TMI Blog2017 (4) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... n Section 28A of SEBI Act by the Securities Laws (Amendment) Act, 2014 with retrospective effect from 18.07.2013. Very fact that the legislature, contrary to the provisions contained in the Ordinances, deemed it necessary to incorporate Section 220 of the Income Tax Act in Section 28A of SEBI Act for recovery of the amounts specified under Section 28A, clearly shows that the legislature intended to apply the rights and obligations contained in Section 220 of the Income Tax Act for recovery of the amounts specified under Section 28A of SEBI Act. Therefore, argument of the appellants that the interest liability contained in Section 220 of the Income Tax Act incorporated in Section 28A of SEBI Act would not be applicable for recovery of the amount specified under Section 28A cannot be accepted. Accordingly, we hold that Section 28A read with Section 220 inserted to SEBI Act with retrospective effect from 18.07.2013 imposes interest liability on a person who fails to pay the amounts specified in Section 28A of the SEBI Act within the stipulated time. Whether Section 28A can be invoked for demanding interest on the amounts due to SEBI pursuant to the orders passed prior to 18.07.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Rajesh Nagory, Advocate Per: Justice J.P. Devadhar 1. Whether Section 28A inserted to the Securities and Exchange Board of India Act, 1992 ( SEBI Act for short) with effect from 18.07.2013 imposes interest liability on a person who fails to pay the amounts specified in Section 28A within the stipulated time and if so, whether Section 28A can be invoked for demanding interest on the amounts due to SEBI pursuant to the orders passed prior to 18.07.2013 is the question raised in all these appeals. 2. The appellants in all these appeals have challenged the orders passed by the Recovery Officer ( RO for short) wherein the RO has demanded interest on the amounts due to SEBI under the orders passed prior to 18.07.2013 from the date of the order till payment. In Appeal No. 41 of 2014, the interest is demanded on the disgorgement amount from the date of the disgorgement order till payment. In all other appeals, interest is demanded on the penalty amount from the date of the penalty orders passed prior to 18.07.2013 till payment. Since the dispute raised in these appeals is common, all these appeals are heard together and disposed of by this common decision. 3. For resolvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew to provide a mechanism for recovery of the amounts specified in that Section. f) As the Securities Laws (Amendment) Bill in terms of the 1st Ordinance (with certain modifications) could not be passed, with a view to give continued effect to the provisions of 1st Ordinance, the Securities Laws (Amendment), Second Ordinance 2013 ( 2nd Ordinance for convenience) was promulgated by the President of India on 16.09.2013, whereby the 1st Ordinance was repealed and, inter alia, Section 28A was once again sought to be inserted to SEBI Act with effect from 18.07.2013. g) As the 2nd Ordinance ceased to operate from 16.01.2014, the President of India on 28.03.2014 promulgated Securities Laws (Amendment) Ordinance, 2014, whereby, Section 28A was sought to be inserted to SEBI Act once again with retrospective effect from 18.07.2013. h) With some modifications to the aforesaid Ordinance, Parliament enacted the Securities Laws (Amendment) Act, 2014 which received the assent of the President of India on 22.8.2014. Thus, Section 28A stood inserted to the SEBI Act with retrospective effect from 18.07.2013. i) In the meantime on 25.09.2013, RO of SEBI in purported exercise of the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges. o) On 17.01.2014, Appeal No.199 of 2013 filed by the appellants was disposed of by this Tribunal by permitting the appellants to file appeal against order passed by RO of SEBI on 16.01.2014 demanding interest on ₹ 4.05 crore from 21.07.2009. The appellants were also permitted to file an application before SEBI for lifting the additional debarment of 7 years imposed upon the appellants on ground that the appellants have paid ₹ 6 crore on 06.01.2014. p) Accordingly, present appeal is filed by the appellants to challenge the order passed by the RO of SEBI dated 16.01.2014 demanding interest on ₹ 4.05 crore from 21.07.2009 till 05.01.2014. It is not in dispute that the application filed by the appellants for vacating the 7 year debarment has been rejected by SEBI. 5. Mr. Joshi, Mr. Modi learned Senior Advocates and Mr. Bhatt, Mr. Sean Wassoodew Ms. Mona Vora, learned Advocates appearing on behalf of respective appellants submit that neither in the disgorgement order nor in any of the penalty orders passed against the respective appellants it was recorded that delay in payment would entail interest liability and therefore, in the absence of any interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debarment for 7 years. Therefore, fact that the appellants in Appeal No. 41 of 2014 have undergone additional debarment of 7 years on account of delay in disgorging the unlawful gain, cannot be a ground for the appellants to deny their liability to pay interest on the unlawful gain of ₹ 4.05 crore from 21.07.2009 till payment. Mr. Rajesh Nagory learned Advocate appearing on behalf of SEBI for some of the appellants submitted that although the penalty orders passed against those appellants do not specifically record the liability to pay interest on delayed payment of penalty amount, on insertion of Section 28A to SEBI Act, penalty remaining unpaid as on 18.07.2013 becomes recoverable with interest @ 12% per annum and therefore, no fault could be found with the decision of RO in demanding interest on delayed payment of the penalty. 7. Before dealing with the rival contentions it would be appropriate to quote Section 28A of SEBI Act (to the extent relevant) and Section 220 of the Income Tax Act, 1961, which read thus:- Section 28A of SEBI Act, 1992 w. r. e. f. 18/07/2013 Recovery of amounts . 