Securities Appellate Tribunal
Mr. Pranav Ansal vs Sebi on 7 January, 2014
Author: J.P. Devadhar
Bench: J.P. Devadhar
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision: 07.01.2014
Appeal No. 188 of 2013
Mr. Pranav Ansal
Properties and Infrastructure Limited,
Vishranti 26, Feroze Shah Road,
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
Mrs. Divya Bahl, Advocate with Mr. Sanket Jain and Mr. Neelabh
Pandey, Advocates for the Appellant.
Mr. Kumar Desai, Advocate with Mr. Manish Acharya and
Ms. Khushboo J. Tatia, Advocates for the Respondent.
CORAM : Justice J.P. Devadhar, Presiding Officer
Jog Singh, Member
A.S. Lamba, Member
Per : Justice J.P. Devadhar (Oral)
1.Whether Chief General Manager and Adjudicating Officer ('AO' for short) of Securities and Exchange Board of India ('SEBI' for short) was justified in imposing penalty of ` 1 lac upon appellant under Section 15A(b) of Securities and Exchange Board of India Act, 1992 ('SEBI Act' for short) is the question raised in this appeal.
2. By consent of counsel for parties, appeal is heard finally at admission stage.
3. Appellant is a promoter director of Ansal Properties and Infrastructure Limited ('APIL' for short). In terms of agreement for 2 pledge of shares dated August 31, 2009, 9964500 equity shares of APIL held by appellant were pledged as collateral security with Industrial Finance Corporation of India ('IFCI' for short) against corporate loan facility availed by APIL. As APIL failed to repay loan under the corporate loan facility, IFCI invoked pledge agreement on September 24, 2012 and sold 2159793 shares on September 25, 2012. By letter dated September 25, 2012 Stock Holding Corporation of India Limited, concerned Depository Participant informed appellant about sale of aforesaid 2159793 shares of APIL.
4. On September 28, 2012 appellant informed stock exchanges regarding change in his shareholding pattern under Regulation 31(1) and 31(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ('SAST Regulations, 2011' for short) and hard copy thereto was dispatched to SEBI on the following day. Since no such disclosure was made under SEBI (Prohibition of Insider Trading) Regulations, 1992 ('PIT Regulations, 1992' for short) show cause notice was issued to appellant on April 15, 2013, calling upon him to show cause as to why penalty under Section 15A(b) of SEBI Act should not be imposed upon appellant for violating PIT Regulations, 1992. Accordingly, appellant showed cause by filing reply to the effect that allegations made against appellant are without any merit. After considering reply and after hearing appellant by impugned order dated September 6, 2013, AO imposed penalty of ` 1 lac under Section 15A(b) of SEBI Act. Challenging aforesaid order present appeal is filed. 3
5. Mrs. Divya Bahl, learned counsel appearing on behalf of appellant submitted that having held that object of disclosure requirement in PIT Regulations were met in view of disclosures made by appellant under SAST Regulations, 2011 AO was not justified in imposing penalty of ` 1 lac under Section 15A(b) of SEBI Act. Reason for not making disclosure under PIT Regulations was on account of there being no provision in PIT Regulations like Regulation 29(4) of SAST Regulations, 2011 which provides that for purposes of SAST Regulations, 2011, shares taken by way of encumbrance shall be treated as an acquisition. Since appellant was under a bonafide belief that sale after invocation of pledge was not required to be disclosed under PIT Regulations, AO ought to have taken a lenient view and not imposed penalty upon appellant.
6. Relying on judgment of Apex Court in case of Hindustan Steel Ltd. vs State of Orissa reported in AIR 1970 SC 253 and various other judgments including a judgment of this Tribunal in case of Vitro Commodities Private Ltd. vs SEBI (Appeal No. 118 of 2013 decided on 4.9.2013). It is contended that in the absence of any loss caused to an investor or group of investors as a result of the alleged default AO was not justified in levying even minimum penalty of ` 1 lac upon appellant.
