Read order: SEBI ADJUDICATION ORDER [Ref. No. Order/SBM/KL/2021-22/12740-12742]

LE Staff

Mumbai, July 29, 2021: The Securities and Exchange Board of India has imposed a monetary penalty of Rs 3 lakh on actress Shilpa Shetty, her husband Raj Kundra and Viaan Industries Ltd (VIL) under section 15A(b) of the SEBI Act, for violating provisions of the SEBI (Prohibition of Insider Trading) Regulations (PIT Regulations).

Suresh Menon, the Adjudicating Officer of SEBI, observed that the penalty has to be paid jointly and severally by the three noticees within 45 days of receipt of the order.

The SEBI (Board) found that pursuant to listing of shares of VIL on the Bombay Stock Exchange, preferential allotment of 1,28,800 shares each was made to Shetty and Kundra without making disclosure in terms of the provisions of Regulation 7(2) of the PIT Regulations. 

Observing that the relevant transactions exceeded Rs. 10 lakh in value, the Board conducted an investigation into the dealings in the scrip of VIL and found violation of the provisions of the Regulation 7(2). This led to initiation of adjudication proceedings. 

Noting that VIL had made belated disclosure of the preferential allotment to BSE after a delay of more than 3 years, the AO refused to accept the plea of inadvertence. 

“The stock exchange is informed so that the investing public will come to know of the position enabling them to stick on with or exit from the company. Timely disclosures of the details of the shareholding of the persons acquiring substantial stake is of significant importance as such disclosures also enable the regulators to monitor such acquisitions,” said the Board. 

The Board reiterated that having regard to the factors listed u/s 15J of SEBI Act, any quantifiable gain or unfair advantage accrued to the Noticees or the extent of loss suffered by the investors as a result of the default by the Noticees cannot be computed. 

The records do not show any repetitive default of this nature by the Noticees, added the AO.

However, the Board refused to accept the argument that the delay was unintentional and that the Noticees has not gained from such delay and therefore penalty ought not to have been imposed. 

The Board made it clear that penal liability arises as soon as the provisions under the regulations are violated and that penal liability is neither dependent upon intentions of parties nor gains accrued from such delay. 

Therefore, opining that the acquisition of shares through the preferential allotment having value of more than Rs 10 lakh was of relevance from an investors’ perspective, the Board proceeded to impose penalty. 

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