SAT reduces penalty from Rs. 30 lakhs to Rs. 3 lakhs as non-disclosure by the appellant didn’t cause any loss to investors

Case Details: Aanchal Jindal v. Securities and Exchange Board of India - [2021] 132 taxmann.com 122 (SAT - Mumbai)

Judiciary and Counsel Details

• • Justice Tarun Agarwala, Presiding Officer
  • Vikas Bengani, Adv. for the Appellant. 
  • Vyom Shah, Ravishekhar Pandey and Ms. Prerna Sharma, Advs. for the Respondent.

Facts of the Case

Pursuant to an investigation by SEBI, it was found that appellants were promoters of a company. A show-cause notice was issued alleging that the appellant as a promoter failed to make disclosures of the changes in the shareholdings in the scrip of the company in accordance with the disclosure requirements under the PIT Regulations and SAST Regulations.

It was noted that the appellant failed to reply to SCN. Since no reply was filed, the AO imposed a penalty of Rs. 10,50,000/-, Rs. 9,00,000/-, Rs. 11,50,000/-, Rs. 12,00,000/- against appellants. On the other hand, appellants contended that they were under a stress concerning the divorce proceedings of Aanchal Jindal (one of the appellants) and other criminal cases & therefore could not file any reply.

However, Appellants stated that some of the transactions were made to the broker to transfer the scrip as security towards margin money and therefore there was no change in the beneficial ownership of the scrip.

It was also mentioned by appellants that inter-se transactions between the promoters were made and therefore the question of any loss to the investors does not arise as the shareholding of the promoter and promoter group remained the same. They prescribed that the quantum of penalty imposed on a technical violation was harsh, arbitrary, and disproportionate.

SEBI specifies that the contention by appellants that some of the transactions were only inter-se transfers between the promoters and therefore such transactions could not be taken into consideration is erroneous in as much as all the transactions whether from one promoter to another promoter was still required to be disclosed under the aforesaid Regulations.

SAT Held

The Tribunal believes that the penalty imposed is excessive and considering the factors taken into section 15J especially the finding that there has been no disproportionate gain made by the appellants while undertaking the transactions in the shares of the Company nor such transactions has caused loss to any of the investors.

Therefore, while affirming the findings of violation insofar as it related to non-disclosure, a penalty of Rs. 30 lac was to be reduced to Rs. 3 lac each on the appellants for violations of sections 13(4A) and 13(5) of the PIT Regulations and 29(2) and 29(3) of the SAST Regulations. The said amount shall be paid by each of the appellants within four weeks.