ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARD OF INDIA versus BHAVESH PABARI

[2019] 18 S.C.R.

AADJUDICATING OFFICER, SECURITIES AND EXCHANGEBOARD OF INDIA

BHAVESH PABARI

(Civil Appeal No.11311 of 2013)

FEBRUARY 28, 2019

[RANJAN GOGOI, CJI, DEEPAK GUPTA ANDSANJIV KHANNA, JJ.]

Securities and Exchange Board of India Act, 1992 – s.15-J,CCl. (a), (b) & (c) – Whether conditions stipulated in Clauses (a), (b)and (c) of s.15-J are exhaustive to govern the discretion in theAdjudicating Officer to decide on the quantum of penalty or thesaid conditions are merely illustrative – Held: Provisions of Clauses(a), (b) and (c) of s.15-J are illustrative in nature and have to beDtaken into account whenever such circumstances exist – But this isnot to say that there can be no other circumstance(s) beyond thoseenumerated in Clauses (a), (b) and (c) of s.15-J that the AdjudicatingOfficer is precluded in law from considering while deciding on thequantum of penalty to be imposed – narrow view would be indirect conflict with the provisions of s.15-I(2) which vests jurisdictionEin the Adjudicating Officer, who is empowered on completion of theinquiry to impose “such penalty as he thinks fit in accordance withthe provisions of any of those sections.”– The above apart, thecircumstances enumerated in Clauses (a), (b) and (c) of s.15-J mayhave no relevance and may never arise in case of contraventionsFcontemplated by certain provisions of the SEBI Act, for instances.15-A, 15-B or 15-C – Therefore, to understand the conditionsstipulated in Clauses (a), (b) and (c) of s.15-J to be exhaustive andadmitting of no exception or vesting any discretion in theAdjudicating Officer would be virtually to admit / concede that inadjudications involving penalties u/ss.15-A, 15-B and 15-C, s.15-JGwill have no application – Such result could not have been intendedby the legislature – Conditions stipulated in Clauses (a), (b) and (c)of s.15-J are not exhaustive and in the given facts of case, therecan be circumstances beyond those enumerated by Clauses (a), (b)and (c) of s.15-J which can be taken note of by the AdjudicatingHOfficer while determining the quantum of penalty.

Securities and Exchange Board of India Act, 1992 – s.15-J,Cl. (a), (b) & (c) and ss.15-A to 15-HA – Whether conditionsstipulated in Clauses (a) to (c) of s.15-J (which enumerates the“factors to be taken into account by the Adjudicating Officer” whileadjudging the quantum of penalty) are mandatory conditions whichmust be read into ss.15-A to 15-HA (the penalty provisions) in thesense that unless the conditions specified in Clauses (a) to (c) aresatisfied, penalty cannot be imposed by the Adjudicating Officerunder the substantive provisions of ss.15-A to 15-HA – Held: Theargument is too far-fetched to be accepted – s.15-J enumerates byway of illustration(s) the factors which the Adjudicating Officershould take into consideration for determining the quantum ofpenalty imposable – Imposition of penalty depends upon satisfactionof the substantive provisions as contained in s.15-A to s.15-HA.

Securities and Exchange Board of India Act, 1992 – s.15-J,Cl. (c) – Default under – Nature of – Continuing or repetitive –Held: Clause(c) of s.15-J refers to repetitive nature of default andnot continuing default – The word “repetitive” as used thereinwould refer to recurring or successive default – This dictum,however, does not mean that factum of continuing default is not arelevant factor as Clauses (a) to (c) in s.15-J of the Act are merelyillustrative and are not the only grounds/factors which can be takeninto consideration while determining the quantum of penalty – Wordsand Phrases – “repetitive”.Securities and Exchange Board of India Act, 1992 – s.15-J,Cl. (a), (b) & (c) and ss.15-A to 15-HA – Whether power anddiscretion vested by s.15-J to decide on the quantum of penalty,stands eclipsed by the penalty provisions contained in s.15-A tos.15-HA – Held: ss.15-A(a) to 15-HA have to be read along withs.15-J in manner to avoid any inconsistency or repugnancy –Need to avoid conflict and head-on-clash and construe the saidprovisions harmoniously – Explanation to s.15-J added byAmendment Act No.7 of 2017, has clarified and vested in theAdjudicating Officer discretion u/s.15-J on the quantum of penaltyto be imposed while adjudicating defaults u/ss.15-A to 15-HA –Explanation to s.15-J, which was introduced / added in 2017 forremoval of doubts created as result of pronouncement in M/s.Roofit Industries Ltd. case, also states that the Adjudicating Officer

Ashall always have deemed to have exercised and applied theprovision – Therefore, provisions of s.15-J were never eclipsed andhad continued to apply in terms thereof to the defaults u/s.15-A(a).Securities and Exchange Board of India Act, 1992 – s.15-Jand s.15A(e) – Applicability of s.15J, in context of s.15A(a) as itBwas between 29[th] October, 2002 till 7[th] September, 2014 – Expression“whichever is less” therein – Meaning and effect – Legislative intentbehind s.15A(a) as amended by Amendment Act No.7 of 2014 andClarificatory Explanation added by Act No.7 of 21017 to s.15Jexplained – Held: M/s Roofit Industries Ltd. case had erroneouslyheld that s.15-J would not be applicable after s.15-A(a) wasCamended with effect from 29[th] October, 2002 till 7[th] September, 2014when s.15-A(a) of the SEBI Act was again amended – Insertion ofExplanation to s.15-J added by Amendment Act No.7 of 2017 wouldreflect that the legislative intent, in spite of the use of the expression“whichever is less” in s.15-A(a) as it existed during the period 29[th]DOctober 2002 till 7[th] September 2014, was not to curtail thediscretion of the Adjudicating Officer u/s.15J on the quantum ofpenalty to be imposed while adjudicating defaults – The legislativeintent is also clear as s.15A(a) was amended by Amendment ActNo.27 of 2014 to state that the penalty could extend to Rs.1 lakhfor each day during which the failure continues subject to maximumEpenalty of Rs. 1 crore – This amendment in 2014 was notretrospective and therefore, clarificatory and for removal of doubtExplanation to s.15-J was added by Act No. 7 of 2017 – Normallythe expression “whichever is less” would connote absence ofdiscretion by prescribing the minimum mandatory penalty, but inFthe context of s.15A(a) as it was between 29[th] October,2002 till 7[th]September, 2014, read along with Explanation to s.15-J added byAct No.7 of 2017, the legislative intent was not to prescribe minimummandatory penalty of Rs.1 lakh per day during which the defaultand failure had continued – s.15-A(a) as it was between 25[th] October,2002 and 7[th] September, 2014 has to be read and interpreted in lineGwith the Amendment Act 27 of 2014 as giving discretion to theAdjudicating Officer to impose minimum penalty of Rs.1 lakh subjectto maximum penalty of Rs.1 crore, keeping in view the period ofdefault as well as aggravating and mitigating circumstancesincluding those specified in s.15-J.H

ADJUDICATING OFFICER, SECURITIES AND EXCHANGEBOARD OF INDIA v. BHAVESH PABARI

Criminal Law – Offence – “Continuing offence” and “Repeatoffence” – Distinction between – Held: The continuing offence is aone which is of continuous nature as distinguished from one whichis committed once and for all – In case of continuing offence, theliability continues until the rule or its requirement is obeyed orcomplied with – On every occasion when disobedience or non-compliance occurs and reoccurs, there is an offence committed –Continuing offence constitutes fresh offence every time or occasionit occurs – recurring or successive wrong, on the other hand, arethose which occur periodically with each wrong giving rise to adistinct and separate cause of action.

Interpretation of Statutes – Doctrine of Harmoniousconstruction – Invocation of – Held: Provision of one section cannotbe used to nullify and obtrude another unless it is impossible toreconcile the two provisions.

Interpretation of Statutes – Explanation to provision –Clarificatory Explanation – Explanation to s.15-J was introduced /added by Amendment Act No.7 of 2017 for removal of doubts createdas result of pronouncement in M/s. Roofit Industries Ltd. case –Explanation to s.15-J so added by Amendment Act No.7 of 2017has clarified and vested in the Adjudicating Officer discretionu/s.15-J on the quantum of penalty to be imposed while adjudicatingdefaults u/ss.15-A to 15-HA – Securities and Exchange Board ofIndia Act, 1992 – s.15-J, Explanation to.

Securities and Exchange Board of India through itsChairman v. Roofit Industries Limited (2016) 12 SCC125 – overruled.

State of Bihar v. Deokaran Nenshi & Ors. (1972) 2 SCC890 : [1973] 3 SCR 1004 and Union of India & Anr. v.Tarsem Singh (2008) 8 SCC 648 : [2008] 12 SCR 104– relied on.

Siddharth Chaturvedi v. Securities and Exchange Boardof India (2016) 12 SCC 119; Securities and ExchangeBoard of India v. Rakhi Trading (P) Ltd. (2018) 13 SCC753; and Securities and Exchange Board of India v.Kishore R. Ajmera (2016) 6 SCC 368: [2016] 1 SCR1118 – referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11311Cof 2013.

From the Judgment and Order dated 10.09.2013 of the SecuritiesAppellate Tribunal, Mumbai in Appeal No. 71 of 2012.

WithD

C.A. No. 1824 of 2014, C.A. No. 9798 of 2014, C.A. No. 9797 of2014, C.A. No. 9799 of 2014, C.A. No. 14728 of 2015, C.A. No. 14730of 2015, C.A. No. 14729 of 2015, C.A. No. 33 of 2017, C.A. No. 1009of 2017, C.A. No. 2641 of 2017, C.A. No. 6160 of 2018 and C.A. No.9563 of 2018.E

Mr. C.U. Singh, Sr. Adv. Sahil Khanna, J.D. Baruah, PraveenKumar, Harish Pandey, Abhishek Anand, M.P. Devanatha, Ms. RuchiKohli, Pradeep Aggarwal, Lal Pratap Singh, Arjun Aggarwal, P.N. Sharma,Atanu Mukherjee, Sarad Kumar Singhania, Purvish Jitendra Malkan,FPrakash Shah, Ms. Dharita Purvish Malkan, Ms. Khushboo V. Malkan,Alok Kumar, Raghaev R. Ms. Deepa Gorasia, Tanmaya Agarwal, NipunGoel, Sudarsh Menon, Ms. Nimisha Menon, Suryodaya Prakash Tiwari,Sanjay Kumar Dubey, Advs. for the Appellants.

Chander Uday Singh, Sr. Adv. Pratap Venugopal, Ms. SurekhaGRaman, Purushottam Kumar Jha, Ms. Remya Raj, M/s K J John andCo., Harish Pandey, Pradeep Aggarwal, Lal Pratap Singh, Umesh PratapSingh, Arjun Aggarwal, P.N. Sharma, Ms. Ruchi Kohli, Advs. for theRespondents.

The Judgment of the Court was delivered by

SANJIV KHANNA, J.

1. Delay condoned.

2. Two primary questions, in way interconnected, have beenreferred by the Referral judgment and order dated 14[th] March, 2016passed in Siddharth Chaturvedi Vs. Securities and Exchange Boardof India1. The correctness of the view expressed on the said twoquestions by numerical smaller bench of this Court inSecurities andExchange Board of India through its Chairman vs.Roofit IndustriesLimited2 would coincidentally arise. The questions referred can beenumerated and summarized as follows:

(i) Whether the conditions stipulated in clauses (a), (b) and (c) ofSection 15-J of the Securities and Exchange Board of India Act, 1992(hereinafter referred to as “SEBI Act”) are exhaustive to govern thediscretion in the Adjudicating Officer to decide on the quantum of penaltyor the said conditions are merely illustrative?

(ii) Whether the power and discretion vested by Section 15-J ofthe SEBI Act to decide on the quantum of penalty, regardless of themanner in which the first question is answered, stands eclipsed by thepenalty provisions contained in Section 15-A to Section 15-HA of theSEBI Act?

3. The SEBI Act, as the object of its enactment would indicate,was enacted “to provide for the establishment of Board to protectthe interests of investors in securities and to promote thedevelopment of, and to regulate, the securities market and formatters connected therewith or incidental thereto.”

4. For the purposes of the present reference, we may proceed toconsider the provisions contained in Chapter VI-A of the SEBI Act.Sections 15-A to 15-HA are the penalty provisions whereas Section 15-I deals with the power of adjudication and Section 15-J enumerates the“factors to be taken into account by the Adjudicating Officer”while adjudging the quantum of penalty.

5. Section 15-A, illustratively, as existing prior to its amendmentby Act No.59 of 2002, as amended by Act No.59 of 2002 and thereafter

1 (2016) 12 SCC 119

2 (2016) 12 SCC 125

as amended by Act No.27 of 2014 and Section 15-J are required to bespecifically noticed at this stage.

Section 15A as existing prior to Amendment Act No.59 of 2002

“15A. Penalty for failure to furnish information, return, etc.- If any person, who is required under this Act or any rules orregulations made thereunder, -

(a) to furnish any document, return or report to the Board,fails to furnish the same, he shall be liable to penalty not exceedingone lakh and fifty thousand rupees for each such failure;

(b) to file any return or furnish any information, books orother documents within the time specified therefor in theregulations, fails to file return or furnish the same within the timespecified therefor in the regulations, he shall be liable to penaltynot exceeding five thousand rupees for every day, during whichsuch failure continues;

(c) to maintain books of account or records, fails to maintainthe same, he shall be liable to penalty not exceeding ten thousandrupees for every day during which the failure continues.”

Section 15A as amended by Act No.59 of 2002

“15A. Penalty for failure to furnish information, return, etc.- If any person, who is required under this Act or any rules orregulations made thereunder, -

(a) to furnish any document, return or report to the Board,fails to furnish the same, he shall be liable to penalty of one lakhrupees for each day during which such failure continues or onecrore rupees, whichever is less;

(b) to file any return or furnish any information, books orother documents within the time specified therefor in theregulations, fails to file return or furnish the same within the timespecified therefor in the regulations, he shall be liable to penaltyof one lakh rupees for each day during which such failure continuesor one crore rupees, whichever is less;

(c) to maintain books of account or records, fails to maintainthe same, he shall be liable to penalty of one lakh rupees for

ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARDOF INDIA v. BHAVESH PABARI [SANJIV KHANNA, J. ]

each day during which such failure continues or one crore rupees,whichever is less.”

Section 15A as amended by Amendment Act No.27 of 2014

“15-A. Penalty for failure to furnish information, return, etc.- If any person, who is required under this Act or any rules orregulations made thereunder,-

(a) to furnish any document, return or report to the Boardfails to furnish the same, he shall be liable to penalty which shallnot be less than one lakh rupees but which may extend to onelakh rupees for each day during which such failure continuessubject to maximum of one crore rupees;

(b) to file any return or furnish any information, books orother documents within the time specified therefor in theregulations, fails to file return or furnish the same within the timespecified therefor in the regulations, he shall be liable to penaltywhich shall not be less than one lakh rupees but which may extendto one lakh rupees for each day during which such failure continuessubject to maximum of one crore rupees;

(c) to maintain books of account or records, fails to maintainthe same, he shall be liable to penalty which shall not be lessthan one lakh rupees but which may extend to one lakh rupees foreach day during which such failure continues subject to maximumof one crore rupees.

Section 15 J

“15-J. Factors to be taken into account by the adjudicating officer.-While adjudging the quantum of penalty under section 15-I, theadjudicating officer shall have due regard to the following factors,namely:-

(a) the amount of disproportionate gain or unfair advantage,wherever quantifiable, made as result of the default;

(b) the amount of loss caused to an investor or group ofinvestors as result of the default;

(c) the repetitive nature of the default.

[2019] 18 S.C.R.

AExplanation - for the removal of doubts, it is clarified that thepower of an adjudicating officer to adjudge the quantum of penaltyunder sections 15-A to 15-E, clauses (b) and (c) of section 15-F,15-G, 15-H and 15-HA shall be and shall always be deemed tohave been exercised under the provisions of this section.”

B[Explanation added by Act No. 7 of 2017]6. Insofar as the second question is concerned, if the penaltyprovisions are to be understood as not admitting of any exception ordiscretion and the penalty as prescribed in Section 15-A to Section 15-HA of the SEBI Act is to be mandatorily imposed in case of default/Cfailure, Section 15-J of the SEBI Act would stand obliterated and eclipsed.Hence, the question referred. Sections 15-A(a) to 15-HA have to beread along with Section 15-J in manner to avoid any inconsistency orrepugnancy. We must avoid conflict and head-on-clash and construe thesaid provisions harmoniously. Provision of one section cannot be used tonullify and obtrude another unless it is impossible to reconcile the twoDprovisions. The explanation to Section 15-J of the SEBI Act added byAct No.7 of 2017, quoted above, has clarified and vested in theAdjudicating Officer discretion under Section 15-J on the quantum ofpenalty to be imposed while adjudicating defaults under Sections 15-Ato 15-HA. Explanation to Section 15-J was introduced/added in 2017 forEthe removal of doubts created as result of pronouncement inM/s. Roofit Industries Ltd. case (supra). We are in agreement withthe reasoning given in reference order dated 14[th] March, 2016 thatM/s Roofit Industries Ltd. had erroneously and wrongly held that Section15-J would not be applicable after Section 15-A(a) was amended witheffect from 29[th] October, 2002 till 7[th] September, 2014 when Section 15-FA(a) of the SEBI Act was again amended. It is beyond any doubt thatthe second referred question stands fully answered by clarification throughthe medium of enacting the Explanation to Section 15-J vide Act No.7 to2017, which also states that the Adjudicating Officer shall always havedeemed to have exercised and applied the provision. We, therefore, deemGit appropriate to hold that the provisions of Section 15-J were nevereclipsed and had continued to apply in terms thereof to the defaultsunder Section 15-A(a) of the SEBI Act.

7. Reference Order in Siddharth Chaturvedi & Ors. (supra)on the said aspect has observed that Section 15-A(a) could apply evenHto technical defaults of small amounts and, therefore, prescription of

minimum mandatory penalty of Rs.1 lakh per day subject to maximumof Rs.1 crore, would make the Section completely disproportionate andarbitrary so as to invade and violate fundamental rights. Insertion of theExplanation would reflect that the legislative intent, in spite of the use ofthe expression “whichever is less” in Section 15-A(a) as it existed duringthe period 29[th] October 2002 till 7[th] September 2014, was not to curtailthe discretion of the Adjudicating Officer by prescribing minimummandatory penalty of not less than Rs. 1 lakh per day till compliancewas made, notwithstanding the fact that the default was technical, noloss was caused to the investor(s) and no disproportionate gain or unfairadvantage was made. The legislative intent is also clear as Section 15A(a)was amended by the Amendment Act No.27 of 2014 to state that thepenalty could extend to Rs. 1 lakh for each day during which the failurecontinues subject to maximum penalty of Rs. 1 crore. This amendmentin 2014 was not retrospective and therefore, clarificatory and removalof doubt Explanation to Section 15-J was added by the Act No. 7 of2017. Normally the expression “whichever is less” would connote absenceof discretion by prescribing the minimum mandatory penalty, but in thecontext of Section 15A(a) as it was between 29[th] October,2002 till 7[th]September, 2014, read along with Explanation to Section 15-J added byAct No.7 of 2017, we would hold the legislative intent was not to prescribeminimum mandatory penalty of Rs.1 lakh per day during which the defaultand failure had continued. We would prefer read and interpret Section15-A(a) as it was between 25[th] October, 2002 and 7[th] September, 2014in line with the Amendment Act 27 of 2014 as giving discretion to theAdjudicating Officer to impose minimum penalty of Rs.1 lakh subject tomaximum penalty of Rs.1 crore, keeping in view the period of default aswell as aggravating and mitigating circumstances including those specifiedin Section 15-J of the SEBI Act.

8. This will require us to consider the first question referred.Having dealt with the submissions advanced by the rival parties, (bothparties have actually canvassed for wider and more expansiveinterpretation of Section 15-J), we are inclined to take the view that theprovisions of clauses (a), (b) and (c) of Section 15-J are illustrative innature and have to be taken into account whenever such circumstancesexist. But this is not to say that there can be no other circumstance(s)beyond those enumerated in clauses (a), (b) and (c) of Section 15-J thatthe Adjudicating Officer is precluded in law from considering whiledeciding on the quantum of penalty to be imposed.

