- (1.) THIS appeal under section 15T of the Securities and Exchange Board of India Act, 1992 (the Act), is directed against the adjudication order dated August 31, 2000 made by the Adjudicating Officer, under section 15I of the Act, imposing monetary penalty against the Appellant.
(2.) Cabot International Capital Corporation, having its registered office at Suite 1300, Two Seaport Lane, Boston MA-02210-2019, the Appellant herein, is the foreign collaborators of an Indian company namely Cabot India Ltd (the company). The company shares are listed in the Stock Exchange, Mumbai. The issued subscribed and paid up share capital of the company as of December 1996 was Rs. 7, 13, 33, 800 consisting of 71, 33, 380 equity shares of Rs. 10/- each. In 1996, the Appellant held 51% of the issued capital of the company. Subsequently, the company allotted 16,05,020 equity shares to the Appellant through a preferential allotment. As a result of the said allotment the Appellant's aggregate holding in the Company's issued capital increased to 60%. This was in 1997. On 10.11.1998, the Appellant through its Merchant Bankers made an application to the Respondent seeking exemption under regulation 3 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the 1997 Regulations) to make a public offer to acquire 14% of the issued capital of the company as against a minimum of 20%, required to be offered to the public under the Regulations. While examining the said proposal, the Respondent felt that since the holding of the Appellant in the company's capital increased from 51 % to 60%, as a result of allotment of 16, 05, 020 equity shares in 1997, the said acquisition attracted regulations 3 (4) and 11, of the 1997 Regulations, and decided to inquire into the matter. For the purpose, Chairman of the Respondent issued two separate orders, on 30.9.1999 and 10. 12.1999, ordering adjudication in the matter of violation of regulation 11 and regulation 3 (4), respectively. Shri P. Sri Sai Ram, an officer of the Respondent was the Adjudicating Officer appointed in both the cases. The Adjudicating Officer issued a common notice to the Appellant on 8.2.2000, asking to show cause as to why action should not be taken against it for the alleged violation of regulations 3 (4) and 11, as provided under sections 15A and 15H of the Act, respectively. Responding to the notice, the Appellant submitted a detailed reply and also made oral submissions before the Adjudicating Officer. In the light of the Appellant's submissions the Adjudicating Officer spared it from the pain of penalty provided under section 15H, observing that: "In this case from the letter dated August 8, 2000 of the Acquirer and from the statement of the Acquirer during the hearing, it is seen that the Acquirer received the shares on 2.6.97 and hence 1 consider 2.6.97as the date of acquisition. In this case, through the process of preferential allotment, the Acquirer acquired 9% of the voting rights of the Issuer Company. As per regulation 11 (1) of SEBI (Sub) Regulations, 1997 as it stood (prior to the amendment 28.10.1998), they should not have acquired more than 2% of the voting power by way of creeping acquisition without making a public offer. Not making such public offer amounts to violation of Section 15H (ii) of SEBI Act, which provides as under: If any person who is required under the SEBI Act or Regulations may thereunder fails to make public announcement to acquire shares at a minimum price, he shall be liable to a penalty not exceeding Rs. 5 lacs. This case however relates to a transitional period. The process of acquisition took place while the 1994 Regulations was in force. The actual allotment/ acquisition took place while the 1997 Regulations came into force. In that process there was lack of clarity on the part of the Acquirer as to the applicability of 1997 Regulations. Keeping all the factors in view, the benefit of doubt is given to the Acquirer on the basis that the Acquirer is exempted from the purview of the Regulations in making a public offer, and no penalty in terms of section 15H (ii) of SEBI Act is levied, on the Acquirer in this count". But, the Adjudicating Officer was not ready to extend the "benefit of doubt" to the alleged violation of regulation 3 (4) punishable under section 15A. He observed: "that however does not mean that the Acquirer is not required to submit a report to SEBI under regulation 3 (4) of the 1997 Regulations".
(3.) ON this count, the Adjudicating Officer imposed a sum of Rs. 1, 50, 000/- as penalty on the Appellant. The Appellant is aggrieved on this count.;