Penal Provisions
I . Regulation 32: Power of the Board to issue direction
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Directing the Acquirer to divest the shares acquired in violation of the regulations and directing appointment of Merchant Banker for such divestiture;
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Directing the Acquirer to divest the shares acquired in violation of the regulations and directing appointment of Merchant Banker for such divestiture;
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Transfer the shares or any proceeds of a directed sale of shares acquired in violation of the regulations to Investor Protection and Education Fund;
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Directing not to exercise any voting or other rights attached to shares acquired in violation of the regulations;
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Debarring any person who has violated these regulations from accessing the capital market or dealing in securities;
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Directing the acquirer to make an open offer at an offer price determined by the Board;
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Not to dispose off the assets of the Target Company or any of its subsidiaries contrary to the contents of letter of offer;
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To cease and desist from exercising control acquired over any Target Company;
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Directing divestiture of such number of shares as would result in the shareholding of an acquirer and persons acting in concert with him being limited to the maximum permissible non-public shareholding;
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Initiate enquiry proceedings against the intermediary registered for failure to carry out the requirement of these regulations.
II. Power to impose penalties and initiate adjudication proceedings:
1. 15H.Penalty for non-disclosure of acquisition of shares and takeovers.-
If any person, who is required under this Act or any rules or regulations made thereunder, fails to,-
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disclose the aggregate of his shareholding in the body corporate before he acquires any shares of that body corporate; or
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make a public announcement to acquire shares at a minimum price;
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make a public offer by sending letter of offer to the shareholders of the concerned iv) make payment of consideration to the shareholders who sold their shares pursuant to letter of offer
he shall be liable to a penalty twenty-five crore rupees or three times the amount of profits made out of such failure, whichever is higher.
2. Criminal prosecution under section 24 of the SEBI Act.
In addition to any award of penalty by the Adjudicating Officer under the Act, if any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules or regulations thereof, he shall be punishable with imprisonment for a term which may extend to ten years, or with fine which may extend to twenty-five crore rupees or with both. Further, for the non compliance of the directions of the Adjudicating Officer, the person shall be punishable with imprisonment for a term which shall not be less than onemonth, but which may extend to ten years, or with fine, which may extend to twenty-five crore rupees or with both.
3. Directions under section 11B of the SEBI Act.
The Board may, in the interest of securities market, give directions, without prejudice to its right to prosecute under section 24 of the SEBI Act including:
- Directing the person concerned not to further deal in securities.
- Prohibiting disposal of securities acquired in violation of these regulations.
- Direct sale of securities acquired in violation of these regulation
4. Directions under section 11(4) of the Act;
The authority may give the directions to the person in default & the directions may include the following:
- Suspend the trading of any security in a recognised stock exchange;
- Restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities;
- Suspend any office-bearer of any stock exchange or self-regulatory organisation from holding such position;
- Impound and retain the proceeds or securities in respect of any transaction which is under investigation
- Attach bank accounts of persons involved in violation for a period not exceeding one month.
- Direct any intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of any transaction which is under investigation
5. Cease and desist order in proceedings under section 11D of the Act;
A Cease and desist order can also be passed under section 11D of the SEBI Act from committing or causing any violation of the SEBI Takeover Regulations.
6. Adjudication proceedings under section 15HB of the Act.
A residual clause has been provided in the Act, wherein whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by the Board thereunder for which no separate penalty has been provided, he shall be liable to a penalty which may extend to one crore rupees.
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