- (1.) THE Appellant is one of the promoters of Highway Resorts Ltd. (the company). THE appellant was holding 4,90,000 shares, which accounted for 9.78 per cent of the paid-up capital of the company. On 7-10-1998 -8-10-1998 the appellant acquired from a co-promoter further 2,51,500 (5.02 per cent of the paid-up capital) of the company thereby increasing its total shareholding to 14.8 per cent in the company's paid-up capital. However, the acquisition was reported to the respondent and other agencies belatedly. In the said context, the Chairman, Securities and Exchange Board of India, vide order dated 15-9-1999 appointed an Adjudicating Officer for holding an inquiry into the matter and imposing monetary penalty, if so warranted. THE Adjudicating Officer so appointed, after holding inquiry came to the conclusion that the Appellant had failed to comply with the requirements of section 15A(b) of the Securities and Exchange Board of India Act, 1992 ('the Act') and imposed rupees two lakhs as monetary penalty against the appellant. THE present appeal is directed against the said order.
(2.) Shri Jayant M. Thakur practising Chartered Accountant, appearing for the appellant reiterated the appellant's version explained in the rejoinder and written submissions. According to Shri Thakur the basis of levy of penalty by the Adjudicating Officer is that the appellant had filed certain documents/reports etc., with the concerned authorities belatedly in the context of acquisition of shares of the company. He cited the observation of the Adjudicating Officer that "the acquirer has failed to submit information to stock exchange, target company, within the time specified under regulation 3(3), 7(1), 8(1) or 8(2) and acquirer also failed to file a report with SEB1 in time specified under the regulation 3(4)". Shri Thakur submitted that there was no legal requirement to submit such report, etc. though the Appellant may have submitted them to keep the information on record. According to the learned representative the requirement of regulation 3(4) gets attracted only when the acquisition of the shares results in crossing the 15 per cent bench of mark holding specified in the regula- tions, that for the purpose what is to be taken into consideration is not the individual holding but the collective holding of all the persons acting in concert; the provisions of regulation 3(4) will not apply to a case where such holding remains unchanged. According to him this view is supported by the words in the regulation that "acquisition which (taken together with shares of voting, if any, held by him or by persons acting in concert with him) would entitle such persons to exercise 15% or more of the voting rights in a company"; to attract regulation 3(4) such acquisition should result in crossing the prescribed limit of 15 per cent; if the holding of the acquirer remains the same, the requirement of the regulation is not attracted. In the instant case, the appellant's holding along with the persons acting in concert (promoters) did not change at all. According to Shri Thakur the requirement relating to exemption to inter-promoter transfer is to cover those cases where there are two promoter groups in the company and not the cases of transfer between promoters of the same group and that the Adjudicating Officer himself has stated in the order that the acquisition was by transfer between parties who are part of the same promoter group. He submitted that the overall level of holdings immediately before and immediately after the acquisition did not change. According to Shri Thakur, in the circumstances the appellant was not at all required to submit any report under regulation 3(4) and as such there was no failure on its part so as to invite any penalty.
(3.) SHRI Thakur further stated that for the same reasons stated with reference to non-applicability of regulation 3(4) it was also not required to file any report under regulation 7(1), as the said regulation also relates to acquisitions that result in increase in holding of the acquirer and the persons acting in concert with him, beyond the prescribed limit.;