SC admits appeal against SEBI's penalty order

The Supreme Court on Monday admitted an appeal challenging the power of market regulator SEBI to impose a penalty for providing wrong information on dealings in securities. The apex court also admitted the plea challenging the market regulator’s order imposing maximum prescribed fine under provisions of an amendment applicable from 2002 for failure to appear in response to the summons order with retrospective effect. A bench comprising justices PP Naolekar and LS Panta also restrained the market regulator from collecting a fine of Rs 1 crore imposed on a firm for allegedly furnishing wrong information on its dealings in securities. Appellant Bonanza Biotech, listed on the BSE and MP Stock Exchange, said, “Section 15A of the SEBI Act, which forms part Chapter VI of the SEBI Act, provides for imposition of penalty for failure to furnish information as required under the SEBI Act or any rule or regulation made thereunder. Chapter VIA of the SEBI Act deals with penalties and adjudication. Section 15A of the SEBI Act does not cover the cases where documents, returns or reports so filed were allegedly false.” SEBI on June 18, 2003, had asked the Bonanza Biotech to provide information on the affairs of its dealings in the securities of M/s Design Auto Systems. On November 19 the same year, the company came up with the details sought by the investigating officer appointed by SEBI. However, on November 28, 2003, SEBI issued summons to the company to appear before the investigating officer under Section 11C (5) of the SEBI Act, 1992. The company representatives failed to appear and filed a petition before MP High Court questioning such an order. It was, however, dismissed. In 2005, SEBI initiated adjudication proceedings. The adjudicating officer on February 13, 2006, imposed a penalty of Rs 1 crore under Section 15A of the Act. The adjudication officer also imposed a fine of Rs 5 lakh for failing to appear in response to the summons. – www.economictimes.com