Interplay between 15A and 15J of the SEBI Act: matter referred to Larger SC Bench [Read Judgment]

Division Bench of Supreme Court has referred a matter involving Interplay between the amended 15A and 15J of the SEBI Act before a larger bench. Bench comprising of Justices Kurian Joseph and R.F. Nariman in Siddharth Chaturvedi vs. SEBI said that it does not subscribe to the views in SEBI vs. Roofit Industries Limited ( 2015 (12) SCALE 642.)

In Roofit Industries Ltd case, another Division Bench of the Apex Court had held that the quantum of penalty under Section 15A can have due regard only to the three factors set out therein and not to other relevant factors as the expression “namely” cannot be equated with the expression “including”, being an exhaustive provision on the subject matter covered by the provision. It has also clearly held that Section 15J would suffer an eclipse for the period 2002 to 2014 inasmuch as the intention of the Legislature, by amending Section 15A, seems to be that no scope for any discretion for this period is to be exercised, if in fact, there is any infraction of Rules or Regulations. It was also held that the discretionary power of the Adjudicating Officer having been withdrawn, the scope of Section 15J would correspondingly stand drastically reduced.

The Bench in this case said “If we were to read Section 15A, as amended in 2002, in the manner suggested by the Division Bench of this Court, it may lead to anomalous results in that the effect of continuing failure to adhere to statutory regulations alleged to have been continued well beyond the period of three days, and which continues till this day, has Rs.1 lakh per day as the minimum mandatory penalty under the provisions, which would culminate in the appellants herein having to pay Rs.1 Crore in each of the three appeals. We do not think that this could have been the intention of the Parliament in enacting Section 15A, as amended in 2002. We also feel that on the assumption that paragraph 5 of the judgment is correct, it would be very difficult for Section 15A to be construed as a reasonable provision, as it would then arbitrarily and disproportionately invade the appellants' fundamental rights.”

Question referred before the Larger bench is “whether the expression “namely” in Section 15A fixes the discretion which can be exercised only in the circumstances mentioned in the three clauses set out in Section 15J, or whether it would also take into account other relevant circumstances, having particular regard to the fact that it is a penalty provision that the Court is construing.”

Read the Judgment here.