IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

Review Petition No. 1 of 2006

in

Appeal No. 23 of 2006

 

Date of Decision

26.6.2006

 

 

Securities and Exchange Board of India			……	Applicant
Versus
Devichand Hansraj Oswal	……			Respondent-appellant

 

 

Present :  Mr.  Shri Kumar Desai & Shri Ravi Hegde, Advocates for the                        applicant

 

                  Mr. Shri V.M. Singh & Shri S.H. Merchant, Advocate for the            respondent – appellant.

 

Coram:

            Justice N.K. Sodhi, Presiding Officer

            C. Bhattacharya, Member

            R. N. Bhardwaj, Member

 

Per:  Justice N.K. Sodhi, Presiding Officer (oral)

             This order will dispose of two review petitions nos. 1 and 2 of 2006 filed in Appeals nos. 23 and 25 of 2006 in which a common question of law arises.  The learned counsel for the parties are agreed that the decision in application no.1 will govern the other application as well.

   2.        This application has been filed under Section 15(U)(2)(e) of the Securities and Exchange Board of India Act, 1992 (hereinafter called “the Act”) seeking review of our order dated 8.2.2006 whereby the order passed by the Securities and Exchange Board of India (for short “the Board”) suspending the certificate of registration of Devichand Hansraj Oswal (hereinafter called “the sub broker”) for a period of two months was modified and instead a monetary penalty of Rs. 50,000/- was imposed.  It is not in dispute that three charges were levelled against the sub broker and these were (1) he did not maintain proper books of accounts and records. (2) the contract notes received by him as a sub broker did not bear details like trade number, trade time and order number etc.  (3) he did not cooperate with the inspection team at the time when the latter carried out inspection of the business premises.  While hearing the appeal against the order of the Board we upheld the first charge.  As regards the second charge, we were of the view that the sub broker was not really at fault and that it was the broker who had defaulted in not furnishing the details in the contract notes.  We further found that the only fault of the sub broker was that he did not inform the exchange in this regard.   The third allegation regarding non-cooperation was stoutly refuted by the sub-broker and since it was the word of the sub broker against that of the inspecting team, we did not think that charge to be serious enough to warrant suspension of the certificate of the appellant.  While upholding the order of the Board we modified the same and converted the penalty from suspension to the payment of Rs.50,000 as monetary penalty.  This order is now sought to be reviewed.

   3.        The learned counsel appearing for the applicant contends that the Board had got the matter enquired into by an enquiry officer appointed under the Securities and Exchange Board of India (Procedure for Holding Enquiry by an Enquiry Officer and Imposing Penalty) Regulations, 2002 (for short “the Regulations) and that under these Regulations it did not have the power to impose any monetary penalty and that on the allegations being proved against the sub broker, his certificate of registration could either be suspended or cancelled or he could be warned or censured in terms of the Regulations.  It was argued by the learned counsel for the applicant that when a stock broker or a sub-broker contravenes any of the provisions of the Act, rules or regulations framed thereunder, then he is liable to a monetary penalty under Chapter VI A of the Act and/or any of the penalties under the Regulations including suspension or cancellation of the certificate of registration and that he could also be prosecuted under Section 24 of the Act.  Regulation 13 of the Regulations prescribes the minor and major penalties which could be imposed on an erring intermediary including a broker and a sub-broker.  The argument is that a monetary penalty could be levied only by an adjudicating officer under Chapter VI A of the Act after the matter has been enquired into by him in accordance with the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 and that any other penalty under the Regulations could be imposed by the Board after considering the report of the enquiry officer who has held an enquiry in accordance with the Regulations.  According to the applicant, the Board could not have imposed a monetary penalty and, therefore, the Tribunal in appeal also could not do the same.  Since we modified the order passed by the Board and imposed a monetary penalty our order, according to the Board, suffers from an error apparent on the face of the record and requires to be reviewed.  Having given our thoughtful consideration to this contention we are unable to accept the same.  May be, (without expressing any opinion in this regard) the Board cannot impose a monetary penalty on a defaulting intermediary when the matter is enquired into by an enquiry officer under the Regulations but the powers of the Tribunal in appeal are not fettered in this regard.  It is true that the Tribunal in appeal exercises the same powers which the Board has but in addition to those powers the Tribunal has also powers under Rule 21 of the Securities Appellate Tribunal (Procedure) Rules, 2000 (for short the Rules) which is reproduced hereunder for facility of reference:-

“21.  The Appellate Tribunal may make, such orders or give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice.”

A reading of the aforesaid rule leaves no room for doubt that the Tribunal in appeal apart from exercising the power which the Board has can also exercise powers to make such orders and give such directions as may be necessary or expedient to “secure the ends of justice”.  These powers have been conferred on the Tribunal with a view to do complete justice between the parties.  In the very nature of things, these powers are of very wide amplitude and are in the nature of supplementary powers.  It is a residuary power which this Tribunal may exercise whenever it is just and equitable to do so in the facts and circumstances of a case to ensure justice between the parties or to prevent injustice.  It is in the exercise of this power that the Tribunal modified the order passed by the Board and converted the penalty of suspension of the certificate of registration of the sub broker into monetary penalty and directed him to deposit a sum of Rs.50,000 with the Board.  This order was passed with a view to secure the ends of justice as we were of the view that on the findings recorded by the Board the penalty of suspension of registration was too harsh and disproportionate to the gravity of the charges proved.  It may be observed that the Act and the rules and regulations framed thereunder provide for imposition of a monetary penalty.  As already noticed, what is contended on behalf of the Board is that since the enquiry was held under the Regulations, any one of the penalties referred to in Regulation 13 alone could be imposed.  Had the contraventions been adjudged by the adjudicating officer then, even according to the Board, a monetary penalty could  be levied.  It is, thus, clear that imposition of a monetary penalty is not barred under the Act or under the rules and regulations framed thereunder.  It cannot, therefore be said that our order modifying the penalty of suspension of the certificate of registration to a monetary penalty suffered from inherent lack of jurisdiction.  We are clearly of the view that the Tribunal in appeal had the power to modify the penalty of suspension into one for a monetary penalty.  In this view of the matter, we have no hesitation in holding that the Tribunal had the power under Rule 21 of the Rules to modify the order passed by the Board.  It may be mentioned that the plea that we could not modify the order of suspension into one for monetary penalty was not raised before us when we heard and disposed of the appeal on 8.2.2006.

   4.        Since our order dated 8.2.2006 does not suffer from any inherent lack of jurisdiction and had been passed to secure the ends of justice we do not think that this is a fit case for us to review the same.   Moreover, we are also of the view that the said order does not suffer from any error apparent on the face of the record warranting a review. 

   5.        Having regard to nature of the charges proved against the sub broker the monetary penalty of Rs.50,000/- was appropriate in the circumstances.  There is, thus, no merit in the review applications and the same stand dismissed.

 

Sd/-

Justice N.K. Sodhi
Presiding Officer

Sd/-

R.N.Bhardwaj
Member

26.6.2006