Kanaiyalal Baldevbhai Patel And Others vs Recovery Officer

Tarun Agarwala, Presiding Officer

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

Rs. 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.

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 Rs. 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.

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 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.â€​

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

Rs. 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.

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.

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 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.

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 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.