SEBI imposes penalty of Rs. 1 lakh for Violation of SAST Regulations
In the matter of KBS India Limited (Target Company/KBS), markets regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs. One lakh upon Ms. Kalavati Kanakia (Noticee) for the violation of Regulation 29(2) read with 29(3) of the SAST (Substantial Acquisition of Shares and Takeover) Regulations, 2011.
Herein, SEBI pursuant to the periodic examination of DWBIS alerts observed that a non-disclosure based alert was generated by the system in the scrip of KBS, which mentioned about increase in shareholding by the Noticee in the target company from 0.16% to 5.32% shares vide transaction dated December 15, 2016.
It had been alleged that the Noticee had not made the relevant disclosures and hence violated Regulation 29(1) r/w regulation 29(3) of the SAST Regulations.
The Noticee in her reply to the Show Cause Notice stated that at the relevant time she was not aware of nor advised of the requirement to make requisite disclosure under Regulation 29(1) r/w Regulation 29(3) of the SAST Regulations within two working days of the acquisition of shares on 15.12.2016.
She communicated to SEBI that she had made the required disclosure to BSE on 04.12.2019 pursuant to SEBI emails seeking clarifications from her. The disclosure was to be made by19.12.2016. However, the disclosure was made on 04.12.2019.
It was also contended that at the most the alleged lapse may be deemed a mere technicality and may be at the most considered as a procedural lapse. The Noticee relied on the judgment of Hon'ble Bombay High Court in SEBI Vs Cabot International Capital Corporation, 2004.
The Adjudicating Officer (AO) in the present matter observed that the Noticee by virtue of off market transaction dated December 15, 2016, acquired 5.16% equity shares of the Target Company and with the aforesaid acquisition of shares by the Noticee, the shareholding of the Noticee increased from 0.16% to 5.32% in the Target Company. As a result of aforesaid acquisition consequently, the Noticee was obligated to make disclosure to BSE and the Target Company as stipulated under regulation 29(1) r/w regulation 29(3) of SAST Regulations.
Thereafter, BSE vide e-mail dated December 03, 2020 informed SEBI that, exchange was not in receipt of any disclosure from the Noticee with respect to the aforesaid acquisition under the SAST Regulations. SEBI sought clarification from the Noticee with respect to the alleged non-disclosure through various emails.
The AO stated that effective date of transaction was December 15, 2016. It is noted that the disclosure was to be made by Noticee latest by December 19, 2016 and as per confirmation/evidence provided by the Noticee, the disclosure was made on December 4, 2019 resulting in a delay of 1079 days.
It has also been found from the submissions made by the Noticee that she has admitted her failure to make the necessary disclosures under the SAST Regulations.
Hence, it was concluded that the Noticee, by not making the necessary disclosures upon increase in shareholding in the target company from 0.16% to 5.32% shares, has violated the provisions of Regulation 29(1) read with 29(3) of the SAST Regulations which warrants imposition of monetary penalties as prescribed under Section15A (b) of the SEBI Act, 1992.