The adjudicating officer of the Sebi in its order dated February 20, 2007 has imposed a penality of Rs 1 crore on them collectively for violating regulatory norms.
BFSL has challenged the Sebi order before the SAT. The appellants as promoters of BFSL, a non-banking finance company, held 98.73% of the equity shares of the company; the remaining shares were held by only 26 public shareholders. Since the acquisition of the shares of the promoters by DLF would trigger the Sebi (substantial acquisition of shares and takeovers) regulations, 1997 and a public offer for acquisition of shares would be necessary, DLF applied to Sebi in October 2004 seeking exemption from making the public offer and observing other connected procedures and formalities.
Since there were only 26 public shareholders and DLF was willing to make an offer to all of them by issuing individual registered acknowledgement due letters, on June 29, 2005 Sebi agreed to grant the exemption applied for by DLF.
BFSL argued that they were not engaged in organising or assisting in organizing any unrecognized stocks exchange nor were they members of any similar stock exchange and therefore they did not come under the purviews of section 19 of SCRA. Appellants pointed out that they had not, at any stage, made any secret of their intention to purchase all the shares of BFSL through a recognised stock exchange, SAT order said.
After hearing both BFSL and Sebi, SAT said that the appellants can not be held to have violated section 19 of SCRA, which is the charge against them. Accordingly, we allow the appeal and set aside the impugned order of the board.