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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:
Waverley Investments Ltd.
5, Clive Row
2nd Floor, Room No - 51
Kolkata- 700 001
PAN No. AAACW4794N
FACTS IN BRIEF
1. Securities and Exchange Board of India (hereinafter referred to as SEBI)
while examining the draft Letter of Offer filed by Franktex Enterprises Pvt.
Ltd. and Goodfaith Commercial Pvt. Ltd. to acquire 20% shares of Waverley
Investments Ltd. (hereinafter referred to as 'WIL / Noticee / Company'),
SEBI observed certain non-compliances of SEBI (Substantial Acquisition of
Shares & Takeover) Regulations 1997 (hereinafter referred to as 'SAST
Regulations'). The shares of the Noticee were listed at Calcutta Stock
Exchange Ltd. (hereinafter referred to as 'CSE').
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 SEBI
Act), read with Rule 3 of Securities and Exchange Board of India (Procedure
for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules,
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Regulation
Actual date of
Delay in compliance
compliance
compliance
8(3)
30.04.1998
31.10.2011
4,932
8(3)
30.04.1999
31.10.2011
4,567
8(3)
30.04.2000
31.10.2011
4,201
8(3)
30.04.2001
31.10.2011
3,836
8(3)
30.04.2002
31.10.2011
3,471
8(3)
30.04.2003
31.10.2011
3,106
8(3)
30.04.2004
31.10.2011
2,740
8(3)
30.04.2005
31.10.2011
2,375
8(3)
30.04.2006
31.10.2011
2,010
10
8(3)
30.04.2007
31.10.2011
1,645
11
8(3)
30.04.2008
31.10.2011
1,279
12
8(3)
30.04.2009
31.10.2011
914
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13
8(3)
30.04.2010
31.10.2011
549
14
8(3)
30.04.2011
31.10.2011
184
5. The noticee vide its letter dated 29.05.2014 requested to extend the time to
file a reply to the SCN upto 15.06.2014. Subsequently the noticee submitted a
reply to the SCN vide its letter dated 14.06.2014 as follows:
Noticee requests to take into account the peculiar nature of the transactions
and that it was totally bona fide, not causing loss to any person and noncompliance of law, if any, was purely technical and inconsequential and in
any case fully remedied.
Except some miniscule acquisitions of equity shares of the Company by
Promoters / Promoter Group, the overall shareholding, control and
management of the Promoters / Promoter Group remained exactly the same
since 20.021997 to 31.03.2011. The overall shareholding did not change at
all. In view of this, the non-compliance / delayed compliances were of no
consequence whatsoever.
Since year 1997, Promoter / Promoter Group of the Company was holding the
majority stake and the public holding in the equity share capital of the
Company is very nominal and in any case the trading is almost nil. Thus, noncompliance under the aforesaid Regulation is insignificant and
inconsequential nature as it has no such vital impact on the public
shareholders of the Company.
Since there was no competent person having an adequate knowledge of
reporting requirements under the SEBI (SAST) Regulations, 1997, SEBI
(Prohibition of Insider Trading) Regulations, 1992 and other relevant
regulations is / was associated with the Company leading to the prima facie
factor for such non-compliance of aforesaid regulations.
There was no undue benefit derived from the aforesaid delayed compliances.
The delay in making requisite disclosures under the Regulations to the Stock
Exchange for the information of public is not price sensitive also.
Noticee has also quoted few case laws which deals with the issue that
penalty may not be imposed even if the person has failed to carry out any
statutory obligation.
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6. Vide personal hearing notice dated 25.06.2014, the noticee was granted an
opportunity of hearing on 15.07.2014 at 11:30 am at SEBI Bhavan, Mumbai.
The said notice came back undelivered with remark "left". The said hearing
notice was sent via email also. Noticee vide its letter dated 21.07.2014 stated
that since their registered office has been shifted they could not receive the
aforesaid hearing notice and therefore requested for a new date of hearing.
The noticee also provided its new correspondence address.
7. Noticee was granted a final opportunity of hearing vide hearing notice dated
25.08.2014 to appear on 10.09.2014 at 11:00 am at SEBI Bhavan, Mumbai.