28A. (1) If a person fails to pay the penalty imposed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice : Provided that, where the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of thirty days aforesaid is allowed, he may, with the previous approval of the Joint Commissioner, direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand. (2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid : Provided that, where as a result of an order under section 154, or section 155, or section 250, or section 254, or section 260, or section 262, or section 264 or an order of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount then outstanding, and the other instalment or instalments shall be deemed to have been due on the same date as the instalment actually in default. (6) Where an assessee has presented an appeal under section 246 or section 246A the Assessing Officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of. (7) Where an assessee has been assessed in respect of income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India, the Assessing Officer shall not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India, and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed. Explanation.-For the purposes of this section, income shall be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lection Recovery shall be treated as if the said provisions were the provisions of SEBI Act, the legislature has made it clear that on insertion of Section 28A, recovery of the amounts referred to in Section 28A shall be made by following the procedure prescribed under the Income Tax Act relating to Collection Recovery with such modifications as is deemed necessary. c) Since Section 220 of the Income Tax Act is deemed to be incorporated in Section 28A of SEBI Act in its entirety, it is apparent that recovery of the amounts referred to in Section 28A are liable to be made by applying the provisions contained in Section 220 of the Income Tax Act. Section 220(1) of the Income Tax Act provides that any amount specified as payable in the notice of demand under Section 156 shall be paid within 30 days of the service of the notice of demand under Section 156 and Section 220(2) provides that if the amount specified in any notice of demand referred in Section 220(1) is not paid within 30 days, then the assessee shall be liable to pay simple interest at one percent for every month (i.e. @ 12%) or part of a month comprised in the period commencing from the day immediately following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not contain any clause for levy of interest, the RO is not justified in demanding interest on delayed payment of the amounts referred to in Section 28A. There is no merit in the above argument, because, it is the prerogative of the legislature either to impose a liability by way of a substantive provision in the statute itself or impose such liability by incorporating such substantive provisions contained in an earlier Act. In the present case, by treating inter alia Section 220 of the Income Tax Act, 1961 as forming part of Section 28A of SEBI Act, the legislature has mandatorily imposed interest liability contained in Section 220 of the Income Tax Act for recovery of the amounts set out in Section 28A. Section 220(1) of the Income Tax Act, requires the person to whom notice of demand is already served to pay the amounts set out in the demand notice within 30 days. Section 220(2) provides that if the amounts demanded under the notice of demand is not paid within 30 days as specified in Section 220(1), then interest @ 12% per annum would be payable on the amounts specified in the notice of demand from the end of the period set out in Section 220(1). Thus, by incorporating Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 220 of the Income Tax Act shall be deemed to be bodily incorporated into Section 28A of SEBI Act and shall be applied for recovery of the amounts due to SEBI with such modifications as deemed necessary. In other words, by incorporating Section 220 in Section 28A, the legislature has statutorily applied the interest provisions contained in the Income Tax Act for collection recovery of the amounts under the SEBI Act. The Apex Court, in the aforesaid case noticed that no such provisions contained in the State Act were incorporated in the CST Act. Therefore, the decision of the Apex Court in case of India Carbon Ltd. (supra) has no relevance to the facts of present case. 12. It was contended on behalf of the appellants that since Section 28A uses the words and for this purpose after setting out the five modes of recovery and provides that the provisions of the Income Tax Act referred to in Section 28A shall in so far as may be, apply with necessary modifications clearly shows that the object of incorporating certain provisions of the Income Tax Act in Section 28A was for the limited purpose of facilitating recovery of the amounts under the five modes specified in Section 28A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act for recovery of the amounts referred to in Section 28A of SEBI Act. Not to do so would defeat the object with which Section 220 has been incorporated in Section 28A of SEBI Act. Thus, the arguments of the appellants if accepted it would render the provisions of Section 220 specifically incorporated in Section 28A redundant or otiose and therefore, such argument advanced by the appellants cannot be accepted. 