BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision: 5.12.2019
Appeal No.75 of 2019
1. Anilkumar Nandkumar Harchandani
B-1201, Imperial Heights,
Behind Goregaon Bus Depot,
Goregaon West, Mumbai – 400104.
2. Nandkumar Khattumal Harchandani
469, Poonam Vila, New Colony,
Nagpur- 440001.
3. Poonamdevi Nandkumar Harchandani
B-1201, Imperial Heights,
Behind Goregaon Bus Depot,
Goregaon West, Mumbai – 400104.
4. Riteshkumar Nandkumar Harchandani
B-1201, Imperial Heights,
Behind Goregaon Bus Depot,
Goregaon West, Mumbai – 400104.
5. Vijaykumar Nandkumar Harchandani
B-1201, Imperial Heights,
Behind Goregaon Bus Depot,
Goregaon West, Mumbai – 400104.
6. Archana Deepak Wani
455, Saroj Vila, New Colony,
Nagpur-440001.
7. Nandkumar Khattumal Harchandani HUF
469, Poonam Vila, New Colony,
Nagpur-440001.
8. Poonam Resorts Ltd.
1st Floor, B, Poonam Chambers,
Byramji Town, Chindwara Road,
Nagpur -440013.

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9. Kumar Hotels Ltd.
1st Floor, B, Poonam Chambers,
Byramji Town, Chindwara Road,
Nagpur -440013.
10. Kardhar Finance Pvt. Ltd.
7th Floor, Poonam Plaza,
Palm Road, Civil Lanes,
Nagpur – 440001.
11. Lire Investment Pvt. Ltd.
1st Floor, B, Poonam Chambers,
Byramji Town, Chindwara Road,
Nagpur – 440013.
12. N Kumar Housing & Infrastructure Pvt. Ltd.
1st Floor, B, Poonam Chambers,
Byramji Town, Chindwara Road,
Nagpur – 440013.

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

…Respondent
Dr. S.K. Jain, PCS with Mr. Vikas Bengani, Advocate for the
Appellant.
Mr. Vishal Kanade, Advocate with Mr. Vivek Shah and Mr.
Abhiraj Arora, Advocate i/b. ELP for the Respondent.

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

Aggrieved by the imposition of penalty of Rs.25 lakhs
on the present 12 appellants for violation of Regulation 11(1)
of Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997
(hereinafter referred to as ‘SAST Regulations’) the present
appeal is preferred.
2.

The submissions from both the sides as well as the
record would show that on the reference from the
Commissioner of Income Tax (IAP)-1, Indore dated May 2,
2014 SEBI conducted investigation in the alleged artificial
price rise in the scrip of Linkhouse Industries Ltd.
(hereinafter called ‘Company’) during the period 2004-2008.
It was found that between the period from 1st April, 2004 to
31st June, 2004 the present appellants who were the
promoters of the Company or the persons acting in concert
with each other had acquired around 2% of the share capital
of the Company. This had increased their shareholding from
70.52% to 77.47% in Company. As this has crossed the limit
as provided by the SAST Regulations it was found that the
appellant had violated the provisions of Regulation 11(1) of
the SAST Regulations which reads as under:11. (1) No acquirer who, together with persons acting
in concert with him, has acquired, in accordance with
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the provisions of law, 15 percent or more but less
than fifty five per cent (55%) of the shares or voting
rights in a company, shall acquire, either by himself or
through or with persons acting in concert with him,
additional shares or voting rights entitling him to
exercise more than 5% of the voting rights, with post
acquisition shareholding or voting rights not exceeding
fifty five percent, in any financial year ending on 31st
March, unless such acquirer makes a public
announcement to acquire shares in accordance with the
Regulations.
3.

Therefore show cause notices were issued to the
appellants. Some of the appellants did not answer the show
cause notice while some of the noticees at the time of
personal hearing came with a case that they were not aware
of the acquisition of shares by other promoters.

In the
situation, the Adjudicating Officer found the violation of the
provisions and imposed the penalty as detailed above.
4.

Dr. S.K. Jain, Company Secretary for the appellant
submitted before us that the order is liable to be quashed on
the sole ground of the delay. He submitted that the violation
if any on the acquisition of shares had occurred between
March, 2004 to June, 2004. The show cause notices were
issued by SEBI dated 7th November, 2017 and, thereafter, the
impugned order is passed on 24th May, 2018. He further
submitted that the investigating report dated 18 th March,
2017 itself would show that there was lack of documentary
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evidence about the mode of shares acquired by each of the
appellant. Hence it was recommended that it would not be
practicable to ask the appellant to make a public
announcement for acquisition of shares of the Company (para
9.1.4 of the investigation report). In the situation he relied on
the ratio of:(1) Corporation Bank and Another vs. Navin J. Shah,
(2002) 2 SCC 628 dated January 25, 2000.
(2) Rajendra Singh and Other vs. Santa Singh and
Others (1973) 2 SCC 705 dated August 16, 1973.
(3) Ashok Shivlal Rupani & Anr. vs. SEBI Appeal
no.417 of 2018 alongwith connected Appeal no.440 of
2018 decided by this Tribunal on 22nd August, 2019. He
submits that the appeal deserves to be allowed.
5.

