BEFORE THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

Date of Decision : 28.06.2019

Appeal No. 483 of 2018

1. Sanjay Jethalal Soni

2. Krupa Sanjay Soni
3. J M Soni Consultancy through its
Proprietor Sanjay Jethalal Soni

36, Malay Bungalows, Science City

Road, Sola, Ahmedabad - 380 001. ….. Appellants

Versus

Securities & Exchange Board of India

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

Mr. Nishant K. Upadhyay, Advocate for the Appellants.

Mr. Karan Bhosale, Advocate with Mr. Kaushal Parsekar, Advocate
i/b Legasis Partners 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)

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1. Adjudication proceedings were initiated against the appellants

for violation of Regulations 7(1) and 7(2) of the Securities and

Exchange Board of India (Substantial Acquisition of Shares and

Takeovers) Regulations, 1997 (hereinafter referred to as, ‘SAST

Regulations’) alongwith Regulation 13 of the Securities and

Exchange Board of India (Prohibition of Insider Trading)

Regulations, 1992 (hereinafter referred to as ‘PIT Regulations’).

After considering the reply of the appellants, it was found that the

appellant Sanjay Jethalal Soni alongwith Krupa Sanjay Soni and J.

M. Soni Consultancy were connected to each other and were persons

acting in concert (PAC). It was found that the appellant Sanjay

Jethalal Soni is the proprietor of J. M. Soni Consultancy and Krupa

Sanjay Soni is his wife and, therefore, they are connected and related

to each other and were categorized as PAC. The Adjudicating

Officer (hereinafter referred to as, AO) further found that the

appellant was an acquirer and had acquired the shares of M/s. Oregon

Commercial Ltd. (OCL) in violation of Regulations 7(1) and 7(2) of

the SAST Regulations. The AO found that the acquisition of the

shares made by him had triggered Regulation 7(1) for which he was

required to make a disclosure within two days under Regulation 7(2)

which apparently was not done. Similarly, the disclosure of his

shareholding pattern was required to be made under Regulations

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13(1), 13(3) read with 13(5) of the PIT Regulations which apparently

was not done.

2. Accordingly, the AO imposed a penalty of Rs. 5 lacs each under

Section 15A(b) of the Securities and Exchange Board of India Act,

1992 (hereinafter referred to as, ‘SEBI Act’) upon Krupa Sanjay

Soni, Sanjay Jethalal Soni and J. M. Soni Consultancy for violation

of Regulation 7(1) read with Regulation 7(2) of the SAST

Regulations. The AO further imposed a sum of Rs. 4 lacs on Sanjay

Jethalal Soni and Rs. 5 lacs on Krupa Sanjay Soni under Section

15A(b) of the SEBI Act for violation of the Regulations 7(1) and 7(2)

of the SAST Regulations and Regulations 13(1), 13(3) read with

13(5) of the PIT Regulations. The appellants being aggrieved have

filed the present appeal.

3. We have heard Shri Nishant K. Upadhyay, the learned counsel

for the appellants and Shri Karan Bhosale with Shri Kaushal

Parsekar, the learned counsel for the respondent.

4. Under Regulation 45 of the SAST Regulations, the penalty for

non-compliance is on the acquirer or any person acting in concert

with him. For facility, the provisions of Regulation 45 of the SAST

Regulations is extracted hereunder :-

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“45. (1) Any person violating any provisions of the

regulations shall be liable for action in terms of the
regulations and the Act.

(2) If the acquirer or any person acting in concert with

him, fails to carry out the obligations under the
regulations, the entire or a part of the sum in the escrow
account shall be liable to be forfeited and the acquirer or
such a person shall also be liable for action in terms of the
regulations and the Act.

(3) The board of directors of the target company failing to

carry out the obligations under the regulations shall be
liable for action in terms of the regulations and the Act.

(4) The Board may, for failure to carry out the

requirements of the regulations by an intermediary,
initiate action for suspension or cancellation of
registration of an intermediary holding a certificate of
registration under Section 12 of the Act:

Provided that no such certificate of registration shall be

suspended or cancelled unless the procedure specified in
the regulations applicable to such intermediary is
complied with.

(5) For any mis-statement to the shareholders or for

concealment of material information required to be
disclosed to the shareholders, the acquirers or the
directors where the acquirer is a body corporate, the
directors of the target company, the merchant banker to
the public offer and the merchant banker engaged by the
target company for independent advice would be liable for
action in terms of the regulations and the Act.

(6) The penalties referred to in sub-regulations (1) to (5)

may include:—

(a) criminal prosecution under section 24 of the Act;

(b) monetary penalties under section 15H of the Act;
(c) directions under the provisions of section 11B of the
Act;
(d) directions under section 11(4) of the Act;
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(e) cease and desist order in proceedings under section

11D of the Act;
(f) adjudication proceedings under section 15HB of the
Act.”

5. In the instant case, we find that the appellants are persons acting

in concert and have been penalized for a sum of Rs. 5 lacs each

which, in our opinion, is incorrect. Once the appellants have been

categorized as PACs then the penalty can only be imposed upon the

PAC as a homogeneous unit. Regulation 45 of the SAST

Regulations provides payment of penalty on an acquirer or any

person acting in concert. The penalty is not on an acquirer and

person acting in concert. Thus, the imposition of penalty of

Rs. 5 lacs each on each of the persons acting in concert is erroneous

and cannot be sustained.

6. Admittedly, the disclosures were not made under the SAST

Regulations and PIT Regulations and, therefore, the imposition of the

penalty is justified for which we do not find any error.

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

The penalty of Rs. 5 lacs each imposed on the appellants, namely,

Krupa Sanjay Soni, Sanjay Jethalal Soni and J. M. Soni Consultancy

as PAC to the extent of Rs. 5 lacs each is modified to Rs. 5 lacs

which shall be paid by the said PAC jointly and severally. In

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addition, the imposition of penalty on Sanjay Jethalal Soni and Krupa

Sanjay Soni to the tune of Rs. 4 lacs and Rs. 5 lacs is affirmed. The

amount of penalty shall be paid 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

28.06.2019
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