Bail Application
Case BriefsHigh Courts

Himachal Pradesh High Court: Tarlok Singh Chauhan, J. partly allowed the appeal of filed by an employer challenging the compensation granted to a deceased employee’s wife under the Employees Compensation Act, 1923 on the ground that before passing a penalty order against the employer, a reasonable opportunity must have been given to him to justify himself.

Appellant herein was the employer of the respondent’s husband (deceased employee) who was employed as a driver by the appellant and died in an accident. Respondent’s wife filed a petition against the appellant seeking payment of compensation along with interest and penalty against the appellant and other respondents towards their joint and severe liability under the Employees Compensation Act, 1923. The appellant in his reply denied the salary as claimed and requested the recovery of the insurance amount. However, the Employee’s Compensation Commissioner-II awarded the respondent with compensation and interest along with a penalty. Aggrieved by this award, the appellant filed the present appeal.

Navlesh Verma learned counsel for the appellant, contended that there was no employer-employee relationship between the appellant and the deceased employee; and secondly that no show-cause notice was issued on the appellant-employer before passing an adverse award against him.

The Court held that the records proved that there was a relationship of employer and employee between the appellant and the deceased.

With respect to the second contention, it was held that as per the judgment in Ved Prakash Garg v. Premi Devi, (1997) 8 SCC 1 penalty under Section 4-A(3)(b) of the Act can only be imposed when the employer is given a prior notice and an opportunity to defend himself against the same which was certainly not given to the appellant herein.

Hence, the court allowed the appeal and set aside the penalty imposed on the appellant. [Amandeep Singh v. Shaheena Parveen, 2019 SCC OnLine HP 1416, decided on 30-08-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS & PBPT Act: Justice Manmohan Singh (Chairman) allowed an appeal challenging the impugned Judgment wherein the appellants were penalized for abetting illegal transfer of money.

In the present case, the respondent had alleged that the appellant-Bank abettor in illegal and unauthorized dealing of foreign exchange. The appellant-Bank had cleared four cheques issued by the Bank of Economic Affairs (which were denominated in non-convertible Indian Rupees) totalling Rs 11 Crores, for the purpose of crediting the VOSTRO Account of Girobank Plc (convertible rupee account) maintained by ANZ Grindlays Bank. Thereafter, this money was freely transmitted outside India in foreign currency by Girobank Plc. The Adjudicating Authority issued show-cause notices in respect of four cheques and imposed penalties against the appellants.

The counsel representing the respondents, Ashok Kumar Panda submitted that on receipt of the said amount of Rs 3,00,00,000 from Canara Bank, the ANZ Grindlays Bank, an authorised dealer of Foreign Exchange in India credited to the non-resident-Girobank Plc, London. Thereby on the instructions from the Canara Bank, the non-convertible rupee funds of the Bank of Economic Affairs into the convertible funds and transferred the same in foreign exchange to Girobank Plc., London a person resident outside India.

Thus, Canara Bank, Bombay abetted ANZ Grindlays Bank in contravening the provisions of the Foreign Exchange Regulation Act, 1973. The respondents placed reliance on the Supreme Court’s statement on abetment in the case of State of Madhya Pradesh v. Mukesh, 2006 (10) SCALE 346 wherein the Apex Court stated “A person, it is trite, abets by aiding, then by any act done either prior to, or at the time of, the commission of an act, he intends to facilitate and does, in fact, facilitate, the commission thereof would attract the third clause of Section 107 of the Indian Penal Code. Doing something for the offender is not abetment. Doing something with knowledge so as to facilitate him to commit the crime or otherwise would constitute abetment.”

The counsel representing the appellant-Bank, Debarshi Bhuyan submitted that although cheques were honoured by the Canara Bank, they did not possess any knowledge of the fact that the cheques were to be remitted abroad. The appellants relied on Shri Ram vs. State of U.P., (1975) 3 SCC 495 wherein it was held that in order to constitute abetment it must be established that there were active complicity and intentional aiding. The appellant further submitted that it was not within the knowledge of the appellants that the money was to be transferred abroad.

High Court upon perusal of the facts and records allowed the appeal. The Court stated that ANZ Grindlays Bank had presented the drafts to the appellant for payment in normal clearance without being accompanied by the required form A3 and in these circumstances, the appellant had no reason whatsoever to believe or to apprehend that the proceeds of the said draft were to have been remitted outside India.