7. Mr. Kumar Desai, learned counsel appearing on behalf of respondent submitted that although there is no allegation that appellant had deliberately concealed change in his shareholding APIL under PIT Regulations, as a promoter director appellant was obliged under Section 13(5) of PIT Regulations, 1992 to disclose those facts within 2 days of 4 change in his shareholding in APIL by way of acquisition or sale of shares or voting rights as the case may be. Admittedly, in this case, pledged shares were sold by IFCI on September 25, 2005 and appellant was informed about such sale on September 25, 2012 itself. As per Regulation 13(5) of PIT Regulation, appellant ought to have disclosed the same within two days i.e. on or before September 27, 2012. Even though no disclosure has been made till date under PIT Regulations, 1992, taking in to consideration, disclosure made on September 28, 2012 under SAST Regulations, 2011, minimum penalty of ` 1 lac has been imposed which cannot be said to be unreasonable.
8. We have carefully considered rival submissions.
9. It is relevant to note that disclosure regarding change in shareholding by a promoter is required to be made both under SAST Regulations, 2011 as also under PIT Regulations, 1992. However, disclosure under SAST Regulations, 2011 is required to be made within 7 days whereas, disclosure under PIT Regulations, 1992 is required to be made within 2 days of change in shareholding.
10. Object of requiring such disclosure to be made within two days under PIT Regulations is with a view to ensure that there is no abuse on account of investors being not aware of such change in shareholding of a promoter director who is an insider under PIT Regulations. Disclosure made under SAST Regulations, 2011 on September 28, 2012 if considered as disclosure made under PIT Regulations, 1992, even then, it would amount to violating PIT Regulations, 1992, because such 5 disclosure was not made within two days of change in shareholding of appellant in APIL.
11. Argument that in view of ambiguity in PIT Regulations, 1992 appellant did not make disclosure under PIT Regulations, 1992 cannot be accepted, because Regulation 13 read with Form D of PIT Regulations, 1992 make it abundantly clear that every promoter director is obliged to disclose within two days any change in his shareholding inter-alia on account of sale of shares. Admittedly on September 25, 2012 appellant came to know that 21,59,793 shares of APIL pledged by him have been sold by IFCI. Having known on September 25, 2012 that there is change in shareholding on account of sale of shares, appellant was obliged to disclose the same within two days from September 25, 2012. Since disclosure was not made within two days, appellant has violated PIT Regulations, 1992.
12. Reliance placed on decision of Apex Court in case of Hindustan Steel Ltd. (supra) is misplaced because Apex Court in case of Chairman SEBI vs. Shriram Mutual Fund and Anr. reported in 2006 SC 2287 had held that decision in case of Hindustan Steel Ltd. (supra) relating to criminal/quasi criminal proceedings would not apply to imposition of civil liabilities under SEBI Act and Regulations made thereunder. In this case penalty of ` 1 lac is imposed under SEBI Act and hence decision of Apex Court in Hindustan Steel Ltd. (supra) does not support case of appellant. Similarly, reliance placed on decision of this Tribunal in case of Vitro Commodities Pvt. Ltd. (supra) does not support case of 6 appellant, because, in that case even after considering that there was no loss caused to an investor or group of investors as a result of default committed by appellant therein, penalty has been sustained to the extent specified therein. Hence, decision of this Tribunal in case of Vitro Commodities (supra) does not support contention of appellant.
13. Argument that penalty is excessive cannot be accepted, because, considering all facts, including disclosure made on September 28, 2012 under SAST Regulations, 2011, AO has imposed penalty of ` 1 lac, even though Section 15A(b) of SEBI Act empowers AO to impose penalty of ` 1 lac per day during which such failure continues under PIT Regulations, 1992 or ` 1 crore whichever is less and admittedly till date no such disclosure has been made by appellant under PIT Regulations, 1992.
14. For all aforesaid reasons, appeal is devoid of any merit and same is hereby dismissed with no order as to costs.
Sd/-
Justice J.P. Devadhar Presiding Officer Sd/-
Jog Singh Member Sd/-
A S Lamba Member 07.01.2014 Prepared & Compared By: Pk