9. narrow view would be in direct conflict with the provisions ofSection 15-I(2) of the SEBI Act which vests jurisdiction in theAdjudicating Officer, who is empowered on completion of the inquiry toimpose “such penalty as he thinks fit in accordance with theprovisions of any of those sections.”

B10. The above apart, the circumstances enumerated in clauses(a), (b) and (c) of Section 15-J of the SEBI Act may have no relevanceand may never arise in case of contraventions contemplated by certainprovisions of the SEBI Act, for instance Section 15-A, 15-B or 15-C ofthe SEBI Act. Failure to furnish information, return, etc.; failure to enterinto agreement with clients; and failure to redress investors’ grievancesCcannot give rise to the circumstances set out in clauses (a), (b) and (c)of Section 15-J.

11. Therefore, to understand the conditions stipulated in clauses(a), (b) and (c) of Section 15-J to be exhaustive and admitting of noexception or vesting any discretion in the Adjudicating Officer would beDvirtually to admit/concede that in adjudications involving penalties underSections 15-A, 15-B and 15-C, Section 15-J will have no application.Such 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-J are not exhaustive and in the given factsEof case, there can be circumstances beyond those enumerated byclauses (a), (b) and (c) of Section 15-J which can be taken note of bythe Adjudicating Officer while determining the quantum of penalty.

12. At this stage, we must also deal with and reject the argumentraised by some of the private appellants that the conditions stipulated inFclauses (a) to (c) of Section 15-J are mandatory conditions which mustbe read into Sections 15-A to 15-HA in the sense that unless the conditionsspecified in clauses (a) to (c) are satisfied, penalty cannot be imposedby the Adjudicating Officer under the substantive provisions of Sections15-A to 15-HA of the SEBI Act. The argument is too far-fetched to beaccepted. Section 15-J of the SEBI Act enumerates by way ofGillustration(s) the factors which the Adjudicating Officer should take intoconsideration for determining the quantum of penalty imposable. Theimposition of penalty depends upon satisfaction of the substantiveprovisions as contained in Sections 15-A to Section 15-HA of the SEBIAct.

ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARDOF INDIA v. BHAVESH PABARI [SANJIV KHANNA, J. ]

13. There is distinction between continuing offence and arepeat offence. The continuing offence is one which is of continuousnature as distinguished from one which is committed once and for all.The term “continuing offence” was explained and elucidated by giving3several illustrations in State of Biharvs. Deokaran Nenshi & Ors..In case of continuing offence, the liability continues until the rule or itsrequirement is obeyed or complied with. On every occasion whendisobedience or non-compliance occurs and reoccurs, there is an offencecommitted. Continuing offence constitutes fresh offence every timeor occasion it occurs. In Union of India & Anr.Vs. Tarsem Singh4,continuing offence or default in service law was explained as singlewrongful act which causes continuing injury. recurring or successivewrong, on the other hand, are those which occur periodically with eachwrong giving rise to distinct and separate cause of action. We havemade reference to this legal position in view of clause (c) of Section 15-J of the SEBI Act which refers to repetitive nature of default and not acontinuing default. The word “repetitive” as used therein would refer toa recurring or successive default. This factum has to be taken intoconsideration while deciding upon the quantum of penalty. This dictum,however, does not mean that factum of continuing default is not relevantfactor, as we have held that clauses (a) to (c) in Section 15-J of theSEBI Act are merely illustrative and are not the only grounds/factorswhich can be taken into consideration while determining the quantum ofpenalty.

14. We now proceed to consider each of the case as, in ourconsidered view, such exercise would be appropriate to finally terminate/decide the appeals under consideration.

C.A. No. 9797 of 2014 (Bhavesh Pabari Vs. The AdjudicatingOfficer, SEBI)

C.A. No. 9798 of 2014 (M/s. Shree Radhe Vs. The AdjudicatingOfficer, SEBI)

C.A. No. 9799 of 2014 (Hemant Sheth Vs. The AdjudicatingOfficer, SEBI)

15. These appeals arise from common order dated 10[th]September, 2013 passed by the Securities Appellate Tribunal, Mumbai,

3 (1972) 2 SCC 8904 (2008) 8 SCC 648

A(“Appellate Tribunal” for short), on appeals preferred by Mr. BhaveshPabari, M/s Shree Radhe, and Mr. Hemant Sheth impugning threeseparate orders all dated 30[th] December, 2011 passed by the AdjudicatingOfficer under Section 15-I of the SEBI Act.

16. Impugned order passed by the Appellate Tribunal confirmsBpenalty of Rs.20,00,000 (Rupees twenty lakhs only) each as imposed onthe appellants by the Adjudicating Officer under Section 15-HA of theAct for violation of Regulation Nos.4(2)(a), (b) and (g) of the SEBI(Prohibition of Fraudulent and Unfair Trade Practices relating toSecurities Market) Regulations, 2003 (“PFUTP Regulations” for short).

C17. Factual findings, as observed by the Adjudicating Officer andaccepted by the Appellate Tribunal as un-controvertible, are mentionedbelow:

(i)Bhavesh Pabari in his name and as sole proprietor of M/s.Shree Radhe, Hemant Sheth and one Neeraj Sanghvi hadDindulged in synchronized/structured and reversed trade inthe scrips of M/s. Gulshan Polyols Ltd. (erstwhile GulshanSugar and Chemicals Ltd.) (“GPL” for short) from 10[th]April, 2006 to 8[th] September, 2006.

(ii)Connection/complicity between Bhavesh Pabari/M/s. ShreeERadhe, Hemant Sheth and one Neeraj Sanghvi wasestablished and was not disputed. Hemant Sheth andBhavesh Pabari/M/s. Shree Radhe had commonintroducer in the “Know Your Customer” documentation.

(iii)Scrips of GPL opened at Rs.44.75 on 12[th] January, 2006,touched peak high of Rs.103.40 on 30[th] August, 2006 andFclosed at Rs. 31.70 on 29[th] December, 2006. The shareprice of the scrips during the period 1[st] December, 2005 to11 January, 2006 was in the range of Rs.31.50 to Rs. 49.90with an average daily volume of 8,255 shares.

(iv)The three appellants along with Neeraj Sanghvi, during theGperiod 10th April, 2006 to 8[th] September, 2006 had tradedwith each other in 18,48,081 shares of the GPL which hadaccounted for around 16.29% of the total traded volume inthis period.

(v)About 45% of the total shares, i.e., 8,34,453 shares wereAexecuted via structured orders, i.e., buy and sell orderswhich were placed within gap of one minute. Out of this,trade in 5,97,835 shares (32% of the total shares traded)were through synchronized orders as the rate and quantityof the buy and sell order were identical.

(vi)On 64 trading dates between 10[th] April, 2006 to 8[th]September, 2006, reverse trading pattern was espied in15,18,204 shares, which had accounted for 13.38% of thetotal market value and was more than 20% of the marketvolume in the aforesaid period.

(vii)On 24 days between the period from 10 April, 2006 to 8[th]September, 2006, the quantity traded in the GPL scripsbetween the connected persons was more than 50% of themarket volume.

(viii) On 1[st] August, 2006, the connected transactions were83.79% of the market volume.

(ix)Bhavesh Pabari had indulged in self trade in 60,203 GPLshares (5.1% of the total traded quantity from 18[th] April,2006 to 25[th] August, 2006).

(x)Bhavesh Pabari had executed reversal trades with M/s.Shree Radhe and Hemant Sheth for 7,73,810 shares duringthe period 18[th] April, 2006 to 25[th] August, 2006 which was66% of the total traded quantity.

(xi)Bhavesh Pabari had entered into 96 buy trades in 1,22,324shares which were found to be synchronized by price andtime and 69 buy trades in 1,43,170 shares synchronized byprice, time and quantity with his sole proprietorship M/s.Shree Radhe in the period 18[th] April, 2006 to 25[th] August,2006.

(xii)Bhavesh Pabari had entered into 282 sell trades in 2,16,578shares which were synchronized by price and time, and 32sell trades for 43,626 shares which was found to besynchronized by price, time and quantity with M/s ShreeRadhe during the period 18[th] April, 2006 to 25th August,2006.

A(xiii) Bhavesh Pabari had entered into 28 buy trades for 55,915shares synchronized by price and time and 21 buy tradesfor 39,350 shares synchronized by price, time and quantitywith Hemant Sheth in the period 18[th] April, 2006 to 25[th]August, 2006.

(xiv) Bhavesh Pabari had entered into 22 sell trades for 41,500shares which were found to be synchronized by price andtime and 16 sell trades for 40,422 shares which weresynchronized by price, time and quantity with Hemant Shethin the period 18[th] April, 2006 to 25[th] August, 2006.

C(xv)Similarly, there were 13 buy and sell trades with NeerajSanghvi.

18. The sole contention of the learned counsels appearing on behalfof Bhavesh Pabari and M/s Shree Radhe is that penalties of Rs.20,00,000(Rupees twenty lakhs only) each should not have been separatelyDimposed on Bhavesh Pabari and M/s Shree Radhe, of which he was thesole proprietor.

19. This contention superficially seems attractive, but on an in-depth reflection should be rejected as Bhavesh Pabari had indulged intrading in its personal name and as also the sole proprietor of M/s. ShreeRadhe. This is clear from inter se transactions and transactions withEconnected persons. Thus, Bhavesh Pabari had transacted in two differentcapacities, i.e., in his personal name and as sole proprietor of M/s. ShreeRadhe. It is in this background that total penalty of Rs.40 lakhs (Rupeesforty lakhs only) under Section 15-HA of the SEBI Act had been imposedfor violation of Regulations 4(2)(a), (b) and (g) of the PFUTP RegulationsFas the transactions were in two different names, though belonging to thesame individual.

20. Accordingly, C.A. No.9798/2014 preferred by M/s ShreeRadhe and C.A. No.9797/2014 preferred by Bhavesh Pabari hold nomerit and are dismissed affirming the order passed by the AppellateGTribunal and confirming the penalty of Rs.20,00,000/- (Rupees twentylakhs only) each imposed under Section 15-HA of the Act. C.A. No.9799/2014 by Hemant Sheth must also fail. In the given facts, we arenot inclined to show indulgence and leniency to the three appellants, asthe facts found are highly ignominious and scandalous.

C.A. No. 11311 of 2013 (A.O., Securities and Exchange Boardof India vs. Bhavesh Pabari)

C.A. No. 1824 of 2014 (Securities & Exchange Board of IndiaVs. M/s. Shree Radhe)

21. SEBI has filed cross appeals aggrieved by the order ofAppellate Tribunal dated 10[th] September, 2013 deleting the penalty ofRs.10,00,000 (Rupees ten lakhs only) each imposed on Bhavesh Pabariand M/s Shree Radhe under Section 15-A(a) of the SEBI Act for violatingSection 11-C(3) and 11-C(5) of SEBI Act.

22. The relevant portion of the impugned order passed by theAppellate Tribunal reads:

“Additional challenge in Appeal No. 71 of 2012 and 72 of2012, relates to imposition of Rs.10 lac penalty upon each appellantfor violating Section 11C (3) and 11C (5) of SEBI Act. Grievanceof appellants is that failure to furnish requisite information wasdue to circumstances beyond control viz. grandmother of BhaveshPabari (Appellant in Appeal No. 71 of 2012) who is proprietor ofM/s. Shree Radhe (Appellant in Appeal No. 72 of 2012) hadexpired during the relevant period and, therefore, he was indisturbed mind at the material time. Though, explanation givendoes not inspire confidence in the facts of present case, wherepenalty of Rs. 20 lac has already been upheld, in our opinion, itwould be just and proper to delete penalty of Rs. 10 lac imposedupon both appellants”.

23. Submission of the SEBI that the impugned order did not recordany reason for deleting the said penalty, in spite of observing that theexplanation given by Bhavesh Pabari did not inspire confidence, wouldbe just and fair criticism and good challenge. We clearly havereservations on the ground stated or rather lack of reasoning given bythe Appellate Tribunal, especially in the light of the language of Sections15-A(a) and Section 15-J of the Act. However, during the hearing, thelearned counsel appearing for Bhavesh Pabari had drawn our attentionto his reply dated 28[th] September, 2009 stating that Bhavesh Pabari’sgrandmother had expired and, therefore, he had requested for time tomake an appearance. It was stated at the Bar that grandmother ofBhavesh Pabari had expired on 19[th ]September, 2009, and this aspectwas highlighted and made known to the authorities. Furthermore, Bhavesh

APabari/ M/s. Shree Radhe had submitted part information vide letterdated 2[nd] November, 2009. These aspects and explanations have notbeen considered by the Appellate Tribunal.

24. Adjudicating Officer, while imposing penalty had referred tothe letter dated 6[th] May, 2009 by which Bhavesh Pabari and M/s. ShreeBRadhe were required to furnish information of details regarding tradingin the GPL scrips, connection/relation with the GPL, its promoters/directors, connection/relation between Hemant Sheth, etc. but the saidnotice was not complied with. Thereafter, reminders dated 21[st] July,2009 and 14[th] August, 2009 were issued, but again of no avail. This wasfollowed by summons dated 4[th] September, 2009, 23[rd] September 2009,C20[th] October, 2009 and 5[th] November, 2009.

25. Given the aforesaid facts, we should have remitted the matterto the Appellate Tribunal for fresh adjudication and examination butwould refrain from doing so in view of the time gap, the quantum of fineimposed, and, as we have upheld the total penalty of Rs.40,00,000/-D(Rupees forty lakhs only) imposed on the appellant under Section 15-HA of the SEBI Act. We would rather close the proceedings.Accordingly, appeals preferred by SEBI, i.e., C.A. No.11311 of 2013and C.A. No.1824 of 2014 are also disposed of.

C.A. No.14728/2015 (Ankur Chaturvedi vs. Securities andEExchange Board of India);C.A. No.14729/2019 (Jay Kishore Chaturvedi vs. Securities andExchange Board of India); and

C.A. No.14730/2015 (Siddharth Chaturvedi vs. Securities andExchange Board of India); andF26. The above-captionedappellants are Promotors-cum- Directorsof M/s. Brij Laxmi Leasing and Finance Co. Ltd., company whoseshares were listed on the Bombay Stock Exchange.

27. It is accepted and admitted that the appellants AnkurGChaturvedi, Sidharth Chaturvedi and Jay Kishore Chaturvedi havingpurchased shares of M/s. Brij Laxmi Leasing and Finance Co. Ltd. on2, 3 and 6 occasions respectively, were required but had failed to makenecessary disclosures to the stock exchange as stipulated and statutorilymandated by Regulations 13(4) and 13(4A) read with Regulation 13(5)of the Securities and Exchange Board of India (Probation of InsiderHTrading) Regulations, 1992 (“PIT Regulations” for short).

ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARDOF INDIA v. BHAVESH PABARI [SANJIV KHANNA, J. ]

28. For the said violations, penalty of Rs.5,00,000/- (Rupees fivelakhs only) in the case of Ankur Chaturvedi and Sidharth Chaturvediand Rs.11,00,000/- (Rupees eleven lakhs only) in the case of Jay KishoreChaturvedi were imposed under Section 15-A(b) of the SEBI Act. AnkurChaturvedi had also suffered penalty of Rs.2,00,000/- (Rupees two lakhsonly) under Section 15-HB of the SEBI Act as he had sold 45,032 sharesafter acquiring 45,000 shares on 29[th] January, 2013, which was in violationof Clause 4.2 of the Model Code of Conduct for Prevention of InsiderTrading for Listed Companies as set out in Schedule I, Part of the PITRegulations.

29. The aforesaid penalties were affirmed in the impugned orderpassed by the Appellate Tribunal, rejecting the contention that the penaltyso imposed was harsh and deserved substantial reduction as there wasno intention on the part of the appellants to suppress purchase or sale orthat non-disclosure had not caused profits to appellants or otherwise aloss to the investors and that the failure to make disclosure was aninadvertent error without mala fide intention.

30. The Appellate Tribunal, considering the factual matrix, hasheld that the maximum penalty stipulated in the PIT Regulations wasRs.1,00,000/- (Rupees one lakh only) for each day during which thefailure continued or Rs.1,00,00,000/- (Rupees one crore only), whicheverwas less. The penalty imposed by the Adjudicating Authority took intoconsideration the mitigating factors and cannot be said to be excessivelyharsh or unreasonable.

31. In view of the factual background and the reasoning given bythe Appellate Tribunal, we do not find any good ground and reason tointerfere with the quantum of penalty confirmed by the impugned orderpassed by the Appellate Tribunal.

C.A. No.33/2017 (Akshat Tandon and Others vs. Securities andExchange Board of India); and

C.A. No.9563/2018, (Badri Vishal Tandon vs. Securities andExchange Board of India).

32. We have jointly dealt with these two appeals as they bothrelate to shares of M/s Bhawani Paper Mills Ltd. (“the Target Company”in short).

A33. In the first appeal, Akshat Tandon and 14 others are aggrievedby the order dated 5[th] October, 2016 passed by the Appellate Tribunalwherein their appeal against order dated 31[st] July, 2014 passed by theAdjudicating Officer imposing penalty between Rs.3,00,000/- (Rupeesthree lakhs only) to Rs.6,00,000/- (Rupees six lakhs only) for each of the15 violations of Regulation Nos. 3(3) and 3(4) of the Securities andBExchange Board of India (Substantial Acquisition of Shares and Takeover)Regulations, 1997 (“SAST Regulations” for short) was upheld.34. The appellants were promotors of the target company andtogether were holding 54% of the paid-up shares of the target company,which were acquired on various dates. The acquisition was in excess ofCthe limits prescribed under Regulations 3(3) and 3(4) of SAST Regulations.Failure to notify/submit report to the concerned authorities within thestipulated time in terms of Regulations 3(3) and 3(4) is accepted. Thecase of the appellants is predicated on the principle of proportionality,for it is asserted that the quantum of penalty imposed is excessive andDunreasonably harsh. Similar contentions were raised before the AppellateTribunal with the submission that the target company had incurred hugelosses and that it was sick company. Furthermore, there was an absenceof disproportionate gain or unfair advantage to the appellants or otherwisea loss to the investors. Contentions were rejected on the ground that thepenalty imposed was reasonable and not harsh. To justify the quantum,Ereference was made to Sections 15-A(a) and (b) of the SEBI Act, whichstipulate 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 highas Rs.1,00,00,000/- (Rupees one crore only) for each violation.

35. This court, in the exercise of its jurisdiction under Section 15-FZ of the SEBI Act, cannot go into the proportionality and quantum of thepenalty imposed, unless the same is distinctly disproportionate to thenature of the violation which makes it offensive, tyrannous or intolerable.Penalty by the very nature of the provision is penal. We can interfereonly where the quantum is wholly arbitrary and harsh which noGreasonable man would award. In the instant case, the factual findingsare not denied and, thus, we are not inclined to intermeddle with thequantum of penalty. The penalty imposed is just, fair and reasonableand, thus, upheld.

36. The appellants have also contended that in the absence of anyHprescribed limitation period, SEBI should have issued show cause notice

within reasonable time and there being delay of about 8 years inissuance of show cause notice in 2014, the proceedings should havebeen dropped. This contention was not raised before the AdjudicatingOfficer in the written submissions or the reply furnished. It is not clearwhether this contention was argued before the Appellate Tribunal. Thereare judgments which hold that when the period of limitation is notprescribed, such power must be exercised within reasonable time.What would be reasonable time, would depend upon the facts andcircumstances of the case, nature of the default/statute, prejudice caused,whether the third-party rights had been created etc. The show causenotice in the present case had specifically referred to the respectivedates of default and the date of compliance, which was made between30[th] August, 2011 to 29[th] November, 2011 (delay was between 927 daysto 1897 days). Only upon compliance being made that the defaults hadcome to notice. In the aforesaid background, and so noticing the quantumof fine/penalty imposed, we do not find good ground and reason tointerfere.

37. Now coming to the second appeal, Badri Vishal Tandon hasimpugned the order dated 20[th] June, 2018 passed by the Appellate Tribunalaffirming the order dated 29[th] December, 2017 passed by the AdjudicatingOfficer, whereby he has been saddled with penalty of Rs. 1,50,000/-(Rupees one lakh fifty thousand only) for violation of Regulation 7(1A)read with Regulation 7(2) of the SAST Regulations. The appellant asKarta of Ram Mohandas Tandon (HUF) was allotted 22,50,000 sharesof the target company by way of preferential allotment, which constituted6.46% of its total share capital. The shares were allotted pursuant to theapproval given by the Board of Directors vide letter dated 25[th] June,2011. The letter of allotment was received by him on 27[th] June, 2011,and 22,50,000 shares of the Target Company were transferred to hisdemat account on 12[th] August, 2011.38. The Appellate Tribunal has affirmed the factual findings thatthere was delay in disclosure, which was required to be made withintwo days of the receipt of intimation of allotment of shares, as perRegulations 7(1A) and 7(2) of the SAST Regulations. The intimation/letter from the Target Company about the said acquisition was receivedby the Bombay Stock Exchange only on 11[th] July, 2011.

39. Maximum penalty imposable on Badri Vishal Tandon was uptoRs.1,00,00,000/- (Rupees one crore only). In this backdrop, we do not

Afind 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 ofjurisdiction under Section 15-Z of the SEBI Act.

C.A. No.1009/2017 (Magnum Equity Broking Ltd. Vs.Securities and Exchange Board of India).B

40. The appellant has assailed the order of the Adjudicating Officerdated 18[th] July, 2014, which was affirmed by the Appellate Tribunal videorder dated 28[th] November, 2016, whereby penalty of Rs.3,00,000/-(Rupees three lakhs only) was imposed on the appellant for violation ofClause A(2) of the Code of Conduct for Stock Brokers. The said penaltyCwas imposed pursuant to investigation into trading in scrips of M/s AareyDrugs and Pharmaceuticals Ltd. (“ADPL” in short) and M/s WinsomeTextile Industries Ltd. (“WTIL” in short) during the period 1[st] January,2009 to 31[st] August, 2009.

41. The brief facts are that the appellant was stock broker andDmember of the Bombay Stock Exchange Limited. The appellant hadexecuted synchronized trades in the aforesaid scrips on behalf of itsclients - Mr. Ronak Choski, Mr. Shailesh Patel, Ms. Nitaben Patel andMs. Kapilaben Patel, acting both as stock broker as well as partystock broker. Total volume of symphonized trade in the scrip of WTILwas 68,02,131 shares, which were executed on one day. Total volumeEof 88,89,052 shares in the case of scrip of ADPL were transacted overa period of five days. The appellate order succinctly refers to the figuresand details of such transactions, for example, on 19[th] February, 2009, theappellant’s clients had executed 18 trades in the scrip of WTIL, whichconstituted 68% of the total number of shares traded on that date andF38% of the trades executed on that date. For 7 out of 18 synchronizedtrades, the buy and sell orders were perfectly matching in price andquantity. Similarly, on 20[th] March, 2009, there were 73 synchronizedtrades in the scrip of ADPL amounting to 43.8% of the shares tradedand 63.4% of the trades executed. The appellate order observes thatsuch synchronized trades create an artificial volume, leading to ratchetingGup in the trading of the scrip and cause price fluctuations, therebymisleading the potential investors. Such transactions create deceptiveappearance as to the quantum of trading in the scrip which could beunderstood as viable investment opportunity when it is not. This hurtsand damages sanctity of the securities market. Reference was specificallyHmade to the factum that the synchronized trade on different dates was

amounting to 3.4%, 7.17%, 20.4% and 15.12% of the total market volumeon 25[th] March, 2009, 23[rd] March, 2009, 26[th] March, 2009 and 27[th] March,2009 respectively.

42. The appellant does not controvert the transactions/trades. Thecase of the appellant is that the trades were executed within normalprice range and did not lead to an artificial price movement. Reliancewas placed on SEBI’s circular dated 14[th] September, 1999 that crossdeals executed between two clients of the same broker can be conductedthrough the screen mechanism of the stock exchange. Submission wasthat the synchronized trade was not result of any illicit scheme.However, Appellate Tribunal had rejected the contentions as thetransactions/trades made by the appellants were between familymembers restricted to two scrips of WTIL and ADPL spread over aperiod of 6 days and had referred to the factual matrix of the case.43. Reference to the Securities and Exchange Board of Indiavs. Rakhi Trading (P) Ltd.5 which refers to an earlier decision in theSecurities and Exchange Board of Indiavs.Kishore R. Ajmera6 ismisconceived, for the said decisions do not hold that broker cannot beproceeded against for violation of Regulation 7 of the SEBI (StockBrokers and Sub-Brokers) Regulations, 1992 (“Stock BrokerRegulations” for short) for violation of Clause A(2) of the Code ofConduct for Stock Brokers. The decisions hold that broker would notbe liable merely because he had facilitated the transactions, in the absenceof any material to suggest negligence and connivance on the part of thebroker. Thus, the matter would be different as observed in the concurringjudgment of Banumathi, J. in Rakhi Trading Pvt. Ltd. (Supra), wherethere was evidence to show involvement and meeting of minds of theshare broker with the client to indulge in egregious and foul transactions,in which circumstances the stock broker would be held liable. Whileproximity of time in an isolated case may not be conclusive, but hugevolume of trading between same set/group of brokers can in givencase reasonably point to some kind of fraudulent and manipulativeexercise with prior meeting of minds. Further, there is differencebetween synchronized trading involving bulk quantities and negotiatedtrades as result of consensual bargaining involving synchronization ofbuy and sell orders resulting in matching thereof as per permissible

5 (2018) 13 SCC 753 (paragraph 40)

6 (2016) 6 SCC 368

Aparameters which are programmed accordingly. Test of preponderanceof probability applies for the adjudication and determination of civil liabilityfor violation of the SEBI Act or the provisions of the Regulations framedthereunder (see para 65 to 69 in Rakhi Trading Pvt. Ltd.). Keeping theaforesaid parameters in mind, the adjudicating authority had imposedpenalty of Rs.3,00,000/- (Rupees three lakhs only) under Section 15-HBBof the SEBI Act, which has been upheld by the Appellate Tribunal beingcommensurate with the violation.

44. For the aforesaid reasons, we do not find any infirmity withthe concurrent findings or with the quantum of penalty imposed and thesame is upheld.C

C.A. No.2641/2017 (M/s Quantum Global Securities & LeasingCompany Ltd. vs. Securities and Exchange Board of India).

45. In the present appeal, the appellant is the registered stockbroker and had indulged, as per the findings recorded in the adjudicationDorder dated 22[nd] July, 2014 and upheld by the Appellate Tribunal videorder dated 18[th] January, 2017, in synchronized trades, circular tradesand reversal trades in the scrips of M/s Gangotri Textiles Ltd. during theperiod 7[th] April, 2006 to 31[st] May, 2006. Accordingly, the appellant hadviolated Sections 12A (a), (b), (c) of the SEBI Act and Regulations 3(a),(b), (c), (d), 4(1), 4(2)(a), (e) and (g) of the PFUTP Regulations andERegulation 7 read with Clauses A(1), (2), (3), (4) and (5) of the Code ofConduct for Stock Brokers specified under Schedule II of the StockBroker Regulations. Consequently, penalty of Rs.60,00,000/- (Rupeessixty Lakhs only) was imposed under Section 15-HA for violation of theprovisions of the SEBI Act and the PFUTP Regulations and the penaltyFof Rs.15,00,000/- (Rupees fifteen lakhs only) was imposed under Section15-HB of the SEBI Act for the violation of the provisions of the Code ofConduct for Stock Brokers.

