# ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARD OF INDIA v. BHAVESH PABARI

- **Citation:** [2019] 18 S.C.R. 898
- **Court:** Supreme Court of India
- **Decided:** 2019-02-28
- **Case number:** Civil Appeal No.11311 of 2013
- **Bench:** Ranjan Gogoi, Deepak Gupta, Sanjiv Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/adjudicating-officer-securities-and-exchange-board-of-india-v-bhavesh-pabari-33715
- **Pages:** 26

## Headnote

Securities and Exchange Board of India Act, 1992 - s.15-J,
Cl. (a), (b) & (c) - Whether conditions stipulated in Clauses (a), (b)
and (c) of s.15-J are exhaustive to govern the discretion in the
Adjudicating Officer to decide on the quantum of penalty or the
said conditions are merely illustrative - Held: Provisions of Clauses
(a), (b) and (c) of s.15-J are illustrative in nature and have to be
taken into account whenever such circumstances exist - But this is
not to say that there can be no other circumstance(s) beyond those
enumerated in Clauses (a), (b) and (c) of s.15-J that the Adjudicating
Officer is precluded in law from considering while deciding on the
quantum of penalty to be imposed - A narrow view would be in
direct conflict with the provisions of s.15-I(2) which vests jurisdiction
in the Adjudicating 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."- The above apart, the
circumstances enumerated in Clauses (a), (b) and (c) of s.15-J may
have no relevance and may never arise in case of contraventions
contemplated by certain provisions of the SEBI Act, for instance
s.15-A, 15-B or 15-C - Therefore, to understand the conditions
stipulated in Clauses (a), (b) and (c) of s.15-J 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 u/ss.15-A, 15-B and 15-C, s.15-J
will have no application - Such a result could not have been intended
by the legislature - Conditions stipulated in Clauses (a), (b) and (c)
of s.15-J are not exhaustive and in the given facts of a case, there
can be circumstances beyond those enumerated by Clauses (a), (b)
and (c) of s.15-J which can be taken note of by the Adjudicating
Officer while determining the quantum of penalty.
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[2019] 18 S.C.R. 898
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Securities and Exchange Board of India Act, 1992 - s.15-J,
Cl. (a), (b) & (c) and ss.15-A to 15-HA - Whether conditions
stipulated in Clauses (a) to (c) of s.15-J (which enumerates the
"factors to be taken into account by the Adjudicating Officer" while
adjudging the quantum of penalty) are mandatory conditions which
must be read into ss.15-A to 15-HA (the penalty provisions) in the
sense that unless the conditions specified in Clauses (a) to (c) are
satisfied, penalty cannot be imposed by the Adjudicating Officer
under the substantive provisions of ss.15-A to 15-HA - Held: The
argument is too far-fetched to be accepted - s.15-J enumerates by
way of illustration(s) the factors which the Adjudicating Officer
should take into consideration for determining the quantum of
penalty imposable - Imposition of penalty depends upon satisfaction
of 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 and
not a continuing default - The word "repetitive" as used therein
would refer to a recurring or successive default - This dictum,
however, does not mean that factum of continuing default is not a
relevant factor as Clauses (a) to (c) in s.15-J of the Act are merely
illustrative and are not the only grounds/factors which can be taken
into consideration while determining the quantum of penalty - Words
and 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 and
discretion vested by s.15-J to decide on the quantum of penalty,
stands eclipsed by the penalty provisions contained in s.15-A to
s.15-HA - Held: ss.15-A(a) to 15-HA have to be read along with
s.15-J in a manner to avoid any inconsistency or repugnancy -
Need to avoid conflict and head-on-clash and construe the said
provisions harmoniously - Explanation to s.15-J added by
Amendm

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SUPREME COURT REPORTS
[2019] 18 S.C.R.
ADJUDICATING OFFICER, SECURITIES AND EXCHANGE
BOARD OF INDIA
v.
