BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. CFD/ CSL/AO/DRK-AKS/EAD3-671/217-2014]

______________________________________________________________________
UNDER SECTION 15 I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT,
1992 READ WITH RULE 5(1) OF SECURITIES AND EXCHANGE BOARD OF INDIA
(PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY
ADJUDICATING OFFICER) RULES, 1995
In respect of:
Ms. Kajal R Vasa
Ashray, Nandanvan Society,
Near Karnavati Club,
Sarkhej Gandhinagar Highway,
Ahmedabad 380 058
______________________________________________________________________
FACTS OF THE CASE IN BRIEF
1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI'), while
examining the offer document of Contech Software Limited (hereinafter referred
to as 'CSL/ Company') observed certain non compliances by the promoters of
the company. The shares of the company are listed at BSE Ltd.
APPOINTMENT OF ADJUDICATING OFFICER
2. I was appointed as Adjudicating Officer under Section 15-I of the Securities and
Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act)
read with Rule 3 of the SEBI (Procedure of Holding Inquiry and Imposing
Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as the
Rules), Section 19 of the SEBI Act read with Regulations 44 and 45 of the SEBI
(Substantial Acquisition of Shares and Takeover) Regulations, 1997 (hereinafter
referred to as 'SAST Regulations') and Regulation 35 of the SEBI (Substantial
Acquisition of Shares and Takeover) Regulations, 2011 to inquire into and
adjudge under Section 15A(b) of the SEBI Act, the violation of Regulations 7(1A)
read with 7(2) of the SAST Regulations alleged to have been committed by Ms.
Kajal R Vasa (hereinafter referred to as 'noticee'). The said appointment was
communicated vide proceedings of the Whole Time Member appointing
Adjudicating Officer dated April 26, 2013.

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SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

3. A Show Cause Notice no. A&E/EAD-3/DRK-DS/21720/2013 dated August 28,
2013 (hereinafter referred to as 'SCN') was served on the noticee by Speed Post
Acknowledgement Due requiring her to show cause as to why an inquiry should
not be held against her and why penalty, if any, should not be imposed on her
under Section 15A(b) of the SEBI Act for the alleged violation of the provisions of
Regulations 7(1A) read with 7(2) of the SAST Regulations.
4. It was alleged in the SCN that SEBI while examining the offer document of CSL
observed that the noticee has violated Regulations 7(1A) read with 7(2) of the
SAST Regulations. The details of the aforesaid violations are given in the
following table:

Sr.
No.

Regulation 7(1A) and 7(2)

Regulation

Due Date of

Actual Date of

Delay

Compliance

Compliance

(days)

1.

7(1A)

31.12.2006

03.03.2007

62

2.

7(2)

31.12.2006

03.03.2007

62

3.

7(1A)

07.02.2007

03.03.2007

24

4.

7(2)

07.02.2007

03.03.2007

24

5. The noticee, vide her letter dated September 13, 2013 sought 30 days time to
submit reply to the SCN as she had to collect detailed information and records of
the said transactions. In response to the same, vide letter dated September 26,
2013, the noticee was granted 15 days time to submit a reply to the SCN.
6. Vide her letter dated October 14, 2013, the noticee made the following
submissions:
a. Noticee states that a perusal of the notice itself would show that there is in
fact actual compliance made of various regulations of SAST Regulations
mentioned in the SCN though after some delay.
b. From the facts and circumstances, it is evident that noticee has made
compliance of all the Regulations 7(1A) and 7(2) of the SAST Regulations
way back in March 2007. The SEBI / Board has accepted the compliance
without any qualification or objection. Noticee has acted upon the
acquisitions of shares in question for all these years without any
interruption or objection from SEBI / Board.
c. Noticee had acquired some shares from the market which was under
permissible limits of the creeping acquisition and then had gifted her entire
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shareholding to her sons which is legally permissible. The resultant

