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TMI Blog2017 (4) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... quantified at 1.95 crore up to 21.07.2009 within 45 days from 21.07.2009 failing which, the appellants were debarred from entering the Securities market for a period of 7 years without prejudice to the right of SEBI to recover the unlawful gain with interest till payment. Since the order passed by the WTM of SEBI on 21.07.2009 contained an obligation to pay interest @ 12% per annum on the unlawful gain of 4.05 crore till payment, the RO was justified in demanding interest on the unlawful gain of 4.05 crore from 21.07.2009 till payment. Accordingly, Appeal is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... isgorge unlawful gain of ₹ 4.05 crore with interest amounting to ₹ 1.95 crore calculated @ 12% per annum for four years (2005-2009) on the unlawful gain of ₹ 4.05 crore within 45 days from 21.07.2009. The WTM of SEBI further held that if the aforesaid amount was not paid within 45 days, then, the appellants shall be restrained from accessing the securities market for a further period of seven years without prejudice to SEBI's right to enforce the disgorgement order. c) Appeals filed by the appellants against the disgorgement order dated 21.07.2009 were dismissed by this Tribunal on 12.11.2010. d) Further appeal filed by the appellants against the order of this Tribunal dated 12.11.2010 was dismissed by the Apex Court on 21.02.2011. Review Application filed by the appellants was also dismissed by the Apex Court on 24.08.2011. e) On 18.07.2013 the Securities Laws (Amendment) Ordinance ("1st Ordinance" for convenience) was promulgated by the President of India. By that Ordinance, inter alia, Section 28(A) was sought to be inserted to SEBI Act with a view to provide a mechanism for recovery of the amounts specified in that Section. f) As the Securities Laws (Amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er certificate-cumnotice of demand was issued by the RO to the appellants on 12.12.2013 demanding ₹ 6 crore (Rs. 4.05 crore towards disgorgement of unlawful gain + ₹ 1.95 crore towards interest @ 12% per annum on ₹ 4.05 crore for four years from 2005 up to 21.07.2009). By the said certificate-cum-notice the appellants were called upon to pay further interest on ₹ 4.05 crore @ 12% per annum from 21.07.2009 till 12.12.2013 amounting to ₹ 2,13,30,000/- and further interest @ 12% per annum on ₹ 4.05 crore from 13.12.2013 till payment along with costs, charges and expenses incurred in that behalf. m) Appellants ultimately paid ₹ 6 crore to SEBI on 06.01.2014, but failed to discharge the interest liability on ₹ 4.05 crore from 21.07.2009. n) On 16.01.2014 RO passed the impugned order demanding interest @ 12% per annum on ₹ 4.05 crore from 21.07.2009 to 12.12.2013 amounting to ₹ 2,13,30,000/- with further interest @ 12% per annum on ₹ 4.05 crore from 13.12.2013 to 5.1.2014 plus costs and charges. o) On 17.01.2014, Appeal No.199 of 2013 filed by the appellants was disposed of by this Tribunal by permitting the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the time stipulated in the respective orders and therefore, the RO was justified in demanding interest from the date of the order till payment. Counsel for SEBI submits that in the case of Dushyant Dalal & Anr. (Appellants in Appeal No. 41 of 2014) the order passed by the WTM on 21.07.2009 itself stipulates that if the amount of ₹ 6 crore (Rs. 4.05 crore unlawful gain + ₹ 1.95 crore interest) is not paid within 45 days, then, without prejudice to the SEBI's right to enforce disgorgement, the appellants would be further restrained from accessing the securities market for a period of seven years. According to SEBI, the order of WTM dated 21.07.2009 envisages that if ₹ 4.05 crore with interest quantified at ₹ 1.95 crore was not paid within 45 days from 21.07.2009, then the appellants subject to the right of SEBI to recover ₹ 4.05 crore with interest @ 12% per annum quantified at ₹ 1.95 crore and further interest @ 12% per annum on ₹ 4.05 crore from 21.07.2009 till payment would have to undergo additional debarment for 7 years. Therefore, fact that the appellants in Appeal No. 41 of 2014 have undergone additional debarment of 7 years on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961. Explanation 1.-…………. Explanation 2.- Any reference under the provisions of the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962 to the assessee shall be construed as a reference to the person specified in the certificate. Explanation 3.