On Tuesday, 14th July 2020, The Securities Appellate Tribunal (SAT) has set aside SEBI’s order which imposed a fine of Rs. 10 lakhs on ICICI Bank for delayed disclosure about a binding agreement signed by the lender with Bank of Rajasthan in 2010. Market regulator SEBI imposed a fine of Rs. 10 lakhs in September 2019, on ICICI Bank for disclosure lapses which include delayed disclosures of the binding contract signed with Bank of Rajasthan. The ICICI Bank moved the court against the order. It also referred to the unreasonable delay of eight years in issuing the show cause notice and nine years in passing the impugned order.
The Tribunal, in an order passed on 8th July 2020, stated that though there are laches, that by itself in the peculiar circumstances of the case, will not vitiate the proceedings but definitely the penalty amount of Rs 10 lakh imposed on the bank cannot be sustained and deserves to be substituted by a lesser penalty. “... while upholding the impugned order on merits, we modify the penalty imposed on the appellant to only a warning which will meet the ends of justice in the given facts and circumstances of the matter.” It added Early on the morning of 18th May 2010, the Executive Director of ICICI Bank signed a binding contract with the dominant shareholders of Bank of Rajasthan recommending the merger of the two lenders. Disclosures surrounding the amalgamation were provided to the stock exchanges on the evening of the same day. The tribunal said, “On the basis of the interpretation given in the impugned order itself, the finding that signing of the binding agreement was material and price-sensitive information and hence there was a delay of a trading day in making the disclosure to the stock exchanges cannot be faulted.” It added, “After all the charge against the appellant is one trading day's delay in disclosure, but the delay on the part of SEBI to show cause is 2,955 days from the date of the event and about 2,130 days from the date of the preliminary investigation report, which is too wide a gap to be ignored.”
The order further added, “Several years delay in show-causing and concluding proceedings in such known incidence of violation/ alleged violations is a failure in effectively performing the behavior modification function of a market regulator” According to the Tribunal, it was considered that the issuing of a penalty order against ICICI Bank in September 2019 for certain violations of disclosure in mid- May 2010 by the issuing of a notice of show cause on 26th June 2018 has caused harm to the bank and the order suffers from laches. The Securities and Exchange Board of India (SEBI) is the regulator of the securities and commodity market in India owned by the Government of India. It was established in 12th April 1988 and given Statutory Powers on 30th January 1992 through the SEBI Act, 1992