SEBI is duty bound to ensure that the investing public are not deprived of any statutory rights available to them

SEBI is duty bound to ensure that the investing public are not deprived of any statutory rights available to them

The Securities and Exchange Board of India (SEBI) has held that securities market is based on free and open access to information, and that protection of the interests of the investors is the prime objective of SEBI.

It further held that disclosures in respect of the vital information of any company has been made mandatory for the protection of the investors so as to enable them to take suitable informed investment decisions. The objective behind such requirement is that the investing public shall not be deprived of any vital information in respect of their investments in the securities market. If any person who is to make such disclosures doesn't make it and are depriving the investing public the statutory rights available to them, then SEBI is duty bound to ensure that the investing public are not deprived of any statutory rights available to them.

The markets regulator imposed a penalty of Rs. 6 lakhs each on Kiran Kulkarni (Noticee 1) and Shri Pankaj Kumar (Noticee 2) and a penalty of Rs. 2 lakhs on Veena Pankaj Kumar (Noticee 3) for the violation of SAST Regulations, 2011, PIT Regulations, 2015 and PIT Regulations, 1992.

Herein, SEBI had conducted investigation in the matter of M/s Geodesic Limited (Geodesic/GDL/Company) for the period of April 01, 2012 to March 31, 2013 (investigation period) and had observed violations of (a) Regulations 31(1) and 31(2) of SAST Regulations, 2011, Regulation 13(3),13(4)and13(4A) of PIT Regulations, 1992 read with Regulation 12(2) of PIT Regulations, 2015, Regulation 29(2) of SAST Regulations, 2011by Noticee 1and Noticee 2 (b)Regulation 13(4A) of PIT Regulations, 1992 read with Regulation 12(2) of PIT and Regulations, 2015, Regulation 29(2) of SAST Regulations, 2011 by Noticee 3.

The Adjudicating Officer (AO) opined that shares of Noticee 1 and 2were used as security against the loan taken by the Company with the consent of Noticee 1 and 2 for the said use of their shares. It was evident that in case of failure to repay loan by the Company, the shares used as security could be pledged/invoked byICICI Bank.

It was clear that the Noticees were well aware of the terms and conditions of the NDU(Non Disposal Undertaking)arrangement using the Power of Attorney tocreation of pledge/ invocation of the pledge and sale of shares held in the account of the Noticees by the pledgee couldnot be held to have happened without the consent of the Noticees.

The said arrangement or any part thereof had not been disowned by the Noticees anywhere in their submissions. Thus, being fully aware of the terms and conditions of the NDU arrangement using the Power of Attorney to recover the loan amount byICICI bank it could not now be claimed by the Noticee 1 and 2 that the shares were soldwithout their consent or their knowledge.

The AO did not find any merit in the contention of Noticee 1 and 2 that ICICI bank did not inform them while pledging and invoking their shares to recover loan. The AO observed that Noticee 1 and 2 were holding shares in demat account. Noticees1 and 2 had further stated that during Jan-Feb, 2013, their shares were pledged and invoked by ICICI bank. However,it was observed that even before January 2013, there were instances of creation of pledge by Noticees 1 and 2.

The AO was of the view that Noticees 1 and 2 failed to make relevant disclosures under Regulations 31(1) and 31(2) of SAST Regulations, 2011.

With regard to the contention of Noticees 1 and 2 that they were unable to access the documents from Company as the same were in the premises of the Company which were attached and sealed by the Official Liquidator of the Bombay High Court, the AO was of the view that Noticees 1 and 2 were supposed to be aware of and in possession of the disclosures made by them to the Company for their own transactions.

Further, the AO did not agree with the contention of the Noticee1 and 2 that they were unaware of sale of their shares by ICICI bank. Noticees 1 and 2 failed to make relevant disclosures under Regulation 13(4)and 13(4A)of PIT Regulations, 1992read with Regulation 12(2) of PIT Regulations, 2015.

With respect to Noticees 1 and 2 being promoters of the Company and as person acting inconcert with promoter group, it was observed that there was a change in shareholding of more than 2%on January 30, 2013 and February 25, 2013which required disclosure to be made under Regulation 29(2) of SAST Regulations, 2011. However, the promoter Group, including the Noticees 1 and 2 failed to make requisite disclosures.

Noticee 3 had contended that it had made required disclosures under Regulation 13(4A)of PIT Regulations, 1992and was unable to produce documents in this regard from Company as the same were in the premises of the Company which were attached and sealed by the Official Liquidator of the Bombay High Court.

In this regard, the AO was of the view that the Noticee 3 was supposed to be aware of and in possession of the disclosures made by her to the Company for her own transactions. Therefore, without documentary evidence, the AO was not inclined to accept the claim of the Noticee3 that she had complied disclosure requirements.

Noticee 3 failed to make relevant disclosures under Regulation 13(4A)of PIT Regulations, 1992 read with Regulation 12(2) of PIT Regulations, 2015. With regard to allegation of violation of Regulation 29(2) of SAST Regulations, 2011by Noticee 3, it was observed that Noticee 3 is the spouse of Mr. Pankaj Kumar and thereby is part of promoter group of the Companyas person acting in concert.