- Bookmark
- Share
- CaseIQ
Rakhi Trading Pvt. Ltd. v. Securities And Exchange Board Of India, Sebi Bhavan .
Factual and Procedural Background
The appellant was initially penalized by the Adjudicating Officer under Section 15I of the SEBI Act, 1992, with a penalty of Rs.1,08,00,000 for violations of certain PFUTP Regulations, as per the order dated 26th March 2009. This penalty was to be paid within 45 days. The appellant challenged this order before the Securities Appellate Tribunal (SAT), which set aside the Adjudicating Officer’s order by an order dated 11th October 2010, thereby nullifying the penalty demand.
SEBI, aggrieved by the SAT order, appealed to the Supreme Court of India. The Supreme Court allowed SEBI’s appeal on 8th February 2018, setting aside the SAT’s decision with respect to the appellant, thus reviving the Adjudicating Officer’s order and reinstating the penalty demand.
Since the appellant did not pay the penalty, the Recovery Officer issued Recovery Certificate No.1773 of 2018 dated 14th December 2018, demanding Rs.2,34,05,932, which included penalty, interest, and recovery costs. The appellant filed the present appeal against this Recovery Certificate with a delay of 335 days and also filed a Miscellaneous Application seeking condonation of the delay.
The appeal was heard without requiring a reply from the respondent as there was no factual dispute.
Legal Issues Presented
- Whether the delay of 335 days in filing the appeal against the Recovery Certificate can be condoned under Section 15T of the SEBI Act.
- Whether the order of the Adjudicating Officer revives automatically after the Supreme Court’s decision or requires fresh quantification of penalty.
- Whether the principle of merger applies to the orders of the Adjudicating Officer and the SAT in this context.
Arguments of the Parties
Appellant's Arguments
- The impugned Recovery Certificate is void, and hence no cognizance was taken of it initially.
- The appeal was filed only after the appellant’s bank account was attached and money withdrawn, justifying the delay.
- There is no undue delay warranting dismissal; thus, the delay should be condoned.
- The order of the Adjudicating Officer merged with the SAT order, which set aside the penalty quantum, so no amount is payable as on date.
- Following the Supreme Court’s decision allowing SEBI’s appeal, the Adjudicating Officer’s order does not revive automatically; a fresh quantification of penalty is necessary.
Respondent's Arguments (SEBI)
- The principle of merger is not applicable in this case.
- The delay of 335 days in filing the appeal is inordinate and unjustified.
- The appeal should be dismissed on grounds of laches due to the undue delay.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ram Nath Sao Alias Ram Nath Sahu and Ors. (2002) 3 SCC 195 | Liberal construction of "sufficient cause" to advance substantial justice where no negligence or bad faith is imputable. | The court acknowledged the principle but found no sufficient cause shown by the appellant to condone the delay. |
| Balwant Singh (Dead) vs. Jagdish Singh & Ors. (2010) 8 SCC 685 | "Sufficient cause" means presence of legal and adequate reasons for delay. | The court applied this stricter interpretation to hold that the appellant failed to demonstrate legal and adequate reasons for condonation of delay. |
Court's Reasoning and Analysis
The court noted that the appellant was aware of the Recovery Officer’s order dated 14th December 2018 but took no prompt action, only seeking reconsideration of penalty quantum after a significant delay. The court held that such a belated representation does not extend the limitation period for filing an appeal under Section 15T of the SEBI Act.
The court examined the delay of 335 days and found it to be inordinate. It relied on Supreme Court precedents clarifying the interpretation of "sufficient cause" for condonation of delay. Despite the appellant’s contentions, no adequate or legal reasons were demonstrated to justify the delay.
Regarding the appellant’s argument on merger and revival of the penalty order, the court implicitly rejected the application of the merger principle, aligning with SEBI’s submission, and confirmed that the penalty demand revived with the Supreme Court’s decision.
Holding and Implications
The appeal for condonation of delay is dismissed due to inordinate delay and absence of sufficient cause.
The direct effect is that the appellant’s appeal against the Recovery Certificate is not admitted, and the penalty demand including interest and recovery costs remains enforceable. No new legal precedent was established by this decision.
