SAT confirms Penalty for Non-Appointment of Company Secretary and Two Independent Directors [Read Order]

The Securities Appellate Tribunal (SAT), Mumbai upheld the penalty imposed by the Bombay Stock Exchange (BSE) for non-appointment of Company Secretary and two Independent Directors in the absence of cogent reasons.

Penalty imposed by Bombay Stock Exchange (BSE) for non-compliance of various provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 cannot be waived or reduced other than in exceptional cases like calamity, seizure of books/computers by regulatory/statutory authorities, the compliances not approved by the Board, directions issued by the Court/regulator which prevented from making the requisite disclosure and accidental damage.

The ruling was made by the Coram comprising of Presiding Officer Justice Tarun Agarwala and Member  Dr. C.K.G. Nair on an application filed by Advance Lifestyles Ltd.

The Appellant is a public listed company and has more than 6800 shareholders. Under the Listing Regulations, the appellant was required to comply with various provisions and upon failure, penalties could be imposed for non-compliance. In this regard, SEBI issued a circular dated May 3, 2018, known as “Standard Operating Procedure” which streamlined the process and adopted a uniform approach in the matter of levy of fines for non-compliance of certain provisions of the Listing Regulations. The said circular also provided discretion to the stock exchange to deviate from the circular dated May 3, 2018, under exceptional circumstances only after recording reasons in writing. Thus, flexibility and discretion were provided to the stock exchange for levying penalties for noncompliance with the Listing Regulations. The present appeal has been filed against the order of Bombay Stock Exchange Ltd.dated August 19, 2019, and October 7, 2019, whereby a total penalty of Rs. 20,40,000/- has been imposed for non-compliance with various provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Securities Appellate Tribunal (SAT), therefore, finds that there no justification or any reason has been given as to why a Company Secretary and the two independent directors could not be appointed. In the absence of any cogent reasons, we do not find any justification to reduce the quantum of penalty.