Civil penalty under SEBI law follows proof of contravention; mens rea is not required for liability.

Civil penalty under the SEBI Act and SEBI (Mutual Funds) Regulations, 1996 is attracted on proof of contravention, and mens rea is not a necessary ingredient unless the statute expressly makes it so. Chapter VI-A uses the expression "shall be liable" to secure regulatory compliance and investor protection; section 15I governs adjudication after hearing, while section 15J affects only the quantum of penalty by directing consideration of disproportionate gain, investor loss, and repetitive default. Repeated routing of transactions through associate brokers beyond the prescribed limit constituted continuing violations, so penalty followed once breach was established. The criminal-law approach in Hindustan Steel was treated as inapplicable to this civil regulatory scheme.

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Issues: Whether, on established violation of the SEBI Act and the SEBI (Mutual Funds) Regulations, 1996, the imposition of penalty is mandatory and whether mens rea is an essential ingredient for penalty under the civil penalty provisions.

Analysis: Chapter VI-A of the SEBI Act, 1992 creates civil penalty provisions intended to secure compliance with securities law and protect investors. The statutory scheme uses the expression "shall be liable" and does not incorporate mens rea as a condition precedent for penalty under sections 15D(b) and 15E. Section 15I provides for adjudication after hearing, while section 15J governs only the quantum of penalty by requiring regard to disproportionate gain, loss to investors, and repetitive nature of default. The admitted routing of transactions through associate brokers beyond the prescribed limit under regulation 25(7)(a) constituted repeated contraventions over several quarters. In such a regime, the penalty follows upon proof of contravention; only the amount remains discretionary. The decision in Hindustan Steel was held inapplicable because the present proceeding concerns civil regulatory liability and not criminal or quasi-criminal punishment.

Conclusion: Mens rea is not necessary for imposing penalty under the SEBI Act and the SEBI (Mutual Funds) Regulations, 1996, and once contravention is established, penalty is attracted; the Tribunal's order setting aside the adjudicating officer's penalty was incorrect.

Ratio Decidendi: For civil penalty regimes enacted to enforce regulatory compliance, proof of the statutory contravention is sufficient to attract penalty unless the statute expressly requires mens rea; adjudicatory discretion ordinarily extends only to the quantum of penalty.

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