transaction did not add any voting rights nor it did add any shares to the
Promoter Group, all voting right and shares, through this group was
already available to the Promoters and it continued to remain with them.
The interests of the investors are thus not put to any prejudice. Without
prejudice, all the compliances as relevant to such inter ser transfers are
already made. The delay in compliance which is only in the nature of
reporting has not caused any prejudice to any person, authority or
investors.
d. Noticee states that there is no gain or unfair advantage received by her or
by her sons by virtue of delay in making compliance of the above stated
Regulations. In fact, it is not even the case of your good self in the notice
that on account of delay in complying the above stated regulations, there
is any disproportionate gain or unfair advantage made by any of them.
e. Even otherwise, the provisions of the SAST Regulations cannot be held to
be mandatory in nature. She has already complied with the regulations
though after some delay. There is thus substantial compliance of the
Regulations already made. The compliances made by her has been
accepted by the SEBI/ Board without any objection.
7. As requested by the noticee, vide hearing notice dated August 08, 2014, noticee
was granted personal hearing on August 27, 2014 at SEBI Bhavan, Mumbai.
However, vide letter dated August 18, 2014, noticee sought adjournment of the
said hearing on account of non-availability of lawyer.
8. Subsequently, vide final hearing notice dated August 26, 2014, noticee was
granted final opportunity of hearing on September 09, 2014 at SEBI Bhavan,
Mumbai. Vide the said hearing notice, the noticee was also advised to attend the
said hearing, failing which the matter shall be proceeded based on the material
available on record.
9. Noticee, vide letter dated September 05, 2014 authorised Shri Rajan Vasa and
Shri Mital Gandhi, Vice- President, Contech BPO Services Pvt. Ltd. as her
Authorised Representatives (hereinafter referred to as 'ARs'). The ARs appeared
for the hearing and made the following submissions:
a. There was a delay in the compliances of Takeover Regulations due to lack
of proper knowledge of the relevant regulations.
b. The ARs submitted that there was no open market transaction but the
shares were transferred pursuant to gift deeds.
c. The ARs have further submitted that the noticee did not gain anything from
the non-compliances and no investor complaints were made in this regard.
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CONSIDERATION OF EVIDENCE AND FINDINGS

10. I have taken into consideration the facts and circumstances of the case, and the
material made available on record.
11. It is observed from the material made available on record that noticee had
acquired on 29.12.2006, 2.03% of shares (1,12,106 shares) which increased her
shareholding in the company from 1.72% to 3.75%. Further, on 05.02.2007,
noticee sold 3.75% of shares (2,06,909 shares) which reduced her shareholding
in the company to nil.
12. As per the requirements of Regulations 7(1A) read with 7(2) of SAST
Regulations, noticee was required to make disclosures on two occasions to the
company as well as to the stock exchanges with respect to her acquisition and
sell transaction of shares. The text of the said provisions (inadvertently a different
text was quoted in the SCN) is as follows:
7 (1A) Any acquirer who has acquired shares or voting rights of a company under subregulation (1) of regulation 111 * shall disclose purchase or sale aggregating two per cent
or more of the share capital of the target company to the target company, and the stock
exchanges where shares of the target company are listed within two days of such
purchase or sale along with the aggregate shareholding after such acquisition or sale.
Explanation.For the purposes of sub-regulations (1) and (1A), the term acquirer shall
include a pledgee, other than a bank or a financial institution and such pledgee shall
make disclosure to the target company and the stock exchange within two days of
creation of pledge.
(2) The disclosures mentioned in sub-regulations (1) and (1A) shall be made within two
days of,
(a) the receipt of intimation of allotment of shares; or
(b) the acquisition of shares or voting rights, as the case may be."
*inadvertently the words " or under second proviso to sub-regulation (2) of regulation 11"
was quoted in the SCN

13. In this regard, noticee has admitted that there was a delay of 62 days when she
had acquired shares and a delay of 24 days when she had sold shares while

11.(1)Noacquirerwho,togetherwithpersonsactinginconcertwithhim,hasacquired,inaccordancewiththe
provisions of law,15per cent or more but less thanfifty five per cent.(55%) of the shares or voting rights in a
company,shallacquire,eitherbyhimselforthroughorwithpersonsactinginconcertwithhim,additionalshares
or voting rights entitling him to exercise more than5% of the voting rights,in any financialyear ending on 31st
March,unlesssuchacquirermakesapublicannouncementtoacquiresharesinaccordancewiththeRegulations.