46. The appellant did not dispute the factual findings of havingindulged in synchronized trade, circular trade and reversal trade in theGscrips of M/s. Gangotri Textiles Ltd. They pleaded leniency claimingthat they had no mala fide intention and their annual turnover for severalyears was around Rs.5,00,000/- (Rupees five lakhs only). Lastly, theircontribution towards Last Traded Price (LTP) variation was nominal.The contentions have to be rejected as the appellant was part of thelarger game plan along with other entities who had indulged inHsynchronized, circular and reversal trading leading to total cumulativepositive and negative LTP contribution of Rs.999.25 and Rs.1007.25respectively. It is to be further noted that the penalty imposable under15-HA of the SEBI Act could be upto Rs.25,00,00,000/- (Rupees twenty-five crores only) or three times the amount of profit made out of suchpractices whichever was higher. Thus, the penalty of Rs.60,00,000/-(Rupees sixty lakhs only) was not unreasonable and excessive. Similarly,penalty of Rs.15,00,000/- (Rupees fifteen lakhs only) for failing to adhereto the standards required to be maintained by the stock brokers whichcould be as high as Rs.1,00,00,000/- (Rupees one crore only) was notexcessive, unreasonable or harsh. Penalty was also imposed on otherswho had participated in the nefarious plan. Findings are correct andunchallengeable. We do not find any good ground and reason to interferewith the quantum of penalty.

C.A. No.6160/2018 (Durga Prasad Yadav & Anr. vs. Securitiesand Exchange Board of India).

47. Durga Prasad Yadav and Jai Hind Kumar have filed the presentappeal having suffered penalty of Rs.1,00,00,000/- (Rupees one croreonly) under Section 15-A(a) of the SEBI Act for violation of Section 11-C(3) of the SEBI Act vide adjudication order dated 20[th] January, 2016which stands affirmed by the Appellate Tribunal in its order dated 15[th]January, 2018.

48. The appellants were required to furnish particulars about theplans/schemes offered to the public, funds mobilized, Memorandum ofAssociation, details of Directors, etc. in order to examine the matterunder Section 11-AA of the SEBI Act and the SEBI (CollectiveInvestment Schemes), Regulations, 1999 (“CIS Regulations” for short).For this purpose, various letters dated 22[nd] November, 2012, 11[th] January,2013, 7[th] November, 2013 and 20[th] February, 2014 were written by SEBIto the two appellant Directors, two other Directors and M/s SkylarkLand Developers & Infrastructure India Pvt. Ltd. for furnishing ofinformation /documents/reports. Since there was an inordinate delay,default and failure in furnishing information and responding to these letters,fresh summons were issued on 30[th] July, 2014 under Section 11-C(3) ofthe SEBI Act requiring them to furnish the details to which again therewas no response. Consequently, second summons dated 12[th] September,2014 were issued for furnishing information by 22[nd] September, 2014, towhich yet again there was no response. Thereafter, show cause notice

Aon 30[th] June, 2015 was issued to which part reply was given by theappellants on 23[rd] September, 2015. An email dated 30[th] November, 2015was also sent by SEBI asking them to reply before 10[th] December, 2015,with an opportunity to appear on 15[th] December, 2015. This was alsocommunicated by forwarding the notice through Speed Post AD, whichwas returned undelivered in case of Durga Prasad. Thus, severalBopportunities were given to ensure compliance by the appellants.Afterwards, on 15[th] December, 2015 Subodh Kumar Gupta, authorizedrepresentative of the appellants and others had appeared and soughtadjournment for 22[nd] December, 2015, on which date reply was filed.Subsequently, an additional reply dated 30[th] December, 2015 wasCfurnished. Appellants in the aforesaid replies had stated that their officeswere sealed and, therefore, the required details and information couldnot be furnished. Further, SEBI had not provided them necessarydocuments including the copy of complaint, affidavit, evidence againstthem and the investigation report.D49. We would now refer to the background of the case and whynotices/summons were issued. The aforesaid notices and summons wereissued pursuant to orders passed by the High Court of Madhya Pradeshin the year 2010 in Public Interest Litigation against various companiesincluding M/s Skylark Land Developer and Infrastructure India Pvt. Ltd.for cheating thousands of investors in fraudulent schemes by promisingEhigh returns. Pursuant to orders passed by the High Court, differentauthorities including SEBI were given liberty to take appropriate actionin accordance with law. Central Bureau of Investigation was also directedto conduct investigation. Therefore, SEBI had issued notice to theaforesaid company, the two appellants and two other Directors to provideFinformation of documents for alleged violation of Section 11-C of theSEBI Act.

50. During the course of hearing by SEBI, most details as providedby the appellants were general in nature. We would observe that in casethere was no violation pertaining to mobilization of funds from the publicGunder various schemes/arrangements, this could have been so stated inclear and categoric terms. Moreover, the contention that the officeswere sealed which rendered them incapable to furnish information hasbeen rejected for two good reasons. First, this stand is belated and heldto be an afterthought when it could have been raised at the first instancewhen the reply dated 5[th] December, 2012 was furnished, given that theH

records were seized by the police on 5[th] May, 2011. Second, assertionwas contradicted by their own conduct when during the proceedingsthey had submitted few documents, which were incomplete and not asdesired. They did not make any distinction as to the documents withintheir possession and as to those with the police. Appellate Tribunal hadin these circumstances affirmed the finding that there was lack ofgood faith and failure in complying with the aforesaid notices/letters/summons/emails. Adjudicating Officer had, therefore, rightly recordedthat non-compliance of summons had hampered the further course ofinvestigation. The failure was without any justification. Agreeing withthe said findings, the Appellate Tribunal has observed that details werewithheld with view to delay the investigation being conducted by SEBIto the detriment of investors from whom funds were collected by theappellants in contravention of CIS Regulations.

51. We do not find any fault with the reasoning given. We are ofthe opinion that the fault squarely lied with the appellants and, thus, penaltyof Rs.1,00,00,000/- (Rupees one crore only) for violation of Section 11-C(3) under Section 15-A(a) of the SEBI Act does not call for anyinterference.

52. The reference made vide order dated 14[th] March, 2016 andthe above captioned Civil Appeals are, accordingly, disposed of. In thefacts and circumstances of the cases, there shall be no order as to costs.

Bibhuti Bhushan Bose

Appeals disposed of.