BHAVESH PABARI
(Civil Appeal No.11311 of 2013)
FEBRUARY 28, 2019
[RANJAN GOGOI, CJI, DEEPAK GUPTA AND
SANJIV KHANNA, JJ.]
Securities and Exchange Board of India Act, 1992 - s.15-J,
Cl. (a), (b) & (c) - Whether conditions stipulated in Clauses (a), (b)
and (c) of s.15-J are exhaustive to govern the discretion in the
Adjudicating Officer to decide on the quantum of penalty or the
said conditions are merely illustrative - Held: Provisions of Clauses
(a), (b) and (c) of s.15-J are illustrative in nature and have to be
taken into account whenever such circumstances exist - But this is
not to say that there can be no other circumstance(s) beyond those
enumerated in Clauses (a), (b) and (c) of s.15-J that the Adjudicating
Officer is precluded in law from considering while deciding on the
quantum of penalty to be imposed - A narrow view would be in
direct conflict with the provisions of s.15-I(2) which vests jurisdiction
in the Adjudicating 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."- The above apart, the
circumstances enumerated in Clauses (a), (b) and (c) of s.15-J may
have no relevance and may never arise in case of contraventions
contemplated by certain provisions of the SEBI Act, for instance
s.15-A, 15-B or 15-C - Therefore, to understand the conditions
stipulated in Clauses (a), (b) and (c) of s.15-J 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 u/ss.15-A, 15-B and 15-C, s.15-J
will have no application - Such a result could not have been intended
by the legislature - Conditions stipulated in Clauses (a), (b) and (c)
of s.15-J are not exhaustive and in the given facts of a case, there
can be circumstances beyond those enumerated by Clauses (a), (b)
and (c) of s.15-J which can be taken note of by the Adjudicating
Officer while determining the quantum of penalty.
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Securities and Exchange Board of India Act, 1992 - s.15-J,
Cl. (a), (b) & (c) and ss.15-A to 15-HA - Whether conditions
stipulated in Clauses (a) to (c) of s.15-J (which enumerates the
"factors to be taken into account by the Adjudicating Officer" while
adjudging the quantum of penalty) are mandatory conditions which
must be read into ss.15-A to 15-HA (the penalty provisions) in the
sense that unless the conditions specified in Clauses (a) to (c) are
satisfied, penalty cannot be imposed by the Adjudicating Officer
under the substantive provisions of ss.15-A to 15-HA - Held: The
argument is too far-fetched to be accepted - s.15-J enumerates by
way of illustration(s) the factors which the Adjudicating Officer
should take into consideration for determining the quantum of
penalty imposable - Imposition of penalty depends upon satisfaction
of 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 and
not a continuing default - The word "repetitive" as used therein
would refer to a recurring or successive default - This dictum,
however, does not mean that factum of continuing default is not a
relevant factor as Clauses (a) to (c) in s.15-J of the Act are merely
illustrative and are not the only grounds/factors which can be taken
into consideration while determining the quantum of penalty - Words
and 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 and
discretion vested by s.15-J to decide on the quantum of penalty,
stands eclipsed by the penalty provisions contained in s.15-A to
s.15-HA - Held: ss.15-A(a) to 15-HA have to be read along with
s.15-J in a manner to avoid any inconsistency or repugnancy -
Need to avoid conflict and head-on-clash and construe the said
provisions harmoniously - Explanation to s.15-J added by
Amendment Act No.7 of 2017, has clarified and vested in the
Adjudicating Officer a discretion u/s.15-J on the quantum of penalty
to be imposed while adjudicating defaults u/ss.15-A to 15-HA -
Explanation to s.15-J, which was introduced / added in 2017 for
removal of doubts created as a result of pronouncement in M/s.
Roofit Industries Ltd. case, also states that the Adjudicating Officer
ADJUDICATING OFFICER, SECURITIES AND EXCHANGE
BOARD OF INDIA v. BHAVESH PABARI
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shall always have deemed to have exercised and applied the
provision - Therefore, provisions of s.15-J were never eclipsed and
had continued to apply in terms thereof to the defaults u/s.15-A(a).
