- (1.) Both the appeals have been preferred by the same appellant under Section 15Z of the Securities & Exchange Board of India Act, 1992 (for short, 'SEBI Act'). The main appeal is of 2006 and requires detailed consideration. It is directed against order dated 08th August 2005 passed by the Securities Appellate Tribunal upholding and confirming the order of Securities & Exchange Board of India (SEBI) dated 27th January 2004 directing the appellant to make public announcement in terms of Regulation 11(1) of the Securities & Exchange Board of India (Substantial Acquisition of Shares & Takeovers) Regulations, 1997 (hereinafter referred to as 'the Regulations of 1997). The other appeal is directed against orders passed by SEBI and confirmed by the Tribunal to impose penalty upon the appellant for non- compliance with the order which is subject matter of the earlier appeal.
(2.) It goes without saying that the latter appeal will follow the fate of the main appeal.
(3.) Before adverting to the issues of law raised on behalf of the appellant, the essential facts may be noticed only in brief. The appellant, Kosha Investments Ltd., acquired shares of another company Snowcem India Ltd. (hereinafter referred to as 'SIL') from one of the original promoters of SIL and thus itself became one of the promoters. An investigation by SEBI covered the period June 1999 to August 1999 when there was an initial upward movement in the price of shares of SIL and also substantial increase in the volume of their trade. As a result of such investigation the appellant faced charges in another proceeding under SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 and was also served with a show cause notice dated 14.11.2002 for alleged breach of provisions of Regulation 44 and 45(6) of the Regulations of 1997 read with provisions of Section 11 and 11B of the SEBI Act. The proposed action under Regulations of 1997 was based upon report of investigation showing that appellant had consistently bought and sold shares of SIL prior to June 1999 and also after August 1999. As per record it was holding 21,32,900 shares of SIL constituting 20.29% of total paid up capital of SIL. The appellant made additional purchase of shares amounting to 10.81% of the paid up capital of SIL in violation of Regulation 11(1) of the Regulations of 1997 as it failed to make the required public announcement in terms of the said Regulation. After granting personal hearing and considering the appellant's reply to the show cause notice, in the final order SEBI came to a finding that as on 31st March 1999 appellant was actually holding only 21,32,900 shares as shown by SEBI and not 31,84,228 shares which was claimed by the appellant on the ground that it had already pledged its shares to lenders who had lent money to SIL. The plea of pledge raised by the appellant was found without any substance and only an attempt to conceal subsequent purchase. Hence, SEBI came to a conclusion that the appellant was already holding between 15% to 75% shares of the target company SIL and it could acquire additional shares of this company through creeping acquisition mode, that is, without public announcement only upto 5% of its paid up capital during the period of 12 months ending on 31st March 2000. However, by acquiring 11,36,700 shares of SIL during June 1999 to August 1999 it acquired shares constituting more than 5% of the paid up capital of SIL. For making such acquisition, the appellant was liable to make public announcement as required by Regulation 11(1) of the Regulations of 1997. Since the appellant failed to do so, the Whole Time Member of SEBI held it guilty and issued the following directions on 27th January 2004 : "15. In view of the findings above and in exercise of the powers conferred upon me under Section 19 read with Section 11B of SEBI Act read with regulations, I hereby direct the acquirer viz., Kosha Investments Ltd. to make public announcement in terms of regulation 11(1) of the said Regulations taking June 29, 1999 as the reference date for calculation of offer price. The public announcement shall be made within 45 days of passing of this order. 16. .. The Acquirers are hereby accordingly directed to pay interest @ 15% per annum to the share holders for the loss of interest caused to the shareholders from October 28, 1999 till the date of actual payment of consideration for the shares to be tendered and accepted in the offer directed to be made by the Acquirers. 17. It is also noted that an order dated 3.12.03 was passed by me restraining the Kosha Investments Ltd. from buying, selling or dealing in securities in any manner, directly or indirectly, for a period of two years for violating the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995. However, I direct the said order dated 3.12.2003 shall not hamper the implementation of this order.";