1. The facts leading to the filing of the present appeal is that the Adjudicating Officer passed an order dated 26th March, 2009 under Section 15I of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act) imposing a penalty of Rs.1,08,00,000/- for violating Regulations 3(a), (b), (c) and 4(1), 4(2)(a) and (b) of the Securities and Exchange of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as PFUTP Regulations). The order further directed the appellant to pay the amount within 45 days from the date of receipt of the order. The said order was challenged by the appellant before this Tribunal which was allowed by an order dated 11th October, 2010 and the order of the Adjudicating Officer was set aside. Consequently, the demand of Rs.1,08,00,000/- came to an end.
2. Securities and Exchange of India (hereinafter referred to as SEBI) being aggrieved by the order of this Tribunal filed an appeal before the Supreme Court of India. The Civil Appeal of SEBI was allowed by judgment dated 8th February, 2018 and the order of SAT was set aside in so far as the appellant was concerned.
3. As a result of the setting aside of the order of the Tribunal the order of the Adjudicating Officer revived and the demand of Rs.1,08,00,000/- became payable by the appellant. Since the same was not paid, the Recovery Officer issued a Recovery Certificate No.1773 of 2018 dated 14th December, 2018 directing the appellant to pay a sum of Rs.2,34,05,932/- which included the component of interest and recovery cost in addition to the penalty imposed by the Adjudicating Officer. The appellant being aggrieved by the Recovery Certificate dated 14th December, 2018 issued by the Recovery Officer has filed the present appeal. Since there is a delay of
335 days in filing the present appeal, a Misc. Application No.1 of 2020 has also been filed for condoning the delay.
4. We have heard Shri Mr. Vikram Nankani, Senior Advocate assisted by Mr. P.R. Ramesh, Mr. KRCV Seshachalam, Ms. Sabeena Mahadik, Mr. Pankaj Uttaradhi and Mr. Aayush Kothari, Advocates for the Appellant and Mr. Kumar Desai, Advocate assisted by Mr. Mihir Mody and Mr. Shehaab Roshan, Advocate for the Respondent. Since there is no factual dispute the appeal is being decided at the admission stage without calling for a reply.
5. Under Section 15T of the SEBI Act, an appeal is required to be filed within 45 days from the date of receipt of the order. In the instant case, the impugned order is dated 14th December, 2018. The present appeal was filed on 31st December, 2019. There is a delay of 335 days in filing the appeal. The ground urged is, that the impugned order is void and, therefore, no cognizance was taken on the said order and only when the appellants bank account was attached and money was withdrawn that an application was filed before the Recovery Officer in October, 2019. Since the Recovery Officer took no action on the representation of the appellant the present appeal was filed. It was thus urged that there is no undue delay on the part of the appellant and, in the circumstances of the case, the delay, if any, was liable to be condoned.
6. It was further contended by the learned Senior counsel that no amount is payable as on the date in as much as the order of the Adjudicating Officer merged with the order of SAT and consequently the quantum of penalty was set aside. It was further contended that once the appeal of SEBI was allowed by the Supreme Court the order of the Adjudicating Officer with regard to the quantum of penalty does not revive and that the Adjudicating Officer was required to quantify the penalty, if any, afresh.
7. On the other hand, learned counsel for SEBI submitted that the principle of merger is not applicable in the present case and since there is undue delay in filing the appeal the same should be dismissed on the ground of laches.
8. Having heard the learned counsel for the parties, we find that the appellant was aware of the order of the Recovery Officer dated 14th December, 2018. Even after the receipt of the said order the appellant took no action and sat over the matter. The request for reconsideration of the quantum of penalty was only made by the appellant in October, 2019 after a considerable delay. Such representation so made will not allow the appellant to extend the period of limitation for the purpose of filing an appeal under Section 15T of the SEBI Act.
9. We are of the opinion, that there is an inordinate delay in filing the appeal. No sufficient cause has been shown for condoning the inordinate delay. The Supreme Court in Ram Nath Sao Alias Ram Nath Sahu and Ors. (2002) 3 SCC 195 held that the expression sufficient cause should be given a liberal construction so as to advance substantial justice especially when no negligence or inaction or want of bonafides is imputable to a party. However, in Balwant Singh (Dead) vs. Jagdish Singh & Ors. (2010) 8 SCC 685 the Honble Supreme Court held that the expression sufficient cause means the presence of legal and adequate reasons.
Alert