Appeal No. 112 of 2013. Case: Alacrity Securities Limited Vs Securities and Exchange Board of India. Securities and Exchange Board of India

Case Number:Appeal No. 112 of 2013
Party Name:Alacrity Securities Limited Vs Securities and Exchange Board of India
Counsel:For Appellant: Mr. Vinay Chauhan and Mr. K.C. Jacob, Advocates and For Respondents: Mr. Kumar Desai and Mr. Pratham V. Masurekar, Advocates
Judges:J.P. Devadhar, (Presiding Officer) and Jog Singh, Member
Issue:Securities And Exchange Board of India Act, 1992 - Section 15A(b)
Judgement Date:November 19, 2013
Court:Securities and Exchange Board of India
 
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Judgment:

J.P. Devadhar, (Presiding Officer)

  1. This appeal challenges the order passed by the Adjudicating Officer ("AO" for short) of Securities and Exchange Board of India ("SEBI" for short) on May 3, 2013, whereby penalty of ` three lakh has been imposed upon appellant for violating regulation 8A (2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ("Takeover Regulations, 1997" for short). Appellant is a registered stock broker and is also one of the promoters of Odyssey Corporation Limited ("Odyssey" for short).

  2. In the ordinary course of business as a stock broker, one of the appellant's clients agreed to transfer equity shares of Odyssey towards dues owed by that client to the appellant. Accordingly, those shares kept in the client beneficiary account were transferred to the demat account of the appellant.

  3. Thereafter, appellant pledged those shares with Canara Bank for raising finance. It is relevant to note that 50,000 and 27,000 shares of Odyssey pledged by appellant on February 18, 2011 and September 20, 2011 respectively got doubled to 1,54,000 shares due to stock split from ` 10 to ` 5 on record date, i.e., on December 26, 2011.

  4. Since appellant who was also one of the promoters of Odyssey failed to disclose pledging of Odyssey shares to the company/stock exchanges as contemplated under Takeover Regulations, 1997, show cause notice was issued on February 25, 2013 calling upon appellant to show cause as to why action should not be taken against appellant for violating Takeover Regulations, 1997.

  5. Appellant in its reply to show cause notice denied to have violated Takeover Regulations, 1997. Personal hearing was then granted to the appellant. Thereafter, by impugned order dated May 3, 2013 penalty of ` three lakh has been imposed upon the appellant for violating regulation 8A (2) of the Takeover Regulations, 1997. Challenging aforesaid order, present appeal is filed.

  6. Mr. Vinay Chauhan, learned counsel appearing on behalf of appellant fairly submitted that failure to disclose pledging of Odyssey shares by appellant who is one of the promoters of Odyssey may technically amount to violating regulation 8A(2) of Takeover Regulations, 1997. However, counsel for appellant submitted that for the following reasons excessive and disproportionate penalty imposed upon appellant be reduced to such extent as this Tribunal deems feet and proper.

    1. Pledging of 1,54,000 shares by appellant constituted...

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