Securities Appellate Tribunal
M/S. Sincere Packers Ltd. vs Sebi on 30 March, 2015
Author: J. P. Devadhar
Bench: J. P. Devadhar
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
DATE : 30.03.2015
Appeal No. 426 of 2014
M/s. Sincere Packers Ltd.
43, Babar Road, Bengali Market,
New Delhi 110 001. ..... Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ...... Respondent
Mr. Sunil Humbre, Advocate with Mr. Abhishek Bhadang, Advocate for
the Appellant.
Mr. Kumar Desai, Advocate with Mr. Tomu Francis, Advocate for the
Respondent.
With
Appeal No. 427 of 2014
Novel Trade Links Ltd.
43, Babar Road, Bengali Market,
New Delhi 110 001. ..... Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ...... Respondent
Mr. Sunil Humbre, Advocate with Mr. Abhishek Bhadang, Advocate for
the Appellant.
Mr. Kumar Desai, Advocate with Mr. Tomu Francis, Advocate for the
Respondent.
With
Appeal No. 428 of 2014
M. D. Overseas Ltd.
43, Babar Road, Bengali Market,
New Delhi 110 001. ..... Appellant
2
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ...... Respondent
Mr. Sunil A. Humbre, Advocate with Mr. Abhishek Bhadang, Advocate for
the Appellants.
Mr. Kumar Desai, Advocate with Mr. Tomu Francis, Advocate for the
Respondent.
CORAM : Justice J. P. Devadhar, Presiding Officer
Per : Justice J. P. Devadhar (Oral)
1.Counsel on both sides state that since the issues raised in these appeals are covered by the decisions of this Tribunal, all these appeals may be heard and disposed of by a common decision. Counsel on both sides further state that the facts in these three cases being almost identical, decision in any one Appeal would apply to the remaining two Appeals.
2. Appellants in these appeals are aggrieved by the respective orders passed by the Adjudicating Officer of SEBI ('AO' for short) whereby penalty of ` 7 lac is imposed on each appellant under Section 15A(b) of the Securities and Exchange Board of India Act, 1992 ('SEBI Act' for short), for violating Regulation 8(3) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ('SAST Regulations, 1997' for short) during the years 1998 to 2011.
3. Counsel for the appellants fairly states that each of the appellants had failed to make disclosures under regulation 8(3) of SAST Regulations, 1997 for the year 1998 to 2011. However, in view of the decision of this Tribunal in case of M/s. Gulab Impex Enterprises Ltd. vs. SEBI (Appeal No. 330 of 2014 decided on November 3, 2014), counsel for appellants 3 submit that the penalty of ` 7 lac imposed upon each of the appellant is excessive and unreasonable and hence cannot be sustained for the following reasons :-
a. During the relevant period, the U. P. and Delhi Stock Exchanges on which the shares of the respective appellant companies were listed, were non functional and, therefore, failure to make disclosure under regulation 8(3) being inconsequential, the AO was not justified in imposing penalty of ` 7 lac on the appellants.
b. Suo moto consent applications were filed by each appellant before SEBI seeking settlement of the penalty imposable on account of non disclosure under Regulation 8(3) of SAST Regulations, 1997. Eventhough the said consent applications were rejected by SEBI the month of March 2012, in view of suo moto proposal put up by appellants, the AO is not justified in imposing exorbitant penalty of ` 7 lac on each appellant. c. Having recorded specific finding in the impugned order that it is impossible to ascertain the exact monetary loss caused to the investors on account of non disclosure under Regulation 8(3) of SAST Regulations, 1997, the AO is not justified in imposing penalty of ` 7 lac on each appellant. Accordingly, it is submitted that the exorbitant penalty imposed on each appellant is unsustainable.
4. Counsel for SEBI on the other hand submitted that the impugned order passed by the AO in the respective appeals is based on Larger Bench decisions of this Tribunal in case of Mrs. Komal Nahata vs. SEBI (Appeal No. 5 of 2014 decided on January 27, 2014), Hybrid Financial Services Ltd. 4 vs. SEBI (Appeal No. 119 of 2014 decided on June 12, 2014) and Gaylord Commercial Company Ltd. vs. SEBI (Appeal No. 62 of 2014 decided on April 10, 2014) and hence there is no merit in these appeals and the same are liable to be dismissed.