Further, Court mentioned that the adjudicating authority has without considering the role of the officers of the Canara Bank imposed a penalty on them and also considering the similarity in the appeals filed by Standard Chartered Bank in another appeal, wherein the issue of abetment has been seen not to arise, the appeals were allowed.[Canara Bank v. Special Director, 2019 SCC OnLine ATFEMA 16, decided on 20-09-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): A Division Bench of Justice Tarun Agarwala, (Presiding Officer) and Dr C.K.G. Nair (Member), upheld the order passed by the Adjudicating Officer which imposed a penalty on the appellant for violation of SEBI regulations.

SEBI, in this case, observed a large scale reversal of trade in Stock Options segment of BSE Ltd., leading to the creation of artificial volume. On investigation, it was found that trades executed in Stock Options segment of BSE were non-genuine trades creating artificial volume to the tune of 826.21 crore units or 54.68% of the total market volume in Stock Options segment of BSE and this was done in illiquid Stock Options. The appellant was one of the various entities which indulged in this. A show-cause notice was issued indicating that the appellant had indulged in reversal trades which were non-genuine and creating a false and misleading appearance of trading in terms of artificial volumes in Stock Options and, therefore, were manipulative and deceptive in nature, thus, violating the provision of Regulations 3 and 4 of the PFUTP Regulations. The Adjudicating Officer for this case imposed a penalty of Rs 5,50,000 for violation of the said Regulations on the appellant.

The appellant contended that he did not execute any trade and did not give any authority to the stockbroker to execute any trades on behalf of the appellant and contended that at the time of submission of the reply before the AO a specific relief was prayed that the authority should summon the stockbroker and question him as to how he had executed the trades.

The Tribunal was of the consideration that although the appellant claimed to have made this submission before the AO, he did not contend the same before the Tribunal. In fact, the stand taken by the appellant before the AO was that he was trapped by R.K. Stockholding Pvt. Ltd. who was their stockbroker and who gave a rosy picture of high volatility with high rate of return in securities market and succeeded to gain confidence of the appellant by opening a trading account after signing the account opening booklet the trades were performed in the account of the appellant under supervision of the stockbroker. Thus, it is clear that the appellant was doing trades which amounted to a violation of Regulations 3 and 4 of the PFUTP Regulations. In light of the same, the order passed by the AO was upheld.[Basic Clothing Pvt. Ltd. v. Securities and Exchange Board of India, 2019 SCC OnLine SAT 150, decided on 21-08-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT), Mumbai: Coram of Justice Tarun Agarwala, (Presiding Officer), Dr C.K.G. Nair (Member), and Justice M.T. Joshi, (Judicial Member) directed an Adjudicating Officer to look into a matter afresh since BSE waived off the penalty imposed by them on the appellants.

The appellant, in this case, failed to comply with the provisions of Rule 19 of the Securities Contract (Regulation) Rules, 1957 (SCRR) with regard to the continuous listing.  An Adjudicating Officer, therefore, imposed a penalty of Rs 4 lakhs under Section 23-E of the Securities Contracts (Regulation) Act, 1956 (SCRA). The said penalty was imposed inspite of the fact that the appellant had contended that the MPS requirement was not required to be done in view of the order passed by Board for Industrial and Financial Reconstruction (BIFR) pursuant to the scheme of rehabilitation.

Subsequent to the passing of the impugned order, SEBI issued a letter advising the appellant to file the correct shareholding pattern with the stock exchange as directed by a BIFR order back in 2014. Based on the fresh shareholding pattern filed by the appellant, BSE withdrew the fines imposed upon the appellant with regard to the non-compliance of the MPS requirements.

Based on the facts, the Tribunal directed the Adjudicating Officer to reconsider the matter afresh. They set aside the older order by the Adjudicating Officer so that he/she can pass a fresh order after giving an opportunity of hearing to the appellant. The decision as for the amount of penalty already deposited by the appellant would be decided by fresh orders passed by the Adjudicating Officer.[Smiths & Founders India Ltd. v. Securities & Exchange Board of India, 2019 SCC OnLine SAT 133, decided on 07-08-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): Justice Tarun Agarwala (Presiding Officer) and Dr C.K.G. Nair (Member) justified the penalty imposed by SEBI on the appellants under Section 15-J of SEBI Act.

The appellants challenged the order of the Adjudicating Officer (AO) of SEBI. The order directed them to pay a penalty of Rs 25 Lakhs for running a Collective Investment Scheme (CIS) without SEBI registration and thereby violating Section 12(1-B) of the SEBI Act, 1992 and Regulation 3 of the SEBI (Collective Investment Scheme) Regulations, 1999 (CIS Regulations).

