2017 (3) TMI 1811 - SC - SEBI

Penalty by Adjudicating Officer u/s 15A of SEBI Act - documents which has been asked for has been furnished are false - whether power of the Adjudicating Officer to impose penalty is limited and can be exercised only in the event of failure to furnish documents? - HELD THAT - It appears from the order which was passed that the Adjudicating Offier had specifically stated in para 31 that the appellant has already furnished the materials which are available on record . Since the materials have already been furnished, in our opinion, the said Section is not attracted on the given facts. Appellate Tribunal was not justified in upholding the order passed by the Adjudicating Officer on the basis of drawing adverse inferences against the appellant which is based on no material facts and no positive evidence has been furnished is totally erroneous. Adjudicating Officer has also failed to take into consideration that there was no non-compliance of summons, if she considered that in the first instance the summons was not issuable to the appellant. SEBI had all the information and the appellant (like many other non-registered entities) was under the bonafide belief that it did not come under the ambit, purview, compass and jurisdiction of SEBI. Having regard to the submissions made, we are of the view that that the order passed by the Tribunal is not sustainable and hence the same is set aside.

Summary

Issues: Whether the Adjudicating Officer has the authority to impose a penalty for furnishing false documents under Section 15A of the Securities and Exchange Board of India Act, 1992.

Analysis:
The Supreme Court analyzed the key issue of whether the Adjudicating Officer could impose a penalty for submitting false documents under Section 15A of the SEBI Act. The Court observed that the Adjudicating Officer had mentioned in the order that the appellant had already provided the materials available on record. Consequently, the Court opined that Section 15A did not apply in this situation since the materials had already been furnished.

The appellant's counsel contended that the Appellate Tribunal erred in upholding the Adjudicating Officer's order based on adverse inferences without substantial evidence. The counsel argued that there was no non-compliance with summons, and the appellant, like other non-registered entities, believed it was not under SEBI's jurisdiction. Additionally, the Adjudicating Officer's observation regarding the information furnished by the appellant was highlighted, suggesting deliberate misleading actions.

Moreover, the counsel referred to a report by an expert group under Mr. Justice M.H. Kania, which emphasized SEBI's lack of specific power to penalize false information. The report recommended empowering SEBI to initiate adjudication proceedings for furnishing false information. The appellant's counsel concluded that the Tribunal's order was arbitrary and unjustified.

Considering the submissions, the Court held that the Tribunal's order was unsustainable and set it aside, allowing the appeal. In another civil appeal, the appellant chose not to press the appeal, leading to its dismissal. Similarly, in a different civil appeal, as no one appeared on behalf of the appellants even after a second call, the appeal was dismissed for non-prosecution.