TaxTMI 
TaxTMI 
2019 (3) TMI 197
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....rred can be enumerated and summarized as follows: (i) Whether the conditions stipulated in clauses (a), (b) and (c) of Section 15J of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as "SEBI Act") are exhaustive to govern the discretion in the Adjudicating Officer to decide on the quantum of penalty or the said conditions are merely illustrative? (ii) Whether the power and discretion vested by Section 15J of the SEBI Act to decide on the quantum of penalty, regardless of the manner in which the first question is answered, stands eclipsed by the penalty provisions contained in Section 15A to Section 15HA of the SEBI Act? 3. The SEBI Act, as the object of its enactment would indicate, was enacted "to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto." 4. For the purposes of the present reference, we may proceed to consider the provisions contained in Chapter VIA of the SEBI Act. Sections 15A to 15HA are the penalty provisions whereas Section 15I deals with th....
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....r one crore rupees, whichever is less." Section 15A as amended by Amendment Act No.27 of 2014 "15A. Penalty for failure to furnish information, return, etc. If any person, who is required under this Act or any rules or regulations made thereunder, (a) to furnish any document, return or report to the Board fails to furnish the same, he shall be liable to a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees; (b) to file any return or furnish any information, books or other documents within the time specified therefor in the regulations, fails to file return or furnish the same within the time specified therefor in the regulations, he shall be liable to a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees; (c) to maintain books of account or records, fails to maintain the same, he shall be liable to a penalty which shall not be less than one lakh rupees but which may extend to one lakh r....
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....tion 15A( a) of the SEBI Act was again amended. It is beyond any doubt that the second referred question stands fully answered by clarification through the medium of enacting the Explanation to Section 15J vide Act No.7 to 2017, which also states that the Adjudicating Officer shall always have deemed to have exercised and applied the provision. We, therefore, deem it appropriate to hold that the provisions of Section 15J were never eclipsed and had continued to apply in terms thereof to the defaults under Section 15A( a) of the SEBI Act. 7. Reference Order in Siddharth Chaturvedi & Ors. (supra) on the said aspect has observed that Section 15A( a) could apply even to technical defaults of small amounts and, therefore, prescription of minimum mandatory penalty of Rs. 1 lakh per day subject to maximum of Rs. 1 crore, would make the Section completely disproportionate and arbitrary so as to invade and violate fundamental rights. Insertion of the Explanation would reflect that the legislative intent, in spite of the use of the expression "whichever is less" in Section 15A( a) as it existed during the period 29th October 2002 till 7th September 2014, was not to curtail the discretion ....
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....udicating Officer, who is empowered on completion of the inquiry to impose "such penalty as he thinks fit in accordance with the provisions of any of those sections." 10. The above apart, the circumstances enumerated in clauses (a), (b) and (c) of Section 15J of the SEBI Act may have no relevance and may never arise in case of contraventions contemplated by certain provisions of the SEBI Act, for instance Section 15A, 15B or 15C of the SEBI Act. Failure to furnish information, return, etc.; failure to enter into agreement with clients; and failure to redress investors' grievances cannot give rise to the circumstances set out in clauses (a), (b) and (c) of Section 15J. 11. Therefore, to understand the conditions stipulated in clauses (a), (b) and (c) of Section 15J to be exhaustive and admitting of no exception or vesting any discretion in the Adjudicating Officer would be virtually to admit/concede that in adjudications involving penalties under Sections 15A, 15B and 15C, Section 15J will have no application. Such a result could not have been intended by the legislature. We, therefore, hold and take the view that conditions stipulated in clauses (a), (b) and (c) of Section 15....
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....ion while deciding upon the quantum of penalty. This dictum, however, does not mean that factum of continuing default is not a relevant factor, as we have held that clauses (a) to (c) in Section 15J of the SEBI Act are merely illustrative and are not the only grounds/factors which can be taken into consideration while determining the quantum of penalty. 14. We now proceed to consider each of the case as, in our considered view, such exercise would be appropriate to finally terminate/decide the appeals under consideration. C.A. No. 9797 of 2014 (Bhavesh Pabari Vs. The Adjudicating Officer, SEBI) C.A. No. 9798 of 2014 (M/s. Shree Radhe Vs. The Adjudicating Officer, SEBI) C.A. No. 9799 of 2014 (Hemant Sheth Vs. The Adjudicating Officer, SEBI) 15. These appeals arise from a common order dated 10th September, 2013 passed by the Securities Appellate Tribunal, Mumbai, ("Appellate Tribunal" for short), on appeals preferred by Mr. Bhavesh Pabari, M/s Shree Radhe, and Mr. Hemant Sheth impugning three separate orders all dated 30th December, 2011 passed by the Adjudicating Officer under Section 15I of the SEBI Act. 16. Impugned order passed by the Appellate Tribunal confirms penalty ....
