BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. ASK/AO/174-75/2014-15]
UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD
OF INDIA ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE
FOR

HOLDING

INQUIRY

AND

IMPOSING

PENALTIES

BY

ADJUDICATING OFFICER) RULES, 1995

In respect of
Sr. No.
1
2

Name of entity
PAN
PVP Ventures Limited
AAACS3101P
Prasad V. Potluri
AHZPP1406F
(Chairman
and
Managing
Director of PVP Ventures Ltd.)

Order No.
ASK/AO-174/2014-15
ASK/AO-175/2014-15

In the matter of
PVP Ventures Limited
BACKGROUND IN BRIEF
1. Based on the report received from NSE, Securities and Exchange Board of
India (SEBI) conducted investigation in the scrip of the PVP Ventures Limited
for the period from September 01, 2009 to October 30, 2009. It was observed
during investigation that Mr. Prasad V. Potluri (hereinafter referred to as
"Noticee no. 2") is the Chairman and Managing Director (CMD) of PVP
Ventures Limited (hereinafter referred to as Noticee no.1) and also Director
of PVP Energy Pvt. Ltd. (hereinafter referred to as "PEL"). He is also the
promoter of Noticee no. 1 and PEL. Further, the Board of Directors of PEL had
authorized Noticee no.2 to operate and manage the share trading account of
PEL.
2. It was observed that PVP Malaxmi Energy Pvt. Ltd. (former name of PEL)
held 15.77 per cent shares of Noticee no. 1 during quarter ending June 2009

Adjudication order against PVP Ventures Ltd. and its CMD Mr. Prasad V Potluri

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which decreased to 9.96 per cent during quarter ended September 2009 and
further fell to 3.47 per cent during quarter ended December 2009. PEL
submitted during the course of investigation that it was holding 3,54,53,387
equity shares of Noticee no. 1 and the sale transactions were reported to
Noticee no. 1 from time to time in terms of regulation 13(3) of SEBI
(Prohibition of Insider Trading) Regulations, 1992 (hereinafter referred to as
"PIT Regulations"). However, it was observed that Noticee no. 1 did not make
the requisite disclosure under Regulation 13(6) of PIT Regulations. In view of
the aforesaid, it was alleged that Noticee no.1 by not making the requisite disclosures, and
Noticee no.2, by not getting the requisite disclosures made
about the sale of shares by PEL to the exchanges despite the same being
made available to Noticee no.1 by PEL, violated Regulation 13(6) of PIT
Regulations.
3. Investigation further revealed that the PEL vide email dated January 28, 2013
admitted that it forgot to make disclosure under SEBI (Substantial Acquisition
of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "SAST
Regulations") for sale of shares aggregating two per cent or more of the share
capital of Noticee no.1 to Noticee no.1 and exchanges. It was observed that
Noticee no. 2, who is the CMD of Noticee no. 1 and Director of PEL, was
aware of all transactions in the shares of Noticee no. 1 by PEL and should have
ensured reporting of the same to Noticee no. 1 and the exchanges. However,
Noticee no. 2 did not disclose sale of shares of more than two per cent by PEL
to Noticee no. 1 and the exchanges. In view of the same, noticees were alleged
to have violated Regulation 7(3) of SAST Regulations.

Adjudication order against PVP Ventures Ltd. and its CMD Mr. Prasad V Potluri

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APPOINTMENT OF ADJUDICATING OFFICER

4. Shri Piyoosh Gupta was appointed as Adjudicating Officer vide order dated
April 17, 2013 to inquire into and adjudge under section 15A(b) of the
Securities and Exchange Board of India Act, 1992 (hereinafter referred to as
SEBI Act) the alleged violations of provisions of Regulation 13(6) of PIT
Regulations and regulation 7(3) of SAST Regulations, 1997 by the Noticees.
Subsequently, upon the transfer of Shri Piyoosh Gupta, I have been appointed
as Adjudicating Officer, in the present matter, vide order dated November 08,
2013.
SHOW CAUSE NOTICE, REPLY AND HEARING
5. Separate Show Cause Notices dated September 19, 2013 (herein after referred
to as SCN) were issued to the Noticees under rule 4 of SEBI (Procedure for
Holding Inquiry and imposing penalties by Adjudicating Officer) Rules, 1995
(hereinafter referred to as Rules) to show cause as to why an inquiry should
not be held against them in terms of rule 4 of the Rules read with section 15I of
SEBI Act, 1992 and penalty be not imposed under section 15A(b) of SEBI Act,
1992 for the violations specified in the SCN. The copies of the documents
relied upon in the SCN were provided to the Noticees along with the SCN.
6.The Noticees vide similar letters dated November 15, 2013 replied to the
SCN and made the following submissions:
The obligation to disclose under regulation 13(6) of PIT Regulations and
regulation 7(3)of SAST Regulations, 1997 exists only on the company
and that too after such information is received from PEL. However, PEL
could not submit the disclosure required under SAST Regulations, 1997
only because of inadvertence, while inadvertently the company did not
make the requisite Insider Trading Disclosures which was an unintended
result of the company being under the impression that such filings had
already been made. Therefore the said non disclosure was neither willful
nor wanton.
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 It is clarified that the primary obligation regarding the disclosures lies on