- Any reference to appeal in Chapter XVIID and the Second Schedule to the Income-tax Act, 1961, shall be construed as a reference to appeal before the Securities Appellate Tribunal under section 15T of this Act. (2) ……….. (3) ……….. (4) For the purposes of sub-sections (1), (2) and (3), the expression "Recovery Officer "means any officer of the Board who may be authorised, by general or special order in writing, to exercise the powers of a Recovery Officer.]" Section 220 of Income Tax Act, 1961 "When tax payable and when assessee deemed in default. 220. (1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice : Prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 200A for any period, then, no interest shall be charged under sub-section (2) on the same amount for the same period. (3) Without prejudice to the provisions contained in subsection (2), on an application made by the assessee before the expiry of the due date under sub-section (1), the Assessing Officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case. (4) If the amount is not paid within the time limited under sub-section (1) or extended under sub-section (3), as the case may be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default. (5) If, in a case where payment by instalments is allowed under sub-section (3), the assessee commits defaults in paying any one of the instalments within the time fixed under that sub-section, the assessee shall be deemed to be in default as to the whole of the amount then outstanding, and the other instalment or instalments shall be deemed to have been due on the same date as the instalment actually in default. (6) Where an assessee has presented an appeal under section 246 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate and proceed to recover the amounts specified in the certificate by any one or more of the five modes specified therein and for that purpose the provisions of Section 220 to 227, 228A, 229, 232, the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962 as in force from time to time, in so far as may be, would apply with necessary modifications as if the said provisions and the rules made thereunder were the provisions of SEBI Act and referred to the amount due to SEBI under the SEBI Act. b) It is well established in law that once the legislature incorporates certain provisions of an earlier Act into later Act then the provisions of the earlier Act so incorporated become part and parcel of the later Act as if the said provisions have been bodily transposed into the later Act. In the present case, by providing that the provisions of Income Tax Act and the Rules relating to 'Collection & Recovery' shall be treated as if the said provisions were the provisions of SEBI Act, the legislature has made it clear that on insertion of Section 28A, recovery of the amounts referred to in Section 28A shall be made by following the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest on delayed payments. By incorporating Section 220 of the Income Tax Act in Section 28A of SEBI Act, the legislature has statutorily imposed interest liability on the delayed payment of the amounts set out in Section 28A of the SEBI Act. In other words, the liability to pay interest under Section 28A read with Section 220 is automatic and arises by operation of law. Therefore, the argument of the appellants that there is no substantive provision in the SEBI Act to demand interest and hence, the RO, could not demand interest for the delayed payment cannot be accepted. 9. Referring to regulation 32(1)(h)&(j) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 which provide for levy of interest in case of delayed open offer, it was contended on behalf of the appellants that wherever a power to levy interest was intended to be conferred, SEBI has expressly provided for the same and since Section 28A does not contain any clause for levy of interest, the RO is not justified in demanding interest on delayed payment of the amounts referred to in Section 28A. There is no merit in the above argument, because, it is the prerogative of the legislature either t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed thereunder is a tax or penalty under the general Sales Tax Law of the state and for that purpose all or any of the powers under the general Sales Tax Law of the State may be exercised. In that case, the Central Sales Tax payable by India Carbon Ltd. was assessed by the Assam Sales Tax authorities and the Central Sales Tax determined as payable was demanded with interest by applying Section 35A of the Assam Sales Tax Act, 1947. Since the CST Act, 1956 did not contain any provision for levy of interest and the applicability of State Act under Section 9(2) of CST Act was