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....tity traded in the GPL scrips between the connected persons was more than 50% of the market volume. (viii) On 1st August, 2006, the connected transactions were 83.79% of the market volume. (ix) Bhavesh Pabari had indulged in self trade in 60,203 GPL shares (5.1% of the total traded quantity from 18th April, 2006 to 25th August, 2006). (x) Bhavesh Pabari had executed reversal trades with M/s. Shree Radhe and Hemant Sheth for 7,73,810 shares during the period 18th April, 2006 to 25th August, 2006 which was 66% of the total traded quantity. (xi) Bhavesh Pabari had entered into 96 buy trades in 1,22,324 shares which were found to be synchronized by price and time and 69 buy trades in 1,43,170 shares synchronized by price, time and quantity with his sole proprietorship M/s. Shree Radhe in the period 18th April, 2006 to 25th August, 2006. (xii) Bhavesh Pabari had entered into 282 sell trades in 2,16,578 shares which were synchronized by price and time, and 32 sell trades for 43,626 shares which was found to be synchronized by price, time and quantity with M/s Shree Radhe during the period 18th April, 2006 to 25th August, 2006. (xiii) ....
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....er of Appellate Tribunal dated 10th September, 2013 deleting the penalty of Rs. 10,00,000 (Rupees ten lakhs only) each imposed on Bhavesh Pabari and M/s Shree Radhe under Section 15A( a) of the SEBI Act for violating Section 11C( 3) and 11C( 5) of SEBI Act. 22. The relevant portion of the impugned order passed by the Appellate Tribunal reads: "Additional challenge in Appeal No. 71 of 2012 and 72 of 2012, relates to imposition of Rs. 10 lac penalty upon each appellant for violating Section 11C (3) and 11C (5) of SEBI Act. Grievance of appellants is that failure to furnish requisite information was due to circumstances beyond control viz. grandmother of Bhavesh Pabari (Appellant in Appeal No. 71 of 2012) who is proprietor of M/s. Shree Radhe (Appellant in Appeal No. 72 of 2012) had expired during the relevant period and, therefore, he was in disturbed mind at the material time. Though, explanation given does not inspire confidence in the facts of present case, where penalty of Rs. 20 lac has already been upheld, in our opinion, it would be just and proper to delete penalty of Rs. 10 lac imposed upon both appellants". 23. Submission of the SEBI that the impugned order d....
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.... of India); and 26. The above captioned appellants are Promotor scum Directors of M/s. Brij Laxmi Leasing and Finance Co. Ltd., a company whose shares were listed on the Bombay Stock Exchange. 27. It is accepted and admitted that the appellants Ankur Chaturvedi, Sidharth Chaturvedi and Jay Kishore Chaturvedi having purchased shares of M/s. Brij Laxmi Leasing and Finance Co. Ltd. on 2, 3 and 6 occasions respectively, were required but had failed to make necessary disclosures to the stock exchange as stipulated and statutorily mandated by Regulations 13(4) and 13(4A) read with Regulation 13(5) of the Securities and Exchange Board of India (Probation of Insider Trading) Regulations, 1992 ("PIT Regulations" for short). 28. For the said violations, penalty of Rs. 5,00,000/( Rupees five lakhs only) in the case of Ankur Chaturvedi and Sidharth Chaturvedi and Rs. 11,00,000/( Rupees eleven lakhs only) in the case of Jay Kishore Chaturvedi were imposed under Section 15A( b) of the SEBI Act. Ankur Chaturvedi had also suffered penalty of Rs. 2,00,000/( Rupees two lakhs only) under Section 15HB of the SEBI Act as he had sold 45,032 shares after acquiring 45,000 shares on 29th January, ....
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....isition was in excess of the limits prescribed under Regulations 3(3) and 3(4) of SAST Regulations. Failure to notify/submit report to the concerned authorities within the stipulated time in terms of Regulations 3(3) and 3(4) is accepted. The case of the appellants is predicated on the principle of proportionality, for it is asserted that the quantum of penalty imposed is excessive and unreasonably harsh. Similar contentions were raised before the Appellate Tribunal with the submission that the target company had incurred huge losses and that it was a sick company. Furthermore, there was an absence of disproportionate gain or unfair advantage to the appellants or otherwise a loss to the investors. Contentions were rejected on the ground that the penalty imposed was reasonable and not harsh. To justify the quantum, reference was made to Sections 15A( a) and (b) of the SEBI Act, which stipulate that the penalty could be Rs. 1,00,000 (Rupees one lakh only) for each day during which the violation continued and could be as high as Rs. 1,00,00,000/( Rupees one crore only) for each violation. 35. This court, in the exercise of its jurisdiction under Section 15Z of the SEBI Act, cannot ....
