Back
Supreme Court of India
THE HONOURABLE DR. JUSTICE ARIJIT PASAYAT & THE HONOURABLE MR. JUSTICE LOKESHWAR SINGH PANTA
S.E.B.I
Versus
Saikala Associates Ltd.
CIVIL APPEAL NO.3696 OF 2005
Decided on : 21-04-2009
(b) Securities and Exchange Board of India (Procedure For Holding Enquiry By Enquiry Officer and Imposing Penalty) Regulation, 2002 – Regulations 13(1)(a) (iv) r/w Regulation, 13(4) and Regulation 13(1)(b)(i) – Contravention of Section 12(1) – Minor penalty of suspension of the Certificate of Registration upto three months under Regulation 13(1)(a) (iv) r/w Regulation, 13(4) – major penalty of cancellation of registration under Regulation 13(1)(b)(i) – No power to impose any monetary penalty (Para 11)
(c) Securities and Exchange Board of India Act, 1992 – Section 15T r/w Rule 21, Securities Appellate Tribunal [Procedure] Rules, 2000 – Tribunal’s power to modify the orders of SEBI – Tribunal cannot travel beyond the provisions of the Act, Regulations and the Rules – Monetary penalty having not been provided, Tribunal’s order is not sustainable. (Para 16)
Facts of the case:
Unregistered sub-Brokers working with NSE members created large values which is in breach of Section 12(1) of the Securities and Exchange Board of India Act, 1992.
SEBI ordered suspension of the Members’ registration.
The Securities Appellate Tribunal held that the proved charges against the respondent were not serious enough to warrant suspension of certificate of registration.
Finding of the Court:
Tribunal travelled beyond its jurisdiction.
Result:
Appeal allowed.
Judgment :
Dr. ARIJIT PASAYAT, J.
1. In both these appeals common points are involved and are, therefore, taken up together for disposal. In both these appeals challenge by the Securities and Exchange Board of India (in short `SEBI) is to the order passed by the Securities Appellate Tribunal (in short the `Tribunal).
2. Factual Position is almost undisputed and in respect of the appellants stand as follows:
(I) C.A. No. 3696 of 2005:
The Respondent has acted as a sub-broker at the National Stock Exchange with 2 NSE Members, MIS PCS Securities Limited & M/S Zen Securities Ltd. without being registered as a sub-broker with the SEBI with the said Exchange for the Period from the years 2000-01, 2001-02 and from April, 2002 to May, 2002 and created the value of Rs.403.29 Crores, in breach of Section 12(1) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the "Act") read with Rule 3 of the Securities and Exchange Board of India (Stock Brokers & Sub Brokers) Rules, 1992 (hereinafter referred to as the " Rules" )
(II) C.A. No. 4640 of 2006 ( SEBI Vs SHILPA STOCK BROKERS P. LTD & M/S MEHTA VAKIL & Co )
Tribunal has recorded the fair concession of the Respondent that the Respondent registered as a broker with the SEBI while executing trades on behalf of their client Kamlesh Shroff, had dealt with M/s Jairam Enterprises, an unregistered sub-broker, which is admittedly in violation of the Circular No. SMD/I POLICY /CIRCULAR/3-97 dated 31.3.1997 issued by SEBI in exercise of powers under Section 11 of the Act. As regards the second charge, the Tribunal did not uphold the finding of the Appellant SEBI.
(III) As regards M/s. Mehta Vakil & Co P. Ltd. (Appeal No. 11 of 2000 before the Tribunal) the respondent-co. were involved in purchase of 19400 shares and Sale of 800 shares of V.B. Financial which had been transacted by the said broker on behalf of their sub-broker, namely, Akshay Dalal, who was registered as a sub broker only with effect from 14.1.2000 but had dealt with him since December, 1998 in breach of the Act, Rules Securities and Exchange Board of India Regulations & Circulars of SEBI, (Stock Brokers and Sub-Brokers) (Hereinafter referred to as "Regulation").
3. The only question is whether Tribunal has power to modify the penalty imposed by SEBI? According to the appellant the Tribunal had no jurisdiction to modify the sentence. The Tribunal in each case held that the proved charges against the respondent were not serious enough to warrant suspension of certificate of registration.
4. The respondent, on the other hand, supports the order of the Tribunal and contends that proportional penalty can be leveled and the modification done is clearly within the scheme and framework of the Act. It is submitted that when a regulator chooses to elect a particular form of authority, amongst various available penalties which is available and it is appealable the Tribunal has the right to modify it. Reference in this context is made to Section 15(T) of the Act.
5. There is no dispute that there was violation of the provisions of Section 12(1) of the Act read with Rule 3 of the Rules.
6. Section 12, 15A, 15B, Rule 3 of the Rules and Regulation 25 of the Regulation are relevant and read as follows:
"Regulation of stock brokers, sub-brokers, share transfer agents, etc.
12. (1) No stock broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market shall buy, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under this Act:
Provided that a person buying or selling securities or otherwise dealing with the securities market as a stock broker, sub-broker, share transfer agent, banker to an issue, truste
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
