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TMI Blog2002 (5) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... td. is also a public limited company which is incorporated in India. The equity shares of Castrol India Ltd. are listed on the Stock Exchange of Bombay and are also permitted to be traded on the National Stock Exchange. The main challenge by the appellants to the said order of Securities Appellate Tribunal is on three grounds. Firstly, the appellants contend that the Securities and Exchange Board of India ( the SEBI ) has no express statutory power to award interest as awarded. Secondly, the appellants contended that the interest could not have been awarded from 14-7-2000 and at the most it could have been awarded only from 7-11-2000. Thirdly, the challenge is that the award of interest at the rate of 15 per cent p.a. to be exorbitant and the award ought to be at 5-6 per cent as prevalent in United Kingdom. 2. We have heard both the learned counsel at length. Perused the record as well as the impugned order dated 5-9-2001 passed by the Securities Appellate Tribunal. As far as the first issue is concerned, i.e., the SEBI has no statutory power to award interest, Mr. Setalvad, the learned senior advocate, appearing for the appellants brought to our notice that the only Regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest no such interest can be awarded. Mr. Setalvad thereafter referred to a judgment of Privy Council in New Port Borough Council v. Monmouthshire Country Council 1947 AC 520. Wherein also the Privy Council has held that as a matter of construction there must be found in section a power express or implied given to the arbitrator to award interest. Therefore, if such power was not to be there no interest could be levied. Mr. Setalvad referred to a judgment in Radio Companies Ltd. v. Phonographic Performance Ltd. 1994 RPC 143, wherein also it is held that unless there is an express provision for award of interest the same cannot be awarded. 4. Mr. Setalvad referred to the Halsbury s Laws of England, 4th edn., Reissue of 1999 and in clause 109 it is held that the Court always has a right of award interest which is by way of an equitable right. 5. Mr. Setalvad also referred to and relied on a clause 35 of the SEBI (Mutual Funds) Regulations, 1996 wherein there is a provision for payment of interest at 15 per cent in the event of failure to refund the amount with regard to mutual fund. Similarly Mr. Setalvad referred to clause 31 of the SEBI (Collective Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an express provision for compulsory exaction of any money, there is no room for intendment. He also referred to another judgment of the Apex Court in Khemka Co. (Agencies) (P.) Ltd. v. State of Maharashtra AIR 1975 SC 1549 wherein also it was held that in the absence of any express provision there cannot be any imposition of penalty for non-payment of tax within the prescribed period. 8. Mr. Setalvad also contended that interest could not have been awarded even assuming such a power existed from 14-7-2000 and at the most it could have been awarded from 7-11-2000 and not from 7-7-2000 when the minimum acquisition of 50 per cent had taken place. Therefore, he contended that award of interest at the most could be from 7-11-2000 and not from 7-7-2000. Mr. Setalvad also contended that appellants are from United Kingdom and there the prevalent rate of interest was of 5-6 per cent p.a. and the award of interest at 15 per cent p.a. to be highly exorbitant which almost amounted to levy of penalty. 9. Mr. Goolam Vahanvati, the learned Advocate General on behalf of the respondent contended that as far as the date is concerned for award of interest, the correct date would be 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the investors in securities and the measures referred to in section 11(2) does not mean that such measures will have to be laid down in advance. The High Court has also held that it is a matter of common knowledge that the SEBI has to regulate a speculative market and in the case of a speculative market varied situations may arise and all such exigencies and situations cannot be contemplated in advance and, therefore, looking to the exigencies and the requirement, SEBI has been entrusted with the duty and function to take such measures as it thinks fit. Thus, the measures cannot be laid down as a one time exercise to be followed in defined cases. The SEBI has to rise to the occasion for taking appropriate measures to combat even such situations in the speculative market, which may or may not be conceived in advance. 