BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. CFD/ CSL/AO/DRK-AKS/EAD3-668-669/214-215-2014]

______________________________________________________________________
UNDER SECTION 15 I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT,
1992 READ WITH RULE 5(1) OF SECURITIES AND EXCHANGE BOARD OF INDIA
(PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY
ADJUDICATING OFFICER) RULES, 1995
In respect of:
Shri Kahaan Vasa
Shri Karan Vasa
Ashray, Nandanvan Society,
Near Karnavati Club,
Sarkhej Gandhinagar Highway,
Ahmedabad 380 058
______________________________________________________________________
FACTS OF THE CASE IN BRIEF
1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI'), while
examining the offer document of Contech Software Limited (hereinafter referred
to as "CSL/ Company") observed certain non compliances by the promoters of
the company. The shares of the company were listed at BSE Ltd.
APPOINTMENT OF ADJUDICATING OFFICER
2. I was appointed as Adjudicating Officer under Section 15-I of the Securities and
Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act)
read with Rule 3 of the SEBI (Procedure of Holding Inquiry and Imposing
Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as the
Rules), Section 19 of the SEBI Act read with Regulations 44 and 45 of the SEBI
(Substantial Acquisition of Shares and Takeover) Regulations, 1997 (hereinafter
referred to as "SAST Regulations") and Regulation 35 of the SEBI (Substantial
Acquisition of Shares and Takeover) Regulations, 2011 to inquire into and
adjudge under Section 15A(b) of the SEBI Act, the violation of Regulations 3(4),
7(1), 7(1A) and 7(2) of the SAST Regulations alleged to have been committed by
Shri Kahaan Vasa and Shri Karan Vasa (hereinafter referred to as " noticees").
The said appointment was communicated vide proceedings of the Whole Time
Member appointing Adjudicating Officer dated April 26, 2013.

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SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

3. A common Show Cause Notice no. A&E/EAD-3/DRK-DS/21718/2013 dated
August 28, 2013 (hereinafter referred to as 'SCN') was served on the noticees
requiring them to show cause as to why an inquiry should not be held against the
noticees and why penalty, if any, should not be imposed on them under Section
15A(b) of the SEBI Act for the alleged violation of the provisions of Regulations
3(4), 7(1), 7(1A) and 7(2) of the SAST Regulations.
4. It was alleged in the SCN that SEBI while examining the offer document of CSL
observed that the noticees have violated Regulations 3(4), 7(1), 7(1A) and 7(2) of
the SAST Regulations. The details of the aforesaid violations are given in the
following tables:
Regulation 3(4)

Sr.
No.
1.

Regulation
3(4)

Due Date of

Actual Date of

Delay

Compliance

Compliance

(days)

13.07.2006

03.03.2007

233

Due Date of

Actual Date of

Delay

Compliance

Compliance

(days)

Regulation 7(1), 7(1A) and 7(2)

Sr.
No.

Regulation

1.

7(1)

24.06.2006

03.03.2007

251

2.

7(1A)

24.06.2006

03.03.2007

251

3.

7(2)

24.06.2006

03.03.2007

251

4.

7(1A)

07.02.2007

03.03.2007

24

5.

7(2)

07.02.2007

03.03.2007

24

5. The SCN stated that the reply shall reach within 15 days from date of receipt of
the notice, failing which it shall be presumed that the noticees have no reply to
submit and the matter shall be proceeded on the basis of material available on
record. The said SCN was sent through Speed Post Acknowledgement Due
(SPAD) and was served on the noticees. Proof of service is available on record.
6. The noticees, vide letter dated September 13, 2013 sought 30 days time to
submit reply to the SCN as they had to collect detailed information and records of
the said transactions. In response to the same, vide letter dated September 26,
2013, the noticees were granted 15 days time to file reply to the SCN.

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7. Vide letter dated October 14, 2013, the noticees submitted similarly worded
replies to the SCN and made the following submissions:
a.

