BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision: 24.4.2019
Appeal No.285 of 2015
1. Bhupendra Kumar H. Shah
2. Bhupendra Kumar H. Shah (HUF)
3. Purvi S. Shah
4. Romil B. Shah
5. S.H. Shah (HUF)
6. Roshan S. Shah
7. Rohil B. Shah
8. Shrenik H. Shah
9. Sunita S. Shah
A-4, Suparshwanath Society
Market Yard, Gultekdi
Pune 411 037.

….. Appellants
Versus
Securities & Exchange Board of India
SEBI Bhavan, C-4A, Bandra Kurla
Complex, Bandra (E), Mumbai 400051. …… Respondent
Mr. J.J. Bhatt, Advocate with Ms. Rinku Valanju and Ms.
Hiral Shah, Advocates i/b. Rinku Valanju for the Appellants.
Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora and Mr.
Vivek Shah, Advocates i/b. ELP for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer
Dr. C.K.G. Nair, Member
Justice M.T. Joshi, Judicial Member
Per : Justice Tarun Agarwala (Oral)
2
1.

The appellants being aggrieved by the order of the
Adjudicating Officer imposing penalty has filed the present
appeal. The facts leading to the filing of the present appeal
is, that the appellants are promoters in Safal Herbs Ltd.
(referred to hereinafter as ‘SHL’) which is a public listed
Company and its shares was listed on the Bombay Stock
Exchange Ltd. and Ahmedabad Stock Exchange. Securities
and Exchange Board of India (referred to hereinafter as
‘SEBI’) conducted an examination during the period 1st
January, 2012 to 31st January, 2013 and noticed that the
appellants failed to make disclosures under various provision
of the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011
(referred to hereinafter as ‘SAST Regulations’) and
Securities and Exchange Board of India (Prohibition of
Insider Trading) Regulations, 1992 (referred to hereinafter as
‘PIT Regulations’) read with Regulations 13(3), 13(4A), read
with Regulation 13(5) of PIT Regulations and Regulations
29(2) read with 29(3) and Regulation 30(2) read with
Regulation 30(3) of the SAST Regulations and directed to
show cause as to why a penalty be not imposed under Section
3
15A(b) of the Securities and Exchange Board of India Act,
1992 (referred to hereinafter as ‘SEBI Act’).
2.

The appellants filed a common reply contending that
they had sold their entire shareholding in 2010-2011 in
physical form to one KB Enterprises, Ahmedabad through
share transfer forms without share certificates for a lumpsum
amount of Rs.18,79,050/- and that the payment was received
through RTGS on 1st June, 2012. It was contended that since
the entire shares were sold before relisting, disclosures under
the SAST and PIT Regulations were not required. It was
further contended that the appellants were not aware as to
what KB Enterprises did with those shares subsequently nor
were they aware of the subsequent sale made by KB
Enterprises to other parties. It was further contended that by
way of abundant precaution the disclosure as required under
the SAST and PIT Regulations was made on 14th May, 2015
wherein the sale of the shares was disclosed as having been
sold on 21st June, 2011.
3.

The Adjudicating Officer found that the appellants had
offloaded the shares on various dates from 1st April, 2012 to
31st December, 2012 in excess of the benchmark limit
specified in the PIT Regulations and SAST Regulations.

4
Since the disclosure was not made there was clear cut
violation of the provisions of PIT and SAST Regulations.
The Adjudicating Officer disbelieved the contention of the
appellants that the shares were sold to KB Enterprises. The
Adjudicating Officer accordingly imposed a penalty under
different heads and directed the appellants to pay the penalty
amount within 45 days from the receipt of the order. The
appellant being aggrieved has filed the present appeal.
4.

Heard Shri Mr. J.J. Bhatt assisted by Ms. Rinku
Valanju and Ms. Hiral Shah, Advocates for the appellants
and Shri Kumar Desai assisted by Mr. Abhiraj Arora and Mr.
Vivek Shah, Advocates for the respondent.
5.

Before us the learned counsel for the appellant
contended that the trading of the shares of the Company was
suspended since 2000 till January, 2012 and that the
suspension was revoked on 13th January, 2012. It has further
been stated that the face value of the scrip was Rs.10/- which
was subsequently split into shares of Re.1/- with effect from
9th August, 2012. But prior to the split the appellants had
offloaded the shares to KB Enterprises in the year 2010-2011
by way of blank transfer forms without share certificates. It
was contended that the appellants received a consideration of
5
Rs.18,79,050/- on 1st June, 2012 which is reflected in the
bank statement.

