Jayeshkumar Narottamdas Gandhi & Ors vs Securities And Exchange Board Of India

Tarun Agarwala, Presiding Officer

We have heard Ms. Rinku Valanju along with Mr. Pratham Masurkar, Advocates for the Appellant, and Shri Kumar Desai along with Mr. Abhiraj

Arora, Mr. Vivek Shah, Advocates and SEBI official Mr. Pradeep Kumar.

The facts in brief are, that the Adjudicating Officer (“AO†for short) by an Order dated 24th June 2019 imposed a penalty of Rs.6,00,000/- 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.

The Appellant filed an appeal before this Tribunal and, during the pendency of the appeal, the Recovery Officer of SEBI recovered an amount of

Rs.6,35,521/- on 17th December, 2019. Appeal No.503/2019 was heard and finally allowed by this Tribunal by Judgment dated 21/2/2020 and the

order of the AO was set aside.

Pursuant to the order of this Tribunal, the appellant filed an application dated 27/2/2020 for refund of Rs.6,35,521/-. The Respondent instead of

refunding the amount issued an email dated 13/3/2020 informing the appellant that SEBI intends to file an appeal before the Supreme Court against the

order of the Tribunal and, therefore, the refund of the amount would be subject to the outcome of the appeal before the Supreme Court.

The appellant was further informed that there is no specific order for refund of the amount by the Tribunal.

The appellant thereafter filed a Misc. Application No.129/2020 before the Tribunal. This Tribunal directed SEBI to file a reply and posted the

application for hearing on 4/4/2020. Before the application could be taken up for consideration, the Tribunal closed on account of the lockdown in view

of the COVID-19 pandemic. The appellant has now filed an urgency application along with Misc. Application No.134/2020 praying that a direction be

issued to SEBI to refund the amount of Rs.6,35,521/- along with interest. The applicant also contended the he is in dire need of money as he has to

undergo a spinal surgery and, in this regard, has filed medical certificates.

The appellant on 5/5/2020 also gave an undertaking to SEBI that he would again place the amount within 15 days of any stay order being passed by

the Supreme Court in the proposed appeal to be filed by SEBI.

The learned Counsel for the appellant contended that once the order of the AO has been set aside by the Tribunal, there was no justification for

SEBI to withhold the money and that holding of the money was wholly illegal and without any authority of law.

On the other hand, Shri Kumar Desai, learned Counsel contended that SEBI has taken a decision to file an appeal against the order of this Tribunal

and that the appeal has been drafted but could not be filed on account of the lockdown. It was also urged that there is no direction of this Tribunal to

refund the amount. The learned Counsel however, contended that in view of the undertaking given by the appellant, SEBI would refund the amount if

such undertaking of the applicant is recorded by the Tribunal.

Having heard the learned counsel for the parties, we are of the opinion 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.

The 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 No.129/2020 and No.134/2020

directing SEBI to refund the amount of Rs.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.

Accordingly, we dispose of the Misc. Application Nos.129/2020 and 134/2020 with no order as to costs.

The present matter was heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor

a certified copy of this order could be issued by the registry. In these circumstances, this order will be digitally signed by the Presiding Officer on

behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Parties will act on production of a digitally

signed copy sent by fax and/or email.