SAT Upholds 1.25 Crs Penalty on Appellants for Breaching SAST Norms by Acquiring More Than 2% Shares Without Disclosures

Case Details: Omprakash Kovuri v. Securities & Exchange Board of India - [2023] 155 taxmann.com 121 (SAT-Mumbai)

Judiciary and Counsel Details

• • Justice Tarun Agarwala, Presiding Officer & Ms Meera Swarup, Technical Member
  • Abishek Venkataraman, Adv., KRCV Seshachalam, Ms Sabeena Mahadik, Pankaj Uttaradhi, Mangesh Avhale & Sagar Hate, Advs. for the Appellant.
  • Pradeep Sancheti, Sr. Adv., Ravishekhar Pandey, Ms Rasika Ghate, Ms Shefali Shankar & Amarpal Singh Dua, Advs. for the Respondent.

Facts of the Case

In the instant case, certain complaints were received by SEBI, which led to an investigation in the trading activities of certain entities. During the investigation, WTM of the SEBI found that company ‘A’ had made a preferential allotment to 11 allottees.

Through the said preferential allotment, 21 lakh shares were allotted to nine non-promoter entities including the appellants and, therefore, their shareholding as a group which was only 24.10% of the total shareholding of the company prior to the preferential allotment was increased to 88.03% and the shareholding of the appellants as a single group changed by more than 2%.

As a result, the appellants were required to make a disclosure to the stock exchange, but the same was not done and, therefore, there was a violation of Regulation 29 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

WTM of SEBI, thus, by impugned order restrained the appellants from buying, selling or otherwise dealing in securities directly or indirectly for a period of five years and further imposed a penalty of Rs. 1.25 crores to be paid jointly and severally by the appellants.

Thereafter, an appeal was made to the Securities Appellate Tribunal (SAT) against the order passed by the SEBI.

It was noted that the appellants were acting in concert and even though the appellants refuted the said fact, it was found in Lata Bejgam v. SEBI [2023] 153 taxmann.com 382 (SAT – Mum.) that the appellants were acting in concert and were connected to each other.

SAT Held

The SAT held that considering the gravity of the violations, the impugned order by WTM was justified.

List of Cases Reviewed

• • Lata Bejgam v. SEBI [2023] 153 taxmann.com 382 (SAT – Mumbai) (para 14) followed.

List of Cases Referred to

• • Lata Bejgam v. SEBI [2023] 153 taxmann.com 382 (SAT – Mum.) para 14).