TaxTMI 
TaxTMI 
2016 (3) TMI 1376
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....' for short) on October 31, 2014. By the said order, penalty of Rs. 25,00,000/- is imposed on the appellants to be paid jointly and severally under Section 15H(ii) of Securities and Exchange Board of India Act, 1992 ('SEBI Act' for short) for violating Regulation 11(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ('Takeover Regulations, 1997' for short) read with Regulation 35 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ('Takeover Regulations, 2011' for short). 2. Appellants were the promoters of Apte Amalgamations Ltd. ('Company' for convenience) a company registered under the Companies Act, 19....
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....0, the appellants sought to sell the shares of the company to purchasers which were in excess of the limits prescribed under Regulation 10 of the Takeover Regulations, 1997 and hence offer obligations under the Takeover Regulations, 1997 got triggered. Thereupon, the purchasers made public announcement on May 19, 2010 and the open offer was made on June 29, 2010. 6. On perusal of the documents annexed to the open offer, it was noticed by SEBI that the appellants had acquired shares of the company in the year 2009 in contravention of Regulation 11(2) of the Takeover Regulations, 1997. Accordingly, AO was appointed to inquire into and adjudge on the alleged violations. Thereupon, the AO issued show cause notice on May 6, 2014, calling upon....
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....n the shares of the target company were suspended during the relevant period and, therefore, it was not possible to acquire shares of the company through the stock exchange. In such a case, acquisition of shares through off market cannot be faulted. c) Impugned acquisition of shares to the extent of 2.44% i.e. within the permissible limit of 5%, was made under the bonafide belief that since trading on the stock exchange being suspended, acquisition of shares through off market would not attract obligation to make public announcement. Thus, the impugned acquisition in the facts of present case being covered under the second proviso to Regulation 11(2), the AO ought not to have held that the appellants have failed to make publi....
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....nate gain or unfair advantage or loss to investors or shareholders of the company on account of the alleged violations does not arise. j) In the facts and circumstances of the present case, imposing penalty of Rs. 25 lac is not only unwarranted but also disproportionate to the violations allegedly committed by the appellants. 9. We see no merit in the above contentions. 10. It is well established in law that in order to claim exemption, the claimant must strictly comply with the terms of the exemption provisions. In the present case, to claim exemption from complying with the open offer obligation contained in Regulation 11(2) of the Takeover Regulations, 1997, the appellants ought to have acquired additional sha....
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....roviso to Regulation 11(2) being clear and unambiguous, the appellants are not justified in contending that in the absence of trading in the shares of the company on the stock exchange, the appellants could acquire shares in the off market. 13. If there was genuine need to purchase the shares, then the appellants could have approached SEBI seeking relaxation of the condition set out under the second proviso to Regulation 11(2). Without seeking relaxation of the conditions set out in the second proviso to Regulation 11(2) appellants could not have acquired shares through off market and still claim that the said acquisitions are in compliance with the second proviso to Regulation 11(2). 14. Argument of the appellants that the pro....
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....(five) there was no undue profits made by appellants and (six) the penalty imposed is disproportionate to the violations committed are totally unsustainable, because, once the violations are committed, then whether there was any intention to violate the provisions or not, whether there were financial difficulties or not, whether the violation had any impact on the share price or not, whether there was any investor compliant or not and whether, there was any undue profit or not, penalty imposable for violating Regulation 11(2) of the Takeover Regulations, 2011 would be not less than Rs. 25 crore. 17. In the instant case, SEBI by misconstruing the provisions contained in Section 15H(ii) of SEBI Act, has erroneously imposed penalty of Rs. 2....