Penalty for non-disclosure of share-holding pattern
27 January, 2014
Penalty for non-disclosure of
share-holding pattern was at the center of disputes this month before the
Securities Appellate Tribunal (SAT). While penalty in one of the disputes was upheld
for non-disclosure under one provision even when there was disclosure under
another set of provisions, the same was substantially reduced, in another case,
when the company whose shares were acquired had disclosed the share-holding
Disclosure under one provision is not disclosure
Imposition of penalty under
Section 15A(b) of Securities and Exchange Board of India Act, 1992 for
non-disclosure of change in share-holding pattern under SEBI (Prohibition of
Insider Trading) Regulations, 1992 though the same was disclosed to the stock
exchanges and the SEBI under SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011, was upheld by the Appellate Tribunal on 7-1-2014.
The SAT, deciding Appeal No. 188 of 2013, rejected the contentions that
requirement of disclosure under the former Regulations were also met when the
disclosures were made under the latter Regulations.
It was observed that even if
disclosure under the 2011 Regulations were to be treated as disclosure under
the 1992 Regulations, these earlier regulations stood violated as disclosure
was not made in 2 days, as required. Absence of provisions like Regulation
29(4) of SAST Regulations, 2011 in the Insider Trading Regulations, cited as
reason for non-disclosure, was also rejected noting Regulation 13 read with
Form D of the 2011 Regulations.
The matter involved
non-disclosure of sale of pledged shares after the non-payment of loans by the
company where appellant acted as promoter director.
Non-disclosure and public knowledge
Penalty for non-disclosure was
though upheld, but substantially reduced, by the Appellate Tribunal in another
case, decided on 15-1-2014. The appellant, in Appeal No. 201 of 2013, had
failed to inform the stock exchanges about its acquisition of shares to the
tune of 5.22 per cent instead of 5%. The Tribunal in this case noted that the
disclosure was made by the company whose shares were acquired and hence the
public at large had knowledge of acquisition.
It was observed that the information
to the stock exchanges, by the other company, duly included the exact
percentage of decrease in promoter’s shareholding and the corresponding
increase in the public shareholding and hence no one was deprived of this