers Regulations. 3. Pursuant to the reply filed by the appellant, the Adjudicating Officer found that the appellant had violated the provisions of Regulation 64(1) of the ICDR Regulations holding that a crucial fact was not disclosed in the prospectus and therefore the Adjudicating Officer imposed a penalty of Rs. 8,00,000/- under Section 15HB of the SEBI Act. 4. We have heard Mr. Deepak R. Shah, Advocate for the appellant and Mr. Karan Bhosale, Advocate assisted by Mr. Shantanu Mitra and Mr. Nishant Upadhyay for the respondent. It was urged by the learned counsel for the appellant that the appellant had exercised due diligence and had verified the adequacy of the disclosures. It was contended that a loan of Rs. 1....
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....and prospectus shall contain: (i) the disclosures specified in Schedule II of the Companies Act, 1956; and (ii) the disclosures specified in Part A of Schedule VIII, subject to the provisions of Parts B and C thereof." Clause 2(VII) (G) and (XVI) (B)(2) of Part A of Schedule VIII read with regulation 57(2)(a). 2(VII)(G)- Sources of financing of funds already deployed: The means and source of financing, including details of bridge loan or other financial arrangement, which may be repaid from the proceeds of the issue. 2(XVI)(B)(2) - The signatories shall further certify that all disclosures made in the offer document are true and correct." Regulation 64 of the ICDR Regulations which relates to due....
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.... Thus, the Adjudicating was justified in holding that there was a violation of Regulation 57 of the ICDR Regulations. 9. In the light of violation of the provisions of Regulation 57 we find that the appellant did not exercise due diligence nor satisfied himself with regard to all aspects of the issue including the veracity and adequacy of disclosure in the offer document. We find that quite apart from the fact that the loan taken was not disclosed in the prospectus, a wrong statement was made in the prospectus that the Company had not raised any bridge loan against the proceeds of this issue. This statement was factually incorrect as the loan of Rs. 5.94 crores was clearly a bridge loan. The contention of the learned counsel for the a....