Securities and Exchange Board of India Act, 1992 - s.15-J
and s.15A(e) - Applicability of s.15J, in context of s.15A(a) as it
was between 29th October, 2002 till 7th September, 2014 - Expression
"whichever is less" therein - Meaning and effect - Legislative intent
behind s.15A(a) as amended by Amendment Act No.7 of 2014 and
Clarificatory Explanation added by Act No.7 of 21017 to s.15J
explained - Held: M/s Roofit Industries Ltd. case had erroneously
held that s.15-J would not be applicable after s.15-A(a) was
amended with effect from 29th October, 2002 till 7th September, 2014
when s.15-A(a) of the SEBI Act was again amended - Insertion of
Explanation to s.15-J added by Amendment Act No.7 of 2017 would
reflect 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 29th
October 2002 till 7th September 2014, was not to curtail the
discretion of the Adjudicating Officer u/s.15J on the quantum of
penalty to be imposed while adjudicating defaults - The legislative
intent is also clear as s.15A(a) was amended by Amendment Act
No.27 of 2014 to state that the penalty could extend to Rs.1 lakh
for each day during which the failure continues subject to a maximum
penalty of Rs. 1 crore - This amendment in 2014 was not
retrospective and therefore, clarificatory and for removal of doubt
Explanation to s.15-J was added by Act No. 7 of 2017 - Normally
the expression "whichever is less" would connote absence of
discretion by prescribing the minimum mandatory penalty, but in
the context of s.15A(a) as it was between 29th October,2002 till 7th
September, 2014, read along with Explanation to s.15-J added by
Act No.7 of 2017, the legislative intent was not to prescribe minimum
mandatory penalty of Rs.1 lakh per day during which the default
and failure had continued - s.15-A(a) as it was between 25th October,
2002 and 7th September, 2014 has to be read and interpreted in line
with the Amendment Act 27 of 2014 as giving discretion to the
Adjudicating Officer to impose minimum penalty of Rs.1 lakh subject
to maximum penalty of Rs.1 crore, keeping in view the period of
default as well as aggravating and mitigating circumstances
including those specified in s.15-J.
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Criminal Law - Offence - "Continuing offence" and "Repeat
offence" - Distinction between - Held: The continuing offence is a
one which is of a continuous nature as distinguished from one which
is committed once and for all - In case of continuing offence, the
liability continues until the rule or its requirement is obeyed or
complied with - On every occasion when disobedience or noncompliance occurs and reoccurs, there is an offence committed -
Continuing offence constitutes a fresh offence every time or occasion
it occurs - A recurring or successive wrong, on the other hand, are
those which occur periodically with each wrong giving rise to a
distinct and separate cause of action.
Interpretation of Statutes - Doctrine of Harmonious
construction - Invocation of - Held: Provision of one section cannot
be used to nullify and obtrude another unless it is impossible to
reconcile 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 created
as a result of pronouncement in M/s. Roofit Industries Ltd. case -
Explanation to s.15-J so added by Amendment Act No.7 of 2017
has clarified and vested in the Adjudicating Officer a discretion
u/s.15-J on the quantum of penalty to be imposed while adjudicating
defaults u/ss.15-A to 15-HA - Securities and Exchange Board of
India Act, 1992 - s.15-J, Explanation to.
Securities and Exchange Board of India through its
Chairman v. Roofit Industries Limited (2016) 12 SCC
125 - overruled.
State of Bihar v. Deokaran Nenshi & Ors. (1972) 2 SCC
890 : [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 Board
of India (2016) 12 SCC 119; Securities and Exchange
Board of India v. Rakhi Trading (P) Ltd. (2018) 13 SCC
753; and Securities and Exchange Board of India v.
Kishore R. Ajmera (2016) 6 SCC 368: [2016] 1 SCR
1118 - referred to.
