2014 (8) TMI 1166 - AT - Companies Law

Tribunal overturns penalty decision for Appellant, stresses consistency in securities regulation

R.M. Shares Trading (P.) Ltd. Versus Securities and Exchange Board of India

The Tribunal set aside the penalty imposed on the Appellant under section 15HA of the Securities and Exchange Board of India Act, 1992, due to the ... Refusal on the part of the Adjudicating Officer to consider decision of another Adjudicating Officer of SEBI - Penalty u/s 15HA of SEBI Act, 1992 - Object of conferring penal powers upon the Adjudicating Officer - Held that:- Object of conferring penal powers upon the Adjudicating Officer is to ensure that the market players who violate the provisions of SEBI Act and the Rules and Regulations made there-under are brought to book and punished if found guilty, so that the order acts as a deterrent to other market players and carry on their trades in securities market in accordance with law. In an Adjudication proceedings, if a party relies on adjudication order passed in an another case, then, judicial discipline demands that the Adjudicating Officer considers that order and thereafter passes an order either to follow or distinguish the earlier order or disagree with the order by recording reasons as to how that order is erroneous and ought not to be followed. In the present case, the Adjudicating Officer has flatly declined to consider the order passed by another Adjudicating Officer on ground that such an order does not have binding effect and that he would prefer to form an independent view. Unless facts and circumstances set out in an order passed by Adjudicating Officer are materially different from the facts and circumstances of the case in hand, it would be just and proper for the Adjudicating Officer to follow the earlier order so that there is uniformity in the quasi judicial orders passed by the Adjudicating Officers' of SEBI. In the present case, since the Adjudicating Officer of SEBI has committed impropriety of refusing to consider the decision of another Adjudicating Officer which according to the Appellant has direct bearing on the facts of present case, without going into the merits of the case we set aside the impugned order and direct SEBI to pass fresh order. Issues:1. Challenge to penalty imposed under section 15HA of the Securities and Exchange Board of India Act, 1992.2. Refusal of Adjudicating Officer to consider decision of another Adjudicating Officer of SEBI.Analysis:Issue 1:The appeal challenges the penalty imposed on the Appellant under section 15HA of the Securities and Exchange Board of India Act, 1992. The Adjudication order dated 28th April, 2014, imposed a penalty of Rs. 10 lac on the Appellant. The Tribunal decided to set aside the impugned order without delving into the merits of the case, based on the refusal of the Adjudicating Officer to consider the decision of another Adjudicating Officer of SEBI. The purpose of conferring penal powers on the Adjudicating Officer is to ensure compliance with the law and to penalize violators as a deterrent to others in the securities market. The Tribunal emphasized the importance of considering previous adjudication orders for maintaining consistency and judicial discipline in decision-making.Issue 2:The key issue in this case revolves around the refusal of the Adjudicating Officer to consider the decision of another Adjudicating Officer of SEBI. The Tribunal criticized this refusal as highly improper, emphasizing that adjudication orders are quasi-judicial in nature and require a thorough consideration of past decisions for consistency and fairness. It was highlighted that in adjudication proceedings, if a party relies on a previous adjudication order, the Adjudicating Officer must consider and either follow, distinguish, or disagree with it, providing reasons for the decision. By refusing to consider the previous decision, the Adjudicating Officer created the risk of chaos and inconsistency in SEBI's adjudication process. The Tribunal set aside the impugned order and directed SEBI to assign the matter to a different Adjudicating Officer for a fresh hearing and decision based on the merits of the case.In conclusion, the Tribunal's judgment focused on upholding the principles of consistency, fairness, and judicial discipline in adjudication proceedings, emphasizing the importance of considering and respecting previous decisions to ensure uniformity and adherence to the law in the securities market regulatory framework.