SEBI penalises Roselabs Finance for violating market norms; imposes Rs. 15 lakh fine
SEBI penalises Roselabs Finance for violating market norms; imposes Rs. 15 lakh fine
The Securities Exchange Board of India (in short SEBI) in the matter of Gujarat Arth Ltd. (in short GAL) imposed a fine of Rs. 15 lakh on Roselabs Finance (hereinafter referred to as 'noticee' for violating market regulations.
The order consequently came after the Securities Appellate Tribunal (in short SAT) in its ruling in December, 2022 quashed SEBI's December, 2019 order wherein a penalty of Rs. 2.5 crore was imposed on noticee for violating SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (in short PFUTP) and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (in short SAST).
The Board after examining the relevant records also found that the promoters and persons acting in concert with GAL, including Noticee, had divested shares in the market through off-market transfer. The same was done around the time of misleading announcement made by the Gujarat Arth Ltd. The investors were defrauded as the announcement published created a substantial artificial volume and effected the price of the scrip.
Additionally, it was found that 15 per cent of the paid-up capital was triggered of the company as the noticee had transferred shares off-market and received back shares before transferring again in their entire holding in an off-market transaction.
However, the noticee had failed to make requisite disclosures and no public announcements were made by it, hence violating the as per Section 15 of the Securities Exchange Board of India, Act 1992 (in short SEBI Act).
The single Adjudicating Officer- Asha Shetty placed reliance on the judgment passed by the Supreme Court of India in the matter of SEBI vs. Ajay Agarwal, wherein, it was held that "The right of a person of not being convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence and not to be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence, is a Fundamental Right guaranteed under our Constitution only in a case where a person is charged of having committed an "offence" and is subjected to a "penalty".
Further, the Board also placed reliance on the judgment passed by the Supreme Court in L. R. Brothers Indo Flora Ltd v. Commissioner of Central Excise, (2020) wherein, it was held that for application of a subsequent legislation retrospectively it is necessary to show that the previous legislation had any omission or ambiguity or it was intended to explain an earlier act.
The Board opined that, "in absence of the above ingredients, a legislation cannot be regarded as having retrospective effect. Therefore, I am of the view that the monetary penalty to be imposed on the Noticee be decided based on the Section 15H and 15HA of the SEBI Act, as they stood in their earlier form, pre-amendment of 2014 i.e., at the time of violation."
The Board also highlighted that the violations transpired in the year 2003 and since then the management of the notice has changed twice and the current management of the firm was not involved when the said violations were committed. Therefore, the Board was inclined to take a lenient approach while levying penalty in respect of the violations and accordingly slapped a fine of Rs. 15 lakh on Roselabs Finance.