11. Mr. Vahanvati referred to and relied on a Division Bench judgment of our High Court in Anand Rathi v. SEBI [2001] 32 SCL 227 , wherein our Division Bench in para 18 has in unequivocal terms held that the Court has to adopt a construction that gives force and life to the legislative intention rather than the one which would defeat the same and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f carrying out the purpose in view. We thus find that the SEBI has ample authority in law to take the action under section 11B as has been taken by it." (p. 243) 12. Therefore, Mr. Vahanvati contended that in view of the section 11(1) read with regulation 44, the SEBI has the authority to award such an interest all the more because the main objective and purpose for which SEBI was constituted was to protect the interest of the investors and if such a power were not to be construed under section 11 read with regulation 44, the main objective of setting up of SEBI would be defeated, therefore, Mr. Vahanvati contended that the award of interest was to protect interests of the shareholders otherwise the companies may hold the investors to ransom. As has been held in both the aforesaid judgments the power to award interest is inherent in the aforesaid provisions of the Act and the Regulations. 13. As far as the second issue is concerned that is the award of interest from 14-7-2000 is concerned it has been held by the Securities Appellate Tribunal which was confirmed by this Court in Appeal No. 582 of 2001 that the relevant date for fixing the price was 14-3-2000 and if that was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no provision in the Act for payment of interest. This judgment has no application as in the instant case, as the respondents contend that section 11(1) and regulation 44 empowers the Board to award interest. ( iii )The same applies to the Allahabad High Court in the case of Prestige Engg. (India) (P.) Ltd. v. Union of India 1991 (51) ELT 255 where it was held that since the Act did not provide for rules for payment of interest in case of refund of duty, the authorities under the Act including CEGAT had no power to award interest. The Court was really dealing with whether the Court in writ jurisdiction could award such an interest in the absence of any legal provision. This judgment will not apply in the instant case. ( iv )With regard to the judgment of the CEGAT in the case of Sachin Textiles (P.) Ltd. v. CCE 2001 (127) ELT 108 (Mum. Trib.) the judgment merely follows the judgment of the Allahabad High Court in Prestige Engg. India (P.) Ltd. s case ( supra ) hence has no application here. ( v )The judgment of the Supreme Court in Mahabir Prasad Rungta v. Durga Datta AIR 1961 SC 990 dealt with the question of entitlement of interest in a suit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the Supreme Court in the case of G.C. Roy ( supra ) has held as under : "43. The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge : ( i )A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of section 34, C.P.C., and there is no reason or principle to hold otherwise in the case of arbitrator. ( ii )An arbitrator is an alternative form of resolution of dispute arising between the parties. If so, he must have the power to decide all the disputes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes or refer the disputes as to interest as such to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view." (p. 748) 17. The Apex Court in State of Orissa v. B.N. Agarwalla AIR 1997 SC 925 has held that interest can be awarded even during the pre-reference period, and observed as under: "18. In view of the aforesaid decisions there can now be no doubt with regard to the jurisdiction of the arbitrator to grant interest. The principles which can now be said to be well-settled are that the arbitrator has the jurisdiction to award pre-reference interest in cases which arose after the Interest Act, 1978 has become applicable. With regard to those cases pertaining to period prior to the applicability of the Interest Act, 1978. In the absence of any substantive law, contract or usage, the arbitrator has no jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her SEBI has statutory power to award interest or not, one has to see the main objective of the said Act which is to protect the interest of the investors securities and also to promote the development of and to regulate the securities market. Section 11(1) clearly provides that it is the duty of the Board to protect the interest of investors in securities and they have been empowered to take such measures and regulations as it thinks fit. Section 11(2) also makes it clear that without prejudice to the generality of the above provisions in section 11(1) certain measures have been mentioned in section 11(2). That is to say section 11(2) does not preclude SEBI from taking such measures as and when need arises. If one were to read section 11(1) with regulation 44 it is clear that SEBI has ample power to award such interest when SEBI s main duty is to protect the interests of the investors. There is no regulation or statutory provision which debars SEBI from awarding such an interest. Section 11(1) read with regulation 44, it is abundantly clear that SEBI has inherent power to award such an interest. 20. This is all the more clear from the Division Bench judgment of our High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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