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Showing contexts for: sebi act in Chairman Sebi vs Roofit Industries Ltd on 26 November, 2015Matching Fragments
VIKRAMAJIT SEN, J.
1 These Appeals lay siege to the decision of the Securities Appellate Tribunal (SAT) which modified the order of the Adjudicating Officer under SEBI, reducing the penalty payable by the Respondent, Roofit Industries Ltd., under Section 15A of the Securities And Exchange Board of India Act, 1992 (SEBI Act) from Rs. 1 crore to Rs. 60,000. In the connected matters, the penalty imposed by the Appellant SEBI was reduced from Rs. 75,00,000 to Rs. 15,000 in five cases and Rs. 60,000 in one case. What formulae, if any, has been followed in these reductions is not forthcoming, making the exercise pregnant to the possibility of arbitrariness if not inconsistency or caprice.
2 The Appellant, having noticed allegations of share-price rigging by the Respondent, initiated an investigation into the shareholder pattern of the Respondent and price manipulation thereof. During the investigation, the Appellant issued Summons on 23.7.2002 to the Respondent requiring it to procure and produce certain documents and also for submitting additional information. The Respondent sought time till 20.8.2002 to provide the documents and information sought by the Appellant, and thereafter sought further time till 31.8.2002 and then 30.9.2002. After a reminder dated 5.9.2002, since the Summons were still not complied with and the information required was not provided by the Respondent, an Adjudicating Officer was appointed on 23.6.2003 under Section 15I of the SEBI Act to conduct an enquiry. By Show-Cause Notice dated 1.9.2003 for non-compliance of Summons dated 23.7.2002, the Adjudicating Officer granted the Respondent two opportunities of personal hearing on 25.2.2004 and 8.3.2004. The Respondent did not appear before the Adjudicating Officer despite these opportunities. The Adjudicating Officer therefore held, on 29.3.2004, that there was no material to suggest that the Respondent had complied with the Summons or had given the information sought for by SEBI despite extensions of time. In terms of Section 15A(a) of the SEBI Act, a penalty of Rs. 1 crore was imposed on the Respondent. In the connected appeals, a penalty of Rs. 75 lakhs was imposed on each of the various Respondent companies. Aggrieved, the Respondent moved an Appeal before the SAT.
5 It would be apposite for us to begin our analysis of the penalty to be imposed by laying out Section 15A(a) as it stood subsequent to the 2002 amendment, for the facility of reference:
15A. If any person, who is required under this Act or any rules or regulations made thereunder,– to furnish any document, return or report to the Board, fails to furnish the same, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less; ………… In the connected appeals before us, the Appellant has imposed a penalty of Rs. 75 lakhs despite the failure having continued for substantially more than 75 days. Learned Senior Counsel for the Appellant has contended that the Appellant has discretion to impose a penalty below the number of days of default regardless of the words “whichever is less”. He has argued that there would be no purpose to Section 15J if the Adjudicating Officer’s discretion to fix the quantum of penalty did not exist, and that such an interpretation would render certain Sections of the SEBI Act as expropriatory legislation due to the crippling penalties they would impose. We do not agree with these submissions. The clear intention of the amendment is to impose harsher penalties for certain offences, and we find no reason to water them down. The wording of the statute clarifies that the penalty to be imposed in case the offence continued for over one hundred days is restricted to Rs. 1 crore. No scope has been given for discretion. Prior to the amendment, the Section provided for a penalty “not exceeding one lakh fifty thousand rupees for each such failure”, thus giving the Appellant the discretion to decide the appropriate amount of penalty. In this context, the change to language which does not repose any discretion is even more significant, as it indicates a legislative intent to recall and remove the previously provided discretion. Additionally, Section 15J existed prior to the amendment and was relevant at that time for adjudging quantum of penalty. Once this discretionary power of the adjudicating officer was withdrawn, the scope of Section 15J was drastically reduced, and it became relevant only to the Sections where the Adjudicating Officer retained his prior discretion, such as in Section 15F(a) and Section 15HB. This ought to have been reflected in the language of Section 15I, but was clearly overlooked. Section 15J has become relevant once again, subsequent to the Securities Laws (Amendment) Act, 2014, which changed Section 15A(a), with effect from 8.9.2014, to read as follows:
However, before initiating action in terms of prosecution under Section 24 of the SEBI Act, 1992 and/or levying penalty under Section 15A of the SEBI Act, 1992, you are once again advised to submit the information sought vide our above mentioned summons by September 16, 2002 failing which appropriate action(s) as mentioned above would be initiated and no further communication would be entertained from your end.
It is thus abundantly clear from a perusal of the letter that the Appellant had declined the request for a further extension of time beyond 16.9.2002. The Respondent had failed to furnish the information by that date, resulting in the penalty under Section 15A becoming applicable. It would thus be palpable that the penalty prior to the amendment to Section 15A would be applicable, i.e. Rs. 1.5 lakhs.