SecureKloud Technologies Limited Vs Securities and Exchange Board of India (SAT Mumbai)
The Securities Appellate Tribunal (SAT) in Mumbai recently reduced the penalty imposed on SecureKloud Technologies Limited for violations of SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations. The penalty was reduced from Rs 25 lakhs to Rs 10 lakhs.
Background: The Adjudicating Officer (AO) of the Securities and Exchange Board of India (SEBI) had initially imposed penalties under Section 23E of the Securities Contracts Regulation Act, 1956 (SCRA) and Section 15HB of the SEBI Act, 1992. These penalties were for violations like improper approval of related-party transactions, compromised independence of Independent Directors, and failure to disclose a forensic audit.
Key Observations
- Related-Party Transactions: The SAT noted that the company had failed to take prior approval for some related-party transactions from the Audit Committee. SecureKloud acknowledged this as an inadvertent mistake, which the SAT took into account.
- Independence of Independent Directors: The SAT observed that relatives of two Independent Directors were appointed in the company’s overseas subsidiary, which was a violation of the LODR Regulations.
- Non-Disclosure of Forensic Audit: The company failed to disclose the initiation of a forensic audit, which is a material event requiring disclosure under the LODR Regulations.
The Tribunal’s Ruling: The SAT held that while the company and its functionaries had committed violations, the nature of these was not so severe as to warrant the high penalties imposed by the AO. Therefore, it reduced the penalties on various counts, including:
