1. SEBI held Company Secretary responsible for misinformation provided in the financials during buyback procedure. Financials contained inflated reserves and surplus for conducting buyback. This misinformation was stipulated in the public announcement which was signed by the Company Secretary in the capacity of a compliance officer.
2. Company Secretary filed an appeal with SAT wherein SAT set aside the order of the whole time member of SEBI. SAT relied on regulation 19(3) of Buyback Regulations which states "The company shall nominate a compliance officer and investors service centre for compliance with the buy-back regulations and to redress the grievances of the investors." SAT interpretated the regulation as follows:
“The aforesaid provision indicates that the company will nominate a Compliance Officer to redress the grievances of the investors. The appellant being a Company Secretary was also a Compliance Officer and thus the role of the Compliance Officer was only limited to redress the grievance to the investors. It was an error on the part of BoD.” And hence, SAT set aside the decision of WTM of SEBI.
3. SEBI preferred an appeal with the Supreme Court in which CJI held as follows
“Regulation 19(3) of the SEBI (Buyback of Securities) Regulations 1998 requires the company to nominate a compliance officer and an investors’ service centre. The purpose of the nomination is twofold, namely (i) to ensure compliance with the buyback Regulations; and (ii) to redress the grievances of investors. There is a patent error on the part of the Tribunal in interpreting the Regulations. The Tribunal held that the role of the respondent, who was a Company Secretary, compliance officer, was limited to redressing the grievances of investors. In arriving at the finding, the Tribunal has relied upon the latter part of Regulation 19(3) which deals with redressal of the grievances of investors. The crucial point which has been missed by the Tribunal is that the compliance officer is also required to ensure compliance with the buyback regulations. Regulation 19(3) of the Regulations expressly so stipulates. Since the interpretation which has been placed by the Tribunal on the interpretation of 19(3) is contrary to the plain terms of Regulation 19(3), we set aside the impugned decision and remit the proceedings back to the Tribunal for consideration of the facts afresh in the light of the interpretation which has been placed above on the provisions of Regulation 19(3).”
Conclusion:
Company Secretary as a compliance officer needs to be very vigilant not only with the procedural compliances but also with the information she/ he is dealing with.
Find the pdf of order below.
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