Regency Hospital Limited vs Ld. Adjudicating Officer And Others

M.T. Joshi, J

Aggrieved by the direction of the respondent Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) dated 28th

September, 2018 vide the impugned order to pay a penalty of Rs.5 lakhs for non disclosure of pledged shares to the stock exchange against the

provisions of Regulation 8A of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997

(hereinafter referred to as ‘SAST Regulations’) the present appeal is preferred by the original notice no.1 the present appellant.

From the record it appears that the original notice nos. 2 and 3 i.e. Dr. Atul Kapoor and Dr. Rashmi Kapoort had made transaction of pledging of

shares of the present appellant on 26th November, 2010 and 30th November, 2010 as detailed in the show cause notice. SEBI alleged that neither

notice nos.2 and 3 disclosed the pledging of shares to notice no.1 i.e. the present appellant nor the appellant disclosed the same to the Bombay Stock

Exchange as required by Regulation 8A of the SAST Regulations which reads as under:-

8A. Disclosure of pledged shares:

(2) A promoter or every person forming part of the promoter group of any company shall, within 7 working days from the date of creation of pledge

on shares of that company held by him, inform the details of such pledge of shares to that company. (4) The company shall disclose the information

received under sub-regulations (1), (2) and (3) to all the stock exchanges, on which the shares of company are listed, within 7 working days of the

receipt thereof, if, during any quarter ending March, June, September and December of any year,─ (a) aggregate number of pledged shares of a

promoter or every person forming part of promoter group taken together with shares already pledged during that quarter by such promoter or persons

exceeds twenty five thousand; or (b) aggregate of total pledged shares of the promoter or every person forming part of promoter group along with the

shares already pledged during that quarter by such promoter or persons exceeds one percent of total shareholding or voting rights of the company,─

whichever is lower.

During the adjudication, respondent SEBI found that the original notice nos.2 and 3 have in fact made disclosure to the appellant Company. The

plea of the appellant Company was that it also made the disclosure to the BSE by sending the same on 4th December, 2010 through First Flight

Couriers Ltd. (Ref. No.J21792056). The copy of the same was also filed alongwith the written submissions. The respondent SEBI made enquiry with

the BSE in this regard. The impugned order would show that vide email dated March 18, 2014 BSE replied that such disclosures were not received to

it. The respondent SEBI therefore held that the present appellant though may have dispatched the disclosure, failed to prove that the disclosure was

received by BSE. It was therefore held that violation of Regulation 8A of the SAST Regulations had occurred hence the penalty was imposed.

Heard Mr. Prakash Shah, Advocate assisted by Mr. Chinmay Paradkar, Advocate for the appellant and Mr. Kaushal Parsekar, Advocate for the

Respondent No.1 and Mr. Anubhav Ghosh, Advocate for the Respondent No.2.

Learned counsel for the appellant submits that the copy of the receipt from First Flight Courier filed before SEBI as well as before this Tribunal

would show that the appellant Company had in fact dispatched the disclosure to the BSE. However, without making any due confirmation with the

BSE the respondent merely relied on the email of BSE and imposed the penalty.

The learned counsel relied on the decision of this Tribunal in the case of Banas Finance Ltd. in Appeal no.275 of 2018 decided on 26th July, 2019.

He submitted that the receipt of the courier would clearly show that the appellant had in fact sent the disclosure to the BSE. There might have been a

mistake at the ends of the stock exchange for which appellant cannot be penalized.

The learned counsel for the respondent however submits that according to the regulations the receipt of the disclosure has to be proved. Therefore

merely dispatch of the disclosure is not enough.

Perused the reasons forwarded in Banas Finance Ltd. (cited supra) by this Tribunal. The said decisions would show that in another case respondent

SEBI had in fact examined an Officer of the BSE concerning the disclosure who in cross examination had accepted that some mistake might have

occurred in non receipt of the disclosure in the listing department. At the relevant time the disclosure in physical form were accepted. In that view of

the matter, in the case of Banas Finance Ltd. the appeal was allowed on the similar ground.

Here in the present case, we find that original noticee nos.2 and 3 had admittedly made disclosure to the appellant Company of the pledging of the

shares. The record would show that the appellant Company had also dispatched the information to the BSE through courier. Considering all these fact

on record, in our view, the impugned order cannot be sustained. Hence the following order.

The appeal is hereby allowed. The impugned order of SEBI is hereby quashed and set aside.