2025 (11) TMI 866 - AT - SEBI

Enhanced penalty reduced to Rs.5 lakh per appellant; refund ordered of any excess paid, original quantum restored

Abhishek Soni, Dhaval Soni, Harshad Panchal, Radhakrishna Broking, Sonal Patel, Umesh Patel, Mr. Hemang S Shah Versus Securities and Exchange Board of India, Mumbai

SAT (LB), Mumbai reduced the enhanced penalty to Rs. 5 lakhs per appellant and ordered refund of any excess paid. The Tribunal held that appellants, by ... Imposition of penalty on all noticees - challenged the ex-parte order - Power of Adjudicating Officer, to enhance penalty on remand - solitary ground urged by the appellants is for maintaining the penalty imposed by the AO in the first exparte order. - HELD THAT:- The ex-parte order dated June 5, 2013, the AO, SEBI had imposed a penalty of Rs. 5 Lakhs. If that order were not challenged, it would have attained finality. By challenging the said order, the appellants got an opportunity to put forth their case before SEBI. After they appeared before the SEBI, the penalty has been increased to Rs. 18 Lakhs. In the facts of this case that the matter has reached this Tribunal thrice and on first two occasions the Tribunal has set aside the impugned orders and remitted the matter, in our view, the appellants cannot be placed in a situation worse than the first ex-parte order and the enhanced penalty requires reconsideration. Penalty is reduced to Rs. 5 Lakhs qua-each appellant. The excess penalty, if any, paid by the appellants shall be refunded. ISSUES PRESENTED AND CONSIDERED 1. Whether, on remand from the Tribunal after setting aside an ex-parte order, the Adjudicating Officer (AO) can legally enhance the monetary penalty originally imposed in the quashed ex-parte order. 2. Whether appellants, by successfully challenging an ex-parte order and obtaining fresh adjudication, may be placed in a position worse than they would have been had the original ex-parte order remained unchallenged. 3. Whether any excess amount paid pursuant to an enhanced penalty on remand is refundable where the Tribunal finds enhancement impermissible. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power to enhance penalty on remand Legal framework: Principles governing fresh adjudication on remand require that the AO decide the matter afresh after quashing the prior order and affording opportunity of hearing; remedies on remand are governed by fairness and limits on aggravation of the appellant's position resulting from exercise of appellate review. Precedent Treatment: The Tribunal had earlier set aside two impugned ex-parte orders and remitted the matter to the AO for fresh consideration after hearing; those remittals framed the procedural context for the AO's subsequent decision to impose an enhanced penalty. Interpretation and reasoning: The Tribunal observed that once an ex-parte order has been quashed and the matter remitted for fresh adjudication, the AO may reconsider the matter on merits. However, where the process of challenge and remand has led to multiple trips to the Tribunal (three rounds here), fairness dictates that an appellant should not be placed in a worse position than if the original ex-parte order had remained unchallenged. Enhancement of penalty on remand, thereby creating a greater liability than the original order that had been successfully challenged, is viewed as impermissible in the facts of this case. Ratio vs. Obiter: The holding that the AO cannot enhance penalty on remand so as to put appellants in a worse position than under the original ex-parte order is treated as ratio in the present decision, based on the specific procedural history of repeated remands and quashments by the Tribunal. Conclusions: The Tribunal concluded that enhancement from Rs. 5 Lakhs to Rs. 18 Lakhs on remand was not permissible in the circumstances and required reconsideration, leading to reduction of penalty to the original amount imposed in the first ex-parte order. Issue 2 - Protection against being placed in a worse position after successful challenge Legal framework: Fundamental fairness and appellate principle that an appellant who successfully obtains vacation of an order and a fresh hearing should not be prejudiced by being made to suffer greater sanction than would have obtained had the initial order remained unchallenged. Precedent Treatment: The Tribunal applied its prior orders setting aside ex-parte orders and remitting for fresh adjudication to assess the equities of increasing penalty; those prior remittals provided the factual and legal backdrop to determine applicability of the protective principle. Interpretation and reasoning: The Tribunal emphasized undisputed facts: initial ex-parte penalty was Rs. 5 Lakhs which, absent challenge, would have become final. By challenging the order, appellants obtained full opportunity to be heard; following hearings, the AO increased the penalty. Given multiple remittals and the appellants' invocation of appellate relief, the Tribunal found force in the contention that appellants should not be left worse off than the position created by the original ex-parte order. The fairness principle therefore operates to limit the penalty on remand to the original amount where the circumstances show repeated quashment and remittal. Ratio vs. Obiter: The protectionary principle applied here-preventing aggravated sanction post-challenge-is treated as operative ratio in the present disposition, linked to the specific history of repeated vacaturs and remands rather than as an absolute bar in all remand situations. Conclusions: The Tribunal held that appellants could not be placed in a worse position than under the initial ex-parte order and accordingly reduced the penalty to Rs. 5 Lakhs per appellant. Issue 3 - Refund of excess amount paid Legal framework: When a higher penalty imposed on remand is found impermissible, equitable and remedial principles require restitution of any excess amounts paid beyond the lawful penalty ultimately upheld. Precedent Treatment: The Tribunal's prior orders remitting the matter for fresh adjudication implied that consequences flowing from subsequent impermissible enhancement would be subject to correction on appeal; the impugned order here reflects that corrective approach. Interpretation and reasoning: Having determined that the enhanced penalty could not stand, the Tribunal directed reduction of the penalty to the earlier amount and ordered refund of any excess penalty paid by the appellants, treating such refund as necessary to restore parties to the position required by the Tribunal's legal conclusion. Ratio vs. Obiter: The directive to refund excess paid is ratio in the present decision, as a necessary corollary to the reduction of penalty on substantive grounds. Conclusions: The Tribunal ordered restitution of any excess penalty paid over Rs. 5 Lakhs per appellant. Cross-references and Outcome Whereas the AO's power to reassess on remand remains (the AO may re-decide on merits), the Tribunal constrained that power in the present circumstances so as not to worsen the appellants' position relative to the original ex-parte order that would have become final but for successful challenge. On that basis the Tribunal allowed the appeals in part, reduced the penalty to Rs. 5 Lakhs each, and directed refund of any excess amounts paid; interlocutory applications were disposed of and no costs were awarded.