Summary
SEBI's Whole Time Member penalised the former Company Secretary of Deccan Chronicle Holdings Rs. 10 lakhs for signing the public announcement of a Rs. 270 crore buyback made without adequate free reserves; the Securities Appellate Tribunal set the penalty aside, holding that his duty was only to authenticate Board-approved documents and that a compliance officer's role under Regulation 19(3) of the Buyback Regulations, 1998 was limited to redressing investor grievances. The Supreme Court allowed SEBI's appeal: Regulation 19(3) requires the compliance officer both to ensure compliance with the buyback regulations and to redress grievances, so the Tribunal's reading was a patent error; the matter was remitted for fresh consideration within six months with all contentions left open.
Issues
- Whether the role of a compliance officer nominated under Regulation 19(3) of the SEBI (Buyback of Securities) Regulations, 1998 is confined to redressal of investor grievances, so that a Company Secretary who signed a buyback public announcement bears no responsibility for regulatory compliance.
Provisions considered
- Regulation 19(3), Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998The company must nominate a compliance officer and investor service centre for two purposes, compliance with the buyback regulations and redressal of investor grievances; the Tribunal relied only on the latter limb and missed the express requirement to ensure compliance. (¶¶ 7, 8, 11)
- Sections 15HA, 15Z and 12A(a) to (c) of the SEBI Act; Sections 68 and 77A of the Companies Act, 1956, Securities and Exchange Board of India Act, 1992 and Companies Act, 1956The penalty was imposed for violation of the buyback provisions and fraudulent and unfair trade practice regulations through authentication of a non-compliant buyback offer; whether the Company Secretary's conduct attracts liability is to be decided afresh by the Tribunal on the correct interpretation of Regulation 19(3). (¶¶ 2, 3, 5, 6, 11, 12)
Held
- Since the Tribunal's interpretation of Regulation 19(3) is contrary to its plain terms, its decision absolving the respondent on the footing that compliance was solely the Board's responsibility cannot stand; the proceedings are remitted for consideration of the facts afresh, with the parties' rights and contentions, including reliance on the Tribunal's decisions in Bhuwaneshwar Mishra and Brooks Laboratories, kept open. (¶¶ 11, 12, 13)
Result
Appeal allowed; Securities Appellate Tribunal judgment dated 01.11.2022 set aside and Appeal No. 283 of 2022 restored to the Tribunal for decision afresh, to be endeavoured within six months of receipt of the certified copy; pending applications disposed of.