We state that we have acquired the shares from our grandmother who had gifted
these shares to us which is legally permissible under the applicable laws. There
is no consideration except gift behind the transfer and acquisition of these
shares. The nature of transaction is an Inter-se transfer among the promoters
and no third party is involved. The Resultant transaction did not add any voting
rights nor it did add any shares to promoter group, all voting rights and shares,
through this group was already available to the Promoters and it continued to
remain with them. The interests of the investors are thus not put to any prejudice.
Without prejudice, all the compliances as relevant to such inter-ser transfers are
already made. The delay in compliance which is only in the nature of reporting
has not caused any prejudice to any person, authority or the investors. We further
state that considering the Scheme of the Act and the Regulations, the present
case as such would not be covered within the ambit of the Act or the Regulations
or the Rules. We thus request your good self to terminate the present
proceedings and withdraw the captioned notice.

b.

We state that considering the facts of the present case, none of the three factors
as defined in Sec. 15-J of the Act would have any application.

c.

The provisions of the SAST Regulations cannot be held to be mandatory in

nature. We state that we have already complied with the regulations though after
some delay. We have thus made substantial compliance of the Regulations. The
compliances made by us has been accepted by the SEBI/ Board without any
objection.

8. Noticees, vide common hearing notice dated August 08, 2014, were granted
personal hearing on August 27, 2014 at SEBI Bhavan, Mumbai. However, vide
letter dated August 18, 2014, Noticees sought adjournment of the said hearing
on account of non-availability of their lawyer.
9. Subsequently, vide final hearing notice dated August 26, 2014, Noticees were
granted final opportunity of hearing on September 09, 2014 at SEBI Bhavan,
Mumbai. Vide the said hearing notice, the noticees were also advised to attend
the said hearing, failing which the matter shall be proceeded based on the
material available on record.
10. Noticees, vide letter dated September 05, 2014 authorised Shri Rajan Vasa and
Shri Mital Gandhi, Vice- President, Contech BPO Services Pvt. Ltd. as their
Authorised Representatives (ARs). The ARs appeared for the hearing and made
the following submissions:
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a. There was a delay in the compliances of Takeover Regulations due to lack of

proper knowledge of the relevant regulations.
b. The ARs submitted that there was no open market transaction but the shares
were transferred pursuant to gift deeds.
c. The ARs have further submitted that the noticees did not gain anything from the
non-compliances and no investor complaints were made in this regard.

CONSIDERATION OF EVIDENCE AND FINDINGS

11. I have taken into consideration the facts and circumstances of the case, and the
material made available on record.
12. It is observed from the material made available on record, noticees had acquired
6.89% each of the shareholding of the company on June 22, 2006 and 1.88%
each on February 05, 2007. The details of the said acquisition is given below:
Name

of

the Date

Acquirer

of No.

transaction

of Shareholding of acquirer Total promoters shareholding

shares

(in %)

in %

acquired

Before

After

Pre-

Post

Acquisition

Acquisition

Acquisition

Acquisition

41.96

41.96

41.89

41.89

Kahaan Vasa

22.06.2006

3,80,168

11.05

17.94

Karan Vasa

22.06.2006

3,80,168

11.05

17.94

Kahaan Vasa

05.02.2007

1,03,454

17.94

19.82

Karan Vasa

05.02.2007

1,03,454

17.94

19.82

13. As per the requirement of Regulation 3(4) of SAST Regulations, noticees were
required to submit a report along with supporting documents to SEBI / Board
giving all details in respect of acquisitions which entitled the noticees 15% or
more voting rights of the company within 21 days of the date of acquisition.
14. Further, as per the requirements of Regulations 7(1), 7(1A) and 7(2) of SAST
Regulations, noticees were required to make disclosures with respect to the
acquisitions made by the noticees to the company as well as the stock
exchanges within two days of the acquisition of shares. The text of the said
provisions is as follows:
"3. Applicability of the regulation.

