Mr. A. Kumar vs Sebi on 23 January, 2023
In Karvy Stock Broking Ltd. v. SEBI, Appeal No.6 of
2007 decided on 2nd May, 2009, this Tribunal held:
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Karvy Stock Broking Ltd. vs Sebi on 8 January, 2007
Rohitkumar Premkumar Gupta vs Sebi on 2 August, 2021
In this regard, reliance has been made by the
appellants in the case of Karvy Stock Broking Ltd. vs. SEBI Appeal
No. 6 of 2007 decided on May 2, 2008, wherein the principle of
disgorgement was propounded in paragraph 5 which is extracted
hereunder :-
Ms. Chitra Ramkrishna vs Sebi on 9 August, 2023
In support of his submission, NSE relied upon the
decision of this Tribunal in Karvy Stock Broking Ltd. Vs. SEBI,
[2008 SCC Online SAT 74], wherein this Tribunal held :-
Sebi vs Shri Dhaval A. Mehta on 27 November, 2007
As far as his contention that initiation of investigation/ enquiry is a condition precedent for passing a direction under Section 11 (4) of the Act, I note that the powers under Section 11 (4) of the Act are in addition to and not in derogation of powers under Sections 11 (1), (2), (2A) and (3) and 11B of the Act. SEBI being the regulator carries with it all the necessary powers expressed or implied which are essential to meet any exigencies in its widest amplitude in order to protect the interest of investors. In such circumstances, the contention that the initiation of investigation/inquiry is a condition precedent for the issuance of direction under Section 11 (4) of the Act is difficult to accept. Further, the Hon'ble Securities Appellate Tribunal (SAT), in its order dated January 08, 2007 inter alia observed in the matter of Karvy Stock Broking Ltd. v SEBI "If the prima facie facts disclose a case for proceeding further in the matter and depending upon the nature and gravity of the wrong doing, it would decide what measures it needs to take under Section 11 to protect the securities market and also the interests of the investors. If it feels that immediate preventive action is essential, it can "restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities" with immediate effect"...." The SAT further observed in the case cited supra "The provisions of the Act are basically intended to protect the interests of the investors and to promote the market. However, the Act as initially enacted provided primarily for taking promotional or protective measures. The power to take preventive or punitive measures was implicit. Now it has been expressly extended to taking even the preventive or punitive measures....
In Re: Shri D.S. Pendse, Nalini ... vs Unknown on 28 December, 2007
As regards the powers available to the Board under Section 11B, Hon'ble SAT had recently clarified vide its judgment in the case of Karvy Stock Broking Ltd. v. SEBI Appeal No. 92/2006 (Date of decision: 08.01.2007) by saying that,
It is clear that a common thread runs through various provisions of the Act and that is to empower the Board to take preventive as well as punitive measures so as to protect the investor and to promote the securities market.
Sebi vs Shri Pratik Mafatlal Shah on 15 February, 2008
3.2 Shri Shah in his reply inter alia contended that the provisions of Sections 11 (4) of the Act could not be invoked without initiating an investigation / enquiry. In this context, I note that the primary function and duty of SEBI is to protect the interests of the investors in securities and to regulate the securities market. The said duty is inter alia performed under Sections 11, 11B of the Act which is the very soul and heart of it. The provisions of the Act such as Sections 11B, 11(4) etc are meant to arm SEBI with authority so as to enable it effectively to exercise power and achieve the declared objectives of the Act. One cannot lose sight of the fact that SEBI has to regulate a speculative market and in such a market varied situations may arise, all of which cannot be envisaged and that there may be an urgent need to pass an order (without an opportunity of hearing), depending on exigencies. As regards his contention that initiation of investigation/ enquiry is a condition precedent for passing a direction under Section 11(4) of the Act, I note that the powers under Section 11(4) of the Act are in addition to and not in derogation of powers under Sections 11(1), (2), (2A) and (3) and 11B of the Act. SEBI being the regulator carries with it all the necessary powers expressed or implied which are essential to meet any exigencies, in order to protect the interest of investors. In such circumstances, the contention that the initiation of investigation/inquiry is a condition precedent for the issuance of direction under Section 11 (4) of the Act is difficult to accept. Further, SAT, in its order dated January 08, 2007 inter alia observed in the matter of Karvy Stock Broking Ltd. v. SEBI "If the prima facie facts disclose a case for proceeding further in the matter and depending upon the nature and gravity of the wrong doing, it would decide what measures it needs to take under Section 11 to protect the securities market and also the interests of the investors. If it feels that immediate preventive action is essential, it can "restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities" with immediate effect"...." The SAT further observed in the case cited supra "The provisions of the Act are basically intended to protect the interests of the investors and to promote the market. However, the Act as initially enacted provided primarily for taking promotional or protective measures. The power to take preventive or punitive measures was implicit. Now it has been expressly extended to taking even the preventive or punitive measures.... "In view of the above, we hold that the word 'inquiry' used in Section 11(4) refers to the inquiries held under Sections 11, 11B, also to the enquiry under the inquiry regulations framed under Section 12(3) and also to the inquiry held under Chapter VIA and it is during the pendency of any of these inquiries that an interim order could be passed with a view to protect the interests of investors or in the interest of the market". It is also to be noted that SEBI , vide order dated January 20, 2006 ordered investigations in the matter of IPO irregularities and in the said order, the requirement for giving notice was waived in the interest of investors and securities market.
