Securities Appellate Tribunal
Mr. Ratanlal Tamakhuwala & Ors. vs Sebi on 1 July, 2016
Author: J.P. Devadhar
Bench: J.P. Devadhar
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision: 1.7.2016
Appeal No.249 of 2014
1.Mr. Ratanlal Tamakhuwala
2. Mr. Rishiraj Agarwal 730/704, A Wing, Shiv Parvati Co-op. Hsg. Society, Near Versova Telephone Exchange, Andheri(West), Mumbai-400053.
3. M/s. Anarcon Resources Pvt. Ltd.
4. M/s. Shri Hanuman Investments Pvt. Ltd. 32, Ezra Street, Todi Mansion, Room No.1060, 10th Floor, Kolkata - 700001. ...Appellants 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. Ramesh Mishra, Practising Company Secretary for the Appellants. Mr. Kumar Desai, Advocate with Mr. Manish Acharya, Advocate i/b. Vigil Juris for the Respondent.
CORAM : Justice J.P. Devadhar, Presiding Officer Jog Singh, Member Dr. C.K.G. Nair, Member Per : J.P. Devadhar
1. Appellants are aggrieved by the order passed by the Adjudicating Officer (AO for short) of Securities and Exchange Board of India (SEBI) on 30th May, 2014. By the said order penalty under section 15A(b) of the Securities and Exchange Board of India Act, 1992 (SEBI Act for short) is imposed on the appellants for violating Regulation 7(1A) read with Regulation 7(2) of Securities and Exchange Board of India (Substantial 2 Acquisition of Shares and Takeovers) Regulations, 1997 ('1997 Regulations' for short) read with Regulation 35 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ('2011 Regulations' for short)
2. Appellants as the promoters of Greenearth Resources and Projects Limited (target company) held approximately 63% shares of the target company. Appellants had sold shares of the target company during the year 2009-10 in excess of the limits prescribed under Regulation 7(1A) of the 1997 Regulations.
3. Since the appellants failed to disclose the said sales as provided under Regulation 7(1A) read with Regulation 7(2) of the 1997 Regulations, proceedings were initiated against the appellants and by the impugned order penalty is imposed on each appellant.
4. Basic argument of the appellants is that since the appellants as promoters of the target company since inception held approximately 63% shares of the target company, which was more than the threshold limits prescribed under Regulation 11(1), the sales effected by the appellants could not be said to have been covered under Regulation 7(1A) of the 1997 Regulations and consequently no penalty could be imposed on the appellants for failing to make disclosure of the sales effected during the year 2009-10.
5. In the case of Mr. Ravi Mohan and Others vs. SEBI, Appeal no.97 of 2014 decided on 16.12.2015 this Tribunal has held as follows:-
"a) Under regulation 7(1A) of the Takeover Regulations, 1997, an acquirer who, together with persons acting in concert with him has acquired 15% or more but less than 55% shares of the target company when purchases or sells shares of the target company together with the persons acting in concert with the 3 acquirer, aggregating 2% or more of the share capital of the target company, then the said acquirer is required to make disclosure of such purchase or sale 39 within two days of purchase or sale under regulation 7(1A) read with regulation 7(2) of the Takeover Regulations, 1997.
b) Disclosure obligation under regulation 7(1A) has to be discharged in accordance with regulation 7(1A) read with regulation 7(2). Since regulation 7(2) does not contemplate for disclosure relating to sale of shares in excess of the limits set out under regulation 7(1A), appellants herein cannot be said to have failed to comply with regulation 7(1A) within the time stipulated under regulation 7(1A) read with regulation 7(2).
Consequently penalty imposed on the appellants cannot be sustained."
6. In view of the aforesaid decision of this Tribunal, it is clear that, assuming that the appellants were covered under Regulation 7(1A), no penalty could be imposed on appellants for failure to disclose the sales effected by the appellants.
7. Counsel for SEBI submitted that challenging the decision of this Tribunal in case of Ravi Mohan (supra) SEBI has filed an appeal and the said appeal is pending before the Apex Court.
8. Fact that the appeal against an order passed by this Tribunal is pending before the Apex Court cannot be a ground not to follow the decision of this Tribunal.
9. In this view of the matter, without going into the question as to whether the appellants were covered under Regulation 7(1A) or not, we hold that in the facts of the present case assuming that the appellants were covered under Regulation 7(1A), for failure on the part of the appellants 4 covered under Regulation 7(1A) to make disclosure of the sales effected during the investigation period, no penalty could be imposed against the appellants.
10. Accordingly the impugned order in so far as it purports to impose penalty on the appellants is quashed as set aside.
11. Appeal is allowed in the aforesaid terms with no order as to costs.
Sd/-
Justice J.P. Devadhar Presiding Officer Sd/-
Jog Singh Member Sd/-
Dr. C.K.G. Nair Member 1.7.2016 Prepared and compared by RHN