PEL. As per market practices and in accordance with the past practices
of the company such disclosures were generally made by the then
compliance officer of the company. In this regard, no liability can be
attributed to the company under Insider Trading Regulation and the SAST
Regulations for the failure of the company to file the requisite filings with
the relevant stock exchanges
7. In the interest of natural justice and in order to conduct an inquiry in terms of
rule 4(3) of the Rules, the Noticees were granted an opportunity of personal
hearing on February 21, 2014 at SEBI, Head Office, Mumbai, vide notices
dated February 04, 2014. On the scheduled date of hearing Shri Amit Vyas,
Advocate, appeared as Authorised Representative (AR) on behalf of the
Noticees and reiterated the submissions made in the reply to SCN. AR
requested for extracts of the Investigation Report and another date of hearing.
AR was given the extracts of Investigation Report and another opportunity of
hearing on March 05, 2014. On the scheduled date of hearing, AR submitted
that as regards, the disclosures under SAST and PIT Regulations, the same was
inadvertent mistake on the part of the Noticee and a lenient view may be taken.
Considering that more than six months had passed since the date of hearing,
another opportunity of hearing was granted to Noticees on December 03, 2014.
On the scheduled date of hearing, Noticees were represented by Shri Amit
Vyas, Advocate and Shri GSV Ranga, Head-Legal and Company Secretary of
the Noticee no. 1 and they reiterated the submissions made in the reply to SCN.
8. Though separate SCNs were issued to the noticees, in view of the fact that
the case emanates from the common set of facts and both the noticees were
represented by the common Authorized representative and were heard together,
I proceed to deal with both the SCN issued to both the notices herein below.
CONSIDERATION OF ISSUES AND FINDINGS
9.

The issues that arise for consideration in the present case are :

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a) Whether Noticees had violated the provisions of regulation 13(6) of

PIT Regulations?
b) Whether Noticees had violated the provisions of regulation 7(3) of
SAST Regulations?
c) Does the violation, if any, on the part of Noticees attract monetary
penalty under Section 15A(b) of SEBI Act?
d) If so, what would be the monetary penalty that can be imposed
taking into consideration the factors mentioned in Section 15J of
SEBI Act?
FINDINGS

10.

On perusal of the material available on record and giving regard to the

facts and circumstances of the case, I record my findings hereunder.

Issue I- Whether Noticees had violated the provisions of regulation 13(6) of
PIT Regulations?
11. The provisions of Regulation 13(6) of PIT Regulations read as under:
Disclosure of interest or holding by directors and officers and substantial
shareholders in a listed companies - Initial Disclosure
13 (1)..
(2)...
(3)...
(4)...
(5)...
Disclosure by company to stock exchanges.
(6) Every listed company, within two working days of receipt, shall disclose to all
stock exchanges on which the company is listed, the information received under
sub regulations (1), (2), (3) and (4) in the respective formats specified in
Schedule III.
12. The day wise trading activity of PEL in the shares of Noticee no. 1 between
September 01, 2009 and November 30, 2009 is as follows:

Adjudication order against PVP Ventures Ltd. and its CMD Mr. Prasad V Potluri

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Date

Gr Buy Vol

Gr Sell Vol

04-09-2009
09-09-2009
14-09-2009
18-09-2009
30-09-2009
01-10-2009
05-10-2009
06-10-2009
07-10-2009
08-10-2009
09-10-2009
14-10-2009
17-10-2009
21-10-2009

0
0
0
0
0
0
0
0
0
0
0
0
0
327

2350000
1100000
1400000
3600000
3700000
1776994
200000
4773214
2600000
900000
2550000
1230000
5000
1175000

