MR. GIRIRAJ KISHORE AGARWAL, GOLDEN STEEL INDUSTRIES PVT. LTD. (FORMERLY KNOWN AS SHREEJI HERBAL LTD.) AND HANDFUL INVESTRADE PRIVATE LIMITED Vs. SECURITIES AND EXCHANGE BOARD OF INDIA

JUDGEMENT

(1.) THE present appeal is preferred by three appellants namely, Mr. Giriraj Kishor Agarwal; (Appellant No. 1), Golden Steel Industries Pvt. Ltd. (formerly known as Shreeji Herbal Ltd.); (Appellant No. 2), Handful Investrade Private Limited; (Appellant No. 3) against the impugned order dated February 4, 2013 passed by the respondent imposing penalty of Rs. 12,57,500 on each of the appellants under section 15H(ii) of Securities and Exchange Board of India Act, 1992 for violation of the provisions of regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (Takeover Regulations). Briefly stated the facts of the case are that the respondent conducted investigation into certain dealings in the scrip of M/s. Axon InfoTech Ltd. (AIL/Target Company) for the period between March 17, 2006 to September 19, 2006. During the investigation it was revealed that some eight entities acting in concert with each other had acquired 32.02% shares/voting rights of the Target Company on April 5, 2006 without making a public announcement as required in terms of regulation 10 of the Takeover Regulations, 1997. Said eight entities are as under:

(2.) THE alleged violation by the above said eight entities was that they crossed the threshold limit of 15% on April 5, 2006 in acquiring shareholding/voting rights of AIL/Target Company without making a public announcement thereby attracting a penalty under section 15H(ii) of the SEBI Act, 1992. Accordingly, an Adjudicating Officer (AO) was appointed by the respondent under section 15I of the SEBI Act read with rule 3 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 to enquire into and adjudge under section 15H(ii) of the SEBI Act, the alleged violations of the Takeover Regulation, 1997 by the appellants. The AO issued a show cause notice dated 5, 2010 (SCN) to the appellants to show cause as to why appropriate action should not be taken against them as per law.

(3.) LEARNED counsel for the appellants, Shri. Vinay Chauhan, has strenuously argued before us that the element of a "common objective" as enshrined under regulation 2(1)(e) of the Takeover Regulations, 1997 which defines the concept of "persons acting in concert" (PAC), is a prerequisite to bringing certain persons under the definition of "PAC". The factum of acquisition of shares in question on April 3rd and 4th, 2006 is not denied by the appellants; the only submission is that mere acquisition of such shares would not prove a "common objective". Therefore, the provisions of section 10 are not attracted as the appellants have acted individually in the matter of acquisition of shares in question which taken together would constitute 33.02%, but not individually.