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complying with Regulations 7(1A) read with 7(2) of the SAST Regulations due to
lack proper knowledge of the relevant regulations.
14. At this juncture, I would like to quote the order of Hon'ble Securities Appellate
Tribunal (hereinafter referred to as 'SAT') in G. Suresh Vs. SEBI dated
29.04.2014, wherein it was held that "True and timely disclosures by an acquirer
of shares in a company are an important regulatory tool intended to serve a
public purpose of disseminating this information to the company as well as to
Stock Exchange expeditiously. Such disclosures are very important as they help
investors to take an informed decision in investing in the scrip of said company."
15. Noticee's submission with respect to her first transaction on 29.12.2006 that it
was under permissible limits of creeping acquisition may not be accepted as the
provisions of Regulation 7 (1A) of SAST Regulations makes it clear that
purchase of shares aggregating to 2% or more is permissible only if a disclosure
has been made within 2 days of such purchase. In the given situation, noticee
failed to adhere to the timeline given under Regulation 7 (2) of SAST
Regulations.

16. The noticee with respect to her second transaction has submitted that she had
given the said shares to her sons as gift. However, she has not submitted any
documents in support of her claim. In the absence of any evidence, it is difficult to
accept noticee's submission.
17. Noticee's contention that delay in compliance has not caused any prejudice to
any person, authority or investors is not material since the regulation get s
triggered the moment there is an acquisition or sale of shares aggregating to two
per cent or more of the share capital.
18. Hon'ble SAT in Ensen Holdings Ltd. Vs SEBI decided on 13.06.2014 has
observed as follows "...Second argument of the appellant to the effect that there
was no disproportionate gain or unfair advantage derived by the appellants or
loss caused to the investors as a result of failure on part of the appellant to make
disclosures and hence penalty ought not to have been levied is also without any
merit because obligation to make disclosure under Regulation 8(1) and 8(2) of
SAST

Regulations,

1997

is

not

restricted

to

cases

where

there

is

disproportionate gain or unfair advantage and where loss is caused to the

investors as a result of failure to make disclosures. In other words, irrespective of
disproportionate gain or unfair advantage derived or any loss caused to the
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investors, obligation to make disclosures under Regulation 8(1) and 8(2) of SAST
Regulations, 1997 have to be complied with. No doubt, that these factors are
required to be taken into consideration while determining the quantum of
penalty..."
19. Although the above observation was on failure to disclose under Regulations 8(1)
and 8(2) of SAST Regulations but in my opinion the same rational can be
extended for delay in making disclosures under Regulation 7(1A) of SAST
Regulations.
20. Noticee's submission that provisions of the SAST Regulations cannot be held to
be mandatory in nature is not correct since a bare reading of the text of
Regulations 7(1A) read with 7(2) of the SAST Regulations makes it clear that the
disclosures are mandatory in nature. The same can be understood from the use
of word "shall" in the said provisions.
21. The submission made by the noticee that the compliances made by her has been
accepted by the SEBI / Board without any objection is also not correct as the
current adjudication proceedings has been initiated by SEBI for the aforesaid
delay in making disclosures under SAST Regulations. Noticee's submission that
delay in compliance was due to lack of proper knowledge may not be accepted.
22. In view of the facts as discussed above and material made available on record, it
can be concluded that the noticee has failed to comply with the provisions of
Regulations 7(1A) read with 7(2) of the SAST Regulations for the acquisition
made on 29.12.2006 and sell transaction on 05.02.2007.
23. The aforesaid delays in making the disclosures makes the noticee liable for
penalty under Section 15A(b) of the SEBI Act which is reproduced below:
" Penalty for failure to furnish information, return, etc.
15A. If any person, who is required under this Act or any rules or regulations made
thereunder,

