TaxTMI 
TaxTMI 
2017 (4) TMI 1196
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 resolving the dispute raised in these appeals, facts of each case have little relevance. However, for better appreciation of the dispute, we set out relevant facts in Appeal No. 41 of 2014. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assed, 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Ordinance" for convenience) was promulgated by the President of India on 16.09.2013, whereby the 1st Ordinance was repealed and, inter alia, Section 28A was once again sought to be inserted to SEBI Act with effect from 18.07.2013.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 powers conferred under the provisions of 2nd Ordinance dated 16.09.2013 i.e. under Section 28A of SEBI Act read with Sections 222 to 232of the Income Tax Act, 1961 and the Second Schedule to the said Act a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....09. 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 Rs. 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 Rs. 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 liability recorded in the disgorgement/ penalty orders, the RO is not justified in demanding interest for the delayed payment of the amounts specified in the respective orders. It is further submitted that Section 28A inserted to SEBI Act with retrospective e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 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 the adjudicating officer or fails to comply with any direction of the Board for refund of monies or fails to comply with a direction of disgorgement order issued under section 11B or fails to pay any fees due to the Board, the Recovery Officer may draw up under his signature a statement in the specified form....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evious 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 Settlement Commission under subsection (4) of section 245D, the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded : Provided further that in respect of any period commencing on or before the 31st day of March, 1989 and ending after that d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee 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 to have been brought into India if it has been utilised or could have been utilised for the purposes of any expenditure actually incurred by the assessee outside India or if the income, whether capitalised or not, has been brought into India in any form." Whether Section 28A imposes interest liability for the delay in payment. 8. Basic argument advanced on behalf of the appellants is that Sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the end of the period mentioned in Section 220(1) and ending with the day on which the amount is paid. d) It is relevant to note that Section 220(1) of the Income Tax Act does not contemplate issuance of any notice of demand, but refers to the notice of demand served under Section 156 and mandates that the amount specified in the said notice of demand shall be paid within 30 days failing which interes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ained 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 Section 220 in Section 28A, the legislature has statutorily imposed interest liability, on the person who fails to pay the amounts specified in Section 28A of SEBI Act within 30 days of Section 28A coming into force. Therefore, argument of the appellants that under Section 28A of the SEBI Act interest cannot be demanded on delayed payment of the amounts due to SEBI cannot be accepted. 10. Strong reliance w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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. We see no merit in the above contention. Very fact that the legislature has sought to incorporate in Section 28A of SEBI Act almost all the provisions contained in Chapter XVII D of the Income Tax Act under the head 'collection and recovery' clearly show that the incorporation was not limited to the modes of recovery but to adopt the entire mechanism provided under the Income Tax Act for 'collection an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 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. 15. Accordingly, we hold that Section 28A read wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 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 SEBI. Instead of providing an independent mechanism, the legislature incorporated the provisions contained in the Income Tax Act relating to 'Collection & Recovery' in Section 28A. b) As a result of incorporating Section 220 of the Income Tax Act in Section 28A obligation to pay interest for delayed payment of the amounts due to SEBI became statutorily introduced from the date on which Section 28A came into ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....covery 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 time for payment or allow payment by installments, subject to such conditions as he thinks fit. Since Section 220 is made applicable for recovery of the amounts specified in Section 28A of SEBI Act from 18.07.2013 it is apparent that a person who has failed to pay the amounts specified under Section 28A as on 18.07.2013 could make an application under Section 220(3) before the expiry of 30 days from 18.07.201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount 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 Rs. 4.05 crore with interest amount of Rs. 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 not justified in demanding further interest on Rs. 4.05 crore from 21.07.2009 till payment. It is submitted that the order dated 21.07.2009 specifically provides that if the amount of Rs. 6 crore was not paid within 45 days, the appellants would have to undergo additional debarment for 7 years which the appellants have already undergone and therefore, the RO cannot demand interest on unlawful gain of Rs. 4.05 crore from 21.07.2009 till payment. 24.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld 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 of the Apex Court in case of Hope Plantations Ltd. v/s Taluk Land Board reported in (1995) 5 SCC 590 and a British decision in case of Thrasyvoulou v/s Secretary of State for the Environment reported in (1990) 2 AC 273 it was contended on behalf of the appellants that the question of levy of interest stood concluded by the disgorgement order dated 21.07.2009 which has been upheld by this Tribunal as also the Apex Court and therefore, SEBI cannot seek to relitigate the issue of interes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9. 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 served on the appellants by the RO. This argument is unsustainable because, interest liability under Section 220 is automatic and does not come into operation after the demand is raised by the RO. In any event, in the present case, since the order passed by the WTM on 21.07.2009 required the appellants to disgorge the unlawful gain with interest, the RO was justified in demanding interest from the appellants. Admittedly, the unlawful gain of Rs. 4.05 crore remained with the appellants from 2005....