- SEBI*1 Fined NHAI*2 for delayed disclosure with respect to SEBI (LODR) Regulations, 2015*3
- Adjudication Order in respect of National Highway Authority of India.
Compliance means “adhering to rules and regulations.”. Compliance is a continuous process of following laws, policies, and regulations, rules to meet all the necessary governance requirements without any failure. A Compliant entity leads to better Corporate Governance in the Industry.
A Corporate Entity is required to comply with all the provisions applicable to the Entity according to the timelines to avoid penalty / litigations.
Case Overview:
An inquiry / examination has been conducted by SEBI in the matter of National Highway Authority of India “NHAI”) for the period Financial Year 2015-16 to Financial Year 2018-19 and violation of Regulation 52(1) of the SEBI (LODR) Regulations, 20153 by NHAI.
Analysis of Case Law:
- Authority: Adjudicating Officer Securities and Exchange Board of India
- Adjudication Order No: ORDER/PM/RR/2020-21/7744
- Applicable Provisions under which examination conducted:
- Under Section 15 - I of The 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.
Provisions for Appointment of Adjudicating Officer SEBI
Mr. Prasanta Mahapatra, Adjudicating Officer appointed vide Order dated January 3, 2020 under Section 15-I of SEBI Act read with Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 to conduct examination and inquire into and adjudge under the provisions of Sections 15A(b) of the SEBI Act.
Facts of the case in brief:
1. Show Cause Notice was served vide SCN dated January 15, 2020 to show cause as to why an inquiry should not be held against the NHAI and why penalty should not be imposed on the NHAI under the provisions of Sections 15A (b) of the SEBI Act, for the aforesaid alleged violations.
2. SEBI received a request from the NHAI for seeking extension for filing of unaudited half-yearly financial results for the year ended March 31, 2019.
3. SEBI has examined the Compliance status of NHAI with respect to Regulation 52(1) of SEBI (LODR) Regulations, 2015 from SEBI / Exchange platform from financial year 2015-16 to financial year 2018-19.
4. Regulation 52(1) of SEBI (LODR), Regulations, 2015 deals with Compliance requirement for the listed entities for submission of half yearly unaudited financial results by the issuer with the exchanges within stipulated time (i.e., 45 days from the end of each half financial year.
5. Adjudicating Officer has conducted thorough examination and find out the delay in submission of half yearly financial results by NHAI as given below:
|
Financial Year
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2015-16
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2016-17
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2017-18
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2018-19
|
|
|
First
Half
|
Second
Half
|
First
Half
|
Second
Half
|
First
Half
|
Second
Half
|
First
Half
|
Second
Half
|
|
BSE Portal (No. of delays)
|
NA
|
04
|
Not submitted
|
15
|
34
|
12
|
19
|
78
|
|
NSE Portal (No. of delays)
|
NA
|
09
|
09
|
22
|
34
|
29
|
19
|
78
|
|
Key Points:
- SEBI (LODR) Regulations, 2015 were not applicable as they came into force w.e.f 2nd day of December, 2015
- Delay in submission has been calculated as difference between 45 days from end of half year and the date of first disclosure to any exchange for establishing violation by NHAI
|
6. SEBI vide letter dated September 21, 2018 had advised NHAI for strict compliance with the LODR Regulations in future, but NHAI does not pay any attention towards it and did not submit the financial result of half year ending on September 30, 2018 and March 31, 2019 on time and the same were submitted with a delay of 19 days and 78 days respectively.
7. NHAI submitted response that due to many units around 200+ across the country and it is time consuming for Consolidation of its accounts consists of finalization of individual trials of all units and consolidation thereof.
8. NHAI e filed its replies vide letters dated February 11, 2020 and March 23, 2020 to the Adjudicating Officer.
9. An opportunity In the interest of natural justice and in order to conduct an inquiry in terms of Rule 4 (3) of the Adjudication Rules, was granted to NHAI. (the NHAI was granted second opportunity of personal hearing on March 11, 2020, post adjournment of First Hearing on the request
10. Post examination of facts/material available on record and replies submitted by the NHAI, The Adjudicating Officer has decided to declare an order.