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....ital. The shares were allotted pursuant to the approval given by the Board of Directors vide letter dated 25th June, 2011. The letter of allotment was received by him on 27th June, 2011, and 22,50,000 shares of the Target Company were transferred to his demat account on 12th August, 2011. 38. The Appellate Tribunal has affirmed the factual findings that there was a delay in disclosure, which was required to be made within two days of the receipt of intimation of allotment of shares, as per Regulations 7(1A) and 7(2) of the SAST Regulations. The intimation/letter from the Target Company about the said acquisition was received by the Bombay Stock Exchange only on 11th July, 2011. 39. Maximum penalty imposable on Badri Vishal Tandon was upto Rs. 1,00,00,000/( Rupees one crore only). In this backdrop, we do not find any reason to interfere with the quantum of penalty of Rs. 1,50,000/( Rupees one lakh and fifty thousand only) as imposed in exercise of jurisdiction under Section 15Z of the SEBI Act. C.A. No.1009/2017 (Magnum Equity Broking Ltd. Vs. Securities and Exchange Board of India). 40. The appellant has assailed the order of the Adjudicating Officer dated 18th July, 2014,....
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..../trades. The case of the appellant is that the trades were executed within a normal price range and did not lead to an artificial price movement. Reliance was placed on SEBI's circular dated 14th September, 1999 that cross deals executed between two clients of the same broker can be conducted through the screen mechanism of the stock exchange. Submission was that the synchronized trade was not a result of any illicit scheme. However, Appellate Tribunal had rejected the contentions as the transactions/trades made by the appellants were between family members restricted to two scrips of WTIL and ADPL spread over a period of 6 days and had referred to the factual matrix of the case. 43. Reference to the Securities and Exchange Board of India vs. Rakhi Trading (P) Ltd . (2018) 13 SCC 753 (paragraph 40) which refers to an earlier decision in the Securities and Exchange Board of India vs. Kishore R. Ajmera (2016) 6 SCC 368 is misconceived, for the said decisions do not hold that a broker cannot be proceeded against for violation of Regulation 7 of the SEBI (Stock Brokers and SubBrokers) Regulations, 1992 ("Stock Broker Regulations" for short) for violation of Clause A(2) of the Code o....
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....a), (e) and (g) 38 of the PFUTP Regulations and Regulation 7 read with Clauses A(1), (2), (3), (4) and (5) of the Code of Conduct for Stock Brokers specified under Schedule II of the Stock Broker Regulations. Consequently, penalty of Rs. 60,00,000/( Rupees sixty Lakhs only) was imposed under Section 15HA for violation of the provisions of the SEBI Act and the PFUTP Regulations and the penalty of Rs. 15,00,000/( Rupees fifteen lakhs only) was imposed under Section 15HB of the SEBI Act for the violation of the provisions of the Code of Conduct for Stock Brokers. 46. The appellant did not dispute the factual findings of having indulged in synchronized trade, circular trade and reversal trade in the scrips of M/s. Gangotri Textiles Ltd. They pleaded leniency claiming that they had no mala fide intention and their annual turnover for several years was around Rs. 5,00,000/( Rupees five lakhs only). Lastly, their contribution towards Last Traded Price (LTP) variation was nominal. The contentions have to be rejected as the appellant was a part of the larger game plan along with other entities who had indulged in synchronized, circular and reversal trading leading to a total cumulative p....
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....was no response. Thereafter, show cause notice on 30th June, 2015 was issued to which a part reply was given by the appellants on 23rd September, 2015. An email dated 30th November, 2015 was also sent by SEBI asking them to reply before 10th December, 2015, with an opportunity to appear on 15th December, 2015. This was also communicated by forwarding the notice through Speed Post AD, which was returned undelivered in case of Durga Prasad. Thus, several opportunities were given to ensure compliance by the appellants. Afterwards, on 15th December, 2015 Subodh Kumar Gupta, authorized representative of the appellants and others had appeared and sought adjournment for 22nd December, 2015, on which date a reply was filed. Subsequently, an additional reply dated 30th December, 2015 was furnished. Appellants in the aforesaid replies had stated that their offices were sealed and, therefore, the required details and information could not be furnished. Further, SEBI had not provided them necessary documents including the copy of complaint, affidavit, evidence against them and the investigation report. 49. We would now refer to the background of the case and why notices/summons were issued.....