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2020 (6) TMI 646 - AT - SEBIWithhold of money by SEBI - penalty for violation of Regulations 3 and 4 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - During the pendency of the appeal, the Recovery Officer of SEBI recovered an amount - HELD THAT - Once the order of the AO imposing a penalty was set aside, there was no justification for SEBI to withhold any amount which was recovered pursuant to the order of the AO. Such retention of the amount after the order of the AO has been set aside, is without any authority of law. The fact that no direction for refund of the amount was issued by the Tribunal is immaterial. Once the order has been set aside, there is no amount to be recovered and consequently any amount so recovered has to be refunded immediately. Respondent has a right to file an appeal before the Supreme Court against the order of the Tribunal. The appeal was allowed by the Tribunal on 21/2/2020. No steps were taken by SEBI to file an appeal before the lockdown i.e. 25/3/2020. Therefore, retention of the money by SEBI was wholly unwarranted, especially when the appellant has also given an undertaking to abide by the order of the Supreme Court, if any. In view of the aforesaid and in view of the undertaking given by the appellant, we dispose of the Misc. Application directing SEBI to refund the amount of ₹ 6,35,521/- on or before 22/5/2020, failing which SEBI would be further liable to pay interest from the date of recovery till date of payment @ 12% per annum.
Issues:
1. Refund of penalty amount by SEBI after the order of the AO was set aside. 2. SEBI's decision to withhold the refunded amount pending a potential appeal to the Supreme Court. 3. Urgency application for refund due to medical emergency. 4. SEBI's justification for withholding the refunded amount. 5. Appellant's undertaking to place the amount back if a stay order is issued by the Supreme Court. Analysis: 1. The Tribunal, after hearing both parties, found that SEBI had no justification to withhold the penalty amount of ?6,35,521/- once the order of the Adjudicating Officer imposing the penalty was set aside. The Tribunal deemed SEBI's retention of the amount as illegal and without any legal authority, emphasizing that any amount recovered post the AO's order being set aside must be refunded promptly. 2. SEBI contended that they intended to file an appeal against the Tribunal's order but had not taken any steps to do so before the lockdown. The Tribunal noted that SEBI's decision to retain the money was unwarranted, especially in light of the appellant's undertaking to comply with any Supreme Court order. The Tribunal directed SEBI to refund the amount by a specified date, failing which SEBI would be liable to pay interest on the refunded amount. 3. The appellant filed an urgency application for refund, citing a medical emergency requiring spinal surgery and submitting medical certificates in support. The Tribunal considered the urgency of the situation and directed SEBI to refund the amount promptly. 4. SEBI argued that there was no specific direction from the Tribunal to refund the amount and that they were waiting to file an appeal. However, the Tribunal held that once the penalty order was set aside, SEBI had no grounds to withhold the refunded amount, regardless of the absence of a specific refund directive. 5. The appellant gave an undertaking to SEBI to place the refunded amount back within 15 days if a stay order was issued by the Supreme Court. The Tribunal considered this undertaking and directed SEBI to refund the amount by a specified date, emphasizing the illegality of withholding the amount post the AO's order being set aside. In conclusion, the Tribunal disposed of the applications, directing SEBI to refund the penalty amount and emphasizing the illegality of withholding the amount after the AO's order was set aside. The Tribunal considered the urgency of the situation due to the appellant's medical emergency and provided a deadline for the refund, with interest payable by SEBI for any delay.
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