JUDGMENT
Kumar Rajaratnam, J. (Presiding Officer)
1. The appeal is taken up with consent of parties. The appellants being aggrieved by the order of the adjudicating officer of SEBI in imposing a penalty of Rs. 50,000/- under Section 15AB of the SEBI Act for the delay in complying with Regulation 6(1) and 6(3) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulation, 1997 has preferred this appeal. Regulation 6(1) & 6(3) deals with disclosure of shareholding and control in a listed company. Regulation 6(1) and 6(3) reads as follows:
“6(1) Any person, who holds more than five percent shares of voting rights in any company, shall within two months of notification of these regulations disclose his aggregate shareholding in that company, to the company.
6(3) A promoter or any person having control over the company shall within two months of notification of these regulations disclose the number and percentage of shares or voting rights held by him and by person(s) acting in concert with him in that company, to that company.”
2. The allegation against the appellants was that there was no due compliance in writing to the company within the time prescribed although the appellants had acquired more than 5% of shares. The delay can be best summed up in the following graph:
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Sr. No. Regulation/Sub Due date for Actual Date of Delay
Regulations compliance compliance (in no. of days)
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1. 6(1) 20.4.1997 6.6.1997 46
2. 6(3) 20.4.1997 26.5.1997 35
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3. The stand of the appellant was that one of the acquirer Mrs. Begam B. Kapadia died and the requirement could not be furnished in time. Under Regulation 6(1) there is a delay of 46 days and under Regulation 6(3) there is a delay of 35 days. It was submitted on behalf of the appellant that the Regulation came into force in February 1997 and the alleged violation took place in April 1997. The appellants were totally unaware of the consequences of the Regulation. It was further submitted that as soon as they became aware they complied with the requirement of Regulation 6(1) and 6(3). It was further submitted that all the appellants have exited from the company on 28.2.2002.
4. Section 15J of the SEBI Act indicates that the adjudicating officer should take into account the amount of disproportionate gain, the amount of loss caused to the investors and repetitive nature of the default. Looking at it from all the three factors it appears that the penalty is excessive. All the factors mentioned in 15J are in favour of the appellant for the Tribunal to take a lenient view. The impugned order refers to a regularization scheme known as SEBI Regularization Scheme 2002 to say that if the appellant had taken advantage of the Regularization Scheme the appellant would be levied with a penalty of Rs. 10,000 under Section 6(1) and 6(3). We are of the view that the adjudicating officer is obliged to follow the discipline of Section 15J while determining the quantum of penalty rather than any regularization scheme, which is not before us. We feel taking into account the factors mentioned in 15J it would be appropriate to reduce the penalty from Rs. 50,000/- to a token amount Rs. 10,000/- only.
5. The impugned order is modified accordingly. The penalty is reduced to Rs. 10,000/-, which the appellant has already deposited. No order as to costs.