(4) In respect of acquisitions under clauses (a), (b), (e) and (i) of subregulation (1), the
acquirer shall, within 21 days of the date of acquisition, submit a report along with
supporting documents to the Board giving all details in respect of acquisitions which
(taken together with shares or voting rights, if any, held by him or by persons acting in
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concert with him) would entitle such person to exercise 15 per cent or more of the voting
rights in a company.
Explanation.For the purposes of sub-regulations (3) and (4), the relevant date in case
of securities which are convertible into shares shall be the date of conversion of such
securities.
7. Acquisition of 5 per cent and more shares or voting rights of a company.
(1) Any acquirer, who acquires shares or voting rights which (taken together with shares
or voting rights, if any, held by him) would entitle him to more than five per cent or ten
per cent or fourteen per cent or fifty four per cent or seventy four per cent shares or
voting rights in a company, in any manner whatsoever, shall disclose at every stage the
aggregate of his shareholding or voting rights in that company to the company and to the
stock exchanges where shares of the target company are listed.
(1A) Any acquirer who has acquired shares or voting rights of a company under subregulation (1) of regulation 111, or under second proviso to sub-regulation (2) of
regulation 112 shall disclose purchase or sale aggregating two per cent or more of the
share capital of the target company to the target company, and the stock exchanges
where shares of the target company are listed within two days of such purchase or sale
along with the aggregate shareholding after such acquisition or sale.
Explanation.For the purposes of sub-regulations (1) and (1A), the term acquirer shall
include a pledgee, other than a bank or a financial institution and such pledgee shall
make disclosure to the target company and the stock exchange within two days of
creation of pledge.
(2) The disclosures mentioned in sub-regulations (1) and (1A) shall be made within two
days of,
(a) the receipt of intimation of allotment of shares; or
(b) the acquisition of shares or voting rights, as the case may be."

11.(1)Noacquirerwho,togetherwithpersonsactinginconcertwithhim,hasacquired,inaccordancewiththe
provisions of law,15per cent or more but less thanfifty five per cent.(55%) of the shares or voting rights in a
company,shallacquire,eitherbyhimselforthroughorwithpersonsactinginconcertwithhim,additionalshares
or voting rights entitling him to exercise more than5% of the voting rights,in any financialyear ending on 31st
March,unlesssuchacquirermakesapublicannouncementtoacquiresharesinaccordancewiththeRegulations.

2
(2)Noacquirer,whotogetherwithpersonsactinginconcertwithhimholds,fiftyfivepercent.(55%)ormore
butlessthanseventyfivepercent.(75%)oftheofthesharesorvotingrightsinatargetcompany,shallacquire
either by himself or through persons acting in concert with him any additional shares or voting rights therein,
unlesshemakesapublicannouncementtoacquiresharesinaccordancewiththeseRegulations:
Providedthatinacasewherethetargetcompanyhadobtainedlistingofitssharesbymakinganofferofatleast
ten per cent. (10%) of issue size to the public in terms of clause (b) of subrule (2) of rule 19 of the Securities
Contracts(Regulation)Rules,1957,orintermsofanyrelaxationgrantedfromstrictenforcementofthesaidrule,
thissubregulationshallapplyasifforthewordsandfiguresseventyfivepercent.(75%),thewordsandfigures
ninetypercent.(90%)weresubstituted.

