Market regulator SEBI has imposed a fine of ₹2 lakh on IDBI Bank for violation of takeover and insider trading regulations in its acquisition of shares in Welspun India.

SEBI found this while examining the letter of offer of two entities — Krishiraj Trading and Welspun Mercantile – for acquiring 26 per cent of the expanded share capital in Welspun India.

IDBI Bank had acquired 50 lakh shares, or a 5.64 per cent stake, in Welspun India on April 22, 2010. The regulator observed a violation of takeover regulations in the transaction (failure to disclose the acquisition of 5 per cent or more in a company) and issued a show-cause notice alleging that the bank had not disclosed the purchase of shares until May 3, 2010. The due date of compliance was April 24, 2010.

Dispute over date

IDBI Bank said it had disclosed the information to the exchanges on April 23, 2010. The regulator sought information from exchanges and found that both the BSE and the NSE received the disclosure on April 27, 2010.

Kolkata Stock Exchange replied that it could not trace any disclosure from IDBI Bank in 2010.

The manager to the offer, Prime Securities, informed SEBI that it received IDBI Bank’s letter (dated April 23) on May 3, 2010.

SEBI said the due date (April 24, 2010) was a Saturday and the next working day was Monday, April 26. However, the exchanges received the disclosure only on April 27 and the company could not have received the letter earlier than April 30, 2010 as per records, SEBI added.

Hence, the duration of non-compliance was one day, said SEBI. “Also, the noticee (IDBI) being a bank had a greater responsibility to ensure compliance with the applicable regulations, and should have put in place appropriate levels of accountability and checks and balances, to make certain that the documents dispatched by the noticee were received by the addressee(s) within the time frame for compliance provided by the underlying regulations,” said SEBI.

Market regulator also found that IDBI Bank had been issued deficiency letters and warning for non-submission of information/ data at least on four separate occasions during the last three years, and fined the bank.

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