It was contended that the Adjudicating
Officer had committed a manifest error in coming to the
conclusion that the appellants had offloaded their holding in
SHL on various dates from 1st April, 2012 to 31st December,
2012. It was contended that the Adjudicating Officer had
wrongly taken the date of transfer of shares as indicted by the
Company as the date of sale in as much as the said shares
were subsequently sold by KB Enterprises to a third party
which fact has not been taken into consideration by the
Adjudicating Officer. It was thus contended that even though
the disclosure was subsequently made by way of abundant
precaution on 14th May, 2015 the appellant had not violated
the provisions of the SAST and PIT Regulations.
6.

On the other hand, Mr. Kumar Desai, the learned
counsel for the respondent contended that the theory raised
by the appellant that the shares were sold in 2010-2011
cannot be believed and is an afterthought. It was contended
that the appellant had sold the shares in violation of the
provisions of the SAST and PIT Regulations. It was urged
that in order to overcome the benchmark prescribed under the
said regulations and to take advantage of the split of shares
6
which occurred in August, 2012 an exercise was made by the
appellant to show that the shares were sold off market in
physical mode on the basis of blank transfer form in the year
2010-2011 but such ingenuity is full of ‘chinks in the
armour’ which can be seen from the following facts, namely,
that the shares were under the lock-in period till 30th April,
2012 and, therefore, the shares could not have been sold in
2010-2011. Further, no proof has been filed by the appellant
to show that the shares were sold in 2010-2011. Even the
disclosures made by the appellant on 14th May, 2015
indicates that the shares were sold on 21st June, 2011. Some
samples of the share transfer form had been filed by the
appellant by way of additional documents before this
Tribunal which were not filed before the Adjudicating
Officer and which could not be considered by the Tribunal as
additional
evidence
without
moving
an
appropriate
application under Order 41 Rule 29 of the Code of Civil
Procedure, nonetheless, a perusal of share transfer forms
indicates that shares were transferred on different dates and,
therefore, it does not lie in the mouth of the appellants to
contend that the shares were sold in 2010-2011 or on
21.6.2011 as per the disclosure form. It was also contended
7
that no proof has been filed by the appellants to show that the
shares were sold to KB Enterprises. It was also contended
that the shares cannot be sold only on blank share transfer
forms without share certificate in view of Section 108 of the
Companies Act, 1956.
7.

Before proceeding further it would be appropriate to
refer to certain provisions:
SEBI (Prohibition of Insider Trading) Regulations, 1992
Disclosure of interest or holding by directors and
officers and substantial shareholders in listed companies Initial Disclosure.
13. (1) ………………………………………..
(2) ………………………………………….
(3) Any person who holds more than 5% shares for voting
rights in any listed company shall disclose to the company
the number of shares or voting rights held and change in
shareholding or voting rights, even if such change results in
shareholding falling below 5%, if there has been change
in such holdings from the last disclosure made under
sub-regulation (1) or under this sub-regulation; and such
change exceeds 2% of total shareholding or voting
rights in the company.
(4A) Any person who is a promoter or part of promoter
group of a listed company, shall disclose to the company
and the stock exchange where the securities are listed in
Form D, the total number of shares or voting rights held and
change in shareholding or voting rights, if there has been a
change in such holdings of such person from the last
disclosure made under Listing Agreement or under subregulation (2A) or under this sub-regulation, and the
change exceeds Rs. 5 lakh in value or 25,000 shares or
8
1% of total shareholding or voting rights, whichever is
lower.
(5) The disclosure mentioned in sub-regulations (3), (4) and
(4A) shall be made within two working days of:
(a) the receipts of intimation of allotment of shares, or
(b) the acquisition or sale of shares or voting rights, as the
case may be.
SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011
Disclosure of acquisition and disposal.
29.(1) ………………………………………………………………….
(2) Any acquirer, who together with persons acting in
concert with him, holds shares or voting rights entitling
them to five per cent or more of the shares or voting
rights in a target company, shall disclose every acquisition or
disposal of shares of such target company representing two
per cent or more of the shares or voting rights in such target
company in such form as may be specified.
(3) The disclosures required under sub-regulation (1) and
sub-regulation (2) shall be made within two working days of
the receipt of intimation of allotment of shares, or the
acquisition of shares or voting rights in the target company
to,—
(a) every stock exchange where the shares of the target
company are listed; and
(b) the target company at its registered office.
Continual disclosures
30(1)…………………………
(2) The promoter of every target company shall together with
persons acting in concert with him, disclose their aggregate
shareholding and voting rights as of the thirty-first day of
March, in such target company in such form as may be
specified.

