JUDGMENT - MOHTA ANOOP V., J.:—Enlarged and projected issue is, whether mens rea is the sine qua non, for imposing penalty for breach of the provisions of the SEBI Act and the regulations framed thereunder, apart from the discretion, exercisable by the adjudicating authority.

2. INTRODUCTION : This appeal is under section 15-Z of the Securities Exchange Board of India Act, 1992 (for short, "SEBI Act") filed by the Securities Exchange Board of India (for short "SEBI") against the order dated 25th January, 2001, of the Securities Appellate Tribunal (for short "SAT") in Appeal No. 24 of 2000, under section 15-I of the SEBI Act, whereby, order dated 31st August, 2002 passed by the Adjudicating Officer under section 15-J of the SEBI Act was set aside.

3. FACTS : The appellants, SEBI, are statutory body constituted under the provisions of the SEBI Act. It can sue and be sued by that name. Being a person aggrieved and affected by the impugned order, has preferred this appeal.

4. The respondents-Cabot International Capital Corporation (for short referred as "CICC") have its Office at Suite 1300, Two Seaport Lane, Boston Mn-02210-2019. Cabot Indian Limited (for short "CIL") is a company incorporated under the Companies Act, 1956. CIL was listed in Bombay Stock Exchange on 16th December, 1996. CICC, the foreign collaboration of the CIL, held 51% of paid up capital of the CIL. After the Board Meeting of the CIL dated 24th December, 1996, the Board of Directors approved the recommendations for the referential issued to the members and shareholders of the CIL and accordingly, Extraordinary General Meeting was convened and conducted on January 23, 1997, which was duly notified to the Bombay Stock Exchange on January 2, 1997.

5. By certificate dated 14th January, 1997, M/s. S.R. Batlibol Associates, Chartered Accountants, being the statutory Auditors of the CIL, addressed a certificate to the SEBI and the Reserve Bank of India (for short "RBI") and it was confirmed that the Preferential Issue could be made by the CIL at a price, less than Rs. 171/- per share. This was done in accordance with the provisions of the SEBI Guidelines for Preferential Allotment dated 4th August, 1994 and the RBI Guidelines determining issue price of preferential shares, dated 3rd June, 1994, regarding approval for raising foreign equity in existing companies. From 4th November, 1994, SEBI (Substantial Acquisition of Shares Takeovers) Regulation, 1994 (for short "SEBI Takeover Regulations, 1994") were in force till 22nd February, 1997.

6. CICC, on 21st January, 1997, communicated to the CIL, its decision to subscribe to the preferential issue, subject to approval of the Foreign Investment Promotion Board, the RBI, the SEBI and all other relevant agencies of the Government of India. On 23rd January, 1997, Extra-General Meeting was held and therein, CILs members and share holders approved the preferential lands to the CICC, of 16,05,200 equity shares, under the provisions of section 81(1-A) of the Companies Act, and all other applicable provisions. The respondents-company, on February 5, 1997, filed Form 23 with the Registrar of Companies, Maharashtra, with other details. CICC, on 18th February, 1997, received an approval from the Foreign Investment Promotion Board, permitting the CICC to increase its equity holding in the CIL from 51% to 74%. The SEBI (Substantial Acquisition of Shares Takeovers) Regulations, 1997 (for short SEBI Takeover Regulations, 1997) are in force, from February 22, 1997. CIL, made an application to the RBI for issuing shares to the CICC and for permission under section 19(1)(d) of the Foreign Exchange Regulation Act, 1973. On 28th February, 1997, sent copies of the Minutes of the Annual General Meeting to the Bombay Stock Exchange. The RBI, by its letter dated 1st February, 1997, granted an approval to the CIL to make the preferential issue to the CICC. On March 3, 1997, the CICC remitted US $ 7,712,346.42 in favour of the CIL, being the

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