Deccan Chronicle Holdings Ltd. Vs Securities and Exchange Board of India (Securities Appellate Tribunal, Mumbai)
Summary: The Securities Appellate Tribunal, Mumbai considered three appeals filed by four noticees against a common adjudication order imposing penalties for alleged violations of the SEBI Act and various securities regulations. Deccan Chronicle Holdings Ltd. (DCHL) was penalised Rs. 4 crore, while noticee nos. 2, 3 and 4 were each penalised Rs. 1.30 crore. The proceedings arose from allegations concerning understatement of outstanding loans and interest liabilities, buy-back of shares without adequate free reserves, transactions relating to the “Deccan Chronicle” and “Andhra Bhoomi” brands, and failure to disclose encumbrances over promoter shareholdings.
In DCHL’s case, the Tribunal held that proceedings initiated by the Adjudicating Officer after the moratorium and approval of the resolution plan could not be sustained. Referring to Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta and the binding effect of an approved resolution plan under Section 31 of the IBC, the Tribunal held that no penalty could be imposed upon the corporate debtor after approval of the resolution plan where the statutory requirements were satisfied. It accordingly quashed the impugned order insofar as DCHL was concerned.
As regards noticee nos. 2, 3 and 4, however, the Tribunal affirmed the violations relating to false financials and non-disclosure of encumbrances. It rejected their substantive challenges but considered the substantial delay in initiation and disposal of proceedings as a mitigating factor. Since the AO had not quantified disproportionate gain, found no unfair advantage or investor loss, and had not established repetitive default, the Tribunal held that the penalty of Rs. 1.30 crore each was harsh and disproportionate. It reduced the penalty to Rs. 65 lakh each and partly allowed their appeals.
