2019 (5) TMI 1172

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....enugopal, Advocate For The Respondent : Mr. Mustafa Doctor, Senior Advocate i/b Legasis Partners ORDER Per : Justice Tarun Agarwala (Oral) 1. The present appeal has been filed questioning the validity of the order dated December 29, 2017 passed by the Adjudicating Officer ('AO' for short) of the Securities and Exchange Board of India ('SEBI' for short) imposing a monetary penalty of Rs. 1 crore under Section 15H(ii) of the SEBI Act, 1992. In addition to the aforesaid, a penalty of Rs. 2 lakh was imposed for non-disclosure under Section 15A(b) of the SEBI Act, 1992. 2. The appellants are all persons acting in concert and promoters of a listed company known as Vas Infrastructure Ltd. (hereafter referred to as the 'target company'). On ....

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....appellants were themselves promoters of the target company and therefore this marginal increase of their shareholding beyond 55% did not result in any change in control of the target company nor brought any loss to the investors. It was further contended that the conversion of warrants was through a preferential allotment and all the facts of the issuance of the warrants were in the public domain and thus the marginal increase beyond 55% was fortuitous and inadvertent, and, in any case, the excess shares were sold and thus the appellants effected a remedial measures on their own accord. It was further submitted that some of the promoters holding warrants to the tune of about 25% of the said warrants did not go for conversion. If all of them....

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....nal increase in the individual shareholding of the appellants, there was no change in the management or control of the target company due to the increase in the shareholding of the appellants and the promoter's group. Further we find that the appellants after becoming aware of crossing the threshold limit of 55% took remedial measures and reduced its shareholding to less than 55%. 7. We find that the default is inadvertent, technical and, in any case, unintentional. The Supreme Court in Hindustan Steel vs State of Orissa [(1969) 2 SCC 627] held7 "whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant....