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2017 (10) TMI 149
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....etail individual investor category (RII) and thereby distorted the integrity of the market. By doing this, they denied other RIIs of allotment of their legitimate shares in initial public offers (IPOs) of various companies and made an unlawful gain of Rs. 4,05,61,579/- to the detriment of other RIIs. The conclusion, therefore, was that they had employed fraudulent, deceptive and manipulative practices to garner shares meant for RIIs in the aforesaid IPOs and hence violated Section 12A (a), (b) and (c) of the SEBI Act, and Regulations 3 and 4(1) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003 (PFUTP Regulations). Given this, the following directions were issued: "a) The noticees [Mr. Dushyant Natwarlal Dalal (PAN AAAPD 5859Q) and Mrs. Puloma Dushyant Dalal (PAN AAEPD 2909B)] shall not buy, sell or deal in the securities market in any manner whatsoever or access the securities market, directly or indirectly, for a period of 45 days from the date of this order; and b) The noticees shall disgorge the unlawful gain of Rs. 4.05 crores (rounded off from Rs. 4,05,61,57....
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....it was held: "In Appeal No. 41 of 2014 the directions given by the WTM of SEBI on 21.07.2009 was to disgorge the unlawful gain of Rs. 4.05 crores with interest @ 12% per annum quantified at Rs. 1.95 crores up to 21.07.2009 within 45 days from 21.07.2009 failing which, the appellants were debarred from entering the Securities market for a period of 7 years without prejudice to the right of SEBI to recover the unlawful gain with interest till payment. Since the order passed by the WTM of SEBI on 21.07.2009 contained an obligation to pay interest @ 12% per annum on the unlawful gain of Rs. 4.05 crores till payment, the RO was justified in demanding interest on the unlawful gain of Rs. 4.05 crores from 21.07.2009 till payment. Accordingly, Appeal No. 41 of 2014 is dismissed." 4. Insofar as the penalty orders are concerned, the facts are similar. In SEBI v. Ashok Panchariya, C.A. 10410 of 2017, a penalty order dated 13.11.2009 was passed for a sum of Rs. 25 lakhs under Section 15HA of the SEBI Act, which was made payable within 45 days of the receipt of the said order. This was because it was found that wrongful and misleading disclosures were made by the respondents to the ....
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....rores on 6.1.2014. He further argued that their case should not have been segregated from the penalty cases by the SAT and that, along with the other individuals in these cases, they should have been made to pay interest only on the unpaid amount from 18.7.2013 and not otherwise. On law, Shri Prasad argued that equity cannot override written law but can only supplement it and cited Raghunath Rai Bareja and another v. Punjab National Bank and others, (2007) 2 SCC 230 at 241-242, paragraphs 29-33. He also relied upon the principle that an executing Court cannot go behind a decree or add to it and that since future interest was expressly not provided for in his case, the SAT was in error in going behind the order dated 21.7.2009. He also argued that casus omissus cannot be filled by Courts, but only by the Legislature. 7. Shri Arvind Datar, on the other hand, argued that in the order dated 21.7.2009, the debarment for a period of 7 years was without prejudice to SEBI's right to enforce disgorgement, which would necessarily include future interest. He added that Section 28A belongs to the realm of procedural law, and when Section 220(2) of the Income Tax Act gets attracted, becau....
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.... (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 specifying the amount due from the person (such statement being hereafter in this Chapter referred to as certificate) and shall proceed to recover from such person the amount specified in the certificate by one or more of the following modes, namely:- (a) attachment and sale of the person's movable property; (b) attachment of the person's bank accounts; (c) attachment and sale of the person's immovable property; (d) arrest of the person and his detention in prison; (e) appointing a receiver for the management of the person's movable and immovable properties, and for this purpose, the provisions of sections 220 to 227, 228A, 229, 232, the Second and Third Schedules to the Income-tax Act, 1961 (43 of 1961) and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from tim....
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.... order in writing, to exercise the powers of a Recovery Officer." 11. A number of judgments have held that interest belongs to the field of substantive and not procedural law. Foremost among these judgments is J.K. Synthetics Ltd. v. Commercial Taxes Officer (1994) 4 SCC 276 at 291, in which a Constitution Bench held: "16. It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat ....
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.... judgment, which is India Carbon Limited v. The State of Assam, (1997) 6 SCC 479 at 482-483. 13. We were also referred to Purbanchal Cables & Conductors Pvt. Ltd. v. Assam State Electricity Board & Another, (2012) 7 SCC 462 at 484, where this Court dealt with the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, as follows:- "51. There is no doubt about the fact that the Act is a substantive law as vested rights of entitlement to a higher rate of interest in case of delayed payment accrues in favour of the supplier and a corresponding liability is imposed on the buyer. This Court, time and again, has observed that any substantive law shall operate prospectively unless retrospective operation is clearly made out in the language of the statute. Only a procedural or declaratory law operates retrospectively as there is no vested right in procedure. 52. In the absence of any express legislative intendment of the retrospective application of the Act, and by virtue of the fact that the Act creates a new liability of a high rate of interest against the buyer, the Act cannot be construed to have retrospective effect. Since the ....
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....d. v. A.P. State Electricity Board and another, (1993) Supp (4) SCC 136 at 178-181, paragraphs 128-133 where, according to him, the Court upheld interest payable in equity as a principle of law, though on the facts of that case, equity was not attracted so as to enable electricity boards to charge interest on security deposits. He also sought to rely upon NTPC Ltd. v. M.P. SEB (2011) 15 SCC 580, in which interest was not awarded on equitable grounds only because, on facts, it was held that it cannot be said that NTPC held on to excess amounts in an unjust way, so as to justify the claim of electricity boards for interest on these amounts. Shri Datar also cited South Eastern Coalfields Ltd. v. State of M.P. and others, (2003) 8 SCC 648, Indian Council For Enviro-Legal Action v. Union of India, (2011) 8 SCC 161 and Union of India v. Tata Chemicals Limited, (2014) 6 SCC 335 at 350, paragraphs 38- 39 to buttress his submission that interest can always be granted on equitable considerations. 16. We are of the view that an examination of the Interest Act, 1978 would clearly establish that interest can be granted in equity for causes of action from the date on which such cause of actio....
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....is Court held: "It was further held in Amrao Singh case [AIR 1961 SC 908 : (1961) 3 SCR 676 : (1961) 2 SCJ 372] that the Court had ample power under proviso to Section 1 of the Interest Act, 1839 to award interest on equitable grounds." 21. The 63rd Law Commission on the Interest Act, 1839 went into the aspect of grant of interest from the date of cause of action till the date of institution of proceedings in great detail. After setting out Section 1, together with the proviso, of the 1839 Act, the Law Commission recommended in paragraph 4.4A as under: "4.4A. But, in general, proceedings, other than suits would be outside the section. We are of the view that the section should be widened to cover proceedings other than suits. The discretion to award interest is as much needed in relation to other proceedings, as in relation to an ordinary civil suit. We are recommending an amendment of the section for the purpose." 22. After examining the proviso to Section 1, the Law Commission found that: "7.2 Broadly speaking, courts have, in cases decided in reliance on the proviso to section 1, awarded interest where the equity of the case so required. For exam....
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.... Parliament accepted the recommendation of the Law Commission and enacted the Interest Act of 1978. Section 2(a) reads as under: "Section 2 - Definitions In this Act, unless the context otherwise requires,- (a) "court" includes a tribunal and an arbitrator;" The Act has, therefore, been expanded to cover not merely civil courts but Tribunals as well. 24. We are directly concerned with Section 4 of the Act which reads as follows:- "Section 4 - Interest payable under certain enactments (1) Notwithstanding anything contained in section 3, interest shall be payable in all cases in which it is payable by virtue of any enactment or other rule of law or usage having the force of law. (2) Notwithstanding as aforesaid, and without prejudice to the generality of the provisions of subsection (1), the court shall, in each of the following cases, allow interest from the date specified below to the date of institution of the proceedings at such rate as the court may consider reasonable, unless the court is satisfied that there are special reasons why interest should not be allowed, namely:- (a) where money or oth....
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....We find that a learned single Judge of the Bombay High Court has, in Prabhavati Ramgarib B. v. Divisional Railway Manager, (2010) 4 Mah LJ 691 at 702-703, specifically held as follows: "35. The petitioner's claim for interest would fall within the ambit of the words "or other rule of law" in section 4(1). The other rule of law being on grounds of equity. Even under the Interest Act, 1839, interest was payable under the proviso to section 1 which reads: "Provided that interest shall be payable in all cases in which it is now payable by law." Interest was payable by law under that Act in equity. This was recognized in a series of judgments. For instance in Trojan and Co. v. Nagappa Chettiar, 1953 SCR 789, the Supreme Court, in paragraph 23, observed that it was well settled that interest is allowed by a Court of equity in the case of money obtained or retained by fraud. Interest was, therefore, awarded in equity. 36. The position is not different under the Interest Act, 1978. The words, in section 4(1) "or other rule of law" would include interest payable in equity. In fact, interest has been awarded by our Courts in equity as well as on principles analogous to sect....
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....(4) and 11B of the SEBI Act, 1992 and after taking into account the period of prohibition already undergone by the Noticee pursuant to the interim Order, I hereby direct that the Noticee, Mr. Dhaval A. Mehta (PAN No. ALKPM 2611G): (a) to disgorge the above unlawful gain of Rs. 72 lakhs and interest thereon @ 10% from the date of listing (August 12, 2005) of the IDFC IPO till the date of actual disgorgement, within 45 days of passing of this Order, by remitting the amount by a crossed demand draft in favour of SEBI, (b) be restrained from buying, selling or dealing in securities market in whatsoever manner or accessing securities market in any manner, directly or indirectly, for a further period of 2 years from the date of issuance of this Order. In case the amount is not disgorged within the specified time, the Noticee shall be restrained from buying, selling or dealing in securities market in whatsoever manner or accessing securities market, directly or indirectly, for an additional period of 5 years without prejudice to SEBI's right to enforce disgorgement." (Emphasis supplied) 30. Similarly, in Netanand Bhambu's case, by an order dated 7.5.2009, the same gentleman passed t....