BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision : 28.06.2019
Appeal No. 483 of 2018
1. Sanjay Jethalal Soni
2. Krupa Sanjay Soni
3. J M Soni Consultancy through its
Proprietor Sanjay Jethalal Soni
36, Malay Bungalows, Science City
Road, Sola, Ahmedabad – 380 001.

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

… Respondent
Mr. Nishant K. Upadhyay, Advocate for the Appellants.
Mr. Karan Bhosale, Advocate with Mr. Kaushal Parsekar, Advocate
i/b Legasis Partners 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, Presiding Officer (Oral)
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1.

Adjudication proceedings were initiated against the appellants
for violation of Regulations 7(1) and 7(2) of the Securities and
Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997 (hereinafter referred to as, ‘SAST
Regulations’) alongwith Regulation 13 of the Securities and
Exchange Board of India (Prohibition of Insider Trading)
Regulations, 1992 (hereinafter referred to as ‘PIT Regulations’).
After considering the reply of the appellants, it was found that the
appellant Sanjay Jethalal Soni alongwith Krupa Sanjay Soni and J.
M. Soni Consultancy were connected to each other and were persons
acting in concert (PAC). It was found that the appellant Sanjay
Jethalal Soni is the proprietor of J. M. Soni Consultancy and Krupa
Sanjay Soni is his wife and, therefore, they are connected and related
to each other and were categorized as PAC.

The Adjudicating
Officer (hereinafter referred to as, AO) further found that the
appellant was an acquirer and had acquired the shares of M/s. Oregon
Commercial Ltd. (OCL) in violation of Regulations 7(1) and 7(2) of
the SAST Regulations. The AO found that the acquisition of the
shares made by him had triggered Regulation 7(1) for which he was
required to make a disclosure within two days under Regulation 7(2)
which apparently was not done. Similarly, the disclosure of his
shareholding pattern was required to be made under Regulations
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13(1), 13(3) read with 13(5) of the PIT Regulations which apparently
was not done.

2.

Accordingly, the AO imposed a penalty of Rs. 5 lacs each under
Section 15A(b) of the Securities and Exchange Board of India Act,
1992 (hereinafter referred to as, ‘SEBI Act’) upon Krupa Sanjay
Soni, Sanjay Jethalal Soni and J. M. Soni Consultancy for violation
of Regulation 7(1) read with Regulation 7(2) of the SAST
Regulations. The AO further imposed a sum of Rs. 4 lacs on Sanjay
Jethalal Soni and Rs. 5 lacs on Krupa Sanjay Soni under Section
15A(b) of the SEBI Act for violation of the Regulations 7(1) and 7(2)
of the SAST Regulations and Regulations 13(1), 13(3) read with
13(5) of the PIT Regulations. The appellants being aggrieved have
filed the present appeal.

3.

We have heard Shri Nishant K. Upadhyay, the learned counsel
for the appellants and Shri Karan Bhosale with Shri Kaushal
Parsekar, the learned counsel for the respondent.

4.

Under Regulation 45 of the SAST Regulations, the penalty for
non-compliance is on the acquirer or any person acting in concert
with him. For facility, the provisions of Regulation 45 of the SAST
Regulations is extracted hereunder :-
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“45. (1) Any person violating any provisions of the
regulations shall be liable for action in terms of the
regulations and the Act.
(2) If the acquirer or any person acting in concert with
him, fails to carry out the obligations under the
regulations, the entire or a part of the sum in the escrow
account shall be liable to be forfeited and the acquirer or
such a person shall also be liable for action in terms of the
regulations and the Act.
(3) The board of directors of the target company failing to
carry out the obligations under the regulations shall be
liable for action in terms of the regulations and the Act.
(4) The Board may, for failure to carry out the
requirements of the regulations by an intermediary,
initiate action for suspension or cancellation of
registration of an intermediary holding a certificate of
registration under Section 12 of the Act:
Provided that no such certificate of registration shall be
suspended or cancelled unless the procedure specified in
the regulations applicable to such intermediary is
complied with.
(5) For any mis-statement to the shareholders or for
concealment of material information required to be
disclosed to the shareholders, the acquirers or the
directors where the acquirer is a body corporate, the
directors of the target company, the merchant banker to
the public offer and the merchant banker engaged by the
target company for independent advice would be liable for
action in terms of the regulations and the Act.
(6) The penalties referred to in sub-regulations (1) to (5)
may include:—
(a) criminal prosecution under section 24 of the Act;
(b) monetary penalties under section 15H of the Act;
(c) directions under the provisions of section 11B of the
Act;
(d) directions under section 11(4) of the Act;
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(e) cease and desist order in proceedings under section
11D of the Act;
(f) adjudication proceedings under section 15HB of the
Act.”
5.

In the instant case, we find that the appellants are persons acting
in concert and have been penalized for a sum of Rs. 5 lacs each
which, in our opinion, is incorrect. Once the appellants have been
categorized as PACs then the penalty can only be imposed upon the
PAC as a homogeneous unit.

Regulation 45 of the SAST
Regulations provides payment of penalty on an acquirer or any
person acting in concert. The penalty is not on an acquirer and
person acting in concert.

Thus, the imposition of penalty of
Rs. 5 lacs each on each of the persons acting in concert is erroneous
and cannot be sustained.

6.

Admittedly, the disclosures were not made under the SAST
Regulations and PIT Regulations and, therefore, the imposition of the
penalty is justified for which we do not find any error.

7.

For the reasons stated aforesaid, the appeal is partly allowed.

The penalty of Rs. 5 lacs each imposed on the appellants, namely,
Krupa Sanjay Soni, Sanjay Jethalal Soni and J. M. Soni Consultancy
as PAC to the extent of Rs. 5 lacs each is modified to Rs. 5 lacs
which shall be paid by the said PAC jointly and severally.

In
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addition, the imposition of penalty on Sanjay Jethalal Soni and Krupa
Sanjay Soni to the tune of Rs. 4 lacs and Rs. 5 lacs is affirmed. The
amount of penalty shall be paid within four weeks from today.

Sd/Justice Tarun Agarwala
Presiding Officer
Sd/Dr. C. K. G. Nair
Member
Sd/Justice M. T. Joshi
Judicial Member
28.06.2019
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