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15. In this regard, noticees have admitted that there was a delay in the compliance of
Regulations 3(4), 7(1), 7(1A) and 7(2) of the SAST Regulations due to lack
proper knowledge of the relevant regulations.
16. At this juncture, I would like to quote the order of Hon'ble Securities Appellate
Tribunal (SAT) in G. Suresh vs. SEBI dated 29.04.2014, wherein it was held that
"True and timely disclosures by an acquirer of shares in a company are an
important regulatory tool intended to serve a public purpose of disseminating this
information to the company as well as to Stock Exchange expeditiously. Such
disclosures are very important as they help investors to take an informed
decision in investing in the scrip of said company."
17. The noticees have stated that they have received the said shares from their
grandmother pursuant to a gift deed. However, they have not submitted any
documents in support of their submission. In the absence of any evidence, it is
difficult to accept noticees submission.
18. While ascertaining whether the noticees have complied with the SAST
Regulations or not, noticees submission that delay in compliance has not caused
any prejudice to any person, authority or investors is not material as the
regulation is triggered the moment there is acquisition or sale of shares
irrespective of any prejudice being caused to any person, authority or investors.
19. Hon'ble SAT in Ensen Holdings Ltd. Vs SEBI decided on 13.06.2014 has
observed as follows "...Second argument of the appellant to the effect that there
was no disproportionate gain or unfair advantage derived by the appellants or
loss caused to the investors as a result of failure on part of the appellant to make
disclosures and hence penalty ought not to have been levied is also without any
merit because obligation to make disclosure under Regulation 8(1) and 8(2) of
SAST

Regulations,

1997

is

not

restricted

to

cases

where

there

is

disproportionate gain or unfair advantage and where loss is caused to the

investors as a result of failure to make disclosures. In other words, irrespective of
disproportionate gain or unfair advantage derived or any loss caused to the
investors, obligation to make disclosures under Regulation 8(1) and 8(2) of SAST
Regulations, 1997 have to be complied with. No doubt, that these factors are
required to be taken into consideration while determining the quantum of
penalty..."

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20. Although the above observation was on failure to disclose under Regulations 8(1)
and 8(2) of SAST Regulations but in my opinion the same rational can be
extended for delay in making disclosures under Regulations 7(1) and 7(1A) of
SAST Regulations.
21. Noticees submission that provisions of the SAST Regulations cannot be held to
be mandatory in nature is not correct since a bare reading of the text of
Regulations 3(4), 7(1), 7(1A) and 7(2) of the SAST Regulations makes it clear
that the submission of report and disclosures are mandatory in nature. The same
can be understood from the use of word "shall" in the said provisions.
22. The submission made by the noticees that the compliances made by them have
been accepted by the SEBI / Board without any objection is also not correct as
the current adjudication proceedings has been initiated by SEBI for aforesaid
delay in disclosure under SAST Regulations. Noticees submission that delay in
compliance was due to lack of proper knowledge may not be accepted.
23. In view of the facts as discussed above and material made available on record, it
can be concluded that the noticees have failed to comply with the provisions of
Regulation 3(4) of the SAST Regulations, Regulations 7(1) read with 7(2) of the
SAST Regulations and Regulations 7(1A) read with 7(2) of the SAST
Regulations for the acquisition made on 22.06.2006. Further the noticees have
also failed to comply with the provisions of Regulations 7(1A) read with 7(2) of
the SAST Regulations for the acquisition made on 05.02.2007.
24. The aforesaid delay in filing the report as well as in making the disclosures
makes the noticees liable for penalty under Section 15A(b) of the SEBI Act which
is reproduced below:
" Penalty for failure to furnish information, return, etc.
15A. If any person, who is required under this Act or any rules or regulations made
thereunder,

(b) to file any return or furnish any information, books or other documents within the
time specified therefor in the regulations, fails to file return or furnish the same within
the time specified therefor in the regulations, he shall be liable to a penalty of one lakh
rupees for each day during which such failure continues or one crore rupees,
whichever is less;"