limited for assessment, reassessment, collection of tax including penalty, it was held that in the absence of any specific provision to levy interest for delayed payment of Central Sales Tax under the CST Act, demand for interest based on the Assam Sales Tax Act cannot be sustained. In the present case, Section 28A specifically provides that inter alia, Section 220 of the Income Tax Act shall be deemed to be bodily incorporated into Section 28A of SEBI Act and shall be applied for recovery of the amounts due to SEBI with such modifications as deemed necessary. In other words, by incorporating Section 220 in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five modes specified in Section 28A, the appellants are not justified in contending that Section 220 of the Income Tax Act is incorporated in Section 28A only to facilitate recovery of the amounts specified in the certificate under the five modes of recovery mentioned in Section 28A. 13. If the contention of the appellants that certain provisions of the Income Tax Act are incorporated in Section 28A only for the limited purpose of facilitating recovery under the five modes mentioned in Section 28A is accepted, then, it would render Section 220 incorporated in Section 28A otiose or redundant because, Section 220 deals with the mechanism to be followed while drawing up a recovery certificate i.e. before initiating recovery under the five modes specified in Section 28A. Moreover, once the provisions of Section 220 of the Income Tax Act are incorporated in Section 28A, full effect must be given to Section 220 of the Income Tax Act for recovery of the amounts referred to in Section 28A of SEBI Act. Not to do so would defeat the object with which Section 220 has been incorporated in Section 28A of SEBI Act. Thus, the arguments of the appellants if accepted it would render the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in paying the amount demanded under the respective orders. In such a case, it is submitted, that interest cannot be demanded for the period prior to 18.07.2013, because substantive provision relating to levy of interest contained in Section 28A was introduced in SEBI Act with effect from 18.07.2013 and not for the period prior thereto. In other words, the submission is that, when the interest liability is statutorily introduced with effect from 18.07.2013, interest cannot be demanded for the period prior to 18.07.2013. 18. Counsel for SEBI, on the other hand, submitted that as on 18.07.2013, that is, the date on which Section 28A read with Section 220 of the Income Tax Act came into force, the amounts demanded under the respective orders had remained unpaid and therefore, applying Section 220 of the Income Tax Act 'mutatis mutandis' for recovery of the amounts referred to under Section 28A of SEBI Act, the RO was justified in demanding interest on the unpaid amount from the date of the orders passed prior to 18.07.2013 till payment. It is submitted that when the RO demanded interest on the unpaid amounts, Section 28A read with Section 220 was in operation. Since interest is deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1982, yarn manufactured at an intermediate stage of an integrated, continuous and uninterrupted process became excisable retrospectively from 1944. That retrospective amendment was upheld by the Apex Court in the case of J. K. Cottton Spg & Wvg Mills Ltd. v/s Union of India reported in 1987 (supp) SCC 350. In the present case, instead of inserting Section 28A retrospectively, the legislature has chosen to insert Section 28A with effect from 18.07.2013. Therefore, the interest obligation contained in Section 28A read with Section 220 would come into operation from 18.07.2013. e) Section 220(1) of the Income Tax Act does not contemplate interest liability from the end of the period for payment mentioned in the demand notice. On the contrary, Section 220(1) provides 30 days time to a person who has failed to pay the amount demanded under demand notice. Interest @ 12% per annum is leviable under Section 220(2) only if the person fails to pay the amount demanded, within 30 days as provided under Section 220(1). Since the interest liability, if any, arises under Section 220(2) only after the expiry of 30 days stipulated under Section 220(1) and since Section 220 is made applicable for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 18.07.2013 do not contemplate interest liability for the delayed payment, the RO could not invoke Section 28A and demand interest on the unpaid amount for the period prior to 18.07.2013. Findings relating to the interest demanded from the appellants in Appeal No. 41 of 2014. 