REPETITIVE DEFAULT IN MAKING DISCLOSURES – A FIT CASE TO IMPOSE MONETARY PENALTY – Eshwars
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REPETITIVE DEFAULT IN MAKING DISCLOSURES – A FIT CASE TO IMPOSE MONETARY PENALTY

Authored by Padma Akila

Date(s) of Order: 11th December 2020

Purported contravention committed: Promoters of the Company sold more than 25000 shares and failed to make requisite disclosures in terms of regulation 13(4A) of SEBI (PIT) Regulations,1992 r/w 13(5) of SEBI (PIT) Regulations,1992 r/w Regulation 12 of the SEBI (PIT) Regulations, 2015.

Persons charged and who are they: Promoters of the company namely; Smita D Gandhi (Noticee 1), Yogesh Shah (Noticee 2) and Yogeshbhai Shah HUF (Noticee 3)

Company which did not fulfil the disclosure requirements: Global Securities Limited.

BACKGROUND OF THE CASE:

1. Pursuant to an investigation by SEBI in the scrip of Global Securities Limited, to examine the matters relating to preferential allotment process and utilization of preferential issue proceeds, disclosure requirements in terms of SEBI (Prohibition of Insider Trading) Regulations, 1992 (“PIT Regulations, 1992”) and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“SAST Regulations, 2011”) and Listing Agreement by the company during the period from May 1, 2010 to April 30, 2014, it was observed that the Noticees had sold more than 25000 shares and failed to make requisite disclosures in terms of [1]Reg 13(4A) of PIT Regulations, 1992 r/w 13(5) of PIT Regulations,1992 r/w [2]Reg 12 of PIT Regulations, 2015.

2. The Noticees neither replied to the SCN issued to them nor did they attend the personal hearing on the scheduled date, till the passing of the order.

3. The scrip was listed only on BSE and was suspended for trading with effect from January 07, 2015 due to non-payment of Annual Listing Fees

FINDINGS BY THE ADJUCATING OFFICER (“AO”):

1. The AO, on perusal of the shareholding pattern of the promoters available on the BSE website during the investigation period, observed that the names of the Noticees did not appear in the shareholding pattern from September 2012 quarter onwards. Further, it was observed that there was a reduction in the shareholding of the Noticees by more than 25000 shares during this quarter.

2. The AO further identified that, vide email dated December 20, 2019, BSE confirmed that the exchange was not in receipt of any disclosures under SAST Regulations and PIT Regulations from the Noticees in September 2012 quarter. Therefore, the AO concluded that the Noticees did not make the required disclosures for the aforesaid changes in their shareholding.

3. The AO observed that the Noticees had simultaneously failed to file quarterly shareholding pattern for June 2013 and September 2013 quarters as required under Clause 35 of the Listing Agreement r/w [1]Reg 103 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and [2]section 21 of the SCRA, 1956.

4. The AO found it pertinent to draw attention to the matter of Coimbatore Flavors & Fragrances Ltd. vs SEBI (Appeal No. 209 of 2014 order dated August 11, 2014), wherein the Hon’ble SAT observed that “Undoubtedly, the purpose of these disclosures is to bring about more transparency in the affairs of the companies. True and timely disclosures by a company or its promoters are very essential from two angles. Firstly; investors can take a more informed decision to invest or not to invest in a particular scrip secondly; the Regulator can properly monitor the transactions in the capital market to effectively regulate the same.”

5. Referring to the judgment in the matter of SEBI vs. Shriram Ram Mutual Fund (2006 SCL 216(SC)), wherein Hon’ble Supreme Court held that; “In our opinion, mens rea is not an essential ingredient for contravention of the provisions of a civil act. In our view, the penalty is attracted as soon as contravention of the statutory obligations as contemplated by the Act is established and, therefore, the intention of the parties committing such violation becomes immaterial. In other words, the breach of a civil obligation which attracts penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not. We also further held that unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not”, the AO concluded that the Noticees had violated abovementioned provisions and were fit to be imposed with a monetary penalty.

[1] Continual disclosure

13.(4A) Any person who is a promoter or part of promoter group of a listed company, shall disclose to the company and the stock exchange where the securities are listed in Form D, the total number of shares or voting rights held and change in shareholding or voting rights, if there has been a change in such holdings of such person from the last disclosure made under Listing Agreement or under sub-regulation (2A) or under this sub-regulation, and the change exceeds Rs. 5 lakhs in value or 25,000 shares or 1% of total shareholding or voting rights, whichever is lower.

(5) The disclosure mentioned in sub-regulations [(3), (4) and (4A)] shall be made within [two] working days of:

(a) the receipts of intimation of allotment of shares, or

(b) the acquisition or sale of shares or voting rights, as the case may be.

[2] Reg 12 is the Repeal and savings regulation of PIT Regulation 1992.

[1]103 (1) On and from the commencement of these regulations, all circulars stipulating or modifying the provisions of the listing agreements including those specified in Schedule X, shall stand rescinded.

(2) Notwithstanding such rescission, anything done or any  action taken or purported to have been  done  or  taken  including  any  enquiry  or investigation  commenced  or  show  cause notice  issued  in  respect  of  the circulars  specified  in sub-regulation  (1) or  the Listing Agreements, entered into between stock exchange(s) and listed entity, in force prior to the commencement of these regulations, shall be deemed to have been done or taken under the corresponding provisions of these regulations.

[2] 21. Where securities are listed on the application of any person in any recognised stock exchange, such person shall comply with the conditions of the listing agreement with that stock exchange.

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