SAT upholds Sebi order against Sicom

Securities Appellate Tribunal (SAT) today upheld Sebi's order against public financial institution Sicom in a case related to non-compliance with takeover norms.
Market regulator Sebi, in May this year, had imposed a penalty of Rs 5 lakh on Sicom Ltd for not disclosing details with regard to acquisition of Raj Oil Mills shares.
Subsequently, Sicom had filed an appeal with SAT against the regulator's ruling in the case and submitted that when a public financial institution acquires shares of a listed firm on invocation of pledge, it is exempted from making any disclosures.
Setting aside Sicom's submissions, SAT in an order today said that "admittedly the appellants (Sicom) have failed to make disclosures even after acquiring shares on invocation of pledge and hence, appellants cannot escape penal liability".

According to SAT norms require 'any person' holding shares in excess of the limits prescribed therein to make disclosures, and admittedly Sicom had acquired shares in excess of the limits prescribed.
SAT held that the expression 'any person' was "wide enough to cover acquisition of shares by scheduled commercial banks/public financial institution on invocation of pledge" and therefore Sicom had violated the disclosure norms.

In December 2010, Sicom had provided financial assistance of Rs 15 crore to Raj Oil Mills.
In turn, the Raj Oil Mills promoter/director had pledged 55.50 lakh equity shares of Raj Oil Mills as security towards the financial facility granted by Sicom.

As Raj Oil Mills failed to repay the amounts due, Sicom on September 28, 2011, invoked 23 lakh pledged shares and invoked balance 32.50 lakh shares on February 24, 2012.
In the show cause notice Sebi had alleged that on acquisition of 23 lakh shares, shareholding of Sicom in Raj Oil Mills stood at 6.39 per cent of the total shares issued by the company and that acquisition being in excess of 5 per cent required the entity to make disclosures.
Similarly, on purchase of 32.50 lakh shares, stake of Sicom stood at 15.35 per cent which again being acquisition in excess of 2 per cent by an acquirer holding shares in excess of 5 per cent, required Sicom to make disclosures.