22. In case of appellants in Appeal No. 41 of 2014, the order passed by the WTM of SEBI on 21.07.2009 contains the following directions:- "a) The noticees [Mr. Dushyant Natwarlal Dalal (PAN AAAPD 5859Q) and Mrs. Puloma Dushyant Dalal (PAN AAEPD 2909B) shall not buy, sell or deal in the securities market in any manner whatsoever or access the securities market, directly or indirectly, for a period 45 days from the date of this order, and b) The noticees shall disgorge the unlawful gain of Rs. 4.05 crore (rounded off from Rs. 4,05,61,579). c) The noticees shall also pay Rs. 1.95 crore (rounded off from Rs. 1,94,69,558), being the simple interest at the rate of 12% per annum for 4 years (2005-09) on the unlawful gain Rs. 4,05,61,579. d) The noticees shall pay the above amount of Rs. 6 crore (Rupees six crore) within 45 (forty five) days from the date of this order by way of crossed demand draft drawn i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s market for 7 years. Therefore, argument of the appellants that there was no direction to pay continued interest on the disgorgement amounts in case of failure to pay within 45 days cannot be accepted. 25. The directions contained in the order dated 21.07.2009 do not even remotely suggest that if the amounts demanded with interest were not paid within 45 days, then in lieu of the interest liability the appellants would have to undergo 7 year debarment. In fact the said order specifically records that 7 years debarment is without prejudice to the right of SEBI to enforce disgorgement i.e. recovery of unlawful gain with interest. 26. Argument of the appellants that demanding further interest on the unlawful gain of ₹ 4.05 crore from 21.07.2009 till payment in addition to the 7 year debarment amounts to double jeopardy is without any merit. By order dated 21.07.2009 the appellants were called upon to pay unlawful gain of ₹ 4.05 crore with interest quantified at ₹ 1.95 crore within 45 days. It is only if the appellants failed to pay the amounts demanded within 45 days, the appellants were to undergo additional debarment of 7 years. Interest payable by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber/December 2013 the appellants requested this Tribunal to permit the appellants to sell the shares lying in the demat account and the said request was immediately allowed. Had the appellants made such request to SEBI earlier, the same would have been granted. Instead of approaching SEBI, seeking permission to sell the shares, the appellants challenged the order of SEBI before this Tribunal and before the Apex Court. Even after the dismissal of the appeal and Review Application by the Apex Court the appellants did not approach SEBI seeking permission to sell the shares. In these circumstances, the appellants are not justified in contending that on account of attachment levied on the demat accounts, the appellants could not disgorge the unlawful gains from 21.07.2009. 30. Relying on principles analogous to Section 34 of the Code of Civil Procedure it was contended on behalf of the appellants that when the order is silent on further interest on the principal amount from the date of the order to the date of the payment, it is deemed that further interest has been refused and, therefore, in the present case since the WTM of SEBI in his order dated 21.07.2009 had not directed further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28A the RO could demand interest on unpaid penalty only if the penalty was not paid within 30 days from 18.07.2013, that is the date on which Section 28A read with Section 220 came into force. Accordingly, in all the appeals (except in Appeal No. 41 of 2014) interest demanded by the RO from the date of the penalty orders are quashed and set aside and all these matters are restored to the file of the RO for fresh computation of interest in terms of this decision. b) In Appeal No. 41 of 2014 the directions given by the WTM of SEBI on 21.07.2009 was to disgorge the unlawful gain of ₹ 4.05 crore with interest @ 12% per annum quantified at ₹ 1.95 crore up to 21.07.2009 within 45 days from 21.07.2009 failing which, the appellants were debarred from entering the Securities market for a period of 7 years without prejudice to the right of SEBI to recover the unlawful gain with interest till payment. Since the order passed by the WTM of SEBI on 21.07.2009 contained an obligation to pay interest @ 12% per annum on the unlawful gain of ₹ 4.05 crore till payment, the RO was justified in demanding interest on the unlawful gain of ₹ 4.05 crore from 21.07.2009 till payment ..... 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