Appeal Nos. 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 and 18 of 2014. Case: GHCL Limited Vs Securities and Exchange Board of India. Securities and Exchange Board of India
| Case Number | Appeal Nos. 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 and 18 of 2014 |
| Counsel | For Appellant: Vinay Chauhan, Neville Lashkari, K.C. Jacob, Advocates and Shyam Mehta and P.N. Modi, Senior Advocates and For Respondents: Kumar Desai, Pratham V. Masurekar, Advocates |
| Judges | J.P. Devadhar, J. (Presiding Officer), Jog Singh and A.S. Lamba, Members |
| Issue | Companies Act, 1956 - Section 6; Securities And Exchange Board of India Act, 1992 - Sections 11(4), 11B, 12, 12(A)(a), 12A(a), 15A(b), 15HA, 19; Securities Contracts Regulation Act, 1956 - Sections 21, 23A, 23E |
| Judgement Date | July 31, 2014 |
| Court | Securities and Exchange Board of India |
Judgment:
Jog Singh, Member
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In this bunch of 13 appeals, the Appellants have challenged impugned order dated October 25, 2013 by which monetary penalties ranging between Rs. 7 lac to 50 lac have been imposed on each of the Appellants by separate orders passed on the same date.
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The charge against the company i.e. GHCL Limited; against the Company Secretary Mr. Bhuwneshwar Mishra; and against Chairman namely Mr. Sanjay Dalmia, who are Appellants in Appeal nos. 6, 7 and 8 of 2014 respectively, is mainly that they transmitted incorrect shareholding of ten promoters, who are Appellants in appeal nos. 9 to 18 of 2014, to the Stock Exchanges. It gave a wrong impression about the shareholding of the promoters to the general public and investors at large. The main charge against ten promoters is that they wrongly and illegally projected their shareholdings far in excess of their real shareholding by taking into consideration shareholdings of third parties as part of their own shareholding in an illegal manner.
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Treating prima facie these actions as violative of Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(f) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulation, 2003, hereinafter referred to as PFUTP Regulations, 2003, read with Sections 12A(a), (b) and (c) of SEBI Act, 1992, a Show Cause Notice dated December 12, 2011 was issued to the Appellants seeking an explanation why appropriate action not be taken against them as per law and after holding enquiry as per the procedure envisaged under the Securities Contract (Regulations) (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 2005 for the alleged violation of provisions of the Securities Contracts (Regulation) Act, 1956, hereinafter referred to as SC(R)A, 1956, SEBI Act, 1992 and PFUTP Regulations, including some of the provisions of Listing Agreement.
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A detailed enquiry was conducted by the Respondent as per law and in accordance with natural justice after affording reasonable opportunity of hearing to the Appellants. The Adjudicating Officer has held the Appellants guilty of charges levelled against them and imposed various penalties on the thirteen Appellants for violations of various provisions of law particularly in terms of Section 15HA of SEBI Act, 1992 read with Section 23A and 23E of SC(R)A, 1956. These differing penalties in each case are mentioned here-in-below for the sake of convenience.
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In Appeal no. 6 of 2014, namely, GHCL Limited vs. SEBI, a penalty of Rs. 50 lac has been imposed on the Appellant-company in terms of Section 15HA of SEBI Act and Section 23A and 23E of SC(R)A, 1956, for violation of Regulation 3(a), (b), (c) and (d), 4(1) and 4(2)(f) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulation, 2003 read with Section 12A(a), (b) and (c) of SEBI Act 1992, Section 21 of SC(R)A, 1956 and Clause 35 of Listing Agreement.
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In Appeal no. 7 of 2014, namely, Mr. Bhuwneshwar Mishra vs. SEBI, a penalty of Rs. 10 lac has been imposed on the Appellant, who is the Company Secretary and Compliance Officer of GHCL since January 2007 and is presently the General Manager and Company Secretary. Appellant is alleged to have colluded with promoter entities of GHCL to mislead shareholders and investors of GHCL by disclosing inflated shareholding on the basis of false claims of arrangement by promoter entities with third parties. The said penalty has been imposed in terms of Section 15HA of SEBI Act, 1992 and Section 23A and 23E of SC(R)A, 1956 for violation of Regulation 3(a), (b), (c) and (d), 4(1) and 4(2)(f) of PFUTP Regulations, 2003 read with Section 12A(a), (b) and (c) of SEBI Act.
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In Appeal No. 8 of 2014, namely, Mr. Sanjay Dalmia vs. SEBI, a penalty of Rs. 25 lac has been imposed. Mr. Sanjay Dalmia, the Appellant, is stated to be a Non-Executive Chairman of GHCL Ltd. He is also alleged to have colluded with promoter entities of GHCL to mislead shareholders and investor of GHCL by making false reporting of promoter's shareholding. The Appellant, as the Chairman and promoter, was a beneficiary of such false disclosures. Said penalty has been imposed in terms of Section 15HA of SEBI Act for violation of Regulation 3(a), (b), (c) and (d), 4(1) and 4(2)(f) of the PFUTP Regulations, 2003 read with Section 12A(a), (b) and (c) of SEBI Act.
