While adjudging the quantum of penalty, AO's discretion should be exercised having due regard to the SEBI Act

While adjudging the quantum of penalty, AO's discretion should be exercised having due regard to the SEBI Act

The Securities and Exchange Board of India (SEBI) had conducted an examination in the scrip of Punjab Wool combers Limited (Company/PWL), during the period October 1, 2016 to December 31, 2016 (examination period) for the probable violation of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations) by Mr Neelam Kumar Oswal (Noticee no. 1), Mr Akhil Oswal (Noticee no. 2) and Ms Sudha Oswal (Noticee no. 3).

Adjudication proceedings were initiated against the Noticees under the provisions of section 15 A (b) of the Securities and Exchange Board of India Act, 1992 (SEBI Act) for their alleged failure to make the necessary disclosures mandated under the provisions of SAST Regulations.

It was alleged that Noticee nos 1 and 2 allegedly failed to make the necessary disclosures which were required to be made by them under Regulation 29(2) r/w Regulation 29(3) of the SAST Regulations and Noticee no. 3 failed to make the disclosure under Regulation 29(1) r/w Regulation 29 (3) of the SAST Regulations in respect of her acquisition of shares of the company during the examination period.

The Adjudicating Officer (AO) opined that certain acquisition /disposal of shares beyond the threshold limit which resulted in change in the shareholding of the Noticees triggered the obligation on their part to make the necessary disclosures u/r 29(1) and 29(2) of SAST Regulations to the company and to BSE within two working days from the date of acquisition/disposal of shares as stipulated u/r 29(3) of the SAST Regulations.

In their replies to the SCN and also during the course of the proceedings, the Noticees have admitted to the fact that no such disclosures were made by them under Regulations 29(1) and 29(2) of SAST Regulations.

Further, BSE in its communication with SEBI had also confirmed that the Noticees had not made the necessary disclosures under Regulations 29 (1) and 29(2) of SAST Regulations. In view of the above, the AO held that Noticee nos. 1 and 2 failed to comply with the provisions of Regulation 29(2) r/w Regulation 29(3) of SAST Regulations and Noticee no. 3 had failed to comply with the provisions of Reg. 29(1) r/w Reg. 29(3) of the SAST Regulations.

It was also mentioned that the disclosure requirements under respective regulations serve very important purposes. The stock exchange is informed so that the investing public will come to know of the position enabling them to take a view to stick on with or exit from the company. Timely disclosure of the details of the shareholding of the persons acquiring/transferring substantial stake is of significant importance as such disclosures also enable the regulators to monitor such acquisitions.

The judgment of the Hon'ble SAT in the matter of Milan Mahendra Securities Pvt Ltd vs SEBI was referred to wherein it was held that the purpose of these disclosures is to bring about transparency in the transactions and assist the Regulator to monitor the transactions in the market.

Another judgment referred to was one of Hon'ble SAT in the matter of Mrs. Komal Nahata Vs. SEBI wherein it was observed that the 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.

Thus,a monetary penalty of Rs 2 lakh was imposed upon the Noticees.