BEFORE THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

Appeal No.179 of 2014


Date of decision : 12/9/2014


1. Hemant Kothari
C/o. Kothari Towers (P) C Ltd.
220/2, Panditya Road Extension,
Kolkata 700 029.

2. Rajesh Kothari
10, Canning Street, 3
rd
Floor,
Kolkata 700 001.

3. Dharmendra Kothari
10, Canning Street, 3
rd
Floor,
Kolkata 700 001.

4. Smt. Ichraj Devi Kothari
10, Canning Street, 3
rd
Floor,
Kolkata 700 001.

5. Smt. Sunita Kothari
10, Canning Street, 3
rd
Floor,
Kolkata 700 001. Appellants


Versus


Adjudicating Officer,
Securities & Exchange Board of India
SEBI Bhavan, Plot No.C4-A, G Block,
Bandra Kurla Complex,
Bandra (E), Mumbai 400 051. Respondent


Mr. Abhishek Borgikar, Advocate for Appellants.

Mr. Kumar Desai, Advocate with Mr. Mihir Mody, Advocate for the
Respondent.

CORAM : Justice J.P. Devadhar, Presiding Officer
Jog Singh, Member
A. S. Lamba, Member


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Per : Justice J.P. Devadhar (Oral)


1. Appellants are aggrieved by the adjudication order of Securities and
Exchange Board of India (SEBI), dated 25
th
March, 2014, whereby penalty of
Rs.40 lac is imposed upon the appellants under Section 15H of Securities and
Exchange Board of India Act, 1992 (for short SEBI Act) for violating
Regulation 10 of Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997 (SAST Regulations,
1997 for short) read with Regulation 35 of Securities and Exchange Board of
India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
(SAST Regulations, 2011 for short) and by that order appellants are
directed to pay the aforesaid penalty jointly and severally within the specified
date.

2. In the present case, investigation carried out by SEBI revealed that
appellants along with Mr. Pradeep Kumar Kothari (now deceased) had
acquired 6,83,717 shares of Kwality Credit & Leasing Limited (KCLL for
short) during the period from 15
th
September, 2010 to 21
st
September, 2010
constituting approximately 19.53% shares of the paid-up capital of KCLL in
off-market at a price of Rs.5, but failed to make public announcement and
open offer as required under Regulation 10 of SAST Regulations, 1997.

3. On issuance of show-cause notice, appellants showed cause and also
made oral submissions at the personal hearing offered to the appellants.
However, by the impugned order, the contentions raised by appellants have
been rejected and penalty of Rs.40 lac has been imposed on the appellants.
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4. Learned Advocate for appellants submitted that the penalty imposed
upon appellants cannot be sustained on following grounds:
(a) Penalty of Rs.40 lac imposed on appellants is too high and
unreasonable and is imposed without considering the
mitigating factors.
(b) Appellants were ready to comply with the open offer and in fact
had appointed BCB Brokerage Private Limited as manager to
the offer, and this material fact has not been considered in the
impugned order.
(c) Total acquisition cost of 6,83,717 shares of KCLL is only
Rs.34,18,585/-, whereas, penalty imposed on appellants is Rs.40
lac which is totally disproportionate.
(d) Trading in the shares of KCLL was suspended during the
period from 2007 till October 19, 2011.
(e) SEBI Takeover Regulations Advisory Committee has published
its report on July 19, 2010 wherein it is recommended that the
threshold limit be increased to 25% from 15%.
(f) As per SEBI (Settlement of Administrative and Civil
Proceedings) Regulations, 2014, the total indicative amount for
such violation is Rs.25 lacs only.
(g) Apart from the aforesaid mitigating factors, in the present case
the target company being in loss at the time of acquisition, there
being no change in management and control due to such
acquisition and the default being not repetitive in nature, the
adjudicating officer is not justified in imposing penalty of
Rs.40 lac.
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5. We see no merit in the above contentions.


6. In the present case, fact that the appellants acquired shares of KCLL in
excess of the limit prescribed under Regulation 10 of SAST Regulations, 1997
is not in dispute. Although appellants had represented to the Adjudicating
Officer that they are taking steps to make open offer in accordance with
Regulation 10, it is an admitted fact that till date no such open offer has been
made by the appellants. Penalty imposable under Section 15H of SEBI Act,
1992 for such failure is Rs.25 crore or three times the amount of profits made
out of such failure, whichever is higher. Thus, on a plain reading of Section
15H penalty imposable upon the appellants for violating Regulation 10 of
SAST Regulations, 1997 is Rs.25 crore. However, taking into consideration all
mitigating factors, the Adjudicating Officer has imposed penalty of Rs.40 lac
which cannot be said to be unreasonable or excessive.

7. Once it is seen that the penalty imposable on appellants is Rs.25 crore,
all arguments advanced on behalf of appellants do not merit consideration,
because, having due regard to all mitigating factors, penalty of Rs.40 lac has
been imposed instead of imposing penalty of Rs.25 crore. Fact that the
Advisory Committee of SEBI has recommended to increase the threshold
limit for triggering violation to 25% from 15% and under SEBI (Settlement of
Administrative and Civil Proceedings) Regulations, 2014, the total indicative
amount for such violation is Rs.25 lac only, have no relevance, because of the
specific provisions contained in Section 15H of SEBI Act which mandates
imposition of higher penalty amounting to Rs.25 crore.

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8. Relying on a decision of this Tribunal in the case of Unijules Life
Sciences Ltd. vs. SEBI (Appeal No.142 of 2012 decided on 1/11/2012), it is
contended on behalf of appellants that in the facts of the present case penalty
of Rs.40 lac imposed upon appellants deserves to be deleted/reduced
substantially. We see no merit in the above contention. Fact that in a given
case penalty is reduced cannot be a ground for reducing the penalty in every
case, especially in the facts of present case, where the appellants had
represented that they are taking steps to comply with the regulation but till
date have not complied with that representation and in the present case it is
seen that compared to the penalty of Rs.25 crore imposable under Section
15H, penalty imposed is only Rs.40 lac. Therefore, in the facts of present case,
we do not consider it proper to reduce the penalty based on aforesaid
decision relied upon by the counsel for appellants.

9. For all aforesaid reasons, we see no reason to entertain the Appeal and
the same is hereby dismissed with no order as to costs.

Sd/-
Justice J.P. Devadhar
Presiding Officer

Sd/-
Jog Singh
Member

Sd/-
A.S. Lamba
Member



12/9/2014
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