"Ignorance of law cannot be an excuse": SEBI fines Premier Polyfilm for related-party transactions

The SEBI order said that, being a listed entity since 1994, the company is reasonably expected to understand the nuances of compliances.

Ignorance of law cannot be an excuse said the market regulator while fining Premier Polyfilm Rs 3 lakh for not taking approvals from its audit committee and shareholders for related-party transactions (RPTs).

In an order passed on December 9, Monday, the Securities and Exchange Board of India's (SEBI's) adjudicating officer Asha Shetty wrote, "as a listed entity, Noticee did not conduct as per required prudence in carrying out such RPTs and therefore, violated the provisions of LODR (Listing Obligations and Disclosure Requirements)".

The company had entered into RPTs s between April 1, 2022, to March 31, 2023 and April 01, 2023 to May 21, 2023 without taking prior approval its of Audit Committee.

The company submitted that it believed that the said entities were not related parties, since the entities did not fall under the ambit of “related parties” as per the definition prescribed in the Companies Act, 2013. The company added that it obtained the necessary approval after its statutory auditor pointed out the error.

To this, the SEBI order said that the company cannot cite ignorance of law as an excuse.

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The order said, "the Noticee (Premier Polyfilm) being a listed company since 1994 is reasonably expected to understand the nuances of compliances. Being a listed company for two decades, Noticee cannot plea ignorance of law. I note that it is a cardinal principle of law that, ‘Ignorantia juris non excusat'."

The company also entered into an RPT, the value of which exceeded 10 percent of its turnover, in FY23 but sought shareholder approval for this transaction only in September 2023 with retrospective effect.

To this too, the company submitted that it was not aware that RMG Polyvinyl is a related party.

Again the SEBI order said that the company, being a compliant listed company so far, is not expected to feign ignorance of law.

The company was found to have made wrong submissions in halfyearly statements of RPTs submitted to the Exchange in FY 2022-23 with respect to the value of RPTs entered with RMG Polyvinyl. The company submitted that it was under the belief that RMG Polyvinyl was not a related party and therefore did not make the requisite disclosure in the half yearly statements of RPTs submitted to the exchange.