Shri Kanaiyalal Baldevbhai Patel vs Sebi

Date of Decision: 14.01.2020

Misc. Application No. 201 of 2018 And Appeal No. 239 of 2018

Shri Kanaiyalal Baldevbhai Patel 01, Shivnagar Society, Bhavpura, Kadi, Gujarat- 382 715 ...Appellant

Versus

The Recovery Officer, Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051 ...Respondent

Mr. Prakash Shah, Advocate with Mr. Chinmay Paradkar, Advocate i/b Prakash Shah & Associates for the Appellant.

Mr. Gaurav Joshi, Senior Advocate with Mr. Mihir Mody and Mr. Shehaab Roshan, Advocates i/b K. Ashar & Co. for the Respondent.

WITH Misc. Application No. 202 of 2018 And Appeal No. 240 of 2018

Shri Dipak Patel 3, Ansuya Society, Bahind Raja Avenue, Kadi- 382 715 Dist- Mehsana, Gujarat ...Appellant 2

Versus

The Recovery Officer, Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051 ...Respondent

Mr. Prakash Shah, Advocate with Mr. Chinmay Paradkar, Advocate i/b Prakash Shah & Associates for the Appellant.

Mr. Gaurav Joshi, Senior Advocate with Mr. Mihir Mody and Mr. Shehaab Roshan, Advocates i/b K. Ashar & Co. for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Justice M. T. Joshi, Judicial Member

Per: Justice Tarun Agarwala (Oral)

1.

Two appeals have been preferred against the issuance of

the Recovery Certificate dated June 18, 2018 calling upon the

appellants to pay a sum of ` 9,03,40,726.03 which includes not

only the penalty amount imposed by the Adjudicating Officer

("AO" for convenience) of the Securities and Exchange Board

of India ("SEBI" for convenience) but also interest calculated

from the date of the order dated September 30, 2011 till June

18, 2018 @ 12% per annum. Since the issue is common, the

two appeals are being decided together. For facility, the facts

stated in Appeal No. 239 of 2018 is being taken into

consideration.

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2. The facts leading to the filing of the present appeals are

that the AO passed an order dated September 30, 2011 imposing

a penalty of ` 5 crore for violation of Regulation 3 of the SEBI

(Prohibition of Fraudulent and Unfair Trade Practice relating to

Securities Market) ("PFUTP Regulations" for short).

Appellants, being aggrieved, filed appeals before this Tribunal

which were allowed by an order dated November 09, 2012.

This Tribunal had set aside the order of the AO imposing the

penalty.

3. SEBI being aggrieved by the order of this Tribunal filed

an appeal before the Hon'ble Supreme Court which was allowed

by judgement dated September 20, 2017 and, the order of this

Tribunal was set aside and the penalty issued by the AO was

restored. For facility, the operative portion of the judgement of

the Supreme Court is extracted hereunder:

".........The consequences for such breach including penal consequences under the provisions of Section 15HA of the SEBI Act must visit the concerned defaulters for which reason the orders passed by the Appellate Tribunal impugned in Civil Appeal Nos. 2595 of 2013, 2596 of 2013 and 2666 of 2013 are set aside and the findings recorded and 4

the penalty imposed by the Adjudicating Officer are restored.

Consequently and in view of the above Civil Appeal Nos. 5829 of 2014 and 11195-11196 of 2014 are dismissed and Civil Appeal Nos. 2595, 2596 and 2666 of 2013 are allowed."

The Supreme Court while setting aside the order of this

Tribunal held that the penalty imposed by the AO was restored.

Consequently, the amount of ` 5 crores imposed by the AO

became payable. Since the amount was not paid interest was

also levied by the Recovery Officer from the date of the order of

the AO.

4. We have heard the learned counsel for the parties. The

contention of the learned counsel for the appellant is that the

interest cannot be imposed from the date of the order passed by

the AO and that interest, if any, could only be levied from the

date of the Supreme Court's order.

5. This controversy as to whether interest could be levied

from the date of the order of the Hon'ble Supreme Court or

from the date of the penalty order has been set at rest by a

decision of this Tribunal in PVP Global Ventures Private 5

Limited vs. Securities and Exchange Board of India in Appeal

No. 451 of 2018 decided on 12.04.2019 wherein this Tribunal

held that interest was not only chargeable under Section 28A of

the SEBI Act read with Section 220(2) of the Income Tax Act

but the provision of Interest Act, 1978 could also be taken into

consideration and that interest could be charged from the date

on which the penalty became due. The said decision is squarely

applicable in the instant case and therefore the contention raised

by the learned counsel for the appellants is rejected.

6. The learned counsel for the appellants further contended

that the decision of this Tribunal in PVP Global Ventures

Private Limited (Supra) was questioned by the said entities

before the Supreme Court of India in Civil Appeal Nos. 5202-

5204/2019 PVP Global Ventures Private Limited vs. Securities

and Exchange Board of India wherein notice has been issued

on July 12, 2019 and that in the meantime, the recovery of

interest on penalty was stayed by the Hon'ble Supreme Court.

Be that as it may. The Hon'ble Supreme Court has only stayed

the order of this Tribunal and has not as yet set aside the order

of the Tribunal. In Shree Chamundi Mopeds Ltd. vs. Church

of South India Trust Association CSI Cinod Secretariat,

Madras (1992) 3 SCC 1 the Supreme Court considered the 6

effect of an interim order staying the operation of the order and

held that a distinction has to be made between quashing of an

order and stay of operation of an order. The Supreme Court

held that the quashing of an order results in the restoration of

the position as it stood on the date of the passing of the order

which has been quashed. The stay of operation of an order does

not, however, lead to such a result. It only means that an order

which has been stayed would not be operative from the date of

the passing of the stay order but it does not mean that the said

order has been wiped out from existence. In the light of the

aforesaid, since the decision of PVP Global Ventures Private

Limited (Supra) has not been set aside by the Supreme Court

the said decision is fully applicable in the instant case and for

the reasons stated therein the appeals lack merits and are

dismissed with on order as to costs. Misc. Application Nos.

201 and 202 of 2018 seeking stay of the impugned order also

stands disposed of.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Justice M. T. Joshi Judicial Member 14.01.2020 Prepared & Compared By: PK