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10. From the aforesaid reply of the noticees, it appears that the noticees failed to
take immediate steps to retrieve old records pertaining to their non-compliances
within a span of one year i.e. time period between the issuance of the SCN
(September 10, 2013) and the scheduled final hearing (September 10, 2014).
Further, even after a lapse of one year, the noticees have failed to produce any
record/document with respect to the reason behind the aforesaid acquisitions. It
is also noted that the noticees did not make any such request in their reply dated
J anuary 24, 2014. Thus, the matter is proceeded on the basis of the reply of the
noticees.
CONSIDERATION OF EVIDENCE AND FINDINGS
11. I have taken into consideration the facts and circumstances of the case, and the
material made available on record.
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12. It was alleged in the SCN that the noticees had failed to make public
announcements as prescribed under Regulation 11(2) read with Regulation 14 of
the SAST Regulations on 3 occasions.
13. Noticees have submitted that the promoters bought the said shares under
compulsion. However, the noticees did not produce any proof/evidence for the
same. As per the requirement of Regulation 11(2) read with14(1) of the SAST
Regulations, the noticees were required to make the public announcement within
four working days of the acquisition on each occasion. Noticees have further
submitted that the alleged violations took place without any intention to
consolidate public holding.
14. Regulation 11(2) of the SAST Regulations stipulates that no acquirer who
(together with PACs) is holding 55% or more shares of the target company shall
not acquire additional share without making a public announcement to acquire
shares through open offer. The acquisition of 100 shares on August 4, 2004 and
1900 shares on February 16, 2006 are governed by Regulation 11 (2) as it stood
prior to its amendment with effect from May 26, 2006 and the acquisition made
on March 31, 2007 is governed by the amended provision (w.e.f. May 26, 2006).
The text of the said provisions is reproduced below:
" Regulation 11(2)- prior to amendment
Consolidation of holdings
11 (2) An acquirer, who together with persons acting in concert with him has acquired, in
accordance with the provisions of law, fifty five per cent (55%) or more but less than
seventy five per cent (75%) of the shares or voting rights in a target company, may
acquire either by himself or through persons acting in concert with him any additional
share or voting right, only if he makes a public announcement to acquire shares or voting
rights in accordance with these regulations.
Regulation 11 (2)- post amendment
Consolidation of holdings
11 (2) No acquirer, who together with persons acting in concert with him holds, fifty-five
per cent (55%) or more but less than seventy-five per cent (75%) of the shares or voting
rights in a target company. shall acquire either by himself or through persons acting in
concert with him any additional shares or voting rights therein, unless he makes a public
announcement to acquire shares in accordance with these Regulations.
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Timing of the public announcement of offer.
14. (1) The public announcement referred to in regulation 10 or regulation 11 shall be
made by the merchant banker not later than four working days of entering into an
agreement for acquisition of shares or voting rights or deciding to acquire shares or
voting rights exceeding the respective percentage specified therein:"
15. In this case, it becomes necessary to quote the order of the Hon'ble Supreme
Court in the matter of Swedish Match Ab vs. SEBI, 2004 (11) SCC 641 wherein it
was held as follows:
"Public announcement of offer is one of the modes of protecting the interests of
the shareholdersRegulation 11 does not brook any other interpretation Except in a
situation which would bring the case within one or the other 'exception clause', the
requirement of complying with the mandatory requirements to make public
announcement cannot be dispensed with."
16. Therefore, in the light of above, it is concluded that all the noticees had failed to
comply with the provisions of Regulation 11(2) read with Regulation 14 of the
SAST Regulations. The text of the said provisions is already reproduced in para
14.
17. The aforesaid failure to make public announcements on 3 occasions makes all
the noticees liable for penalty under Section 15H(ii) of the SEBI Act which is
reproduced below:
"15H. If any person, who is required under this Act or any rules or regulations made
thereunder, fails to,-
(ii) make a public announcement to acquire shares at a minimum price; or
he shall be liable to a penalty of twenty-five crore rupees or three times the amount of
profits made out of such failure, whichever is higher."
18. 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;
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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.
19. 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 noticees or loss caused to the investors as a result of the failure on the part
of the noticees to make the public announcements are not available on record.
Further, it may also be added that it is difficult to quantify the unfair advantage
made by the noticees or the loss caused to the investors in a default of this
nature. However, it is also noted that there have been repetitive defaults of the
same nature by the noticees.
20. 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.
21. Having considered the facts and circumstances of the case, submissions made
by the noticee, the repetitive nature of default by the noticees and after taking
into account the factors under section 15J of the SEBI Act, 1992, I find that a
penalty `50,00,000 [Rupees Fifty Lakhs Only] under Section 15H(ii) of the SEBI
Act on all the noticees would commensurate with the failure on the part of the
noticees to make public announcements.
ORDER
22. 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
Adjudicating Officer) Rules, 1995, I hereby, impose a consolidated penalty of
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`50,00,000 [Rupees Fifty Lakhs Only] on all the noticees viz Shri. Bhanwarlal H
Ranka, Shri. Pradeep B Ranka, Ms. Kusum B Ranka, Ms. Sangeetha P Ranka,
Ms. Anjana B Ranka, Shri. Arun B Ranka , Ms. Rachana A Ranka and Shri.
Kantilal G Bafna in terms of the provisions of Section 15H(ii) of the Securities and
Exchange Board of India Act,1992 for the failure to comply with the provisions of
Regulation 11(2) read with Regulation 14 of the Securities and Exchange Board
of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. In
the facts and circumstances of the case, I am of the view that the said penalty is
commensurate with the repetitive failure on the part of the noticees to make the
public announcements. The Noticees shall be jointly and severally liable to pay
the said monetary penalty.
23. 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-DCR, Securities and Exchange Board of India, Plot No.
C4-A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051.
24. 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 the noticees viz. Shri.
Bhanwarlal H Ranka, Shri. Pradeep B Ranka, Ms. Kusum B Ranka, Ms.
Sangeetha P Ranka, Ms. Anjana B Ranka, Shri. Arun B Ranka , Ms. Rachana A
Ranka and Shri. Kantilal G Bafna and also to Securities and Exchange Board of
India, Mumbai.
Place: Mumbai D. RAVI KUMAR
Date: September 17, 2014 CHIEF GENERAL MANAGER &
ADJUDICATING OFFICER
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