No penalty imposed upon Snehbar Stockholdings in Oasis Tradelink Matter

No penalty imposed upon Snehbar Stockholdings in Oasis Tradelink Matter

In the matter of Oasis Tradelink Limited (OTL), the Adjudicating Officer (AO) of the Securities and Exchange Board of India (SEBI) has disposed the Show Cause Notice (SCN) without imposition of penalty upon Snehbar Stockholding Private Limited (Noticee).

Herein, SEBI had conducted an Investigation in the matter of trading in the scrip of the OTL by its promoter Snehbar Stockholding Private Limited to ascertain whether there was any violation of the provisions of SEBI (Prohibition of Insider Trading) Regulation, 2015 (PIT Regulations) during the period January 1, 2018 to March 31, 2018 (investigation period).

During the investigation it was noted that the Noticee has purchased 1,48,496 shares off market in the first half of February and sold 4,220 shares off market during the second week of February. Later it also sold 1,44,276 shares during second half of March. Due to the aforementioned transactions, the shareholding of the Noticee remained unchanged for the Quarter ended March 2018 vis-à-visfor the quarter ending December 2017.

For these transactions, the transaction value of the shares exceeded ₹10 lakhs. As per regulation 7(2)(a) of the PIT Regulations, the Noticee was under obligation to make the requisite disclosures within two days to OTL. It was alleged that the Noticee failed to make the requisite disclosure to OTL on, many occasions. It was also alleged that the Noticee had violated the provisions of regulation 7(2)(a) of the PIT Regulations with regard to its transfer during the investigation period.

With respect to the allegation of regulation 7(2)(a) of the PIT Regulations, the AO noted that as per regulation 7(2)(a) of the PIT Regulations the Noticee was required to disclose the same to OTL within two trading days of its transactions.

It was noted by the AO that the Noticee vide its email dated September 17, 2020 had provided the copies of disclosures made within requisite time to OTL, duly acknowledged by OTL as per the requirement of the PIT Regulations. Therefore, it was held that the Noticee had made the requisite disclosures to OTL, within stipulated time as required under regulation 7(2)(a) of the PIT Regulations.

Further, with regard to the second allegation of non-compliance of summons, it was alleged that the Noticee did not make any submission. In this regard, the AO noted that Section 11C(3) of the SEBI Act, empowers the IA to seek such information or record evidences/ statement which are relevant or necessary for the purpose of investigations, from any person associated with securities market in any manner.

Section 11C(2) casts mandatory duty upon such person, from whom documents/ records/ information/ evidence has been sought by the IA(Investigating Authority) to produce to the IA or any person authorised by it in this behalf, all the books, registers, other documents and record of, or relating to such person. It was a matter of record that the Noticee had not responded to the aforesaid summons.

However, the AO also observed that the information sought by the IA was already available with the OTL. It was also apparent that the information sought from the Noticee was to ascertain whether the Noticee made requisite disclosures under section 7(2)(a) of the PIT Regulations. As observed earlier, the requisite disclosures were made by the Noticee to OTL.

The judgement of the Hon'ble SAT in the matter of Mr. Ashwin Bhndari Vs. SEBI was also relied upon, wherein it was opined that the investigation report held that the appellant was not involved in the violations relating to the scrip of the company and further for non-compliance of Summonses, only adjudication proceedings was recommended. Based upon the above observations the Hon'ble SAT set aside the penalty imposed on the Noticee.

Taking guidance from this judgement, in the present matter as the Noticee had also not been found in violation of the substantive provision of the regulations in the matter for which the information was sought by way of summon, it was held by the AO that this was not a fit case for imposition of penalty under section 15A(a) of the SEBI Act.