The Securities Appellate Tribunal has set aside the over Rs 1 crore penalty imposed by Sebi on Apollo Tyres with respect to buyback of shares and has directed the regulator to pass a fresh order.
The tribunal's ruling comes after taking into consideration the appeal filed by Apollo Tyres as well as miscellaneous application submitted by eight family members of late Harshad Mehta, who was involved in a big stock market scam. The application sought permission to intervene in the appeal.
A total of Rs 1.03 crore fine was slapped on Apollo Tyres in July 2014 by Sebi for violating norms pertaining to buyback of shares.
While restoring the matter back to Sebi's Adjudicating Officer (AO) for a fresh order, the tribunal said imposing of Rs 1 crore without mentioning the particular violation is "not justified".
It was alleged that shares of Apollo Tyres were bought back by the company and its promoters in contravention of the relevant section of the Companies Act and Sebi regulations.
The violations were alleged to have been committed by the company in 2003.
"We set aside the impugned order dated July 9, 2014 and restore the matter to the file of AO for fresh decision on merits and in accordance with law," SAT said in its order issued on December 30.
According to the tribunal, the overall penalty amount is in excess of the limit prescribed under Section 15HB of the Sebi Act.
"Without recording a finding as to which other regulation was applicable in the present case, the AO is not justified in holding that the appellant has violated the buyback regulations and impose penalty of Rs 1 crore," it added.
SAT noted that regulations 5A and 19(7) are the only two which are identified to have been violated for which separate penalty has been imposed.
Hence, AO could not have imposed additional penalty of Rs 1 crore by merely recording that Apollo Tyres has violated the buy back regulations, it added.
All the norms pertain to buy back of shares of listed companies.
"... without going into the merits of the case, including the merits on the issue relating to imposition of penalty for the alleged violation of regulation 5A & regulation 19(7), we set aside the impugned order dated July 09, 2014 and restore the matter to the file of AO for fresh decision on merits and in accordance with law," SAT said.
Before passing the final order, the tribunal said the AO should consider the question as to whether the applicants from whom the shares were brought back should be heard in the matter.
If found necessary, give an opportunity of hearing to the applicants before passing the final order, it added.
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