sebi:PB/AO-113/2010
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Facts / Headnote
Violation of regulation 54(5) of SEBI (Depositories and Participants) Regulations, 1996 established; monetary penalty imposed on the Noticee.
Provisions invoked
- s. 15A
- s. 19
- s. 12
- s. 19D
- s. 19H
- s. 100
Regulations
- Reg. 199
- Reg. 54(5)
- Reg. 54
Parties
- Sharp Industries Limited (SIL)
Holding
The Noticee, Sharp Industries Limited, violated regulation 54(5) of the DP Regulations by failing to confirm dematerialization of securities within 15 days of receipt of the certificate of security from the participant, and is liable for penalty under section 19D of the Depositories Act, 1996. A monetary penalty of Rs. 8,00,000 was imposed on the Noticee.
Full text
Page 2 of 24 The aforesaid delay is alleged to be in violation of regulation 54 (5) of SEBI (Depositories and Participants) Regulations 1996, (hereinafter referred as "DP Regulations") and liable for penalty under section 19D of the Depositories Act, 1996 (hereinafter referred to as the “Depositories Act”).
Page 3 of 24 steps taken to redress grievances of the investors. The outcome of the replies are as follows; i. Company had proposed a scheme of compromise and arrangement under section 100, 391 & 392 of the Companies Act 1956. The Hon’ble High Court of Judicature at Bomaby vide its certified order dated February 06, 2006 has approved the said scheme. As per the term of the order equity capital of the company shall be written-down by 95% of its existing paid-up equity capital of the company. Accordingly company has issued new share certificates to that effect to its existing equity shareholders holding shares in physical form. However effect of the scheme is yet to be given for the shares dematerialization form. When approached to NSDL/CDSL, we were informed that first in principal approval of the stock exchange would be required to give effect to the corporate action. ii. Company had filed the necessary papers with the Bombay Stock Exchange (BSE) and have been consistently following up for the listing approval for reduction of capital as well as for listing of additional shares allotted under the scheme. On visiting BSE personally, company’s Chairman and Managing Director were advised to submit No Objection Certificate (NOC) from Securities and Exchange Board of India (SEBI). iii. SEBI had issued notice for payment of penalty imposed by Adjudication order no. ADJ/12/-15/2005 AP dated January 31, 2005 under rule 6 of SEBI (procedure for Holding Inquiry by Adjudicating Officer)
Page 4 of 24 further notice for initiation of prosecution proceedings for delay in payment of penalty amount and payment of interest on July 31, 2008 under reference no. IVD/IDI/BM/MB/SIL/133686/08. Company had filed the consent application on August 04, 2008, against the said prosecution proceedings. iv. Unless SEBI grants NOC, BSE cannot grant listing approval to company, subsequent to which NSDL/CDSL would not take corporate action of reduction of the existing demat shares, which would mean that shareholders would continued holding their original quantity. v. Company cannot confirm the new share certificates under same INE number as it would be difficult to separate the old and new shares once the listing approval is received and effect of the scheme is to be given in the demat category. vi. Company in the present context would not be able to confirm the demat request’s received by it unless effect of the scheme is given by NSDL/CDSL, which would follow the in principle approval of the stock exchange. vii. We assure you that as soon as the BSE grants in principle approval and NSDL/CDSL give effect to the corporate action for the scheme and immediately thereafter we would clear the pending demat request.
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Source: SecMarx — sebi:PB/AO-113/2010. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.