5. First contention of the appellants is that the Delhi / U. P. Stock Exchanges on which the shares of the appellant companies were listed, were non functional during the relevant period and, therefore, making annual disclosure under Regulation 8(3) during the relevant period being inconsequential, the AO is not justified in imposing penalty of ` 7 lac on each appellant. In case of Comfort Fincap Ltd. vs. SEBI (Appeal No. 160 of 2014 decided on June 25, 2014) it was contended that during the relevant period there were no trading in the shares on the stock exchange and hence imposition of penalty for not making disclosure under Regulation 8(3) is unjustified. Rejecting that contention it was held that making disclosure under Regulation 8(3) is mandatory and that obligation is not dependant on the actual trading on the stock exchange. In view of the aforesaid Larger Bench decision of this Tribunal in case of Comfort Fincap Ltd. (Supra), first contention of the appellants that the AO was not justified in imposing penalty for not making disclosure under Regulation 8(3) inspite of there being no trading on account of the Stock Exchanges being non functional, cannot be accepted. Moreover, the AO has recorded specific finding in all three cases, that the appellants had contended that there were no trading in shares at Delhi Stock Exchange from July 2003. It is not the case of the appellants, that the said finding is erroneous. In any event, whether the trading had taken place or not once it is accepted that there is violation of Regulation of 8(3), then the appellants cannot escape penal liability. 5
6. Reliance placed by counsel for appellants on the decision of this Tribunal in case of Gulab Impex Enterprises Ltd. (supra) is also misplaced, because, in para 6 of that decision it is specifically recorded that the appellant therein had made disclosures in the past, whereas in these three cases, it is admitted that no disclosures were made. Hence decision of this Tribunal in case of Gulab Impex Enterprises Ltd. (supra) is distinguishable on facts and has no relevance to the facts of present case.
7. Second contention of the appellants is that they had filed suo moto consent applications before SEBI. Filing of suo moto consent applications do not enhance their case, because, what was required under Regulation 8(3) of SAST Regulations, 1997 is to make yearly disclosures suo moto within 30 days from the financial year ending March 31, and not filing suo moto consent applications after a decade. Having failed to make yearly disclosures year after year from 1998, appellants cannot escape penal liability merely because in the year 2011 they had filed suo moto consent applications seeking consent order. Admittedly, the said consent applications have been rejected by SEBI.
8. Third contention of the appellants is that no loss has occurred to any investor due to non disclosure under Regulation 8(3). Very same argument was raised in case of Mrs. Komal Nahata (supra) and the said argument was rejected by recording a finding that the mandatory disclosures under the respective regulations framed by the SEBI have to be complied with, irrespective of the fact that the investors have actually suffered on account of non disclosures or not. In view of the aforesaid decision of this Tribunal, above argument of the appellants cannot be sustained.
9. Argument of the appellants that penalty of Rs. 7 lac on each appellant is excessive and unreasonable is also without any merit. As noted 6 earlier, the appellants have failed to make yearly disclosures under Regulation 8(3) from 1998 to 2011. Penalty under Section 15A(b) for non compliance of the regulation framed by SEBI is ` 1 lac for each day during which such failure continues or ` 1 crore whichever is less. Admittedly, till date the appellants have not made yearly disclosures under Regulation 8(3) for the year 1998 to 2011. Calculated at the rate of ` 1 lac per day for each year subject to a maximum of ` 1 crore per year, penalty for each year from 1998 till 2011 shall be ` 1 crore per year. However, after taking into consideration all mitigating factors, the AO has imposed composite penalty of ` 7 lac on each appellant which cannot be said to be unreasonable or excessive.
10. For all the aforesaid reasons, decision of AO in imposing penalty by following various decisions of this Tribunal cannot be faulted. Accordingly, all the three appeals are liable to be dismissed.
11. At this stage, counsel for the appellants orally requests that two months time be granted to the appellants to pay the amount of penalty of ` 7 lac imposed against each of the appellants. The request made by the counsel for the appellants is reasonable and, accordingly, time to pay the penalty by the three appellants is extended for a period of two months from today.
12. All appeals are disposed of in the above terms with no order as to costs.
Sd/-
Justice J. P. Devadhar Presiding Officer 30.03.2015 Prepared & Compared by PTM