2019 (7) TMI 1894 - SC - SEBI

Guilty of indulging in financial irregularities and misconduct in conduct of business - fine/penalty of ₹ 10 lakhs with suspension from trading membership of the appellant for five trading days came to be imposed - As submitted that the decision of the DAC of NSE is in violation of NSE Circular dated June 27, 2013, because, as per that circular suspending the trading is not contemplated for the violations allegedly committed by the appellant - HELD THAT - Appellate Tribunal, has not examined this contention but proceeded to reject the appeal on the specious ground that the penalty imposed by the appropriate authority cannot be said to be unreasonable or excessive. The argument of the appellant was that even though the appropriate authority can suspend the trading membership of the member indulging in misconduct, it can be resorted to only when it falls within the concerned Bye-law such as Bye-law 8(a) relied upon by the respondent - which envisages that the trading member must conduct business in a manner prejudicial to the Exchange etc. The penalty could not have exceeded an amount of ₹ 1 lakh or 0.1% of the value of misuse, whichever is higher. These arguments have not been dealt with by the Appellate Tribunal at all. Resultantly, we deem it appropriate to set aside the impugned order and relegate the appellant before the Appellate Tribunal by restoring appeal No. 53 of 2017 to the file of the Securities Appellate Tribunal, Mumbai for reconsideration only on the issue of quantum of punishment awarded to the appellant. Indeed, while passing the final order, it will be open to the Tribunal to pass appropriate order with regard to the amount deposited by the appellant pursuant to order dated 27.02.2017 passed by this Court.

Summary

Issues:
- Challenge to the order of Securities Appellate Tribunal rejecting appeal against penalty imposed by Disciplinary Action Committee of National Stock Exchange
- Interpretation of Circular dated 27.06.2013 and Bye-laws Chapter IV Rule 1 regarding imposition of penalty and suspension of trading membership
- Examination of the power of appropriate authority to suspend trading membership and impose penalties for misconduct
- Failure of Appellate Tribunal to consider arguments regarding appropriateness of penalty and suspension

Analysis:
The Supreme Court considered the challenge to the order of the Securities Appellate Tribunal, which rejected an appeal against the penalty imposed by the Disciplinary Action Committee of National Stock Exchange. The appellant argued that the penalty could only be imposed in accordance with a Circular dated 27.06.2013, limiting the authority to suspend trading membership. However, the respondent relied on Bye-laws Chapter IV Rule 1, granting broad powers to the relevant authority to expel, suspend, fine, or warn trading members for various violations, including misconduct deemed detrimental to the exchange's interests.

The Court noted that the appellant specifically raised concerns about the suspension of trading membership and the quantum of penalty imposed. It was observed that the Appellate Tribunal failed to address these contentions and instead focused on the reasonableness of the penalty. The appellant contended that suspension of trading membership should only occur under specific Bye-laws, and the penalty should not exceed the limits set in the Circular. These arguments were not considered by the Appellate Tribunal.

Consequently, the Supreme Court set aside the impugned order and remitted the case back to the Securities Appellate Tribunal for reconsideration solely on the issue of the punishment's quantum. The Tribunal was instructed to decide the appeal afresh, considering the amount deposited by the appellant. The Court clarified that technicalities regarding the withdrawal of another appeal should not be a factor, emphasizing a prompt reconsideration of the punishment issue.

In conclusion, the Civil Appeal was allowed, and no costs were awarded. Any pending applications were disposed of, and the Appellate Tribunal was directed to reexamine the punishment issue promptly.