Securities Appellate Tribunal
Kss Limited vs Sebi on 28 September, 2021
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved: 24.9.2021
Date of Decision: 28.9.2021
Appeal No.92 of 2020
KSS Limited
Unit No.101A and 102, 1st Floor,
Plot No.B-17, Morya Landmark-II,
Andheri (West), Mumbai - 400053. ...Appellant
Versus
The Adjudicating Officer
Securities and Exchange Board of India
SEBI Bhavan, Plot No.C4-A,
G-Block, Bandra Kurla Complex,
Bandra (East), Mumbai 400 051. ...Respondent
Mr. Amit Mishra, Advocate for the Appellant.
Mr. Kumar Desai, Advocate with Mr. Nishit Dhruva, Mr.
Hridhay Khurana and Mr. Yash Garach, Advocates i/b.
MDP & Partners for the Respondent.
CORAM: Justice Tarun Agarwala, Presiding Officer
Justice M.T. Joshi, Judicial Member
Per: Justice Tarun Agarwala, Presiding Officer
1.The present appeal has been filed against the order dated 30th October, 2019 imposing a penalty of 2 Rs.7 lakhs for violation of Regulation 8A of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2009 and clause 36 of the Listing Agreement. Based on the complaint, investigation was made by Securities and Exchange Board of India wherein it was found that the Company had made misleading announcements with regard to offloading of shares by promoters and price manipulation by the management of the Company. Subsequently, a show cause notice was issued alleging failure to make disclosure by the promoters of the Company and failure to disclose the non-implementation of the corporate announcement.
2. It transpires that an ex-parte order was passed by the Adjudicating Officer imposing a penalty of Rs.10 lakhs against which an appeal was filed before this Tribunal which was allowed by an order dated 24th July, 2019. The order of the AO imposing penalty of Rs.10 lakhs was set aside and the matter was remitted to the Adjudicating Officer ('AO' for short) to decide 3 the matter afresh after giving an opportunity of hearing.
3. After hearing the appellant the Adjudicating Officer found that the promoters had pledged the shares in 2010. The Company had disclosed it to the National Stock Exchange but wrong information was submitted with respect to one promoter. Further, there was a delay in the disclosure by two months and no disclosure was made to the BSE. Consequently, the AO found that the appellant had failed to make proper disclosure violating Regulation 8A of the SAST Regulations.
4. Certain corporate announcements was made by the Company which was never implemented. Thus non implementation of the corporate announcement was required to be disclosed in clause 36 of the Listing Agreement. Apparently, this was not done and consequently a sum of Rs.5 lakhs was imposed under this head.
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5. We have heard Mr. Amit Mishra, Advocate for the appellant and Mr. Kumar Desai, Advocate assisted by Mr. Nishit Dhruva, Mr. Hridhay Khurana and Mr. Yash Garach, Advocates for the respondent.
6. The contention of the appellant is two folds, namely, that there has been an inordinate delay in the initiation of the proceedings. The transaction had taken place in the year 2009-2010 and the show cause notice was issued on 24th November, 2017. Thus, there has been an inordinate delay in the initiation of the proceedings and, therefore, on this count the proceedings should be quashed.
7. In the alternative, it was contended that penalty imposed was harsh and inappropriate to the violation. It was contended that on account of the delay the appellant was unable to file an appropriate response and, therefore, this aspect was not taken into consideration. The fact that there was a delay in the initiation of the proceedings was accepted by the AO. 5
8. Having heard the learned counsel for the parties we find that the violation alleged in the show cause notice is admitted by the appellants. On non-disclosure of the pledged shares and the invocation of those shares a penalty of Rs.2 lakhs has been imposed by the AO for violation of Regulation 8A. The minimum penalty is Rs.1 lakh and, in the given circumstances, we do not find any error in the imposition of this penalty.
9. For non-disclosure and non-implementation of the corporate announcement under clause 36 of the Listing Agreement a penalty of Rs.5 lakhs has been imposed. The minimum penalty is Rs.1 lakh. Admittedly, there has been delay in the initiation of the proceedings and, consequently, this delay has to be taken as a mitigating factor for imposition of penalty. The fact that there has been a delay in initiation of the proceedings which resulted in not giving an appropriate reply by the appellant has been admitted by the AO in para 34 of the impugned order. Further, we find that the AO has himself given a finding in 6 para 39 that no loss has been caused to the investors as a result of the default committed by the appellant. Considering the aforesaid, the penalty of Rs.5 lakhs is inappropriate in the given circumstances and, therefore, we reduce the penalty to Rs.2 lakhs under this head.
10. In the result while affirming the violation committed by the appellant we reduce the penalty from Rs.7 lakhs to Rs.4 lakhs. The appeal is partly allowed. In the circumstances of the case, parties shall bear their own costs.
11. The present matter was heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor a certified copy of this order could be issued by the registry. In these circumstances, this order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Parties will 7 act on production of a digitally signed copy sent by fax and/or email.
Justice Tarun Agarwala Presiding Officer Justice M.T. Joshi Judicial Member RAJALA Digitally signed 28.9.2021 by KSHMI RAJALAKSHMI NAIR H Date: 2021.09.30 RHN H NAIR 12:03:41 +05'30'