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Showing contexts for: LODR in Svam Software Ltd & Ors. vs Sebi on 13 October, 2022Matching Fragments
A. ―Violations of LODR Regulations, 2015 due to misrepresentation, including of financials and misuse of funds/books of accounts. B. Violation of PFUTP Regulations, 2003.‖
6. The WTM after considering the replies of the appellants and the material evidence on record concluded that the appellant Company misrepresented its financials and violated the accounting standards. The WTM found that various provisions of LODR Regulations were not complied with during the three financial years and there were lapses on the part of the Company in not making complete disclosures. The WTM further found that there was no violation of Section 12A of the SEBI Act and Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003 (hereinafter referred to as „PFUTP Regulations‟) as there was no misappropriation of the funds nor the Company nor its Directors had played a fraud upon the investors nor was there any disproportionate gain or unfair advantage nor any specific loss was incurred by any investor. The WTM accordingly for the above violations debarred the appellant from accessing the securities market for specified periods and imposed different amounts of penalties on the appellants.
18. The Company has given advances and loans which is a deviation in the business activities of the Company and was a material event which was required to disclosed to the stock exchange in accordance with Regulation 30(6) read with paragraph (c) of Part A of Schedule III of the LODR Regulations. We find that majority of the loans and advances have been repaid by various parties but the fact remains that there has been non-disclosure of the loan and advances under the LODR Regulations. However, such loans and advances are reflected in the Annual Reports of the Company.
20. We, thus, find that the Company had made certain lapses and failed to comply with the LODR Regulations.
21. Admittedly, a clear finding has been given by WTM that there is no misappropriation of funds of the Company nor there is any manipulation in the price of the scrip. The WTM has given a categorical finding that Section 12A of the SEBI Act or PFUTP Regulations have not been violated.
22. In the absence of any finding of any fraudulent activities or misappropriation of funds or diversion of funds, we are of the opinion that direction of debarment and the penalty given for violation of the LODR Regulations appears to be harsh and excessive. We also find that directions of debarment and imposition of penalties have also been imposed upon the appellants.
28. Considering the aforesaid, we affirm the violation committed by the Company with regard to some of the charges leveled under the LODR Regulations. Since the charge of fraud has not been proved under the PFUTP Regulations we find that the order of debarment and penalty imposed for violation of the LODR Regulations is harsh and excessive.
29. Accordingly, while affirming the violation committed by the Company with regard to some of the non-compliance under the LODR Regulation, we direct that the period undergone towards debarment is sufficient for the aforesaid violation and, therefore, the period of debarment is reduced to the period underwent by the appellants. In addition, we reduce the penalty of Rs.30 lakhs to Rs.10 lakhs upon the Company Svam Software Ltd. to be paid within six weeks from today. In view of the debarment underwent by the Directors, namely, noticee no.3 to 6 the penalty imposed upon them is set aside. The appeal is partly allowed.