On the other hand, Mr. Vishal Kanade, the learned
counsel for the respondent SEBI submits that there is no
denial of the fact that the appellant violated the provisions of
SAST Regulations. The respondent came to know about the
violation only when the reference was received from the
Income Tax authority as detailed above.

Thereafter
investigation was conducted and show cause notice was
issued.

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6.

In rejoinder, Dr. S.K. Jain submitted that the disclosure
of the acquisition was made regularly with BSE copy of
which are filed on record. In the situation, he submitted that
the appeal be allowed.
7.

Upon hearing both the sides, in our view the appeal
deserved to be allowed for the following reasons:The time line of the events would show that the alleged
violation had occurred between March, 2004 to June, 2004.
The appellant had disclosed the transaction to the BSE at that
time. The show cause notice however was issued in the
present case dated 7th November, 2017. The investigation
report itself would show that for non availability of the
documentary evidences the investigating authority did not
recommend taking drastic action to direct making of public
announcement. Thus, there was inordinate delay in initiation
of the proceedings. In the circumstance, it would be relevant
to quote the reasoning forwarded by us in the case of Ashok
Shivlal Rupani & Anr. vs. SEBI, Appeal nos.471 of 2018 and
440 of 2018 dated 22nd August, 2019 in para nos. 6 and 7 as
under:6. Having considering the matter, we are of the view
that there has been an inordinate delay on the part of
the respondent in initiating proceedings against the
appellants for alleged violations. Much water has flown
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since the alleged violations and at this belated stage the
appellants cannot be penalized. It is alleged that
disclosure under PIT Regulations was not made but
similar disclosure was made by the appellant under
SAST Regulations. Therefore, information was
available on the Stock Exchange and therefore it cannot
be said that the respondents were unaware of the
alleged violations. Further, the purpose of disclosure
was to make the market aware of the change of
shareholding of the shareholders. When a disclosure
was made by the company under SAST Regulations the
investors became aware of the change in the
shareholding. The non-compliance of Regulation 13 if
any becomes technical in nature.

7.
In Mr. Rakesh Kathotia & Ors. vs. SEBI (Appeal
No. 07 of 2016 decided by this Tribunal on 27.05.2019)
proceedings were quashed on account of inordinate
delay. The said decision is squarely applicable to the
instant case. For facility, the relevant paragraph of the
order is extracted hereunder:
“23. It is no doubt true that no period of
limitation is prescribed in the Act or the
Regulations for issuance of a show cause notice
or for completion of the adjudication proceedings.
The Supreme Court in Government of India vs.
Citedal Fine Pharmaceuticals, Madras and
Others, [AIR (1989) SC 1771] held that in the
absence of any period of limitation, the authority
is required to exercise its powers within a
reasonable period. What would be the reasonable
period would depend on the facts of each case and
that no hard and fast rule can be laid down in this
regard as the determination of this question would
depend on the facts of each case. This proposition
of law has been consistently reiterated by the
Supreme Court in Bhavnagar University v.
Palitana Sugar Mill (2004) Vol.12 SCC 670, State
of Punjab vs. Bhatinda District Coop. Milk P.
Union Ltd (2007) Vol.11 SCC 363 and Joint
Collector Ranga Reddy Dist. & Anr. vs. D.
Narsing Rao & Ors. (2015) Vol. 3 SCC 695. The
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Supreme Court recently in the case of
Adjudicating Officer, SEBI vs. Bhavesh Pabari
(2019) SCC Online SC 294 held:
“There are judgments which hold that when the
period of limitation is not prescribed, such power
must be exercised within a reasonable time. What
would be reasonable time, would depend upon the
facts and circumstances of the case, nature of the
default/statute, prejudice caused, whether the
third-party rights had been created etc.”
8.

In the light of the reasons quoted above there is no
escape from the conclusion that the proceedings are required
to be quashed. Therefore the appeal is hereby allowed with
no order as to costs.

Sd/Dr. C. K. G. Nair
Member
Sd/Justice M.T. Joshi
Judicial Member
5.12.2019
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