Issues Considered by the Adjudicating Officer:
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S. No.
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Issues
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Remarks by Adjudicating Officer
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|
1
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Whether the NHAI has violated the provisions of Regulation 52(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015?
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Yes, based on the research and examination conducted:
NHAI has violated the provisions of Regulation 52(1) of LODR Regulations.
- it was observed that from FY 2015-16 to FY 2018-19, the NHAI had made delayed filings of its half yearly financial results with a delay in the range of 4 days to 78 days.
- NHAI did not submit the financial result on time with respect to half year ending on September 30, 2018 and March 31, 2019 and the same were submitted with a delay of 19 days and 78 days respectively.
|
|
2
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Does the violation, if any, attract monetary penalty under Section 15 A (b) of SEBI Act.?
|
Yes, based on the research and examination conducted:
NHAI is liable for monetary penalty under Section 15A(b) of SEBI Act for violation of Regulation 52(1) of the SEBI (LODR) Regulations, 2015.
|
|
3
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If so, what would be the monetary penalty that can be imposed taking into consideration the factors mentioned in Section 15J of SEBI Act?
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The material available on record has not quantified the amount of disproportionate gain or unfair advantage, if any, made by the NHAI and the loss, if any, suffered by the investors as a result of the NHAI’s failure.
However, the facts of the case clearly bring out the repeated default made by the NHAI.
Adjudicating Officer note that the NHAI has failed to make timely disclosures thereby violated Regulation 52(1) of the SEBI (LODR) Regulations, 2015.
|
Order Given by Adjudicating Officer
In view of the above facts and based on the research and examination conducted, it has been concluded that NHAI has violated the provisions of Regulation 52(1) of LODR Regulations. A Penalty of Rs. 7,00,000/- has been imposed by Mr. Prasanta Mahapatra, Adjudicating Officer, on National Highway Authority of India (NHAI) in terms of the provisions of Sections 15A(b) of the Securities and Exchange Board of India Act, 1992.
Further, NHAI shall remit / pay the said amount of penalty within 45 days from May 31, 2020 either Through online payment facility available on the SEBI website www.sebi.gov.in on the following path, by clicking on the payment link
ENFORCEMENT à Orders of AO à PAY NOW
Or Through e-payment facility into Bank Account in the name of SEBI – Penalties Remittable To Government of India
Effects of this Ruling
All Entities / Establishment are required to comply with the required laws, regulations, procedures laid down by government Authorities. They need to comply with relevant legislation, as well as any internal or external standards. A Compliance Expert / Compliance Officer is the need for every organization to manage the Compliance. Entities will appoint Compliance Expert to avoid litigations / penal provisions.
Author View
- All entities are required to Comply with relevant provisions in a timely manner.
- Entities are required to made correct and timely disclosures with the regulators authorities.
- For Listed Entities, correct and timely disclosures play an essential role in proper functioning of the securities market, and failure to do so results in depriving the investors from taking well informed investment decisions.
- Timely Compliance and disclosures will help Entities to maintain Transparency and eliminating information asymmetry.
- A Compliant Entity will get the tittle of “Good Corporate Governance” Entity.
At the End I would like to quote:
“IF YOU THINK COMPLIANCE IS EXPENSIVE, TRY NON-COMPLIANCE.”
Link of the order copy:
https://www.sebi.gov.in/enforcement/orders/may-2020/adjudication-order-in-respect-of-national-highway-authority-of-india_46713.html
Disclaimer:
Disclaimer: Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.
This article has been written by CS Lalit Rajput (ACS, B.Com.)
Abbreviations
*1- SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992
*2 - National Highway Authority of India
*3 - SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.