13. I note that as per the provisions of Regulation 13(6) of PIT Regulations,
Noticee no. 1 was required to make disclosure in the prescribed Form to the
stock exchanges where its shares are listed within two days of the receipt of
information from PEL about the change in their shareholding exceeding 2% in
Noticee no. 1. I also note that PEL vide its letter June 25, 2010 had submitted
that it reported the sale transactions to Noticee no. 1 in terms of Regulation
13(3) of PIT Regulations vide letters dated September 16, 2009, October 05,
2009, October 08, 2009 and October 12, 2009 and the same has also been not
disputed by the Noticees. However, I find that no disclosures as stipulated
under Regulation 13(6) of PIT Regulations were made by Noticee no. 1 to the
BSE or NSE where its shares are listed and the fact of non making of the
disclosure by Noticee no. 1 was also confirmed by NSE and BSE vide their
correspondences/emails dated November 21, 2012 and December 06, 2012
respectively. I also find that the Noticees in their reply have also admitted that
Noticee no. 1 did not make the requisite disclosures under PIT Regulations.

Adjudication order against PVP Ventures Ltd. and its CMD Mr. Prasad V Potluri

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However, while admitting their default they submitted that the same was an
unintended result of the company being under the impression that such filings
had already been made and put the blame on the compliance officer. It is
needless to say here that Noticee no. 2, being the CMD, was in charge of and was
responsible to Noticee no. 1 for the conduct of its business. While the obligation to

make disclosure is squarely on the noticees which they have admittedly failed
to discharge in the instant case, the noticees cannot escape from the
consequences arising out of default by simply shirking their responsibility and
putting the blame on the compliance officer.
14. Commenting on the role of directors, Hon'ble Securities Appellate Tribunal
in the case of Mr. N. Narayanan v. The Adjudicating Officer, SEBI (Appeal No.
29 of 2012 decided on October 5, 2012) had observed that "With the changing
scenario in the corporate world the concept of corporate responsibilities is also
rapidly changing day by day. The director of a company cannot confine himself
to lending his name to the company but taking light responsibility for its day to
day management. While functions may be delegated to professionals, the duty
of care, diligence, verification of critical points by directors cannot be
abdicated. The directors are expected to have a hands on approach in the
running of the company and take up responsibility not only for the
achievements of the company but also the failings thereto."
15. At this juncture, I would like to quote the order dated 22.12.2011 of the
Honble Securities Appellate Tribunal (SAT) in M/s Alka Securities Ltd. Vs
SEBI wherein it observed: "..........Section 27 of the Act, inter alia, provides that
when an offence under the Act has been committed by a company, every person
who at the time the offence was committed was in-charge of, and was
responsible to, the company for the conduct of the business of the company, as
well as the company, shall be deemed to be guilty of the offence and shall be
Adjudication order against PVP Ventures Ltd. and its CMD Mr. Prasad V Potluri

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liable to be proceeded against. This provision also applies to the violation of

the regulations framed under the Act...." Keeping in mind the aforesaid
observation of the Hon'ble SAT as well as the facts and circumstances of the
present case, I hold that the Noticee no. 1 and 2 have violated the provisions of
Regulation 13(6) of PIT Regulations.
Issue II- Whether Noticees had violated the provisions of Regulation 7(3) of SAST
Regulations?

16. The provisions of Regulation 7(3) of SAST Regulations read as under:

Acquisition of 5 per cent and more shares or voting rights of a company.
7. (1) ..........................................
(1A) ...........................................
(2) ..............................................
(2A) ............................................
(3) Every company, whose shares are acquired in a manner referred to in subregulations (1) and (1A), shall disclose to all the stock exchanges on which the
shares of the said company are listed the aggregate number of shares held by
each of such persons referred above within seven days of receipt of information
under sub-regulations (1) and (1A).
17. I note that the allegation of violation of provision of regulation 7(3) of
SAST Regulations has been made against the Noticees on the ground that
Noticee no. 2, being CMD of Noticee no. 1 as well as director of PEL, was
aware of all transactions done by PEL in the shares of Noticee no. 1 and despite
that he did not disclose sale of shares of more than two per cent by PEL to
Noticee no. 1 and the exchanges. I note that the mandate of Regulation 7(3) of
SAST Regulations is very clear and it requires every listed company to disclose
to all the stock exchanges on which the shares of the said company are listed
within seven days of receipt of information under sub-regulations (1) and (1A).
I find that it is the matter of record that PEL had not made the disclosure to
Noticee no. 1 under SAST Regulations. In this context, I also note that in
respect of the aforesaid transactions, in a separate order passed by me in another

