SEBI Slaps Rs2 Lakh Penalty on 9 Entities for Non-disclosure in Akshar Spintex Case

Moneylife Digital Team 02 September 2024

Market regulator Securities and Exchange Board of India (SEBI) has slapped a penalty of Rs2 Lakh on a group of nine entities associated with Akshar Spintex Ltd for failing to adhere to disclosure norms. The penalty is a result of their non-compliance with Regulation 29(2) and 29(3) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SEBI SAST Regulations).

In an order, Amar Navlani, adjudicating officer, (AO), says "I cannot overlook the fact that the provisions of SEBI (SAST) Regulations, 2011 were mandatory in this case, and the noticees failed to comply with them, as established in the preceding discussion. SEBI is duty-bound to enforce compliance with these regulations. Therefore, I believe that the violation by the noticees must be addressed appropriately."

The investigation period in question spans from 3 October 2022 to 13 January 2023. SEBI’s probe revealed that Harikrushna Shamjibhai Chauhan, Rekhaben Harikrushna bhai Chauhan, Amit Vallabhbhai Gadhiya, Harikrishna Shamjibhai Chauhan (HUF), Narmadaben Shamjibhai Chauhan, Nayan Vallabhbhai Gadhiya, Kantaben Vallabhbhai Gadhiya, Pooja Amit Gadhiya, and White Cott Fabrics, collectively referred to as the 'Noticees', failed to file necessary disclosures despite a significant change in their shareholding.

SEBI observed that the combined shareholding of these individuals and entities in Akshar Spintex decreased from 50.62% to 43.75% during the investigation period. This reduction of 6.87% triggered mandatory disclosure requirements under SEBI (SAST) Regulations, as such a change exceeds the 2% threshold stipulated by the regulations

According to Regulation 29(2) and 29(3) of SEBI SAST Regulations, any person or entity holding 5% or more of the shares in a company must disclose any change exceeding 2% of the total shareholding or voting rights. This disclosure should be made within two working days of the change. The noticees were required to file these disclosures on 1 December 2022 and 8 December 2022, for transactions that met the disclosure threshold.

SEBI AO, Mr Navlani revealed that the required disclosures were not filed with the stock exchanges or the company’s registered office, violating SEBI regulations. Despite submissions from the noticees arguing that the violations were unintentional and technical in nature, SEBI concluded that the failure to comply with the disclosure norms was a significant lapse.

The noticees, being part of the promoter group, were obligated to make these disclosures directly and not through automated systems or other disclosure mechanisms.

In response to these findings, SEBI has imposed a total penalty of Rs2 lakh. The noticees are jointly and severally liable for paying this penalty.

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