The Securities Appellate Tribunal passed an order on 30 October, 2013, setting aside the penalties imposed by SEBI on Golden Tobacco Ltd. and GHCL Ltd., for violating Clause 35 of the Listing Agreement and Regulations 3(d) and 4(2)(f) of the SEBI (PFUTP) Regulations, 2003. Golden Tobacco had not disclosed to the stock exchange that, an arbitration order had restrained certain promoter entities from transferring or creating third party interest in the company’s shares, which had created an encumbrance on such shares otherwise than by way of a pledge. The issue was whether a listed company needs to disclose to the stock exchange, details of ‘otherwise encumbered’ shares of the company held by the promoter/promoter group, although the promoters are not obligated to make such disclosures to the company under Clause 35 of the Listing Agreement.

SAT held that the press releases issued by SEBI on 21 January, 2009, and Regulation 8A of Takeover Regulations, 1997 envisage listed companies to disclose to the stock exchanges only such information as is received by the company from the promoter/promoter group. Regulation 8A(1)/8A(2) of the Takeover Regulations and the two SEBI circulars dated 3 February, 2009, obligate the promoter/promoter group to disclose to the listed company only details of shares that are pledged/revoked/invoked and not shares that are ‘otherwise encumbered’. SAT, while ruling in favour of the appellant companies, observed that, in the absence of any corresponding obligation upon the promoter/promoter group to make disclosures to the company regarding shares that are ‘otherwise encumbered’, it would be unjustified and anomalous to mandate listed companies to make such disclosures to the stock exchanges.