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Chairman SEBI Versus Roofit Industries Ltd.

2015 (11) TMI 1387 - SUPREME COURT

Reduction 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 ₹ 1 crore to ₹ 60,000 - Held that:- On an analysis of the language in the 1961 Act, it is clear that the Legislature intended for non-compliance with the obligation of making a Return to be considered an infraction as long as the default continued. The facts before us are significantly different. The amendment to Section 15 .....

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indicate a legislative intent to consider the default a continuing one. - As in Deokaran Nenshi, the default was clearly complete on the failure to submit the requisite information by the date set by the Appellant, i.e. 16.9.2002. Had the Respondent furnished the information sought by the Appellant by that date, undoubtedly there would have been no culpability against it. Thus the penalty first became applicable under the pre-amendment Section, which imposed "a penalty not exceeding one lak .....

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C.A. No. 1364-65 of 2015 and on each of the Respondents in the connected Appeals is ₹ 1.5 lakhs. The impugned judgment of the SAT is set aside and the Appeals are allowed in these terms. The interim stay order dated 18.2.2005 is vacated. - Civil Appeal No(s). 1364-1365/2005 With C.A. No. 1366-1367/2005, C.A. No. 1368-1369/2005, C.A. No. 1370-1371/2005, C.A. No. 1372-1373/2005, C.A. No. 1374-1375/2005, C.A. No. 1376-1377/2005 & C.A. No. 1378-1379/2005 - Dated:- 26-11-2015 - VIKRAMAJIT SEN, .....

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ge Board of India Act, 1992 (SEBI Act) from ₹ 1 crore to ₹ 60,000. In the connected matters, the penalty imposed by the Appellant SEBI was reduced from ₹ 75,00,000 to ₹ 15,000 in five cases and ₹ 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 R .....

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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 despit .....

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before the SAT. 3 The SAT, on 9.8.2004, came to the conclusion that there was no dispute that the Respondent was liable to answer the summons and produce whatever information was available with it. It noted that the penalty under Section 15A had been enhanced in 2002 to ₹ 1 lakh for each day of failure to furnish the required document, return or report, or ₹ 1 crore, whichever is less. It noted the submission of the Respondent that it had suffered deep financial setbacks and was on .....

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onnected appeals was also reduced for the same reasons, from ₹ 75 lakh to ₹ 15,000 in five cases and ₹ 60,000 in one case. The Appellant's application for review was dismissed on 8.11.2004. The Appellant has now filed the present Appeal, contending that the SAT erred in reducing the penalty imposed by the Adjudicating Officer on wholly extraneous grounds including the inability of the Respondent to pay the penalty, a contingency which is not mentioned or featured in Section .....

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fiable, 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. The use of the word "namely" indicates that these factors alone are to be considered by the Adjudicating Officer. Black's Law Dictionary defines "namely" as "by name or particular mention. The term indicates what is to be included by name. By contrast, including implies a partial list and ind .....

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ument, 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 ₹ 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 .....

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fences, 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 ₹ 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 .....

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s 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: 15A. Penalty for failure to furnish information, return, etc. - If any person, who is required under this Act or any rules or regulations made thereunder,- (a) to f .....

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002 and 8.9.2014, the penalty ought to have been ₹ 1 crore, without the possibility of any discretion for reduction. 6 However, before imposing such a penalty, we must consider the date on which the amendment came into effect, i.e. 29.10.2002. Since the Appellant's Summons to furnish the required documents was prior to this date and the Respondent failed to do so till well after it, the question before us is when the failure or default took place. While this question does not appear to .....

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02. From this date onwards, there was an obligation on the Respondent to produce the documents and information sought by the Appellant, but it failed to do so, even until the imposition of a penalty by the Adjudicating Officer on 29.3.2004. Instead, the Respondent sought extensions of time vide three letters. After the third letter, the Appellant sent a reminder letter dated 5.9.2002, which is reproduced below: URGENT IES/ID9/SP/17502/02 September 5, 2002 SUJIT PRASAD DY. GENERAL MANAGER INVESTI .....

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resaid information. Further, vide you letter dated August 12, 2002 you had again requested for the extension of time till August 31, 2002 and now, vide your letter dated August 28, 2002 you have once again requested for extension of time till September 30, 2002 to furnish the information. From the foregoing, it appears that you do not have any desire to submit the information, as sought by us, and/or do not wish to co-operate in the ongoing investigation in the scrip of M/s. Roofit Industries Lt .....

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clined 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. ₹ 1.5 lakhs. 8 Learned Senior Counsel for the Appellant, however, has argued that this is a continuing default, as it did not end till well after the amendment, with the result that penal .....

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Income Tax Act, 1922 because the former statute stated that it would apply if the Assessment was made subsequent to 1.4.1962. On an analysis of the language in the 1961 Act, it is clear that the Legislature intended for non-compliance with the obligation of making a Return to be considered an infraction as long as the default continued. The facts before us are significantly different. The amendment to Section 15A did not indicate that the amended Section would apply to penalties imposed after 2 .....

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hat the situation before us is more akin in its factual matrix to that in State of Bihar v. Deokaran Nenshi (1972) 2 SCC 890, which distinguished between continuing offences and offences committed once and for all. 5. A continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. It is one of those offences which arises out of a failure to obey or comply with a rule or its requirement and which involves a penalty, the liab .....

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