SAT: Failure to make disclosure under Insider Trading norms attracts penalty, irrespective of mitigating factors

Irrespective of mitigating factors such as disproportionate gain or unfair advantage derived or any loss caused to investors, failure to make timely disclosures under regulation 13 SEBI (Prevention of Insider Trading) Regulations, 1992 would attract penalty

FACTS:

a)The appellant-company had become part of the promoter group of 'INCL' and on account of acquiring control of 'INCL' was obliged to file disclosures under regulation 13(2A) , read with regulation 13(6) of the SEBI (Prevention of Insider Trading) Regulations, 1992.

b)The appellant-company was imposed with penalty for not making disclosures within stipulated time period under regulation 13(2A) of the SEBI (Prevention of Insider Trading) Regulations, 1992.

c)On appeal to the Securities Appellate Tribunal

On appeal, The Securities Appellate Tribunal held as under:

1)An obligation to make disclosure under said regulation is not restricted to cases where there is disproportionate gain or unfair advantage and where loss is caused to investors as a result of failure to make disclosures.

2)Since Explanation to regulation 13 of the Securities and Exchange Board of India (Prevention of Insider Trading) Regulations, 1992 does not deal with disclosure requirements, argument of appellant-company that there was confusion regarding disclosure requirements contemplated in said regulations as compared to Takeover Regulations did not merit consideration.

3)Therefore, penalty imposed after consideration of mitigating factors could not be said to be arbitrary or unreasonably excessive and, thus, order passed by Assessing Officer could not be interfered with. – IndiaNivesh Capitals Ltd. vs. Securities and Exchange Board of India [2014] 47 taxmann.com 339 (SAT - Mumbai)