14. Fact that in the 1st 2nd Ordinances promulgated by the President of India for amending the SEBI Act, Section 220 of the Income Tax Act was not sought to be incorporated in Section 28A, cannot be a ground to ignore the rights and obligations contained in Section 220 of the Income Tax Act which are specifically incorporated in Section 28A of SEBI Act by the Securities Laws (Amendment) Act, 2014 with retrospective effect from 18.07.2013. Very fact that the legislature, contrary to the provisions contained in the Ordinances, deemed it necessary to incorporate Section 220 of the Income Tax Act in Section 28A of SEBI Act for recovery of the amounts specified under Section 28A, clearly shows that the legislature intended to apply the rights and obligations contained in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RO was justified in demanding interest on the unpaid amount from the date of the orders passed prior to 18.07.2013 till payment. It is submitted that when the RO demanded interest on the unpaid amounts, Section 28A read with Section 220 was in operation. Since interest is demanded as per Section 28A, it cannot be said that in all these cases Section 28A read with Section 220 has been applied retrospectively. Alternatively it is submitted that even in the absence of a specific provision in the statute, SEBI based on equity, justice and good conscience could demand interest if there was delay in paying the amounts due to SEBI and therefore the RO was justified in demanding interest for the period prior to 18.07.2013. Findings relating to all appeals except in Appeal No. 41 of 2014. 19. Argument of SEBI that the amounts demanded by SEBI remaining unpaid on 18.07.2013 could be recovered with interest from the date of the orders passed prior to 18.07.2013 by applying the provisions contained in Section 28A cannot be accepted for the following reasons:- a) Object of inserting Section 28A to SEBI Act, was to provide a mechanism for collection recovery of the amounts due to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 220(2) only if the person fails to pay the amount demanded, within 30 days as provided under Section 220(1). Since the interest liability, if any, arises under Section 220(2) only after the expiry of 30 days stipulated under Section 220(1) and since Section 220 is made applicable for recovery of the amounts specified in Section 28A with effect from 18.07.2013, it is clear that interest liability for recovery of the amounts specified in Section 28A would arise only if the amounts are not paid within 30 days from 18.07.2013 and not prior thereto. f) Section 220(2) provides that the interest liability @ 12% per annum would commence from the end of the period mentioned in Section 220(1) till the date of payment. Since Section 220(1) gives 30 days time to a person to pay the amount demanded and in case of failure the interest liability arises from the end of the period specified in Section 220(1), it is apparent that the interest liability under Section would commence after 30 days from 18.07.2013 and not prior thereto. g) Section 220(3) provides that if an application is made before the expiry of the period mentioned in Section 220(1), the assessing officer may extend the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (rounded off from Rs. 1,94,69,558), being the simple interest at the rate of 12% per annum for 4 years (2005-09) on the unlawful gain Rs. 4,05,61,579. d) The noticees shall pay the above amount of Rs. 6 crore (Rupees six crore) within 45 (forty five) days from the date of this order by way of crossed demand draft drawn in favour of Securities and Exchange Board of India , payable at Mumbai. e) In case the aforesaid amount Rs. 6 crore is not paid within the specified time, the noticees shall be restrained from buying, selling or dealing in securities market in any manner whatsoever or accessing the securities market, directly or indirectly, for a further period of seven years, without prejudice to SEBI s right to enforce disgorgement. 23. It is contended on behalf of the appellants in Appeal No. 41 of 2014 that as per the order passed by the WTM of SEBI on 21.07.2009 the appellants were liable to pay the unlawful gain of ₹ 4.05 crore with interest amount of ₹ 1.95 crore for the period from 2005-09 within 45 days and there was no direction to pay further interest or continuing interest from 21.07.2009 till payment and therefore the RO is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y merit. By order dated 21.07.2009 the appellants were called upon to pay unlawful gain of ₹ 4.05 crore with interest quantified at ₹ 1.95 crore within 45 days. It is only if the appellants failed to pay the amounts demanded within 45 days, the appellants were to undergo additional debarment of 7 years. Interest payable by the appellants after 21.07.2009 could not be quantified at the time of passing the order on 21.07.2009. In these circumstances, it is not possible to hold that the order dated 21.07.2009 intended to discharge the appellants from paying interest on the unlawful gain from 21.07.2009 till payment on account of imposing additional debarment of 7 years. In fact, debarment of 7 years was in addition to the obligation to disgorge the unlawful gain with interest till payment. Imposing additional restriction for failing to pay the amount demanded within the stipulated time would not amount to double jeopardy. Therefore, fact that the appellants have undergone additional debarment of 7 years cannot be a ground to hold that the appellants are not liable to pay interest on the unlawful gain retained by the appellants till 06.01.2014. 27. Relying on a decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Civil Procedure it was contended on behalf of the appellants that when the order is silent on further interest on the principal amount from the date of the order to the date of the payment, it is deemed that further interest has been refused and, therefore, in the present case since the WTM of SEBI in his order dated 21.07.2009 had not directed further interest after 21.07.2009, the RO was not justified in demanding interest from the date of the order passed by the WTM of SEBI on 21.07.2009. We see no merit in the above contentions. As already noted above, the debarment of 7 years imposed on the appellants was in addition to the obligation imposed on the appellants to disgorge the unlawful gain with interest @ 12% per annum from the date of the order till payment. Therefore, the argument of the appellants that the order passed by the WTM of SEBI on 21.07.2009 was silent with respect to further payment of interest cannot be accepted. 31. Based on the demand notices issued by the RO under Rule 2 of the Second Schedule to the Income Tax Act it was contended on behalf of the appellants that the interest liability under Section 220 would arise only after the demand notices were se ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
