BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision : 23.07.2019
Misc. Application No. 36 of 2018
And
Appeal No. 36 of 2018
1. Mr. Annand Sarnaaik
2. Ms. Divvyani Sarnaaik
402, Jairaj CHS Ltd. Opp. Income Tax,
Bandra Kurla Complex, Bandra East,
Mumbai – 51.

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

… Respondent
Mr. Neville Lashkari, Advocate with Mr. Kunal Mehta, Advocate i/b
Crawford Bayley & Co. for the Appellants.
Mr.

Anubhav
Ghosh,
Advocate
with
Ms.

Rashi
Advocate i/b The Law Point 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)
Dalmia,
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1.

The appellants have challenged the order dated November 30,
2017 whereby a penalty of Rs. 40 lacs has been imposed upon them
for violation of Regulations 13(3), 13(4), 13(4A) and 13(5) of the
Securities and Exchange Board of India (Prohibition of Insider
Trading) Regulations, 1992 (hereinafter referred to as ‘PIT
Regulations’) read with Regulations 29 and 31 of the Securities and
Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011 (hereinafter referred to as ‘SAST
Regulations’).
2.

The facts leading to the filing of the appeal is that the appellants
are husband and wife and were the erstwhile promoter of Glodyne
Technoserve Ltd. (hereinafter referred to as, ‘Glodyne’).

The
appellants took loans from banks and financial institutions to fund
their business.

The said loan was secured by pledging their
shareholdings in Glodyne. The appellants also gave a power of
attorney to the lenders. According to the appellants, the lenders
invoked the pledge and sold their shares without intimation and when
the appellants became aware they made the disclosures under the PIT
and SAST Regulations though belatedly.
3.

After five years, a show cause notice dated February 7, 2017 was
issued by the Adjudicating Officer (hereinafter referred to as, ‘AO’)
alleging that from January 2, 2012 to April 20, 2013 the appellants
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failed to make the disclosures within the stipulated period provided
under the PIT and SAST Regulations and, therefore, issued a show
cause notice as to why a penalty should not be imposed under
Section 15A(b) of the Securities and Exchange Board of India Act,
1992 (hereinafter referred to as, ‘SEBI Act’). The appellants replied
that much water has flown and, in the meantime, on account of
continuous loss, the company Glodyne has been wound up with
effect from April 16, 2015. Further, the non-disclosure was not
deliberate and that the appellants made the necessary disclosures no
sooner they realised that the lenders had sold the shares pledged to
them. The AO after granting an opportunity of hearing passed the
impugned order imposing a penalty of Rs. 40 lacs upon the
appellants to be paid jointly and severally.
4.

We have heard Shri Neville Lashkari with Shri Kunal Mehta,
the learned counsel for the Appellants and Shri Anubhav Ghosh with
Ms. Rashi Dalmia, the learned counsel for the respondent.
5.

Before this Tribunal, an attempt was made to justify the
disclosures made belatedly on the strength that the appellants were
unaware of the sale of its shares made by the lenders and that the
delay if any, was thus, liable to be condoned. It was also alleged that
the violation, if any, was merely technical in nature and no fraud or
mischief or loss was caused to any investors. It was, thus, urged that
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the penalty of Rs. 40 lacs was harsh and did not commensurate with
the alleged violations.
6.

Having heard the learned counsel for the parties and having
pondered over the matter, we find that on the facts narrated aforesaid
the appellants were duty bound to make the necessary disclosures
within the stipulated period under the PIT and SAST regulations.
Non-disclosures within the stipulated period violated the provisions
of the aforesaid regulations and, consequently, the penalty became
leviable.

Thus, to that extent, the order of the AO holding the
appellants guilty of violating the provisions of the PIT and SAST
Regulations cannot be faulted and is upheld.
7.

However, considering the factors enumerated under Section 15J
of the SEBI Act, we find that there was no disproportionate gain or
unfair advantage gained by the appellants as a result of the default
nor anything has come on record to indicate that the delayed
disclosures resulted in a loss caused to an investor.

However,
considering the repetitive nature of the default and the fact that the
company has now been wound up and taking into consideration all
the facts and circumstances of the case, we think that in the larger
interest of justice, the quantum of penalty should be reduced from
Rs. 40 lacs to Rs. 30 lacs would meet the ends of justice.

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8.

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

The penalty of Rs. 40 lacs is reduced to Rs. 30 lacs which shall be
paid by the appellants 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
23.07.2019
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