ADJUDICATING OFFICER, SECURITIES AND EXCHANGE
BOARD OF INDIA v. BHAVESH PABARI
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Case Law Reference
(2016) 12 SCC 119
referred to
Para 2
(2016) 12 SCC 125
overruled
Para 2
[1973] 3 SCR 1004
relied on
Para 13
[2008] 12 SCR 104
relied on
Para 13
(2018) 13 SCC 753
referred to
Para 43
[2016] 1 SCR 1118
referred to
Para 43
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11311
of 2013.
From the Judgment and Order dated 10.09.2013 of the Securities
Appellate Tribunal, Mumbai in Appeal No. 71 of 2012.
With
C.A. No. 1824 of 2014, C.A. No. 9798 of 2014, C.A. No. 9797 of
2014, C.A. No. 9799 of 2014, C.A. No. 14728 of 2015, C.A. No. 14730
of 2015, C.A. No. 14729 of 2015, C.A. No. 33 of 2017, C.A. No. 1009
of 2017, C.A. No. 2641 of 2017, C.A. No. 6160 of 2018 and C.A. No.
9563 of 2018.
Mr. C.U. Singh, Sr. Adv. Sahil Khanna, J.D. Baruah, Praveen
Kumar, Harish Pandey, Abhishek Anand, M.P. Devanatha, Ms. Ruchi
Kohli, Pradeep Aggarwal, Lal Pratap Singh, Arjun Aggarwal, P.N. Sharma,
Atanu Mukherjee, Sarad Kumar Singhania, Purvish Jitendra Malkan,
Prakash Shah, Ms. Dharita Purvish Malkan, Ms. Khushboo V. Malkan,
Alok Kumar, Raghaev R. Ms. Deepa Gorasia, Tanmaya Agarwal, Nipun
Goel, Sudarsh Menon, Ms. Nimisha Menon, Suryodaya Prakash Tiwari,
Sanjay Kumar Dubey, Advs. for the Appellants.
Chander Uday Singh, Sr. Adv. Pratap Venugopal, Ms. Surekha
Raman, Purushottam Kumar Jha, Ms. Remya Raj, M/s K J John and
Co., Harish Pandey, Pradeep Aggarwal, Lal Pratap Singh, Umesh Pratap
Singh, Arjun Aggarwal, P.N. Sharma, Ms. Ruchi Kohli, Advs. for the
Respondents.
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The Judgment of the Court was delivered by
SANJIV KHANNA, J.
1. Delay condoned.
2. Two primary questions, in a way interconnected, have been
referred by the Referral judgment and order dated 14th March, 2016
passed in Siddharth Chaturvedi Vs. Securities and Exchange Board
of India1. The correctness of the view expressed on the said two
questions by a numerical smaller bench of this Court in Securities and
Exchange Board of India through its Chairman vs. Roofit Industries
Limited2 would coincidentally arise. The questions referred can be
enumerated and summarized as follows:
(i) Whether the conditions stipulated in clauses (a), (b) and (c) of
Section 15-J 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 15-J 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 15-A to Section 15-HA 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 VI-A of the SEBI Act.
Sections 15-A to 15-HA are the penalty provisions whereas Section 15I 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 amendment
by Act No.59 of 2002, as amended by Act No.59 of 2002 and thereafter
ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARD
OF INDIA v. BHAVESH PABARI
1 (2016) 12 SCC 119
2 (2016) 12 SCC 125
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as amended by Act No.27 of 2014 and Section 15-J are required to be
specifically 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 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 not exceeding
one lakh and fifty thousand rupees for each such failure;
(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
not exceeding five thousand rupees for every day, during which
such failure continues;
(c) to maintain books of account or records, fails to maintain
the same, he shall be liable to a penalty not exceeding ten thousand
rupees 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 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 of one lakh
rupees for each day during which such failure continues or one
crore rupees, whichever is less;
(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
of one lakh rupees for each day during which such failure continues
or one crore rupees, whichever is less;
(c) to maintain books of account or records, fails to maintain
the same, he shall be liable to a penalty of one lakh rupees for
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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 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 rupees for
each day during which such failure continues subject to a maximum
of 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, the
adjudicating officer shall have due regard to the following factors,
namely:-
(a) the amount of disproportionate gain or unfair advantage,
wherever quantifiable, made as a result of the default;
(b) the amount of loss caused to an investor or group of
investors as a result of the default;
(c) the repetitive nature of the default.
ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARD
OF INDIA v. BHAVESH PABARI [SANJIV KHANNA, J. ]
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Explanation - for the removal of doubts, it is clarified that the
power of an adjudicating officer to adjudge the quantum of penalty
under 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 to
have been exercised under the provisions of this section."
[Explanation added by Act No. 7 of 2017]
6. Insofar as the second question is concerned, if the penalty
provisions are to be understood as not admitting of any exception or
discretion and the penalty as prescribed in Section 15-A to Section 15HA of the SEBI Act is to be mandatorily imposed in case of default/
failure, 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 be
read along with Section 15-J in a manner to avoid any inconsistency or
repugnancy. We must avoid conflict and head-on-clash and construe the
said provisions harmoniously. Provision of one section cannot be used to
nullify and obtrude another unless it is impossible to reconcile the two
provisions. The explanation to Section 15-J of the SEBI Act added by
Act No.7 of 2017, quoted above, has clarified and vested in the
Adjudicating Officer a discretion under Section 15-J on the quantum of
penalty to be imposed while adjudicating defaults under Sections 15-A
to 15-HA. Explanation to Section 15-J was introduced/added in 2017 for
the removal of doubts created as a result of pronouncement in
M/s. Roofit Industries Ltd. case (supra). We are in agreement with
the reasoning given in reference order dated 14th March, 2016 that
M/s Roofit Industries Ltd. had erroneously and wrongly held that Section
15-J would not be applicable after Section 15-A(a) was amended with
effect from 29th October, 2002 till 7th September, 2014 when Section 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 15-J 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 15-J were never
eclipsed and had continued to apply in terms thereof to the defaults
under 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 even
to technical defaults of small amounts and, therefore, prescription of
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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 15-A(a) as it existed during
the period 29th October 2002 till 7th September 2014, was not to curtail
the discretion of the Adjudicating Officer by prescribing a minimum
mandatory penalty of not less than Rs. 1 lakh per day till compliance
was made, notwithstanding the fact that the default was technical, no
loss was caused to the investor(s) and no disproportionate gain or unfair
advantage 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 the
penalty could extend to Rs. 1 lakh for each day during which the failure
continues subject to a maximum penalty of Rs. 1 crore. This amendment
in 2014 was not retrospective and therefore, clarificatory and removal
of doubt Explanation to Section 15-J was added by the Act No. 7 of
2017. Normally the expression "whichever is less" would connote absence
of discretion by prescribing the minimum mandatory penalty, but in the
context of Section 15A(a) as it was between 29th October,2002 till 7th
September, 2014, read along with Explanation to Section 15-J added by
Act No.7 of 2017, we would hold the legislative intent was not to prescribe
minimum mandatory penalty of Rs.1 lakh per day during which the default
and failure had continued. We would prefer read and interpret Section
15-A(a) as it was between 25th October, 2002 and 7th September, 2014
in line with the Amendment Act 27 of 2014 as giving discretion to the
Adjudicating Officer to impose minimum penalty of Rs.1 lakh subject to
maximum penalty of Rs.1 crore, keeping in view the period of default as
well as aggravating and mitigating circumstances including those specified
in 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, (both
parties have actually canvassed for a wider and more expansive
interpretation of Section 15-J), we are inclined to take the view that the
provisions of clauses (a), (b) and (c) of Section 15-J are illustrative in
nature and have to be taken into account whenever such circumstances
exist. 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 that
the Adjudicating Officer is precluded in law from considering while
deciding on the quantum of penalty to be imposed.
ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARD
OF INDIA v. BHAVESH PABARI [SANJIV KHANNA, J. ]
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9. A narrow view would be in direct conflict with the provisions of
Section 15-I(2) of the SEBI Act which vests jurisdiction in the
Adjudicating 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 15-J 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 15-A, 15-B or 15-C 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 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 no
exception or vesting any discretion in the Adjudicating Officer would be
virtually to admit/concede that in adjudications involving penalties under
Sections 15-A, 15-B and 15-C, Section 15-J 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-J are not exhaustive and in the given facts
of a case, there can be circumstances beyond those enumerated by
clauses (a), (b) and (c) of Section 15-J which can be taken note of by
the Adjudicating Officer while determining the quantum of penalty.
12. At this stage, we must also deal with and reject the argument
raised by some of the private appellants that the conditions stipulated in
clauses (a) to (c) of Section 15-J are mandatory conditions which must
be read into Sections 15-A to 15-HA in the sense that unless the conditions
specified in clauses (a) to (c) are satisfied, penalty cannot be imposed
by the Adjudicating Officer under the substantive provisions of Sections
15-A to 15-HA of the SEBI Act. The argument is too far-fetched to be
accepted. Section 15-J of the SEBI Act enumerates by way of
illustration(s) the factors which the Adjudicating Officer should take into
consideration for determining the quantum of penalty imposable. The
imposition of penalty depends upon satisfaction of the substantive
provisions as contained in Sections 15-A to Section 15-HA of the SEBI
Act.
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13. There is a distinction between a continuing offence and a
repeat offence. The continuing offence is a one which is of a continuous
nature as distinguished from one which is committed once and for all.
The term "continuing offence" was explained and elucidated by giving
several illustrations in State of Bihar vs. Deokaran Nenshi & Ors.3.
In case of continuing offence, the liability continues until the rule or its
requirement is obeyed or complied with. On every occasion when
disobedience or non-compliance occurs and reoccurs, there is an offence
committed. Continuing offence constitutes a fresh offence every time
or occasion it occurs. In Union of India & Anr. Vs. Tarsem Singh4,
continuing offence or default in service law was explained as a single
wrongful act which causes a continuing injury. A recurring or successive
wrong, on the other hand, are those which occur periodically with each
wrong giving rise to a distinct and separate cause of action. We have
made reference to this legal position in view of clause (c) of Section 15J of the SEBI Act which refers to repetitive nature of default and not a
continuing default. The word "repetitive" as used therein would refer to
a recurring or successive default. This factum has to be taken into
consideration 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 15-J 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,
3 (1972) 2 SCC 890
4 (2008) 8 SCC 648
ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARD
OF INDIA v. BHAVESH PABARI [SANJIV KHANNA, J. ]
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("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 15-I of the SEBI Act.
16. Impugned order passed by the Appellate Tribunal confirms
penalty of Rs.20,00,000 (Rupees twenty lakhs only) each as imposed on
the appellants by the Adjudicating Officer under Section 15-HA of the
Act for violation of Regulation Nos.4(2)(a), (b) and (g) of the SEBI
(Prohibition of Fraudulent and Unfair Trade Practices relating to
Securities Market) Regulations, 2003 ("PFUTP Regulations" for short).
17. Factual findings, as observed by the Adjudicating Officer and
accepted by the Appellate Tribunal as un-controvertible, are mentioned
below:
(i)
Bhavesh Pabari in his name and as sole proprietor of M/s.
Shree Radhe, Hemant Sheth and one Neeraj Sanghvi had
indulged in synchronized/structured and reversed trade in
the scrips of M/s. Gulshan Polyols Ltd. (erstwhile Gulshan
Sugar and Chemicals Ltd.) ("GPL" for short) from 10th
April, 2006 to 8th September, 2006.
(ii)
Connection/complicity between Bhavesh Pabari/M/s. Shree
Radhe, Hemant Sheth and one Neeraj Sanghvi was
established and was not disputed. Hemant Sheth and
Bhavesh Pabari/M/s. Shree Radhe had a common
introducer in the "Know Your Customer" documentation.
(iii)
Scrips of GPL opened at Rs.44.75 on 12th January, 2006,
touched a peak high of Rs.103.40 on 30th August, 2006 and
closed at Rs. 31.70 on 29th December, 2006. The share
price of the scrips during the period 1st December, 2005 to
11 January, 2006 was in the range of Rs.31.50 to Rs. 49.90
with an average daily volume of 8,255 shares.
(iv)
The three appellants along with Neeraj Sanghvi, during the
period 10th April, 2006 to 8th September, 2006 had traded
with each other in 18,48,081 shares of the GPL which had
accounted for around 16.29% of the total traded volume in
this period.
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(v)
About 45% of the total shares, i.e., 8,34,453 shares were
executed via structured orders, i.e., buy and sell orders
which were placed within a 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 quantity
of the buy and sell order were identical.
(vi)
On 64 trading dates between 10th April, 2006 to 8th
September, 2006, a reverse trading pattern was espied in
15,18,204 shares, which had accounted for 13.38% of the
total market value and was more than 20% of the market
volume in the aforesaid period.
(vii)
On 24 days between the period from 10 April, 2006 to 8th
September, 2006, the quantity 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.
ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARD
OF INDIA v. BHAVESH PABARI [SANJIV KHANNA, J. ]
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(xiii) Bhavesh Pabari had entered into 28 buy trades for 55,915
shares synchronized by price and time and 21 buy trades
for 39,350 shares synchronized by price, time and quantity
with Hemant Sheth in the period 18th April, 2006 to 25th
August, 2006.
(xiv) Bhavesh Pabari had entered into 22 sell trades for 41,500
shares which were found to be synchronized by price and
time and 16 sell trades for 40,422 shares which were
synchronized by price, time and quantity with Hemant Sheth
in the period 18th April, 2006 to 25th August, 2006.
(xv)
Similarly, there were 13 buy and sell trades with Neeraj
Sanghvi.
18. The sole contention of the learned counsels appearing on behalf
of Bhavesh Pabari and M/s Shree Radhe is that penalties of Rs.20,00,000
(Rupees twenty lakhs only) each should not have been separately
imposed on Bhavesh Pabari and M/s Shree Radhe, of which he was the
sole proprietor.
19. This contention superficially seems attractive, but on an indepth reflection should be rejected as Bhavesh Pabari had indulged in
trading in its personal name and as also the sole proprietor of M/s. Shree
Radhe. This is clear from inter se transactions and transactions with
connected persons. Thus, Bhavesh Pabari had transacted in two different
capacities, i.e., in his personal name and as sole proprietor of M/s. Shree
Radhe. It is in this background that total penalty of Rs.40 lakhs (Rupees
forty lakhs only) under Section 15-HA of the SEBI Act had been imposed
for violation of Regulations 4(2)(a), (b) and (g) of the PFUTP Regulations
as the transactions were in two different names, though belonging to the
same individual.
20. Accordingly, C.A. No.9798/2014 preferred by M/s Shree
Radhe and C.A. No.9797/2014 preferred by Bhavesh Pabari hold no
merit and are dismissed affirming the order passed by the Appellate
Tribunal and confirming the penalty of Rs.20,00,000/- (Rupees twenty
lakhs 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 are
not inclined to show indulgence and leniency to the three appellants, as
the facts found are highly ignominious and scandalous.
