SAT order in the matter of M/s. Gulab Impex Enterprises Limited

Facts: The present appeal is filed by M/s.Gulab Impex Enterprises Limited (“Appellant”) against the initiation of Adjudication proceeding by SEBI and imposed a penalty of Rs. 9,00,000 for violation of Regulation 8(3) of SEBI (SAST) Regulations, 1997 instead of favourably considering the consent application for an amicable resolution of the issue. 

Brief facts of the case: 
  • Gulab Impex Enterprises Limited (“Appellant”) is a company incorporated under Companies Act, 1956 and the shares of the Company are listed at Delhi Stock Exchange Limited and UP Stock Exchange Limited. 
  • Appellant had failed to file the disclosures as required under Regulation 8(3) of SEBI (SAST) Regulations, 1997 for the year 1998 to 2011. Accordingly SEBI imposed the penalty of 9,00,000 for the aforesaid violations on the Appellant. Being aggrieved by the direction of SEBI, the appellant has filed the appeal before Hon’ble Tribunal and contended the following: 
  • The two stock exchanges, where the shares of the companyare listed, namely, Delhi Stock Exchange and UP Stock Exchange, are nonfunctionaland no trading is being carried on by the investors or shareholders in the scrip of theappellant company since last many years. 
  • They had been disclosing regularly the shareholdings under Regulation 8(3) of SEBI (SAST) Regulations, 1997. However, in respect of 2001 there was an inadvertent noncompliance. It was revealed to them by the company secretary and they tookimmediate steps to approach SEBI by disclosing the violation. SEBI instead offavorably considering the consent application for an amicable resolution of the issue, conducted adjudication proceedings and passed the impugned order in question. 
Issues: Whether the penalty imposed by the SEBI is justified?

Decision: After taking into considerations all the facts and circumstances of the case, the Hon’ble Tribunal (“SAT”) observed that the appellant on his own approached SEBI on becoming aware of the technical violation in question and asked for consent proceedings which, somehow, could not materialize. SAT further observed that the conduct of appellant in approaching SEBI on its own and thereby bringing the violation in question to the notice of SEBI. 

As against the above order passed by SEBI, after considering all mitigating factors, SAT held that ends of justice would be met with by disposing of this appeal and directed Appellant to make disclosure as per Regulation 8(3) of SEBI (SAST) Regulation, 1997 on or before November 17, 2014 and after the required disclosure is made by the Appellant, the penalty of Rs. 9 lacs imposed on the appellant shall stand modified to Rs. 5 lacs. In case the appellant does not make appropriate disclosure by November 17, 2014, the original penalty against the company shall revive.

This SAT order is a part of Takeover Panorama Nov- Dec 2014 which is embedded below:

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