2015 (7) TMI 220 - AT - Companies Law

Penalty under Section 15A(a) and Section 15C of the SEBI Act, 1992 - Failed to follow up or reset SEBI Complaints Redress System (SCORES) Login ID and Password - Failed to update the status of complaints in SCOREs within time - whether arguments like no investor loss and violation being not repetitive in nature have any impact on penalty amount imposed by SEBI - Held that - The show cause notice was issued on January 21, 2013 and as on the date of the passing of the impugned order on January 07, 2014 there were three investor grievances which had remained to be redressed. This Tribunal in a number of cases has taken the view that the fact that no investor has suffered and that the violation is not repetitive cannot be a ground to escape penalty for the violations committed. It is not in dispute that the penalty imposable against the appellant under Section 15A(a) and Section 15C is ₹ 1 crore. However, taking into consideration all mitigating factors, the Adjudicating Officer of SEBI has imposed penalty of ₹ 1 lac as against the penalty of ₹ 1 crore imposable under the SEBI Act, which cannot be said to be unreasonable or excessive. - Decided against the appellants.

Summary

Issues:
1. Imposition of penalty by SEBI on the appellant under Section 15A(a) and Section 15C of the SEBI Act for failure to follow up on SEBI Complaints Redress System.

Analysis:
The judgment revolves around the appeal against the adjudication order passed by SEBI imposing a penalty of &8377; 1 lac on the appellant for non-compliance with SEBI directives regarding the SCORES system. The appellant failed to update the status of complaints in the SCORES database within the stipulated time, leading to the penalty. Despite receiving multiple notices to address investor grievances, the appellant did not take necessary actions, resulting in the imposition of the penalty.

The appellant argued that the penalty was excessive as there was no investor loss, and the violation was not repetitive. However, the Tribunal rejected these contentions, emphasizing that the absence of investor loss and non-repetitive nature of the violation do not absolve the appellant from penalties. The Tribunal highlighted that the penalty for such violations under the SEBI Act could be as high as &8377; 1 crore, but considering mitigating factors, SEBI imposed a penalty of &8377; 1 lac, which was deemed reasonable and not excessive.

Ultimately, the Tribunal found no grounds to entertain the appeal and dismissed it without any costs. The judgment underscores the importance of compliance with regulatory directives, even in the absence of direct financial harm to investors, and upholds SEBI's authority to impose penalties for violations of the SEBI Act, irrespective of the quantum of financial loss or the repetitive nature of the breach.