[The following guest post is
contributed by Supreme Waskar,
who is a corporate lawyer]
contributed by Supreme Waskar,
who is a corporate lawyer]
By way of its order dated April 20, 2016 in the matter of
M/s. Krishna Enterprises & M/s. Rajesh Services Centre (“Appellants”), the
Securities Appellate Tribunal (SAT) observed that the Securities and Exchange
Board of India (SEBI) is inconsistent in levying penalties for similar
violations.
M/s. Krishna Enterprises & M/s. Rajesh Services Centre (“Appellants”), the
Securities Appellate Tribunal (SAT) observed that the Securities and Exchange
Board of India (SEBI) is inconsistent in levying penalties for similar
violations.
The Appellants were held guilty of
aiding and abetting Edserv Softsystems Ltd. in siphoning off its IPO proceeds,
whereby under section 15HA of the SEBI Act, 1992, the adjudicating officer (AO)
imposed penalty on each of the Appellants of Rs.10 lakhs for violating section
12A(b)&(c) of the SEBI Act and Rs.10 lakhs for violating Regulation
3(c)&(d) of the SEBI (Prevention of Fraudulent and Unfair Trade Practices
Relating to Securities Market) Regulations, 2003 (“PFUTP Regulations”).
aiding and abetting Edserv Softsystems Ltd. in siphoning off its IPO proceeds,
whereby under section 15HA of the SEBI Act, 1992, the adjudicating officer (AO)
imposed penalty on each of the Appellants of Rs.10 lakhs for violating section
12A(b)&(c) of the SEBI Act and Rs.10 lakhs for violating Regulation
3(c)&(d) of the SEBI (Prevention of Fraudulent and Unfair Trade Practices
Relating to Securities Market) Regulations, 2003 (“PFUTP Regulations”).
The AO found that the violation of section
12A(b)&(c) of the SEBI Act and violation of regulation 3(c)&(d) of
PFUTP Regulations are two independent violations and accordingly imposed
penalty under Section 15HA for two violations separately whereas in the case of
Kejas
Parmar vs. SEBI (2014),[1] the AO had held that where there is
violation under section 12A(b)&(c) and also violation under regulation
3(c)&(d) of PFUTP Regulations, then both the provisions have to be read
together and in such a case common penalty ought to be imposed under Section
15HA of SEBI Act.
12A(b)&(c) of the SEBI Act and violation of regulation 3(c)&(d) of
PFUTP Regulations are two independent violations and accordingly imposed
penalty under Section 15HA for two violations separately whereas in the case of
Kejas
Parmar vs. SEBI (2014),[1] the AO had held that where there is
violation under section 12A(b)&(c) and also violation under regulation
3(c)&(d) of PFUTP Regulations, then both the provisions have to be read
together and in such a case common penalty ought to be imposed under Section
15HA of SEBI Act.
Accordingly, SAT has remanded the
matters to the file of AO for fresh decision on merits and in accordance with
law. The orders passed by the AOs promote the development of the securities
market and are in the interests of the securities market. If the orders passed
by the AO are not in public interest, then under Section 15I (3) of the SEBI
Act, SEBI is empowered to review the orders passed by the AO. Passing
conflicting orders does not promote the development of the securities market
and would not be in the interests of the securities market.
matters to the file of AO for fresh decision on merits and in accordance with
law. The orders passed by the AOs promote the development of the securities
market and are in the interests of the securities market. If the orders passed
by the AO are not in public interest, then under Section 15I (3) of the SEBI
Act, SEBI is empowered to review the orders passed by the AO. Passing
conflicting orders does not promote the development of the securities market
and would not be in the interests of the securities market.
– Supreme Waskar
[1] (Appeal No.188 of 2014)