2009 (4) TMI 452 - SC - Companies Law

Whether Tribunal has power to modify the penalty imposed by SEBI ? Held that - Appeal allowed. the position of Broker/Sub-Broker in case of violation is statutorily provided under section 12 of the Act, which has to be read along with rule 3 of the Rules. No power is conferred on the Tribunal to travel beyond the areas covered by section 12 and rule 3. When something is to be done statutorily in a particular way, it can only be done that way. There is no scope for taking shelter under a discretionary power.

Summary

Issues Involved:
1. Jurisdiction of the Tribunal to modify the penalty imposed by SEBI.
2. Interpretation of relevant provisions of the Securities and Exchange Board of India Act, 1992 and related regulations.
3. Authority of the Securities Appellate Tribunal to alter SEBI's orders.

Analysis:

Issue 1: Jurisdiction of the Tribunal to modify SEBI's penalty
The primary issue in this case revolved around whether the Securities Appellate Tribunal (SAT) had the authority to modify the penalties imposed by SEBI. The appellant argued that the Tribunal did not have the jurisdiction to alter the penalties set by SEBI, while the respondent contended that proportional penalties could be imposed and modified within the framework of the Act. Reference was made to section 15T of the Act in support of the Tribunal's right to modify penalties.

Issue 2: Interpretation of relevant provisions
The violations in question pertained to contraventions of section 12(1) of the Securities and Exchange Board of India Act, 1992, read with rule 3 of the Securities and Exchange Board of India (Stock Brokers & Sub-Brokers) Rules, 1992. The regulations outlined the registration requirements for stock brokers and sub-brokers, emphasizing the necessity of obtaining a certificate from the Board to engage in securities transactions. The penalties for contraventions were specified under regulation 25, including monetary penalties, suspension, or cancellation of registration.

Issue 3: Tribunal's authority to alter SEBI's orders
The Tribunal's authority to modify SEBI's orders was analyzed in light of the statutory provisions. It was established that the Tribunal, constituted under the Act, had the power to pass orders on appeals, including confirming, modifying, or setting aside the orders appealed against. However, the Tribunal's jurisdiction was found to be confined to the provisions of the Act and related rules. The Tribunal could not exceed its statutory mandate and had to adhere to the specified penalties for violations under section 12 and rule 3.

In conclusion, the Supreme Court held that the Tribunal did not have the authority to alter the penalties imposed by SEBI beyond the statutory provisions. As the penalties were clearly outlined in the Act and regulations, the Tribunal could not exercise discretionary powers to modify the nature of penalties. Consequently, the Court set aside the Tribunal's orders and restored SEBI's penalties. The appeals were allowed in favor of SEBI.