Securities Appellate Tribunal (SAT): Justice Tarun Agarwal allowed the appeal and substituted the penalty imposed by the impugned order with a warning.
The facts of the case are such that the appellant in the instant case is National Highway Authority of India i.e. NHAI an autonomous body set up by the Parliament under ‘NHAI Act’. It is also listed on the Bombay Stock Exchange and National Stock Exchange and is subject to the provisions of the (Listing Obligations and Disclosure Requirements) Regulations, 2015 i.e. LODR Regulations, 2015. Regulation 52(1) of the LODR Regulations, 2015 mandates filing of the unaudited half-yearly financial results within 45 days from the end of the half financial year. An extension application under Regulation 102 of LODR Regulation 2015 was filed on two occasions with a procedural fee of Rs 1 lakh pursuant to which SEBI asked for certain clarification which were given therewith yet the request was rejected. The appellants failing which, as there was a delay in filing the half-yearly financial results for the period ending 30-09- 2018 and 31-03-2019, has been slapped with a penalty of Rs 7 lakh by SEBI Board vide order dated 26-05-2020. Being aggrieved by the said order present appeal has been filed.
Counsel for the petitioners Rajesh Ranjan and Neeraj Matta submitted that the delay was a procedural delay which was beyond the control of the officers of NHAI as the NHAI body constituted under the NHAI Act mandates the composition to be from among the high level secretaries from the Union Ministries which makes it difficult for regular meetings to be convened due to lack of adequate quorum and it is also mandated under Regulation 4 of NHAI (Transaction of Business) Regulations, 1997 that no meeting of the Board would be legal or valid unless it was approved by two-third of the members failing which even after the financial results being ready on time it could not been signed and submitted/ furnished. It was further submitted that in view of Section 27 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’) no proceedings could have been initiated for imposing penalty under Section 15A of the SEBI Act unless and until the Officers in default were identified and prosecuted under Section 27 of the Act. It was also submitted that the extension application was rejected without giving proper reasons for doing so and hence is against principles of natural justice and Section 15 J was not taken into consideration before imposing penalty.
Counsel for the respondents Abhiraj Arora and Rashi Dalmia opposed the submissions by petitioners stating that the penalty has been imposed as per Regulation 52 of the LODR Regulations and there being no provision for relaxation, relaxation has not been granted and penalty imposed keeping in mind that such callousness has been shown by NHAI on previous 7 instances and thereby 7 Lakh has been imposed.
Regulation 52(1) “Financial Results.
52(1) The listed entity shall prepare and submit un-audited or audited financial results on a half yearly basis in the format as specified by the Board within forty five days from the end of the half year to the recognised stock exchange(s).”
Regulation 102 “Power to relax strict enforcement of the regulations. 102.The Board may in the interest of investors and securities market and for the development of the securities market, relax the strict enforcement of any requirement of these regulations, if the Board is satisfied that: (a) any provision of Act(s), Rule(s), regulation(s) under which the listed entity is established or is governed by, is required to be given precedence to; or (b) the requirement may cause undue hardship to investors; or (c) the disclosure requirement is not relevant for a particular industry or class of listed entities; or (d) the requirement is technical in nature; or (e) the non-compliance is caused due to factors affecting a class of entities but being beyond the control of the entities.”
The Tribunal stated that in the instant case penalty became leviable under Section 15A (b) of the SEBI Act as the unaudited half-yearly financial results were not filed within the stipulated period. The Tribunal observed that prosecution under Section 27 of the SEBI Act can be initiated against the Company and its Directors/Officers and persons responsible for the default but penalty proceedings can be initiated under Section 15A for non-filing of the financial results without taking recourse to Sec. 27 of the Act. However, there is an exception to the rule and exemption can be granted by extending the time to comply with the provisions Regulation 102 of the LODR Regulations. It was further observed that the Appellate Authority consists of senior government functionaries who are entrusted with multifarious functions in the Union Government and hence strict compliance must be subject to consideration for the extension of time under Regulation 102 of the LODR Regulations.
The Tribunal held that imposing 7 lakh as penalty without assigning reasons as well as the reason cited by the authorities that the amount so fined is due to his default 7 times is wholly arbitrary as not filing the financial results for the financial years 2015-2016 to 2018-2019 cannot be taken into consideration as a ground for imposition as the violation was only for non-filing of the unaudited half-yearly financial results for the year ending 30-09-2018 and 31-03-2019. The delay in the filing of the returns for the earlier financial years stood exempted and condoned by the respondent themselves which cannot be taken as a mitigating circumstance for the imposition of penalty.
The Tribunal also relied on judgment titled Adjudicating Officer, SEBI v. Bhavesh Pabari, (2019) 5 SCC 90 which held that the conditions stipulated in clause (a), (b), and (c) of Section 15-J SEBI Act, 1992 are not exhaustive and, in a given case, the AO can take note of other factors which are not specified in clause (a), (b), and (c) of Section 15-J of the Act. The Adjudicating Officer also could have taken into consideration the mitigating circumstances in addition to the factors mentioned under Section 15J while considering the imposition of penalty.
The Tribunal held that the Adjudicating Officer failed to take into consideration the mitigating circumstances as a factor under Section 15-J while considering the imposition of penalty.
In view of the above, the Court allowed the appeal and found the imposition of Rs 7 lakhs as unsustainable.[National Highway Authority of India v. Securities Exchange Board of India, 2020 SCC OnLine SAT 158, decided on 27-08-2020]
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