TaxTMI 
TaxTMI 
2019 (8) TMI 589
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....2015 has been filed against the order dated June 04, 2015 passed by the AO of SEBI imposing a penalty of Rs. 25,00,000/- (Rupees Twenty Five Lakhs only) for violation of Section 23A of the Securities Contracts (Regulation) Act, 1956 ("SCRA" for convenience) and Rs. 1,75,00,000/- (Rupees Once Crore Seventy Five Lakhs only) for violation of Section 23E of the SCRA for failure to comply with Clause 36 of the Listing Agreement. Appeal No. 150 of 2018 has been filed against the order dated March 16, 2018 passed by the AO imposing penalties under Section 15A(b) of the SEBI Act, 1992 ("SEBI Act" for convenience) as well as under Section 23A(a) and Section 23E of the SCRA for violation of Regulation 13(6) of SEBI (Prohibition of Insider Trading) Regulations ("PIT Regulations" for convenience) read with Clauses 2.1 and 7.0(ii) of Schedule II for Code of Corporate Disclosure Practices for Prevention of Insider Trading specified in Schedule II read with Regulation 12(2) of PIT Regulations as well as violation of Clause 36 of the Listing Agreement. 3. The facts leading to the filing of Appeal No. 358 of 2015 is, that on September 30, 2009 the appellant filed the return of income for the Ass....
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....dated May 29, 2014. 6. In the light of the aforesaid, a show cause notice dated February 12, 2015 was issued calling upon the appellant to show cause why penalty should not be imposed under Section 23A and 23E of the SCRA for violation of Clause 36 of the Listing Agreement. The AO after calling for the reply and after giving an opportunity of hearing found that the appellant had violated provision of Clause 36 of the Listing Agreement by belatedly disclosing the tax demand raised by the Assessing Officer pursuant to the assessment order. The AO found that for the violation of Clause 36 of the Listing Agreement monetary penalty was attracted under Section 23A and 23E of the SCRA and accordingly imposed a penalty totaling Rs. 2 crores. 7. We have heard Ms. Fereshte Sethna, the learned counsel assisted by Shri Adhiraj Malhotra the learned counsel for the appellant and Shri Kevic Setalvad the learned senior counsel assisted by Shri Anupam Surve, Advocate on behalf of the respondent. 8. A preliminary objection was raised by the learned counsel for the appellant that in view of Regulation 16(2) of the Securities and Exchange Board of India (Settlement of Administrative and Civil....
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....yed subject to certain conditions. It was contended that it was not necessary for the appellant to immediately intimate the Stock Exchange with regard to the development and the outcome of the assessment order and that the appellant was allowed a reasonable time and opportunity to arrange its affairs and take remedial action before the Appellate Authority/ Court before making the disclosure under Clause 36 of the Listing Agreement. It was thus contended, that the word "immediately" as stipulated in Clause 36 of the Listing Agreement does not mean that information with regard to the tax demand should be made public instantly and that a reasonable period should be allowed to be given in view of the Guidance Note on Clause 36 of the Listing Agreement issued by the Stock Exchange. It was further contended that under Clause 41 of the Listing Agreement the audited financial results are required to be filed within sixty days from the end of the financial year and accordingly submitted that a reasonable period under Clause 36 has to be allowed to the company/appellants to disclose the material information under Clause 36 of the Listing Agreement. It was thus contended that the informati....
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....de, appropriate penalty was imposed which requires no interference. 14. We have heard the learned counsel for the parties at some length. Before proceeding further, it would be appropriate to refer to Clause 36 of the Listing Agreement which is extracted hereunder: "Apart from complying with all specific requirements, the Issuer will intimate to the Stock Exchanges, where the company is listed immediately of events such as strikes, lock outs, closure on account of power cuts, etc. and all events which will have a bearing on the performance / operations of the company as well as price sensitive information both at the time of occurrence of the event and subsequently after the cessation of the event in order to enable the security holders and the public to appraise the position of the Issuer and to avoid the establishment of a false market in its securities. In addition, the Issuer will furnish to stock exchange(s) on request such information concerning the Issuer as the stock exchange(s) may reasonably require. The material events may be events such as: a. Change in the general character or nature of business. b. Disruption of operations due to natural ....
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....should be made public. 15. In this regard, Clause 6 and 7 of the Guidance Note of the Clause 36 of the Listing Agreement issued by the Stock Exchange is extracted hereunder: 6. Disclosure relating to Litigation/dispute/regulatory action with a material impact: * The Listed entity shall keep the Exchange informed of any litigation/dispute developments with respect to any dispute in conciliation proceedings, litigation, assessment, adjudication or arbitration to which it is a party or the outcome of which can reasonably be expected to have a material impact on its present or future operations or its profitability or financials. The Listed entity may consider the impact of such disclosure on legal/court proceedings while making the disclosures and make the disclosure accordingly. If, Listed Entity is of the opinion that making any such disclosure is not in the interest of the Listed Entity, disclosure may be limited to the extent of stating the occurrence of the event. * The Listed Entity shall keep the Exchanges informed of cessation/conclusion/settlement of the above said litigation/dispute along with the concluding order or concluding settlement inform....
