2006 (5) TMI 191 - SUPREME COURT

Whether once it is conclusively established that the Mutual Fund has violated the terms of the Certificate of Registration and the Statutory Regulations, i.e. SEBI (Mutual Funds) Regulations, 1996 (‘the Regulations’) the imposition of penalty becomes a sine qua non of the violation?

Held that:- Appeal allowed. On a careful perusal of section 15(D)( b ) and section 15E of the Act, there is nothing which requires that mens rea must be proved before penalty can be imposed under these provisions. Hence once the contravention is established then the penalty is to follow. Thus the impugned judgment of the Securities Appellate Tribunal has set a serious wrong precedent and the powers of the SEBI to impose penalty under Chapter VI-A are severely curtailed against the plain language of the statute which mandatorily imposes penalties on the contravention of the Act/Regulations without any requirement of the contravention having been deliberated or contumacious. The imputing mens rea into the provisions of Chapter VI-A is against the plain language of the statute and frustrates entire purpose and object of introducing Chapter VIA to give teeth to the SEBI to secure strict compliance of the Act and the regulations.