Regulation 13(3) r/w 13(5) of the PIT Regulations and Regulation 29(2) r/w 29(3) of the SAST Regulations provide for substantially overlapping obligations

Regulation 13(3) r/w 13(5) of the PIT Regulations and Regulation 29(2) r/w 29(3) of the SAST Regulations provide for substantially overlapping obligations

The SCN (Show Cause Notice) in respect of Dr. Ramesh Mahadevan Subramaniam in the matter of Prism Medico and Pharmacy Limited has been disposed of and it has been concluded that the failure on the part of the Noticee did not warrant imposition of monetary penalty upon it.

Securities and Exchange Board of India (SEBI) had undertaken an examination in the dealing of securities of the Company (M/s Prism Medico and Pharmacy Ltd.).During examination, SEBI observed that Dr. Ramesh Mahadevan Subramaniam (Noticee), had acquired/ sold shares of the Company.

It was alleged that the Noticee had made delayed disclosures to the Company under Regulations13(1) and 13(3) read with 13(5) of the PIT Regulations and to the Company and BSE (Bombay Stock Exchange Limited).

The Adjudicating Officer (AO) opined that the Noticee had acquired 10.04% of shareholding in the Company on March 28, 2014 and he disclosed the aforementioned acquisition of shares to the Company on March 31, 2014and to BSE on April 02, 2014. In this regard, it was noted that March 29, 2014 and March 30, 2014 were Saturday and Sunday and therefore, were non-working days.

It was also noted that the Noticee had made disclosure to the Company within a day of his said acquisition of shares in the Company and therefore, he had not violated the provision of the Regulations 13(1) of the PIT Regulations. It was further put forth that the Noticee had made delayed disclosure to the exchange i.e. BSE in terms of violation of provision of Regulation 29(1) of the SAST Regulations, however, the delay in this case was of one day in making disclosure to the BSE.

It was observed that the provisions of Regulation 13(1) of the PIT Regulations and Regulation 29(1) of the SAST Regulations provides the common threshold regarding the compliance obligation of a person when he holds shares or voting rights entitling him to five per cent or more of the shares or voting rights in a company.

Similarly, Regulation 13(3) of the PIT Regulations and Regulation 29(2) of the SAST Regulations provides for the common threshold regarding the compliance obligation of a person when he holds shares or voting rights entitling him to five per cent or more of the shares or voting rights in a target company and the change in such holdings exceeds two per cent of total shareholding or voting rights in a company, even if such change results in shareholding falling below five per cent.

In the facts of this case, the violation, if any, of the provisions of Regulation 13(1) of the PIT Regulations and Regulation 29(1) read with 29(3) of the SAST Regulations are not substantially different and can be considered as a single violation.

Similarly, the provisions of Regulation 13(3) read with 13(5) of the PIT Regulations and Regulation 29(2) read with 29(3) of the SAST Regulations also provide for substantially overlapping obligations and can be treated single violation in respect of same transaction.

In this case, the Noticee had admitted to the alleged failure in making timely disclosures in terms of respective regulations. It was noted that there were three occasions of failure in making disclosure, however, on two occasions delay was only of a single day and on third occasion delay was of 29 days.

It was also noted that on occasions, where delay was of a single day, the Noticee made timely disclosure to the Company. From the price of the scrip of the Company, during or post disclosure by the Noticee, it was observed that there was no major movement in the price of the scrip of the Company and therefore, the AO was of the view that the Noticee's disclosure did not have impact on the price of the scrip.

It was concluded that corrective steps were taken by the Noticee even prior to issue of SCN in this matter. The instant proceedings had been initiated in 2019 much after the transaction in questions relating to the period March 28,2014to July 21, 2014.

In this case, there was no blameworthy conduct nor lethargic indifference nor the needless procrastination on the Noticee's part. Considering these mitigating factors, criteria under section 15J and guidance pronounced by Hon'ble Supreme Court in SEBI Vs Bhavesh Pabari, the AO opined that the failure on the part of the Noticee was technical and venial.