In response to the same, the noticee vide his letter dated 10.09.2014
authorised Shri Anup Kumar Sharma, Company Secretary (herein after
referred to as AR) to attend the scheduled hearing.
8. At the time of hearing the AR reiterated the submissions made in the reply
dated 14.05.2014 and submitted that the noticee company was under
suspension from the year 2001 to 2012. The AR further submitted that the
noticee company was delisted from CSE in the year 2013 and the
shareholders were offered ` 45 per share at the time of delisting. The AR also
submitted that it was a technical omission on part of the noticee did not have
adequate professional expertise. The AR stated that the alleged disclosures
were finally made when its Merchant Banker informed the noticee of the non
compliances. The AR requested that a lenient view may be taken in the
matter.
CONSIDERATION OF EVIDENCE AND FINDINGS
9. I have taken into consideration the facts and circumstances of the case and
the material made available on record.
10. It is observed from the records that the noticee has failed to comply with
Regulation 8(3) of the SAST Regulations for financial years 1997-1998 to
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2010-2011. Noticee has admitted that it has failed to make disclosures under
SAST Regulations as the noticee did not have adequate professional
expertise.
11. Noticee has submitted that non-compliance under the aforesaid Regulation is
insignificant and inconsequential nature as it has no such vital impact on the
public shareholders of the Company and no undue benefit derived from the
aforesaid delayed compliances are not acceptable. As under Regulation 8(3)
of the SAST Regulations disclosure has to be made yearly as well as the
record date of the company for the purpose of declaration of dividend by
company for persons holding more than 15% shares or voting rights and for
Promoters / persons having control over the company. The said provisions of
Regulation 8(3) of the SAST Regulations are mandatory in nature.
12. With respect to submission of case laws by noticee I would like to quote the
Order of Honble Supreme Court of India in the matter of Chairman, SEBI Vs.
Shriram Mutual Fund {[2006] 5 SCC 361} wherein it was held as follows:
"..In our view, the penalty is attracted as soon as contravention of the
statutory obligations as contemplated by the Act is established and,
therefore, the intention of the parties committing such violation becomes
immaterial. . Hence, we are of the view that once the contravention
is established, then the penalty has to follow and only the quantum of
penalty is discretionary."
13. In view of the above facts and circumstances of the case and the material
made available on record, it can be concluded that the noticee has failed to
comply with Regulation 8(3) of the SAST Regulations. The text of the said
provision is reproduced below:SEBI (Substantial Acquisition of Shares & Takeover) Regulations 1997
8 (3) Every company whose shares are listed on a stock exchange, shall within
30 days from the financial year ending March 31, as well as the record date of
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the company for the purpose of declaration of dividend, make yearly disclosures
to all the stock exchanges on which the shares of the company are listed, the
changes, if any, in respect of the holdings of the persons referred to under subregulation (1)1 and also holdings of promoters or person(s) having control over
the company as on 31st March.
14. The said violation attracts penalty under Section 15A (b) of the SEBI Act. The
text of the said provision is reproduced below:SEBI Act
15A. Penalty for failure to furnish information, return, etc.- 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.
15. 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.
b.
c.
16. It has been noted from the material available on record that it is difficult to
quantify any gain or unfair advantage accrued to the noticee as a result of this
kind of default by the noticee. SEBIs examination has also not quantified the
profit / loss for the nature of default / non compliance by the noticee and no
material is made available on record to assess the disproportionate gain or
1
8 (1) Every person, including a person mentioned in Regulation 6 who holds more than
fifteen percent shares or voting rights in any company, shall, within 21 days from the financial
year ending March 31, make yearly disclosures to the company, in respect of his holdings as on
31st March.
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20. 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 Waverley
Investments Ltd. having registered office at 5, Clive Row, 2nd Floor, Room
No - 51, Kolkata- 700 001 and also to the Securities and Exchange Board of
India, Mumbai.
Place: Mumbai
D. RAVI KUMAR
CHIEF GENERAL MANAGER &
ADJUDICATING OFFICER
Date: 30.03.2015
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