JUDGMENT
Kumar Rajaratnam, J. (Presiding Officer)
1. Appeals taken up for disposal with the consent of both sides.
2. These two appeals are taken up together and a common order is passed by consent of parties as it arises from a common order by the Adjudicating Officer of SEBI dated 22/01/2004.
3. The appellants challenge the order passed by the respondent in imposing penalty of Rs. 30 lakhs for contravening Regulations 7(1) and 7(2) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. The allegation against the appellants is that they did not inform the target company, namely, American Remedies Limited (‘target company’ hereinafter) about acquiring shares beyond 5%.
4. The facts are simple. The appellants’ holding in the target company when taken together would exceed 5%, namely, it would have actually come to 5.889%. There was a delay in informing the target company of 48 days. Regulation 7(1) and 7(2) reads as follows:
7(1) Any acquirer, who acquires shares or voting rights which (taken together with shares or voting rights, if any, held by him) would entitle him to more than five per cent shares or voting rights in a company, in any manner whatsoever, shall disclose the aggregate of his shareholding or voting rights in that company, to the company.”
7(2) The disclosures mentioned in Sub-regulations (1) be made within four working days of,-
(a) the receipt of intimation of allotment of shares; or
(b) the acquisition of shares or voting rights, as the case may be.
5. It is not in dispute that Regulation 7(1) as it stood then was that any acquisition by the acquirer beyond 5% would oblige the acquirer to inform the target company and Regulation 7(2) mandates the acquirer to inform within four working days. It is not denied that there was a delay of 48 days in informing the target company.
6. It is not known why such a huge penalty was imposed on the appellants when the Adjudicating Officer had no authority to impose a penalty more than Rs. 1,50,000/- since that was the maximum amount as it then stood.
7. The appellants were imposed with a penalty under Section 15A(b). Regulation 15A as it then stood when the alleged violation of Regulation 7 took place reads as under:
15A. If any person, who is required under this Act or any rules or regulations made thereunder,-
(a) to furnish any document, return or report to the Board, fails to furnish the same, he shall be liable to a penalty not exceeding one lakh and fifty thousand rupees for each such failure;
(b) to file any return or furnish any information, books or other documents within the time specified therefore in the regulations, fails to file return or furnish the same within the time specified therefore in the regulations, he shall be liable to a penalty not exceeding five thousand rupees for every day during which such failure continues;(emphasise given)
8. Section 15A was subsequently amended to enhance the penalty to Rs. 1 lakh each day or Rs. 1 crore whichever is lower.
9. It is not necessary for this Court to deal with the amended section as it is common ground that at the relevant time the maximum penalty was Rs. 1,50,000/-. We have held in earlier case in appeal No. 151 of 2004 as follows:
13. This Tribunal in Cabbot International Corporetion v. SEBI held that where the violation is of technical nature and due to a bonafide error, the Tribunal should not consider imposing heavy penalty and should help in pointing out the defect to the appellant so that it does not recur again and the Tribunal declined to impose any penalty in that case as there was substantial compliance. This order of this Tribunal was confirmed by the Bombay High Court.
14. It is the common ground that at the relevant period the maximum penalty was Rs. 5 lacs. The amendment enhancing the penalty to Rs. 5 crores came into force with effect from 29th October, 2002.
15. There appears to be no application of mind that at the relevant time the maximum penalty was Rs. 5 lacs and therefore, the penalty of Rs. 4,36,85,949/- was not permissible under law.
16. It is fairly conceded that there is nothing to show under the regulation that the regulation was amended with retrospective effect. Penalties unless specifically made retrospective must inevitably be only with effect from the date of amendment….
10. The Supreme Court in Rattan Lal v. State of Punjab AIR 1965 SC 444 took the view that any amendment which generally affects the aggrieved party cannot be made retrospective unless the legislature intended it to be retrospective. This view was reiterated by the Supreme Court in Dayal Singh v. State of Rajasthan AIR 2004 SC 2608 which pronounced as follows:
We, therefore, do not find that principles laid down in Rattan Lal depart from the well settled principles that a penal statute which create new offences is always prospective and a person can be punished for an offence committed by him in accordance with law as it existed on the date on which an offence was committed.
11. This Tribunal while passing an order in the case of Ajay Agrawal v. SEBI in appeal No. 85 of 2004 has pronounced as follows:
9. The question that arose in consideration is whether Section 11B could be used with regard to the alleged misconducts, which were allegedly committed by the Appellant prior to introduction of Section 11B.
10. The learned counsel for the Appellant relied on Govinddas and Ors. v. Income-Tax Officer and Anr. (1976) 103 ITR 123 –
11. The Supreme Court has held as follows:
It is a well-settled rule of interpretation that unless the terms of statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. If the enactment is expressly in language which is fairly capable of either interpretation, it ought to be considered as prospective only.
12. It may not be forgotten that any non payment of penalty imposed by the Tribunal would lead to a prosecution under Section 24 of the SEBI Act, 1992. Section 24 of the SEBI Act, 1992 reads as follows:
24.(1) Without prejudice to any award of penalty by the adjudicating officer under this Act, if any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules or regulations made thereunder, he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.
(2) If any person fails to pay the penalty imposed by the adjudicating officer or fails to comply with any of his directions or orders, he shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to three years or with fine which shall not be less than two thousand rupees but which may extend to ten thousand rupees or with both.”
13. There is nothing to suggest that the amendments in the Regulations dated 29/10/2002 were to be of retrospective effect. A plain reading would indicate that the amendments were prospective and not retrospective.
14. The Adjudicating Officer also did not take into account the factors under Section 15J which reads as follows:
15J. While adjudging quantum of penalty under Section 15-I, the adjudicating officer shall have due regard to the following factors, namely :-
(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
(b) the amount of loss caused to an investor or group of investors as a result of the default;
(c) the repetitive nature of the default.
15. As we understand every factor in Section 15J should be taken into account in arriving at an equitable, fair and just penalty. In this case it cannot be said that there was any disproportionate gain by the appellants or loss was caused to the investors or there was a repetitive nature of the default. Taking into account all these factors particularly since the appellants have informed the target company although belatedly it would be appropriate if we modify the penalty under Section 15A to Rs. 1,50,000/- jointly and severally. Since the appellants have already deposited Rs. 3 lakhs pursuant to the interim order dated 24/02/2004 balance amount shall be refunded to the appellants as expeditiously as possible by the respondent after deducting Rs. 75,000/- imposed as penalty in appeal No. 45 of 2004.
16. The appeal is disposed of accordingly.