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....e company was Rs. 365 crores and a demand of Rs. 450 crores was made in the assessment order. Such demand which eats away the networth of the company is in our opinion a material event and the assessment order had a "material impact" which the company was required to report to the Exchange "promptly" and which was required to be made public "immediately". 18. We also find that in the instant case a conscious decision was taken by the management of the company not to disclose the said information under Clause 36 of the Listing Agreement. In fact, when clarification was sought by the Stock Exchanges it is only then the information was provided at a belated stage on May 26, 2014 and May 29, 2014 after more than 3 months of the final assessment order dated February 21, 2014. Thus, we are of the opinion, there was gross failure on the part of the appellant in not making the disclosure under Clause 36 of the Listing Agreement. The contention that the information was supplied belatedly is misconceived and an afterthought. No such stand was taken before SEBI and the appellant cannot be allowed to change its stand at this stage. Further, the financial statements, which includes this info....
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....immediate" means occurring without delay, instant. As per Black's Law Dictionary-sixth edition, the term "immediately" means without interval of time, without delay, straightaway, or without any delay or lapse of time. The words 'forthwith' and 'immediately' have the same meaning. They are stronger than the expression 'within a reasonable time.' and imply prompt, vigorous action, without any delay. 22. In Wharton's Law Lexicon the term "immediately" in the statute, means within a reasonable time. In Words and Phrases, the word "immediately" when used in a statute, is not synonymous with "then and there". 23. Thus in a strict sense the word "immediately" means at once, forthwith, instantaneously or instantly and is also defined as meaning promptly, quickly, without delay, without interval or without lapse of time. However, in a broader relative sense, the term "immediately" means within a reasonable time, necessarily exclude all mesne time and is often construed to mean as soon as an act can be performed within a reasonable time. 24. A Full Bench of the Karnataka High Court in Keshava v. Ramchandra AIR 1981 Kant. 97, while interpreting the word "immediately" occurring in Ar....
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....ebruary 21, 2014. An interim order was passed on March 21, 2014 and no effort was made to disclose the information even after obtaining an interim order. The information was made belatedly after more than 3 months which cannot be construed to be a reasonable period. Thus we are of the opinion, that the appellant had violated Clause 36 of the Listing Agreement and was liable for imposition of penalty. 28. The penalty has been imposed under Section 23A and 23E of the SCRA. For facility, the said provision is extracted hereunder: Penalty for failure to furnish information, return, etc.- "23A. Any person, who is required under this Act or any rules made thereunder, (a) to furnish any information, document, books, returns or report to a recognised stock exchange, fails to furnish the same within the time specified therefor in the listing agreement or conditions or bye-laws of the recognised stock exchange, shall be liable to a penalty [which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees] for each such failure; (b) to maintain b....
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....actored in Section 23J of the SCRA. These factors were duly considered based on which the authority has not imposed the maximum penalty. Thus, the contention that the factors were not taken into consideration is patently erroneous. 32. Appeal No. 150 of 2018 has been filed by the Company NDTV, its Directors and Compliance Officer. On the basis of a complaint, a show cause notice dated August 20, 2015 was issued to the appellants for non-disclosure of Rs. 450 crores demand raised by the Income Tax Department under Clause 36 of the Listing Agreement as well as delayed disclosure by the Appellant No. 1 under PIT Regulations and non-compliance by all the appellants under Clauses 2.1, 3.2 and 7.0 (ii) of Schedule II for Code of Corporate Disclosure Practices for Prevention of Insider Trading read with Regulation 12(2) of SEBI (Prohibition of Insider Trading) Regulations ("PIT Regulations" for convenience) Regulations. 33. According to SEBI, the non-disclosure of the tax demand under Clause 36 of the Listing Agreement was also a price sensitive information under the PIT Regulations which the Company was required to disclose the same to both the Stock Exchanges on immediate basis un....
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....hall be responsible for ensuring that the company complies with continuous disclosure requirements. Overseeing and co-ordinating disclosure of price sensitive information to stock exchanges, analysts, shareholders and media and educating staff on disclosure policies and procedures. Clause 7.0(ii) of Code of Corporate Disclosure Practices for Prevention of Insider Trading specified in Schedule II states that corporates shall ensure that disclosure to stock exchanges is made promptly. Regulation 12(2) of SEBI (PIT) Regulations states that the entities mentioned in sub31 regulation (1), shall abide by the Code of Corporate Disclosure Practices as specified in Schedule II of SEBI (PIT) Regulations." 36. The Director of the Company Mr. K.V.L. Narayan Rao had sold some shares and intimated the Company under Regulation 13(6). The company was required to disclose the said sale of shares to all the Stock Exchanges in the prescribed form. It was contended by the learned counsel for the appellant that the dispatch of the information was sent by courier within the stipulated period of two days. This fact was disbelieved by the AO as NSE and BSE confirmed to the AO that the....
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....n in a letterbox." 38. Thus, disclosure of the information under Regulation 13(6) would only be completed when the said information was received by the Stock Exchange. Reliance placed by the appellant on Section 27 of the General Clauses Act, 1897 is wholly misconceived. Section 27 of the General Clauses Act, 1897 states that there is a presumption of deemed service if the letter is sent at the correct address with requisite postal charges. This deemed service under Clause 27 of the General Clauses Act, 1897 will not apply in the instant case in as much as it was clearly mentioned in the show cause notice that the alleged letters dated December 28, 2013 and December 16, 2014 were never received by the Stock Exchanges and that the information was only made available to the said Exchanges for the first time on March 27, 2014. Thus, the burden was upon the appellant to prove by necessary evidence that the disclosure sent through a letter by a courier was duly received by the Stock Exchange. Filing of dispatch receipts given by the courier was not sufficient to prove service. What was necessary was the delivery receipt which in the instant case was not produced. In our view, proo....