6. Vide letter dated April 06, 2015, Noticee filed a reply to the SCN. - PDF document

Page 3 of 10 3. 8(3) 4. 8(3) 5. 8(3) 30.04.200208.08.2012 6. 8 (3) 30.04.200308.08.2012 7. 8 (3) 30.04.200408.08.2012 8. 8 (3) 30.04.200508.08.2012 9. 8 (3) 30.04.200608.08.2012 10. 8 (3) 30.04.200708.08.2012 11. 8 (3) 30.04.200808.08.2012 12. 8 (3) 30.04.200908.08.2012 13. 8 (3) 30.04.201008.08.2012 14. 8 (3) 30.04.201108.08.2012 6. Vide letter dated April 06, 2015, Noticee filed a reply to the SCN.In order to conduct an inquiry in terms of rule 4(3) of the Adjudication Rules, the Noticee was granted an opportunity of personal hearing on May 07, 2015 vide notice dated April 17, 2015. Mr. Shanti BhushanNirmal, appeared as Authorized Representative (AR) on behalf of the Noticee and reiterated the submissions as made in reply dated April 06, 2015 by the Noticee. During the course of hearing, AR of the Noticeealso made additional submissions which were recorded. The salient submissions of Noticee are as follows: NICL / Noticee is a public company listed with DSE and the equity shares of the company were not traded on the stock exchange since its listing, as there is no trading platform provided by the stock exchange yet. The promoter shareholding has remained the same over the years, so by virtue of the delayed submissions, there has been no disproportionate gain or unfair advantage to the promoters. The company was unable to deposit settlement amount during consent proceedings of6,33,750/- as the financial position of the company was very weak and suffered losses from last many years. Since there was no competent person having an adequate knowledge of reporting requirements under the Erstwhile SEBI Regulations, 1997, no such report was filed with the respective regulatory authorities. Immediately after being informed about the violation, it had belatedly submitted the required compliance papers and the Page 5 of 10 c. If so, what would be the monetary penalty that can be imposed taking into consideration the factors mentioned in section 15J of SEBI Act? FINDINGS 8. Before moving forward, it is pertinent to refer to the relevant provisions of SAST Regulations, 1997 which reads as under:- Regulation 8 (1)………. (2)………. (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 purposes 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 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 9. The issues for examination in this case and the findings thereon are asfollows: 10. As per Regulation 8(3) of SAST Regulations, Noticee was required to make yearly disclosure within 30 days from the financial year ending March 31, to stock exchanges on which the shares of the company were 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. 11. The Noticee being a listed company at DSE was under an obligation to comply with the requirement of making yearly disclosures under regulation 8(3) of SAST Regulations. Upon perusal of submissions of the Noticee and documents available on record, I find that Noticeewas required to make disclosures as per regulation 8(3) of SAST Regulations, by April 30, 1998 to Page 7 of 10 14. I do not accept the aforesaid contentions of the Noticee. The contention of the Noticee regarding trading at DSE since listing is not material to the issue involved in the case. It is settled position of law the ignorance of law is not an excuse. I do not agree that such a long noncompliancecannot result any loss to investors, etc. The purpose and consequence of such required disclosure has already been explained in para 12 above. 15. Here I refer the Hon’ble Supreme Court of India in the matter of SEBI Vs. Shri Ram Mutual Fund [2006] 68 SCL 216(SC) has also held that “In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established and hence the intention of the parties committing such violation becomes wholly irrelevant…”. 16. In view of the same, the argument put forth by the Noticee that as there was no competent person, no change in promoter shareholding, no loss or damage was caused to the public shareholders in general or any other person, shares were not traded, etc. does not hold good in the given case. 17. I note that the Hon'ble Securities Appellate Tribunal (SAT) in the matter of KomalNahata Vs. SEBI (Date of judgment- January 27, 2014) has observed “Argument that no investor has suffered on account of non disclosure and that the AO has not considered the mitigating factors set out under Section 15J of SEBI Act, 1992 is without any merit because firstly penalty for non compliance of SAST Regulations, 1997 and PIT Regulations, 1992 is not dependent upon the investors actually suffering on account of such non disclosure.”18. I can not ignore the material fact that the Noticeesuomoto filed an application for consent before SEBI to settle the action of non-compliance of regulation 8(3) of SAST Regulations and also failed to pay the settlement amount of 6,33,750/- within the stipulated time. It is an admitted fact that the Noticee in its reply dated April 06, 2015 and during hearing prayed for depositing Page 9 of 10 22. While determining the quantum of penalty under section 15A(b), it is important to consider the factors stipulated in section 15J of SEBI Act,which reads as under:- “15J Factors to be taken into account by the adjudicating officer While adjudging quantum of penalty under section 15-I, theadjudicating officer shall have due regard to the following factors,namely:- (a) the amount of disproportionate gain or unfair advantage,wherever quantifiable, made as a result of the default; (b) the amount of loss caused to an investor or group ofinvestors as a result of the default;(c) the repetitive nature of the default.”23. From the material available on record, it is not possible to ascertain the exact unfair gain made by the Noticee and monetary loss to the investors on account of non-compliance by the Noticee. The main objective of the SAST Regulations is to afford fair treatment to shareholders who are affected by the change in control. The Regulation seeks to achieve fair treatment by inter alia mandating of timely disclosure and adequate information to the public/ investor/ shareholder to enable them to make an informed decision to be part of / or not to be part of companies due to such change in control. True and timely disclosures are also an essential part of the proper functioning of the securities market and failure to do so results in preventing investors from taking well-informed decisions. 24. In view of above, it would be necessary to impose appropriate penalty to commensurate the gravity of violation committed by the Noticee to meet the ends of justice. ORDER 25. In exercise of the powers conferred under Section 15 I of the Securities and Exchange Board of India Act, 1992, and Rule 5 of Adjudication Rules, 1995,