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C.A. No. 11311 of 2013 (A.O., Securities and Exchange Board
of India vs. Bhavesh Pabari)
C.A. No. 1824 of 2014 (Securities & Exchange Board of India
Vs. M/s. Shree Radhe)
21. SEBI has filed cross appeals aggrieved by the order 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 15-A(a) of the SEBI Act for violating
Section 11-C(3) and 11-C(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 did not record
any reason for deleting the said penalty, in spite of observing that the
explanation given by Bhavesh Pabari did not inspire confidence, would
be a just and fair criticism and a good challenge. We clearly have
reservations on the ground stated or rather lack of reasoning given by
the Appellate Tribunal, especially in the light of the language of Sections
15-A(a) and Section 15-J of the Act. However, during the hearing, the
learned counsel appearing for Bhavesh Pabari had drawn our attention
to his reply dated 28th September, 2009 stating that Bhavesh Pabari's
grandmother had expired and, therefore, he had requested for time to
make an appearance. It was stated at the Bar that grandmother of
Bhavesh Pabari had expired on 19th September, 2009, and this aspect
was highlighted and made known to the authorities. Furthermore, Bhavesh
ADJUDICATING OFFICER, SECURITIES AND EXCHANGE BOARD
OF INDIA v. BHAVESH PABARI [SANJIV KHANNA, J. ]
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Pabari/ M/s. Shree Radhe had submitted part information vide letter
dated 2nd November, 2009. These aspects and explanations have not
been considered by the Appellate Tribunal.
24. Adjudicating Officer, while imposing penalty had referred to
the letter dated 6th May, 2009 by which Bhavesh Pabari and M/s. Shree
Radhe were required to furnish information of details regarding trading
in the GPL scrips, connection/relation with the GPL, its promoters/
directors, connection/relation between Hemant Sheth, etc. but the said
notice was not complied with. Thereafter, reminders dated 21st July,
2009 and 14th August, 2009 were issued, but again of no avail. This was
followed by summons dated 4th September, 2009, 23rd September 2009,
20th October, 2009 and 5th November, 2009.
25. Given the aforesaid facts, we should have remitted the matter
to the Appellate Tribunal for a fresh adjudication and examination but
would refrain from doing so in view of the time gap, the quantum of fine
imposed, and, as we have upheld the total penalty of Rs.40,00,000/-
(Rupees forty lakhs only) imposed on the appellant under Section 15HA of the SEBI Act. We would rather close the proceedings.
Accordingly, appeals preferred by SEBI, i.e., C.A. No.11311 of 2013
and C.A. No.1824 of 2014 are also disposed of.
C.A. No.14728/2015 (Ankur Chaturvedi vs. Securities and
Exchange Board of India);
C.A. No.14729/2019 (Jay Kishore Chaturvedi vs. Securities and
Exchange Board of India); and
C.A. No.14730/2015 (Siddharth Chaturvedi vs. Securities and
Exchange Board of India); and
26. The above-captionedappellants are Promotors-cum- 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).
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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 15-A(b) of the SEBI Act. Ankur
Chaturvedi had also suffered penalty of Rs.2,00,000/- (Rupees two lakhs
only) under Section 15-HB of the SEBI Act as he had sold 45,032 shares
after acquiring 45,000 shares on 29th January, 2013, which was in violation
of Clause 4.2 of the Model Code of Conduct for Prevention of Insider
Trading for Listed Companies as set out in Schedule I, Part A of the PIT
Regulations.
29. The aforesaid penalties were affirmed in the impugned order
passed by the Appellate Tribunal, rejecting the contention that the penalty
so imposed was harsh and deserved substantial reduction as there was
no intention on the part of the appellants to suppress purchase or sale or
that non-disclosure had not caused profits to appellants or otherwise a
loss to the investors and that the failure to make disclosure was an
inadvertent error without mala fide intention.
30. The Appellate Tribunal, considering the factual matrix, has
held that the maximum penalty stipulated in the PIT Regulations was
Rs.1,00,000/- (Rupees one lakh only) for each day during which the
failure continued or Rs.1,00,00,000/- (Rupees one crore only), whichever
was less. The penalty imposed by the Adjudicating Authority took into
consideration the mitigating factors and cannot be said to be excessively
harsh or unreasonable.
31. In view of the factual background and the reasoning given by
the Appellate Tribunal, we do not find any good ground and reason to
interfere with the quantum of penalty confirmed by the impugned order
passed by the Appellate Tribunal.
C.A. No.33/2017 (Akshat Tandon and Others vs.