Securities Appellate Tribunal
Anand Electric Supply Co. Ltd. vs Securities And Exchange Board Of India on 17 November, 2004
JUDGMENT
B. Samal, Member
1. Appeal is taken up for disposal with consent of both parties.
2. The appellant challenges the impugned order which reads as follows:
" Having regard to the number of days breach of Regulation 8(3) of SEBI (SAST) Regulations, 1997, has continued and the penalty which the noticee would have paid if the company had availed the Regularization Scheme, 2002 and also taking into account the submissions made and the factors as contained in Section 15J, of the SEBI Act, 1992, I, hereby, impose a penalty of Rs.50,000 (Rupees Fifty thousand only) under Section 15A(b) of SEBI Act, for the delay in complying with Regulation 8(3) of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 for the years 1999 and 2000 on M/s. Anand Electric Supply company Ltd.,"
3. The impugned order has been issued by the Respondent pursuant to an enquiry held under Rule 4(3) of SEBI (Procedure for holding enquiry and imposing penalties by Adjudicating Officer) Rules, 1995 in the matter of yearly disclosures relating to changes if any, in respect of holding of certain class of persons and also holdings of promoters to the BSE by the appellant as on March 31, 1999 and March 31, 2000 under Regulation 8(3) of SEBI ((Substantial Acquisition of Shares and Takeover) Regulations, 1997.
4. The brief facts of the case in the matter is that the appellant company was formed in 1936 and is a listed company on the BSE. The appellant belonged to a reputed IIT Group at the relevant time and IIT group companies holding in the appellant was about 79.14%. The appellant's present share capital is Rs.5.19 lakhs held by about 80 shareholders. The appellant's shares were not traded on the BSE during 1.4.98 to 31-3-2000 except 50 shares traded on only one occasion. The appellant was taken over by IIT group in 1994-95. For the year ended 31-3-2003 the appellant's gross/total income was Rs.1,26,179/- and loss was about Rs.4,59,714/-. The appellant declared dividend from other sources. The Appellant has submitted that it has an unblemished reputation and at no time committed any breach or contravention or violation of any Rules, Regulations and provisions of SEBI Act and/or of Stock Exchange.
5. The appellant has stated that it received a letter dated 19th January, 2004 from BSE stating that it had not complied with the disclosure requirements of Regulation 8(3) of SEBI ((Substantial Acquisition of Shares and Takeover) Regulations, 1997 for the year 1998-99 and 1999-2000. The said letter however, confirmed company's compliance of regulation 8(3) for the years 1997, 1998, 2001, 2002 and 2003. The appellant had submitted to the Respondent that as there was no change in the shareholding of the promoters or persons having control over the company as on 31st March, 1999 and 31st March, 2000 respectively, as compared to disclosure made on 31st March, 1998, the disclosures in the prescribed format for the two years i.e. 1999 and 2000 were not filed at the relevant time. However, subsequently, the appellant has submitted the disclosure of shareholding as on 31st March, 1999 and 31st March 2000 under Regulation 8(3) SEBI ((Substantial Acquisition of Shares and Takeover) Regulations, 1997.
6. Regulation 8(3) of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 is reproduced below:
8. Continual disclosures -
(1) Every person ....
(2) A promoter ...
(3) Every company whose shares are listed on a stock exchange, shall within 30 days from the financial year ending March 31, as well as the record date of the company for the purpose of declaration of dividend, make yearly disclosures to all the stock exchanges on which the shares of the company are listed, the changes, if any, in respect of the company are listed, the changes, if any, in respect of the holdings of the persons referred to under sub-regulation (1) and also holdings of promoters or person(s) having control over the company as on 31st March."
7. Heard both the parties. There is no dispute about the facts. The appellant has not submitted the necessary disclosures pertaining to the years 1999 and 2000. However, they have submitted it after knowing that this is necessary irrespective of the fact that whether there is any change in the shareholding of promoters or persons or not.
8. According to the Respondent there was a delaying in complying with Regulations 8(3) of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 by the company as under:
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S.No. Regulations Due date of Actual date of Delay
compliance compliance
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1. 8(3) 21.04.1999 03.02.2004 1749 days
3. 8(3) 21.04.2000 03.02.2004 1383 days
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Ms. Himadri Katharani, Compliance Officer had submitted that there was no change in the share holding of promoters or persons having control over the company as on 31.03.99 and 31.03.00. Hence, according to them it was not necessary to disclose under Regulation 8(3) at the relevant time. However, it was submitted that on receipt of a letter from BSE on 28.01.04 the requisite disclosure was made on 03.02.04. The learned authorized representative had also filed copy of letter dated 28.06.04 from BSE and submitted that between 01.04.98 and 31.03.00, there was only a single trade on 02.04.1998 for 50 shares. It was, therefore, submitted that no prejudice was caused to the investors even assuming that there was no compliance of Regulation 8(3).
8. The learned Counsel for the Respondent submitted that for smooth functioning of security market, it is essential that the Appellant must adhere to the conditions as stipulated in the relevant Act. The purpose of imposing penalties is to have the effect of deterrent.
9. This Tribunal in Cabbot International Corpn. Vs. SEBI held that where the violation is of technical nature and due to a bonafide error, the Tribunal should not consider imposing heavy penalty and should help in pointing out the defect to the appellant so that it does not recur again and the Tribunal declined to impose any penalty in that case as there was substantial compliance. This order of this Tribunal was confirmed by the Bombay High Court.
10. The Adjudicating Officer has imposed a penalty of Rs.50,000/-. Taking into consideration the totality of the facts and circumstances of the case and taking all the factors under section 15J of the Act, we are of the view that the penalty be reduced to Rs.10,000/- for failure to comply or delay in complying with the requirements of 8(3) of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 for the years 1999 and 2000. This penalty amount is to be remitted within four weeks from the date of receipt of this order. The impugned order stands modified to this extent.
The appeal is disposed of accordingly.
No order as to costs.