IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No: 45 of 2004
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Date of Hearing
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08/12/2005
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Date of Decision
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14/12/2005
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Appellant – Represented by:
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TVC Shares Stock & Investment P. Ltd.
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Ms. Rajni Iyer, Ms. Manjari Shah, Mr. Tushar Marani, Mr. Anil Shah and Mr. Kirti Shah, Advocates
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Versus
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Securities & Exchange Board of India
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Respondent- Represented by
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Mr. Kumar Desai and Ms. Daya Gupta , Advocates
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CORAM
Justice Kumar Rajaratnam, Presiding Officer
C. Bhattacharya, Member
R.N. Bhardwaj, Member
Per: Justice Kumar Rajaratnam, Presiding Officer
1. Appeal taken up for disposal with the consent of both sides.
2. The appellant challenges the order of the Adjudicating Officer dated 22/01/2004. The Adjudicating Officer by his order dated 22/01/2004 imposed a penalty of Rs. 25 lakhs on the appellant for not furnishing information which he was liable to furnish under Section 15A of the SEBI Act, 1992. Section 15A as it then stood reads as follows:
“15A. If any person, who is required under this Act or any rules or regulations made thereunder,—
“(a) to furnish any document, return or report to the Board, fails to furnish the same, he shall be liable to a penalty not exceeding one lakh and fifty thousand rupees for each such failure;
“(b) to file any return or furnish any information, books or other documents within the time specified therefore in the regulations, fails to file return or furnish the same within the time specified therefore in the regulations, he shall be liable to a penalty not exceeding five thousand rupees for every day during which such failure continues;”
“(c) to maintain books of account or records, fails to maintain the same, he shall be liable to a penalty not exceeding ten thousand rupees for every day during which the failure continues.
3. The allegation is that the appellant did not cooperate with the investigating officer in spite of reminders. Learned counsel for the appellant Ms. Rajni Iyer vehemently submitted that the person incharge was not available to respond to the summons and as soon as the information was available it has been furnished. With regard to Form 32 of the ROC register the respondent was informed that Mr. Doshi was indisposed by letter dated 26th August, 2003. It is also submitted that one Kirti Shah was willing to supply the information sought by the respondent. It was further submitted that copies of Form 32 filed with the ROC was independently obtained by the respondent.
4. We do not agree with the submission of the learned counsel for the appellant that it is the job of SEBI to obtain the information independently that it sought for from the appellant. The fact that SEBI obtained information with regard to the names of Director in Form 32 filed with the ROC was because the appellant did not cooperate fully with the Investigating Officer.
5. Be that as it may. The Adjudicating Officer did not realize that the maximum penalty at they relevant time under Section 15A was Rs. 1.50,000/-. We have held in earlier case in appeal No. 151 of 2004 as follows:
“13. This Tribunal in Cabbot International Corpn. Vs. SEBI held that where the violation is of technical nature and due to a bonafide error, the Tribunal should not consider imposing heavy penalty and should help in pointing out the defect to the appellant so that it does not recur again and the Tribunal declined to impose any penalty in that case as there was substantial compliance. This order of this Tribunal was confirmed by the Bombay High Court.
“14. It is the common ground that at the relevant period the maximum penalty was Rs.5 lacs. The amendment enhancing the penalty to Rs.5 crores came into force with effect from 29th October, 2002.
“15. There appears to be no application of mind that at the relevant time the maximum penalty was Rs.5 lacs and therefore, the penalty of Rs. 4,36,85,949/- was not permissible under law.
“16. It is fairly conceded that there is nothing to show under the regulation that the regulation was amended with retrospective effect. Penalties unless specifically made retrospective must inevitably be only with effect from the date of amendment….. ”
6. The Supreme Court in Rattan Lal Vs. State of Punjab AIR 1965 SC 444 took the view that any amendment which generally affects the aggrieved party cannot be made retrospective unless the legislature intended it to be retrospective. This view was reiterated by the Supreme Court in Dayal Singh Vs. State of Rajasthan AIR 2004 SC 2608 which pronounced as follows:
“We, therefore, do not find that principles laid down in Rattan Lal depart from the well settled principles that a penal statute which create new offences is always prospective and a person can be punished for an offence committed by him in accordance with law as it existed on the date on which an offence was committed.”
7. This Tribunal while passing an order in the case of Ajay Agrawal Vs. SEBI in appeal No. 85 of 2004 has pronounced as follows:
“9. The question that arose in consideration is whether section 11B could be used with regard to the alleged misconducts, which were allegedly committed by the Appellant prior to introduction of section 11B.
“10. The learned counsel for the Appellant relied on Govinddas and Others Vs. Income-Tax Officer and Another (1976) 103 ITR 123 –
“11. The Supreme Court has held as follows:
“It is a well-settled rule of interpretation that unless the terms of statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. If the enactment is expressly in language which is fairly capable of either interpretation, it ought to be considered as prospective only.”
8. It may not be forgotten that any non payment of penalty imposed by the Tribunal would lead to a prosecution under Section 24 of the SEBI Act, 1992. Section 24 of the SEBI Act, 1992 reads as follows:
24.(1) Without prejudice to any award of penalty by the adjudicating officer under this Act, if any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules or regulations made thereunder, he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.
(2) If any person fails to pay the penalty imposed by the adjudicating officer or fails to comply with any of his directions or orders, he shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to three years or with fine which shall not be less than two thousand rupees but which may extend to ten thousand rupees or with both.”
9. There is nothing to suggest that the amendments in the Regulations dated 29/10/2002 were to be of retrospective effect. A plain reading would indicate that the amendments were prospective and not retrospective. Taking all these factors into account the maximum penalty is Rs. 1,50,000/-
10. The learned counsel relied on Section15J and submitted that the factors mentioned under Section 15J were not taken into account.
15J. While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have due regard to the following factors, namely :—
“(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
“(b) the amount of loss caused to an investor or group of investors as a result of the default;
“(c) the repetitive nature of the default.”
11. Admittedly there was no disproportionate gain, no loss to the investors and was not repeatetive in nature.
12. Taking all these factors into account and also taking into account the ill health of Mr. Doshi who was to furnish the information we feel it appropriate to impose a penalty of Rs. 75,000/-. The order of the adjudicating authority is modified accordingly.
13. The appeal is disposed of accordingly. No order as to costs.
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(Justice Kumar Rajaratnam)
Presiding Officer
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(R.N.Bhardwaj)
Member
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(C. Bhattacharya)
Member
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Place: Mumbai
Date: 14/12/2005