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25. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of the
Rules require that while adjudging the quantum of penalty, the adjudicating
officer shall have due regard to the following factors namely;
a. the amount of disproportionate gain or unfair advantage wherever
quantifiable, made as a result of the default;
b. the amount of loss caused to an investor or group of investors as a
result of the default;
c. the repetitive nature of the default.
26. With regard to the above factors to be considered while determining the quantum
of penalty, it is noted that the disproportionate gain or unfair advantage made by
the noticees or loss caused to the investors as a result of the delay on the part of
the noticees are not available on record. Further, it may also be added that it is
difficult to quantify the unfair advantage made by the noticees or the loss caused
to the investors in a default of this nature.
27. At this juncture, I would like to quote the judgement of the Honble Supreme
Court of India in the matter of SEBI Vs. Shri Ram Mutual Fund [2006] 68 SCL
216(SC) wherein it was held that :
..once the violation of statutory regulations is established, imposition of
penalty becomes sine qua non of violation and the intention of parties
committing such violation becomes totally irrelevant. Once the contravention
is established, then the penalty is to follow..
28. In view of the abovementioned conclusion, I hereby impose a penalty of `
3,00,000/- (Rupees Three Lakh only) jointly and severally on the noticees under
Section 15A(b) of the Securities and Exchange Board of India Act, 1992 for their
delay in submitting report under Regulation 3 (4) the SEBI (Substantial
Acquisition of Shares and Takeover) Regulations, 1997 and a penalty of `
3,00,000/- (Rupees Three Lakh only) jointly and severally on the noticees under
Section 15A(b) of the Securities and Exchange Board of India Act, 1992 for delay
in disclosing under Regulations 7 (1) read with 7 (2) of the SEBI (Substantial
Acquisition of Shares and Takeover) Regulations, 1997 for the acquisition made
on 22.06.2006 and a penalty of ` 3,00,000/- (Rupees Three Lakh only) jointly and
severally on the noticees under Section 15A(b) of the Securities and Exchange
Board of India Act, 1992 for delay in disclosing under Regulations 7 (1A) read
with 7 (2) of the SEBI (Substantial Acquisition of Shares and Takeover)
Regulations, 1997 for the acquisition made on 22.06.2006 which is appropriate in
the facts and circumstances of the case. Further, I impose a penalty of
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` 2,00,000/- (Rupees Two Lakh only) jointly and severally on the noticees under
Section 15A(b) of the Securities and Exchange Board of India Act, 1992 for delay
in disclosing under Regulations 7 (1A) read with 7 (2) of the SEBI (Substantial
Acquisition of Shares and Takeover) Regulations, 1997 for the acquisition made
on 05.02.2007 which is appropriate in the facts and circumstances of the case.
ORDER
29. In exercise of the powers conferred under Section15 I of the Securities and
Exchange Board of India Act, 1992, and Rule 5 of Securities and Exchange
Board of India (Procedure for Holding Inquiry and Imposing Penalties by
Adjudicating Officer) Rules, 1995, I hereby, impose a consolidated penalty of
` 11,00,000/- (Rupees Eleven Lakh only) jointly and severally on the noticees
viz.- Shri Kahaan Vasa and Shri Karan Vasa in terms of the provisions of Section
15A(b) of the Securities and Exchange Board of India Act,1992 for their delay in
complying with the provisions of Regulations 3(4), 7(1) and 7(1A) read with 7(2)
of the Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeover) Regulations, 1997. In the facts and circumstances of the case, I
am of the view that the said penalty is commensurate with the delay on the part
of the noticees to file the report and to make the disclosures.
30. The penalty shall be paid by way of Demand Draft drawn in favour of SEBI
Penalties Remittable to Government of India payable at Mumbai within 45 days
of receipt of this order. The said demand draft shall be forwarded to the Chief
General Manager, CFD, Securities and Exchange Board of India, Plot No. C4-A,
G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051.
31. In terms of the provisions of Rule 6 of the Securities and Exchange Board of
India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating
Officer) Rules 1995, copies of this order are being sent to Shri Kahaan Vasa and
Shri Karan Vasa and also to the Securities and Exchange Board of India,
Mumbai.

Place: Mumbai

D. RAVI KUMAR

Date: December 09, 2014

CHIEF GENERAL MANAGER &

ADJUDICATING OFFICER

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