Sebi vs Abhipra Capital Ltd. on 17 August, 2007
4.17 In the matter of M/s Karvy Stock Broking Ltd. v. SEBI also wherein M/s Karvy had challenged the interim order passed by SEBI dated May 26, 2006 directing the appellant not to act as a depository participant pending enquiry and passing of final orders except for acting on the instructions of existing beneficial owners, the Hon'ble Securities Appellate Tribunal in its order dated January 8, 2007, has observed as follows:
Sebi vs Ms. Himani Patel on 30 November, 2007
3.2 As far as her contention that initiation of investigation/ enquiry is a condition precedent for passing a direction under Section 11 (4) of the Act, I note that the powers under Section 11 (4) of the Act are in addition to and not in derogation of powers under Sections 11 (1), (2), (2A) and (3) and 11B of the Act. SEBI being the regulator carries with it all the necessary powers expressed or implied which are essential to meet any exigencies, in order to protect the interest of investors. In such circumstances, the contention that the initiation of investigation/inquiry is a condition precedent for the issuance of direction under Section 11 (4) of the Act is difficult to accept. Further, SAT, in its order dated January 08, 2007 inter alia observed in the matter of Karvy Stock Broking Ltd. v. SEBI "If the prima facie facts disclose a case for proceeding further in the matter and depending upon the nature and gravity of the wrong doing, it would decide what measures it needs to take under Section 11 to protect the securities market and also the interests of the investors. If it feels that immediate preventive action is essential, it can "restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities" with immediate effect".... The SAT further observed in the case cited supra "The provisions of the Act are basically intended to protect the interests of the investors and to promote the market. However, the Act as initially enacted provided primarily for taking promotional or protective measures. The power to take preventive or punitive measures was implicit. Now it has been expressly extended to taking even the preventive or punitive measures.... "In view of the above, we hold that the word 'inquiry' used in Section 11(4) refers to the inquiries held under Sections 11, 11B, also to the enquiry under the inquiry regulations framed under Section 12(3) and also to the inquiry held under Chapter VIA and it is during the pendency of any of these inquiries that an interim order could be passed with a view to protect the interests of investors or in the interest of the market" (Emphasis supplied).
Himani Patel vs Sebi on 7 September, 2009
Now coming to the direction requiring the appellant to disgorge a sum of
Rs. 33,52,636/- alongwith interest at the rate of 10% per annum. It is appellant's own
case that she sold 10,000 shares on November 29, 2005 at the market rate of Rs. 839.75
per share and the remaining 160 shares on December 26, 2005 at the rate of Rs. 854.60
per share. It is common case between the parties that the issue price of the share was
Rs. 510/-. The profit made by the appellant in the present case can be worked out
mathematically as has been done in the impugned order and it cannot be disputed that
she made an undue profit of Rs. 33,52,636/- as calculated by the whole time member.
We had the occasion of dealing with the concept of disgorgement in Karvy Stock
10
Broking Ltd. versus Securities and Exchange Board of India Appeal no. 6 of 2007
decided on May 2, 2008 wherein we have observed as under :
Gagan Rastogi vs Sebi on 12 July, 2019
20. Reliance placed by the appellants on various
judgements (supra) are distinguishable. Contentions regarding
restriction on Section 11B of SEBI Act, relying on Karvy Stock
Broking Ltd. v/s SEBI (Appeal No. 06, 2007 decided on May
02, 2008), is unfounded as there is nothing in Section 11B
which restricts SEBI from issuing directions which are also
penal in nature, if necessary.