BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI

Date of Decision : 07.08.2019

Appeal No. 228 of 2017

Alka India Ltd.
102, 1st Floor, Morya Landmark II,
Off New Link Road, Andheri (West),
Mumbai – 400 053. … Appellant

Versus

1. Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai – 400 051.

2. BSE Ltd.
Floor 25, P. J. Towers,
Dalal Street,
Mumbai – 400 001 … Respondents

Mr. Rajiv Singh, Advocate with Mr. Saurabh Bachhawat, Advocate i/b Shubhangi Chavan for the Appellant.
Mr. Vishal Kanade, Advocate with Mr. Kaushal Parsekar, Advocate i/b Legasis Partners for the Respondent Nos. 1.
Mr. Manish Chhangani, Advocate i/b Khaitan & Co. for the Respondent Nos. 2.

CORAM : Justice Tarun Agarwala, Presiding Officer
Dr. C. K. G. Nair, Member
Justice M. T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer (Oral)

1. The facts leading to the filing of the present appeal is that the scheme of amalgamation of Janice Textiles Ltd. (hereinafter referred to as, ‘the transferor company’) with Alka India Ltd. (the Appellant transferee company) was sanctioned by the High Court ofAhmedabad on November 16, 2005 and High Court of Bombay on August 26, 2005.

In terms of clause 11 of the scheme of amalgamation, the transferee company was directed to issue and allot shares to the shareholders of the transferor company in the ratio of 1:25. There were 430 shareholders in the transferor company holding 53,75,900 shares. The appellant was required to issue and allot the shares to the shareholders of the transferor company in the proportion of 1:25.

These 430 shareholders of the transferor company would have got 13,43,97,500 shares of the appellant company. The allotment of the shares were never made by the appellant till date and consequently, two complaints were made by the shareholders of the transferor company to the Securities and Exchange Board of India (hereinafter referred to as, ‘SEBI’) on February 8, 2014 with regard to the non issuance of the shares of the
appellant company pursuant to the scheme of amalgamation.

2.The said complaints were forwarded to the appellant on the SCORES platform. As per the circular dated December 18, 2014 alllisted companies were required to make efforts for resolution of complaint within 30 days. Since the same was not done, a show cause notice dated June 28, 2016 was issued calling upon the
appellant to show cause as to why a penalty should not be imposed under Section 15A(a) and 15C of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as, ‘SEBI Act’). After considering the reply and, after granting an opportunity of hearing, the Adjudicating Officer (hereinafter referred to as, ‘AO’) passed the impugned order imposing a penalty of Rs. 25 lacs under Section 15C for non redressal of the complaints. The appellant, being aggrieved by the order, has filed the present appeal.

3.We have heard Shri Mr. Rajiv Singh, the learned counsel for the appellant and Shri Vishal Kanade, the learned counsel for SEBI and Mr. Manish Chhangani, the learned counsel for BSE Ltd. (hereinafter referred to as, ‘BSE’).

4. It was contended that the complaints were redressed by the appellant even though there was a delay of one year and eight months and, therefore, the finding that the complaints were not redressed by the appellant is incorrect. It was further contended that no loss was caused to the investors and the AO should have thus, taken into consideration the factors contemplated under Section 15J of the SEBI Act. It was also contended that in similar situations AO has imposed a penalty of Rs. 1 lac for non redressal of the complaints on the SCORES platform and, therefore, the penalty in the case of the appellant was harsh and unwarranted.

5.Having heard the learned counsel for the appellant and having perused the records, we find that the contention raised by the appellant has no merit and deserves to be rejected.

In the first instance, we are of the opinion that the complaints of the investors have not been redressed till date and the contention of the appellant that the complaints were redressed and stood disposed of is wholly incorrect.

The complaints of the shareholders of the transferor company were that they did not receive the shares of the appellant company pursuant to the scheme of amalgamation which was sanctioned by the two High Courts in 2005. The complaints were addressed by the appellant by intimating that the company has not received the NOC or relaxation from SEBI for preferential issue and the company is still in the process of listing the said preferential issue on the platform of exchange. Such intimation does not amount to disposal or redressal of the complaint. We find from the record that the last correspondence for clearance from the exchange platform
was made by the appellant in the year 2008. Till date the shares have not been allotted to the complainants and, therefore, it is incorrect to state that the appellant had redressed the complaints of the complainants.

6.The contention that the complainants did not suffer any loss and that the factors contemplated under Section 15J ought to have been considered is patently erroneous.

Admittedly, not only the complainants but all the shareholders of the transferor company have not been allotted the shares by the appellant pursuant to the scheme of amalgamation sanctioned by the High Courts. We also find in the meanwhile, the transferor company has been delisted on September 20, 2015.

In the absence of allotment of the shares to the shareholders of the transferor company, such shareholders, including the complainants, were deprived of allotment of the shares which has resulted in an opportunity loss. The contention that no loss was suffered by the complainants is patently misconceived.

7.In the light of the aforesaid, we do not find any mitigating circumstances to reduce the quantum of penalty. The decisions cited by the appellant which were passed by the AO imposing lesser quantum of penalty are distinguishable on its own facts and are not applicable in the instant case. We consequently, do not find any
reason to interfere in the quantum of penalty imposed by the respondent under Section 15C of the SEBI Act.

8.For the reasons stated aforesaid, the appeal lacks merit and is dismissed.

Sd/Justice Tarun Agarwala Presiding Officer Sd/Dr. C. K. G. Nair Member Sd/Justice M. T. Joshi Judicial Member 07.08.2019 Prepared & Compared by PTM