SAT reduces Sebi's penalty on Jindal Cotex to Rs 25 lakh in GDR issuance case

"The company is a running concern. Penalising the firm with such a heavy penalty is in fact penalising the shareholders, which is not justifiable especially for a running company," the appellate tribunal said SAT's order dated February 23. (Representative Image)

The Securities Appellate Tribunal has slashed the penalty imposed by Sebi on Jindal Cotex Ltd (JCL) to Rs 25 lakh from Rs 10.3 crore in a case related to manipulation in the issuance of global depository receipts.

Also, the appellate tribunal reduced the fine on JCL's Managing Director Sandeep Jindal to Rs 10 lakh from Rs 20 lakh.

However, it affirmed the penalty imposed on Rajinder Jindal and Yash Paul Jindal who was Whole Time Director and Chairman of JCL, respectively, saying the fines were neither arbitrary nor excessive.

"In our opinion, the penalty imposed is "excessive" and disproportionate to the violation and is also discriminatory.

"The company is a running concern. Penalising the firm with such a heavy penalty is in fact penalising the shareholders, which is not justifiable especially for a running company," the appellate tribunal said in its order dated February 23.

The ruling came after JCL, Sandeep Jindal, Rajinder Jindal and Yash Paul Jindal challenged the order passed by the regulator in January 2020.

Sebi's Adjudicating Officer (AO) had imposed a penalty of Rs 10.30 crore on JCL, Rs 20 lakh on Sandeep Jindal and Rs 10 lakh each on Rajinder Jindal and Yash Paul Jindal in a matter related to manipulation in the issuance of Global Depository Receipts (GDRs).

The "money raised through GDRs has been received by the JCL and has not been misappropriated. The same has been utilised for the purpose for which the GDR was issued which fact has not been disputed. Thus, it is not a case of defalcation of the funds," the appellate tribunal said.

According to the order, a penalty has also been imposed on the firm for violating the section 23E of the Securities Contracts (Regulations) Act for non-disclosure under the listing agreement. The imposition of penalty is wholly erroneous and is not applicable, it added.

Affirming the order of the AO for the violations committed by JCL, it said, "we reduce the penalty against the company to Rs 25 lakh, while the fine against Sandeep Jindal is reduced to Rs 10 lakh and penalties against Rajinder Jindal and Yash Paul Jindal is affirmed, the appellate tribunal said.