BEFORETHESECURITIESAPPELLATETRIBUNAL

MUMBAI

AppealNo.271of2014

Dateofdecision:08/10/2014

ShriAshleshGunvantbhaiShah
16,VasupujyakrupaSociety,
Ambawadi,
Ahmedabad380015 Appellant

Versus

Securities&ExchangeBoardofIndia
SEBIBhavan,C4A,GBlock,
BandraKurlaComplex,Bandra(E),
Mumbai400051. Respondent

Ms. Rinku Valanju, Advocate with Mr. J .J . Bhatt and Mr. Pratham Masurekar,
Advocates for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Manish Acharya, Advocate
for the Respondent.

CORAM: JusticeJ.P.Devadhar,PresidingOfficer
JogSingh,Member
A.S.Lamba,Member

Per:JusticeJ.P.Devadhar(Oral)

1. This appeal is filed to challenge order passed by the Adjudicating

Officer of Securities and Exchange Board of India (SEBI) on 30
th
May, 2014
whereby penalty of Rs.5 lac is imposed upon the appellant under Section
15A(b)ofSecuritiesandExchangeBoardofIndiaAct,1992(SEBIAct,1992
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for short) for violating regulation 13(3) of Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 1992 (PIT Regulations,
1992 for short) and regulation 29(2) of Securities and Exchange Board of
India (Substantial Acquisition of Shares & Takeovers) Regulations, 2011
(SASTRegulations,2011forshort).

2. Facts relevant for the present appeal are that the appellant had
disposed 74,547 shares of Parichay Investments Limited (the target
company for convenience) on 2
nd
May, 2013 which represented 6.2% of the
totalshareholdingofthetargetcompany.Sincethatdisposalofshareswasin
excessofthelimitprescribedunderregulation13(3)ofPITRegulations,1992
andregulation29(2)ofSASTRegulations,2011,itwasobligatoryonpartof
the appellant to make disclosures of sale to the target company. Since
disclosures were not made, showcause notice was issued, and by the
impugnedorderdated30
th
May,2014,penaltyofRs.5lacisimposeduponthe
appellant.Challengingthatorder,presentappealisfiled.

3. Ms. Valanju, learned counsel appearing on behalf of the appellant,

submitted that penalty imposed upon appellant is exorbitant, unreasonable
andisliabletobequashedandsetasideforthefollowingreasons:
(a) Sale of shares effected by the appellant on May 2, 2013 were
reportedonBombayStockExchange(BSE)swebsiteinthebulk
dealdataandthereforefailureonpartoftheappellanttomake
disclosures being technical violation, penalty of Rs.5 lac ought
nottohavebeenimposeduponappellant.
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(b) In fact, target company had also made shareholding pattern
related disclosures under the Listing Agreement to BSE which
wasalsopubliclyavailableonBSEwebsite.
(c) Appellant being a lay investor was not aware of the obligation
tomakedisclosures.
(d) No loss, harm or injury was caused to any investor on account
ofnondisclosureonpartofappellant.
(e) In any event, immediately on receipt of showcause notice,
appellant made disclosures on 26
th
February, 2014. Therefore,
delay in making disclosures being unintentional, technical and
inadvertent,SEBIisnotjustifiedinimposingexorbitantpenalty
ofRs.5lacontheappellant.

Accordingly, counsel for appellant submitted that in the facts of the present
case, exorbitant penalty imposed against the appellant be quashed and set
aside.

4. Mr. Desai, learned counsel appearing on behalf of respondent on the

other hand, supported the impugned order and submitted that obligation to
make disclosures under respective regulations is mandatory and penalty for
eachdaysdelayunderSection15A(b)ofSEBIAct,1992isRs.1lacperday.In
the present case, penalty for the delay comes to more than Rs.1 crore,
however, taking into consideration all mitigating factors, the Adjudicating
Officer has imposed penalty of Rs.5 lac which cannot be said to be
unreasonable or excessive. Accordingly, counsel for the respondent
submitted that the appeal is without any merit and the same is liable to be
dismissed.
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5. We have heard rival submissions made by counsel for respective

parties.

6. It is not in dispute that the shares sold by the appellant on 2

nd
May,
2013constituted6.2%ofthetotalissuedsharecapitalofthetargetcompany.
Insuchacase,asperregulation13(3)ofPITRegulations,1992andregulation
29(2)ofSASTRegulations,2011,itwasmandatoryonpartoftheappellantto
makedisclosureswhichtheappellantfailedtodo.Itisonlyafterissuanceof
showcause notice, disclosures were made. Penalty under Section 15(b) of
SEBIAct,1992forsuchviolationsisRs.1lacperdayorRs.1crore,whichever
islower.Inthepresentcase,penaltycomputedattherateofRs.1lacperday
from the due date till the date of disclosures made on 26
th
February, 2014
comes to more than Rs.1 crore. However, taking into consideration all
mitigatingfactors,theAdjudicatingOfficerhasimposedanominalpenaltyof
Rs.5lacwhichcannotbesaidtobeunreasonableorexcessivelyhigh.

7. FactthatthesaleofsharesinquestionwerereportedonBSEswebsite
in bulk deal data, does not absolve the appellant from making disclosures
undertherespectiveregulations.Similarly,factthatthecompanyhadmade
disclosures under the Listing Agreement to BSE would also not absolve the
appellantfrommakingdisclosuresundertherespectiveregulations.Inother
words, irrespective of such disclosures, obligation on part of appellant to
make disclosures under the respective regulations being mandatory,
appellantcannotescapepenalliabilityonaccountoffailuretomakerequisite
disclosures under the SAST Regulations, 2011 and PIT Regulations, 1992 on
ground that the failure was unintentional, technical and inadvertent.
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Appellantbeingapersondealinginsecuritiesoughttohaveknownhisrights
andobligations.Therefore,inthefactsofpresentcase,nofaultcanbefound
withthedecisionofSEBIinimposingnominalpenaltyupontheappellant.

8. Forallaforesaidreasons,weseenomeritintheappealandthesameis
herebydismissedwithnoorderastocosts.

Sd/
JusticeJ.P.Devadhar
PresidingOfficer

Sd/
JogSingh
Member

Sd/
A.S.Lamba
Member

08/10/2014
Prepared&comparedbyddg

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