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In Appeal No. 9 of 2014, namely, M/s. Carissa Investment Private Ltd. vs. SEBI a penalty of Rs. 9 lac has been imposed on the Appellant who is one of the promoters of GHCL Ltd. and is an investment and finance company, primarily engaged in trading of securities in secondary and primary market. The charges pertain to disclosures made by Appellant to GHCL regarding its shareholding during 2007-2008. Penalty has been imposed in terms of Section 15A(b) of SEBI Act for violation of Regulations 7(1A) and 8(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 1997, hereinafter referred to as SAST Regulations, 1997 and Regulation 13(3) and (5) of PIT Regulations, 1992 and in terms of Section 15HA of SEBI Act for violation of Regulation 3(a), (b), (c) and (d), 4(1) and 4(2)(f) of PFUTP Regulations, 2003 read with Section 12A(a), (b) and (c) of SEBI Act.
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In Appeal No. 10 of 2014, namely, M/s. Dear Investment Private Ltd. vs. SEBI, a penalty of Rs. 7 lac has been imposed on the Appellant who is a promoter of GHCL Ltd. and is an investment and finance company, primarily engaged in trading of securities in secondary and primary market. The charges pertain to disclosures made by Appellant to GHCL regarding its shareholding during 2007-2008. Said penalty has been imposed in terms of Section 15A(b) of SEBI Act for violation of Regulations 7(1A) and 8(2) of the SAST Regulations, 1997 and 13(3) and in terms of Section 15HA of SEBI Act for violation of Regulation 3(a), (b), (c) and (d), 4(1) and 4(2)(f) of PFUTP Regulations, 2003 read with Section 12A(a), (b) and (c) of SEBI Act.
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Similarly, in Appeal nos. 11 of 2014 to 18 of 2014, namely M/s. Dalmia Holding Finance Ltd., 1 lac Investment Pvt. Ltd., Lovely Investment Pvt. Ltd., M/s. Antarctica Investment Pvt. Ltd., M/s. Comosum Investment Pvt. Ltd., M/s. Alter Investment Pvt. Ltd., Anurag Trading Leasing & Investment Pvt. Ltd., Archana Trading Leasing & Investment Pvt. Ltd., vs. SEBI, a penalty of Rs. 7 lac has been imposed on each of the Appellants. Appellants in these appeals are also promoters of GHCL Ltd and are investment companies and engaged in trading of securities in secondary and primary market. The charges pertain to disclosures made by Appellants to GHCL regarding its shareholding during 2007-2008. The penalty has been imposed in terms of Section 15A(b) for violation of Regulation 7(1A) and 8(2) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 1997 and in terms of Section 15HA of SEBI Act for violation of Regulation 3(a), (b), (c) and (d), 4(1) and 4(2)(f) of PFUTP Regulations, 2003 read with Section 12A(a), (b) and (c) of SEBI Act.
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Appeal nos. 6, 7 and 8 of 2014 have been preferred by the company, i.e. GHCL Ltd., the Company Secretary and the Chairman cum Managing Director respectively and have been argued by Shri P.N. Modi, learned Senior Counsel for the Appellants and hence are being dealt with as one group. Whereas Appeal nos. 9 to 18 of 2014 are preferred by the promoters and have been argued by learned Senior Counsel Shri Shyam Mehta and hence are being dealt with separately. Admittedly, the facts and circumstances of these ten appeals preferred by promoters, are same except on a additional allegation regarding violation of certain provisions of PIT Regulations, 1992 is also noted in Appeal No. 9 of 2014 (Carrisa Investment Ltd.) for which an extra penalty of Rs. 2 lac has been imposed only on Carissa.
Appeal nos. 6, 7 and 8 of 2014 - The Company, The Company Secretary and The Chairman.
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Common case of these appellants is that the appellant company is a leading Indian producer of Soda Ash. It is a public limited company and listed on various stock exchanges i.e. Bombay Stock Exchange Ltd. (BSE), National Stock Exchange (NSE), Ahmedabad Stock Exchange (ASE). Its total issued, subscribed and paid up capital comprises of 100019286 (ten crore nineteen thousand two hundred eighty six only) shares of the face value of Rs. 10 each. It is run by professionals and has prominent persons on its Board of Directors. It is stated to have been filing the requisite shareholding pattern as per law from time to time. However, before filing of such quarterly shareholding pattern ending March 2007, the appellant company received letters from some promoter entities stating therein that the said promoters had a mutual understanding with some third parties who were actually holding shares of the appellant company in their own right to include said shares of such third parties in the name of said promoters. The promoters also submitted some letters to the appellant-company received from those third parties indicating such an arrangement.
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The appellants sought advice from legal experts of the highest caliber who pointed that the shares of third parties could be included in the shares of promoters while disclosing the shareholding pattern to the stock exchanges. It is, therefore, contended by Shri P.N. Modi, learned senior counsel for these appellants that the company informed all the Stock Exchanges whatsoever data/information was received by it from the promoters about the shareholding pattern as a conduit only. It is also submitted by Shri Modi that the then existing proforma prescribed by Clause 35 of the Listing Agreement did not talk of inclusion of shares which could be held by third parties/outsiders on behalf of the promoters. Because of such an ambiguity in law various legal...
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