Actual Lose to the investors is not pre-requisite for penalty on non-disclosure under Takeover Regulations

Security and Exchange Board of India: The security market regulator imposed penalty of Rs. 4,50,000 on M/s. Khatau Exim Limited (the company) for non compliance with Takeover Regulation, 1997 and Sec. 15A(b) of the SEBI Act, 1992. The company was found guilty for not to make annual filing to the stock Exchanges where the company’s shares were listed in respect of the holdings of the promoters or person(s) having control over the company.

The adjudicating officer of SEBI while considering the quantum of penalty relied on the decisions of the Supreme Court in SEBI v.  Shri Ram Mutual Fund in which it was ruled that, “penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established and hence the intention of the parties committing such violation becomes wholly irrelevant…”.  The adjudicating officer observed that even if the regulator fails to establish intention behind non-disclosure penalty may be imposed.  The adjudicating officer further opined that, “the argument put forth by the Noticee that there is no question of any gain or advantage that has accrued, let alone any disproportionate gain or unfair advantage and that the alleged delay was without any malafide intention is also not relevant for the given case”. It follows as held by SAT in Komal Nahata v. SEBI that penalty for non compliance of the Takeover Regulations, 1997 is not dependent upon the investors actually suffering on account of such non disclosure. Adjudication Order in the matter of M/s. Khatau Exim Limited, ORDER NO.AK/AO-74/2015, decided on 22.10.2015


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