9
(3) The disclosures required under sub-regulation (1) and
sub-regulation (2) shall be made within seven working
days from the end of each financial year to,—
(a) every stock exchange where the shares of the target
company are listed; and
(b) the target company at its registered office.

8.

A perusal of the aforesaid provisions indicates that
disclosures are liable to be made within specified days
irrespective of the scrip being traded on the exchange
platform or not.

In the present case, the violation of
Regulation 13 of the PIT Regulations relates to the sale
transaction which took place between 1st April, 2012 to
31st December, 2012. Apparently, the disclosure was not
made within two working days and was eventually made
belatedly on 14th May, 2015. Penalty for non-disclosure thus
becomes leviable.
9.

The question which has been contended is whether the
appellants had triggered the provisions of Regulation 13(3)
read with Regulation 13(5) of the PIT Regulations in order to
make a disclosure and/or liable for penalty. In this regard,
we find that the provisions of Regulation 13(3) read with
Regulation 13(5) of PIT Regulations provides that any person
who hold more than five percent shares or voting rights in
10
any listed Company shall disclose to the Company within
two working days the number of shares or voting rights and
change in shareholding or voting rights even if such a change
results in shareholding falling below five percent. Under
Regulation 13(4) read with Regulation 13(5) of PIT
Regulations, 1992, any person who is a promoter or part of
promoter group of a listed Company has to disclose to the
Company and stock exchange where the securities are listed
within two working days if the change in holdings of such
person from the last disclosure exceeds Rupees Five Lakhs in
value or 25000 shares or one percent of the total shareholding
or voting rights, whichever is lower.
10.

In the instant case, the appellants were collectively
holding 18.82% as on March 31, 2012.

The appellants
offloaded the shares in SHL on various dates from 1st April,
2012 to 31st December, 2012 in excess of the benchmark
limit prescribed in the PIT Regulations and SAST
Regulations. The sale of the shares exceeded Rupees Five
Lakhs in value. In some cases, the shares sold were in excess
of 25000 shares and it was more than one percent of the total
shareholding or voting rights. Thus, the benchmark limit
specified in the PIT Regulations and SAST Regulations was
11
exceeded by the appellants.

Consequently, they were
required to make disclosure under the Regulations to the
Company and to the stock exchanges. This was not done.
Consequently, the findings and the penalty imposed by the
Adjudicating Officer does not suffer from any error on fact or
on law.
11.

Further, the contention of the appellant cannot be
accepted for the following reasons:1. No proof has been filed by the appellant to show
that they had sold these shares in 2010-2011. There is
no document on record to prove the sale of shares
during this period.
2. No proof has been filed by way of any document to
show that the shares were sold to one KB Enterprises
Ltd.
3. A passbook entry of Appellant no.1 showing an
entry on 1st June, 2012 of Rs.18,79,050/- does not
mean that the shares were sold.

An entry in the
passbook of Appellant no.1 only indicates that some
money was received by Appellant no.1 without any
corresponding poof of sale of shares.

12
4. Apart from the entry in the passbook of Appellant
no.1 there is no other evidence to show that the
appellant had sold their shares to KB Enterprises.
Further, shares of all the appellants were alleged to
have been sold to KB Enterprises whereas alleged
proof of the sale consideration is shown to have been
received only by Appellant no.1.
5. The sale of shares on blank share transfer forms
without share certificate cannot be accepted as
evidence as it is in violation of Section 108 of the
Companies Act which requires that transfer of shares
can only be registered when the name, address and
occupation of the transferee is indicated in the transfer
form alongwith the share certificates.
6. The appellants alleges that they had sold the shares
in 2010-2011. On the other hand the Appellant no.1
has written a letter dated 24th April, 2012 to the
Registrar of Companies, Pune indicating that as on
24th April, 2012 he was holding 16,65,000 shares of
Rs.10/- each in SHL and that in the annual report of
the Company he was shown as holding the shares
under the head ‘Directors or relatives of Directors’.

13
He informed the Registrar of Companies that he is no
longer a Director and that his holding in the Company
should be included under the head “Other top fifty
shareholders”.

Thus, we find that the appellant is
taking contradictory stand.
6. Another shareholder Ronak Shah (now deceased)
also wrote a letter dated 4th April, 2012 to the Registrar
and Share Transfer Agents indicating that he had
misplaced his share certificates and duplicate share
certificates may be issued.
12.

For the reasons stated aforesaid, the appeal lacks merit
and the same is dismissed. In the circumstances of the case,
there shall be no order as to costs.

Sd/Justice Tarun Agarwala
Presiding Officer
Sd/Dr. C. K. G. Nair
Member
Sd/Justice M.T. Joshi
Judicial Member
24.4.2019
Prepared and compared by
RHN