Mr. Akshat Tandon v. Ms. Neera Tandon

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision : 5.10.2016 Appeal No. 374 of 2014

1. Mr. Akshat Tandon,

2. Ms. Neera Tandon,

3. Ms. Alankar Tandon,

4. Mr. Gaurav Tandon,

5. Mr. Girish Tandon,

6. Ms. Ela Tandon,

7. Mr. Badri Vishal Tandon,

8. Ms. Meenu Tandon,

9. Ms. Chavi Tandon,

10. Ms. Surbahi Tandon,

11. Ms. Paridhi Tandon

15. M/s. Sahitya Bhawan Pvt. Ltd. (Formerly Tandon Investments Private Limited) 33, Dayanand Marg, Allahabad 211002. Appellants Versus Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051. Respondent Mr. Nimay Dave, Advocate with Ms. Rashida F. Savliwala, Advocate i/b. Dhruve Liladhar & Co., for the Appellants. Mr. Rajesh Nagory, Advocate with Mr. Mihir Mody and Mr. Saurabh Bachhawat, Advocates i/b. K. Ashar & Co.,for the Respondent. CORAM : Justice J.P. Devadhar, Presiding Officer Jog Singh, Member Dr. C.K.G. Nair, Member Per : J.P. Devadhar

1. Appellants herein are aggrieved by the order passed by the Adjudicating Officer of Securities and Exchange Board of India (SEBI for short) on 31st July, 2014. By the said order penalty is imposed on the appellants under section 15A(a) and 15A(b) of the Securities and Exchange Board of India Act, 1992 (SEBI Act for short) for violating Regulations 3(3) and 3(4) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (SAST Regulation, 1997).

2. Counsel for the appellants fairly submitted that the appellants who are the promoters of Shree Bhawani Paper Mills Ltd. (Target Company for convenience) holding 54% shares had acquired shares of the Target Company on various dates specified in the impugned order in excess of the limits prescribed under Regulations 3(3) and 3(4) of the SAST Regulations, 1997, as a result whereof the appellants were required to notify/submit report to the respective authorities within the time stipulated therein. Counsel for the appellants further submitted that since the appellants have failed to notify or submit report as contemplated under Regulation 3(3) and 3(4) of SAST Regulations, 1997, the appellants have violated the aforesaid regulations and for the aforesaid violations penalty could be imposed on the appellants under section 15A(a) and 15A(b) of the SEBI Act. However, it is submitted by the counsel for the appellants that in the present case, the penalty imposed is excessively high and unreasonable harsh for the following reasons:-

a) In the absence of any evidence to show that there was any disproportionate gain or unfair advantage to the appellants or loss caused to the investors as a result of the alleged violations, the Adjudicating Officer is not justified in imposing such huge penalty against the appellants.

b) As the target company was incurring huge losses and has been declared as sick by the Board for Industrial and Financial Reconstruction (BIFR) the delay in making the disclosure ought to have been condoned and in any event exorbitant penalty ought not to have been imposed on the appellants.

c) In the impugned order penalty is imposed against the appellants without considering the mitigating factors set out in section 15J of the SEBI Act which is wholly unjustified. Accordingly it is submitted that the impugned penalty be set aside and in the alternative, it is submitted that the impugned penalty be reduced to the extent as this Tribunal deems fit and proper.

3. We see no merit in the above contentions.

4. Obligation to notify or submit report to the respective authority within the time stipulated under Regulations 3(3) and 3(4) of the SAST Regulations, 1997 is mandatory and failure to comply with those obligations entail imposition of monetary penalty under Section 15A(a) and 15A(b) of the SEBI Act, 1992. In the present case it is not in dispute that the appellants have failed to comply with the requirements of Regulation 3(3) and Regulation 3(4) of the SAST Regulations, 1997. It is not in dispute that the appellants have complied with the aforesaid provisions belatedly and penalty calculated at the rate of Rs.1 lac for each day during which the violation continued would be more than 1 crore of rupees for each violation and as such the penalty imposable on appellants for each violations would be a maximum of Rs.1 crore under Section 15A(a) and 15A(b) of SEBI Act. As the violations relate to 15 transactions effected on 15 different dates, the penalty imposable on appellants would have been Rs.15 crore. However, in the present case, the Adjudicating Officer after taking into consideration all mitigating factors has imposed penalty between Rs.3 lac to Rs.6 lac for each of the 15 violations committed by the appellants.

5. Argument of the appellants that in the absence of any finding that there was disproportionate gain or unfair advantage to the appellants or loss caused to the investors, penalty could not be imposed on the appellant is without any merit. Penalty imposable under Section 15A(a) and 15A(b) of the SAST Regulations, 1997 is not dependent upon to disproportionate gain or unfair advantage to the appellants or loss caused to the investors. Penalty is imposable under Section 15A(a) and 15A(b) of the SEBI Act once it is established that the appellants have violated the provisions contained in Regulation 3(3) and 3(4) of the SAST Regulations, 1997. Therefore, in the facts of present case, the appellants having violated the Regulations 3(3) and 3(4) cannot escape penal liability.

6. Argument of the appellants that the target company was in financial difficulty and the company was before BIFR and hence no penalty could be imposed for violating provisions contained in SAST Regulations, 1997 is also without any merit. Whether the target company was before BIFR or not, the appellants as promoters of the target company having acquired shares in excess of the limit prescribed under Regulation 3(3) and 3(4) of the SAST Regulations, 1997 were bound and liable to comply with the provisions contained in the SAST Regulations, 1997. Having failed to comply with the said Regulations, appellants cannot escape penalty merely because the Target Company was incurring losses and was declared as Sick by the BIFR.

7. Argument of the appellants that the AO has imposed penalty without taking into consideration the provisions contained in Section 15J of SEBI Act is also without any merit. As noted earlier, the appellants have violated SAST regulations in respect of 15 transactions executed on 15 different dates. Penalty imposable for each violation being Rs.1 crore, the total penalty imposable on appellants for 15 violations would have been Rs.15 crores. However, the Adjudicating Officer after considering the mitigating factors set out in Section 15J of the SEBI Act has imposed penalty between Rs.3 lac and Rs.6 lac for each of the violation which cannot be said to be excessively harsh or unreasonable.

8. For the aforesaid reasons we see no merit in the appeal and the same is hereby dismissed with no order as to costs. Sd/- Justice J.P. Devadhar Presiding Officer Sd/- Jog Singh Member Sd/- Dr. C.K.G. Nair Member 5.10.2016 Prepared and compared by