Adjudication order against PVP Ventures Ltd. and its CMD Mr. Prasad V Potluri

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adjudication proceedings a finding was given to the effect that PEL did not
make the requisite disclosure under Regulation 7(1A) of the SAST Regulations,
regarding sale of more than two per cent of the share capital of the PVP to PVP
and to the stock exchanges within 2 days of transactions. I am of the view that
in the absence of receipt of information by Noticee no. 1 from PEL, there was
no obligation on Noticee no. 1 or noticee no. 2 to make disclosure under
Regulation 7(3) of SAST Regulations. Therefore, the allegation of violation of
regulation 7(3) of the SAST Regulations, 1997 by the Noticees does not stand
established.
Issue III- Does the violation, if any, on the part of the Noticee attract monetary
penalty under Section 15 A(b) of SEBI Act?

18. By not making the requisite disclosures on time under Regulation 13(6) of
PIT Regulations, Noticees failed to comply with the statutory obligation. The
timely disclosure is mandated for the benefit of the investors at large. There can
be no dispute that compliance of regulations is mandatory and it is duty of
SEBI to enforce compliance of these regulations. The Honble Supreme Court
of India in the matter of Chairman, SEBI v.. Shriram Mutual Fund {[2006] 5
SCC 361} held that "In our view, the penalty is attracted as soon as
contravention of the statutory obligations as contemplated by the Act is
established and, therefore, the intention of the parties committing such
violation becomes immaterial. . Hence, we are of the view that once the
contravention is established, then the penalty has to follow and only the
quantum of penalty is discretionary."
19. As the violation of the statutory obligation under Regulation 13(6) of PIT
Regulations has been established, I hold that the Noticees are liable for
monetary penalty under section 15A(b) of SEBI Act, which reads as under:-

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15A. Penalty for failure to furnish information, return, etc. - If any person,
who is required under this Act or any rules or regulations made there under, a)
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
Issue IV - What would be the monetary penalty that can be imposed taking
into consideration the factors mentioned in section 15J of SEBI Act?
20. While determining the quantum of penalty under section 15A (b), it is
important to consider the factors stipulated in section 15J of SEBI Act, which
reads as under:15J - Factors to be taken into account by the adjudicating officer
While adjudging quantum of penalty under section 15-I, 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.
21. The material made available on record has not quantified the amount of
disproportionate gain or unfair advantage made by the Noticees and the loss
suffered by the investors as a result of the Noticees' default. There is also no
material made available on record to assess the amount of loss caused to
investors or the amount of disproportionate gain or unfair advantage made by
the Noticees as a result of default. However, it is pertinent to mention here that
our entire securities market stands on disclosure based regime and accurate and
timely disclosures are fundamental in maintaining the integrity of the securities
market. Correct and timely disclosures are also an essential part of the proper
functioning of the securities market and failure to do so results in preventing
investors from taking well-informed decision. I further find that Noticees
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committed default on four occasions and the default is, thus, repetitive in
nature.
ORDER
22. After taking into consideration all the facts and circumstances of the case, I,
in exercise of the powers conferred upon me under Section 15I (2) of the SEBI
Act read with Rule 5 of the Adjudication Rules, hereby impose following
penalty under Section 15A(b) of SEBI Act, 1992 for violation of Regulation
13(6) of PIT Regulations on noticees:
Name

Penalty

` 15,00,000/- (Rupees Fifteen Lakh

Only)
Prasad V. Potluri
` 15,00,000/- (Rupees Fifteen Lakh
(Chairman and Managing Director of Only)
PVP Ventures Ltd.)
PVP Ventures Limited

23. I am of the view that the penalty imposed is commensurate with the
violation committed by the Noticees. The amount of penalty shall be paid by
way of demand draft 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 should be forwarded to The Division Chief (IVD-ID10),
Securities and Exchange Board of India, SEBI Bhavan, Plot No. C 4 A, G
Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051.
24. In terms of rule 6 of the Rules, copies of this order are sent to the Noticees
and also to the Securities and Exchange Board of India.

Date: March 27, 2015

Place: Mumbai

A. Sunil Kumar
Adjudicating Officer

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