Analysis of SAT Judgement in Corporate Strategic Allianz Ltd. vs. SEBI

By not furnishing full disclosures and in fact allowing false information to creep in the disclosures misled the investors as on the strength of such disclosures in prospectus, the investors take informed decision to invest and for such inaccuracy and lapses, responsible people and intermediaries be penalise accordingly.

It was urged that whereas the Company and its Directors were penalized a sum of Rs. 1,00,000/- each a similar penalty should have been imposed upon the appellant instead of penalizing it to the tune of Rs. 8,00,000/-. The learned counsel submitted that the imposition of penalty is thus discriminatory. In the first flush, the argument appears to be attractive but, on a closer scrutiny, we find that the said submission cannot be accepted. Making accurate disclosure is the cornerstone of the IPO process. No lapse of accuracy could be tolerated in this regard in as much as it is on the strength of the disclosures made in the prospectus that the investors take a decision to invest. The prospectus requires that full and fair disclosure of the state of affairs of the Company should be disclosed and that the Merchant Banker is required to conduct due diligence in respect of the disclosures. A Merchant Banker is appointed for the purpose of managing the issue of an IPO of a Company and, therefore, plays a fiduciary role by coordinating the activities of the Company, the Regulatory Bodies, and the Investors. The Merchant Banker is required to present the Company’s information to the investors in a fair, concise and unambiguous form. By not furnishing full disclosures and in fact allowing false information to creep in the disclosures has misled the investors. Thus, we are of the opinion that the appellant did not exercise due diligence and did not disclose fairly in the offer document. We are, thus, of the opinion that the imposition of penalty which could extend up to Rs. 1 crore under Section 15HB imposed by the Adjudicating Officer in the given facts is just and reasonable. In the light of the aforesaid, we do not find any error in the impugned order. The appeal fails and is dismissed. In the circumstances of the case, parties shall bear their own costs.

Judgement link : http://sat.gov.in/english/pdf/E2019_JO2017224.PDF

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