(b) to file any return or furnish any information, books or other documents within the
time specified therefor in the regulations, fails to file return or furnish the same within
the time specified therefor in the regulations, he shall be liable to a penalty of one lakh
rupees for each day during which such failure continues or one crore rupees,
whichever is less;"

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24. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of the
Rules require that while adjudging the quantum of penalty, the adjudicating
officer shall have due regard to the following factors namely;
a. the amount of disproportionate gain or unfair advantage wherever
quantifiable, made as a result of the default;
b. the amount of loss caused to an investor or group of investors as a
result of the default;
c. the repetitive nature of the default.
25. With regard to the above factors to be considered while determining the quantum
of penalty, it is noted that the disproportionate gain or unfair advantage made by
the noticee or loss caused to the investors as a result of the delay on the part of
the noticee is not available on record. Further, it may also be added that it is
difficult to quantify the unfair advantage made by the noticee or the loss caused
to the investors in a default of this nature.
26. At this juncture, I would like to quote the judgement of the Honble Supreme
Court of India in the matter of SEBI Vs. Shri Ram Mutual Fund [2006] 68 SCL
216(SC) wherein it was held that :
..once the violation of statutory regulations is established, imposition of
penalty becomes sine qua non of violation and the intention of parties
committing such violation becomes totally irrelevant. Once the contravention
is established, then the penalty is to follow..
27. In view of the abovementioned conclusion, I hereby impose a penalty of
` 2,00,000/- (Rupees Two Lakh only) on the noticee under Section 15A(b) of the
Securities and Exchange Board of India Act, 1992 for delay in disclosing under
Regulations 7 (1A) read with 7 (2) of the SEBI (Substantial Acquisition of Shares
and Takeover) Regulations, 1997 for the acquisition made on 29.12.2006 and
` 1,00,000/- (Rupees One Lakh only) on the noticee under Section 15A(b) of the
Securities and Exchange Board of India Act, 1992 for delay in disclosing under
Regulations 7 (1A) read with 7 (2) of the SEBI (Substantial Acquisition of Shares
and Takeover) Regulations, 1997 for the sell transaction on 05.02.2007 which is
appropriate in the facts and circumstances of the case.
ORDER
28. In exercise of the powers conferred under Section15 I of the Securities and
Exchange Board of India Act, 1992, and Rule 5 of Securities and Exchange
Board of India (Procedure for Holding Inquiry and Imposing Penalties by
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Adjudicating Officer) Rules, 1995, I hereby, impose a consolidated penalty of

` 3,00,000/- (Rupees Three Lakh only) on Ms. Kajal R Vasa in terms of the
provisions of Section 15A(b) of the Securities and Exchange Board of India
Act,1992 for her delay in complying with the provisions of Regulations 7(1A) read
with 7(2) of the Securities and Exchange Board of India (Substantial Acquisition
of Shares and Takeover) Regulations, 1997. In the facts and circumstances of
the case, I am of the view that the said penalty is commensurate with the delay
on the part of the noticee to make the disclosure.
29. The penalty shall be paid by way of Demand Draft drawn in favour of SEBI
Penalties Remittable to Government of India payable at Mumbai within 45 days
of receipt of this order. The said demand draft shall be forwarded to the Chief
General Manager, CFD, Securities and Exchange Board of India, Plot No. C4-A,
G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051.
30. In terms of the provisions of Rule 6 of the Securities and Exchange Board of
India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating
Officer) Rules 1995, copies of this order are being sent to Ms. Kajal R Vasa and
also to the Securities and Exchange Board of India, Mumbai.

Place: Mumbai

D. RAVI KUMAR

Date: December 18, 2014

CHIEF GENERAL MANAGER &

ADJUDICATING OFFICER

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