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CS Executive · Capital Market and Securities Laws · Acquisition of Shares and Takeovers - Concepts

Kaveri Foods Ltd is listed. Mr. Rao, before buying more of its shares, was required to disclose his aggregate shareholding in the company but did not do so. Under the SEBI Act, 1992, what is the consequence?

Under Section 15H, failure to disclose aggregate shareholding before acquiring shares attracts a penalty of at least ten lakh rupees, extending to twenty-five crore rupees or three times the profits made from the failure, whichever is higher. It is not a mere warning or a fixed small fine.

  1. AHe is liable to a penalty of not less than ten lakh rupees, extending to twenty-five crore rupees or three times the profits made, whichever is higherCorrect
  2. BHe is liable only to a warning, with no monetary penalty
  3. CHis shares are automatically cancelled by the company
  4. DHe faces a fixed penalty of one lakh rupees

Explanation

Section 15H(i) penalises failure to disclose aggregate shareholding before acquiring shares. The penalty is at least ten lakh rupees and may extend to twenty-five crore rupees or three times the profits made from the failure, whichever is higher. The other options invent consequences that the Act does not provide.

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