The appellants collected money from a large number of investors for a solar power project in Rubavali village as a joint venture project/scheme. SEBI asked them to furnish details and documents of the project since the appellants were involved in mobilizing funds without obtaining SEBI registration under CIS Regulations, 1999. The appellants denied running a CIS post which SEBI sought further documents regardless of the scheme being CIS or not. SEBI later passed an ex-parte ad-interim order under Section 11 and 11-B of the SEBI and passed the final order concluding that the appellants were engaged in activities covered under CIS without obtaining registration. This order was challenged by the appellants. The Tribunal directed the appellants to file a proposal for the refund of the entire amount before the Recovery Officer without going into the question of whether they are covered under the CIS Regulations, 1999 as sought by the appellants. They submitted original documents of land to SEBI and the auction process was initiated. Later, the AO issued a show cause notice seeking why an enquiry should not be held and penalty be not imposed under Section 15-D(a) of the SEBI Act and Regulation 3 of CIS Regulations, 1999.

The appellant argued that they entered into agreements with investors to expand their business. They further contended that the appellants and the other parties were collectively managing the business, and therefore they were not running any CIS. On the same grounds, SEBI had no jurisdiction in the matter. A substantial amount has already been recovered by SEBI through auctions. Their final contention was that a penalty of Rs 25 was too harsh. SEBI submitted that the penalty imposed is reasonable as under Section 15-D(a) as the penalty imposable at the relevant time was Rs 1 lakh for each day subject to a maximum of Rs 1 crore and therefore the penalty is just and reasonable.

The Tribunal dismissed the appeal and directed the appellants to pay the penalty. They held that the law does not prevent SEBI from initiating parallel proceedings to direct the appellants to complete the process of repayment to the investors. They further held that submission of joint venture agreement is not proof of joint management of the business since the investors will have no say in the management of the business. The appellants were running CIS in terms of its definition under Section 11-AA(2), 12(1-B) of SEBI Act, 1992 without obtaining a certificate of registration for running such a scheme.[Shree Sai Space Creations Ltd. v. Securities & Exchange Board of India, 2019 SCC OnLine SAT 105, decided on 01-08-2019]

Business NewsNews

Reserve Bank of India (RBI) has, by an order dated July 31, 2019, imposed monetary penalty on seven banks for non-compliance with certain provisions of directions issued by RBI on “Code of Conduct for Opening and Operating Current Accounts”, “Opening of Current Accounts by Banks – Need for Discipline”, “Discounting/ Rediscounting of Bills by Banks”, “Reserve Bank of India (Frauds classification and reporting by commercial banks and select FIs) directions 2016”, “End Use of Funds – Monitoring ” and “Deposits on Balance Sheet Date”, as detailed below:

Sl. No. Name of the bank Amount of penalty
(Rs in crore)
1. Allahabad Bank 2.0
2. Bank of Baroda 1.5
3. Bank of India 1.5
4. Bank of Maharashtra 2.0
5. Indian Overseas Bank 1.5
6. Oriental Bank of Commerce 1.0
7. Union Bank of India 1.5

The penalties have been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949, taking into account the failure of the banks to adhere to the aforesaid directions issued by RBI. This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers.

Background

A scrutiny was carried out by RBI in the accounts of the companies of a Group and it was observed that the banks had failed to comply with provisions of one or more of the directions issued by RBI as mentioned above. Based on the findings of the scrutiny, Notices were issued to the banks advising them to show cause as to why penalty should not be imposed for non-compliance with the directions. After considering the replies received from the banks, oral submissions made in the personal hearings, where sought by the banks, and examination of additional submissions, if any, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions were sustained and warranted imposition of monetary penalty on aforementioned seven banks, based on the extent of non-compliance in each bank.


[Press release dt. 02-08-2019]

Reserve Bank of India

Business NewsNews

In exercise of powers vested under Section 30 of the Payment and Settlement Systems Act, 2007, the Reserve Bank of India has imposed a monetary penalty on the following Prepaid Payment Instrument (PPI) issuers for non-compliance of regulatory guidelines.

S. No. Name of the PPI Issuer Speaking Order Dt. Penalty (Lakh)
1. One Mobikwik Systems (P) Ltd. 17-05-2019 Rs 15.00
2. Hip Bar (P) Ltd. 24-05-2019 Rs 10.85

Press Release: 2019-2020/273

[Press Release dt. 29-07-2019]

Reserve Bank of India

Case BriefsHigh Courts

Uttaranchal High Court: Sudhanshu Dhulia, J. contemplated a writ petition where the residents of village Danpur in Rudrapur moved a petition before the National Green Tribunal and informed that the rice mills which were operated in the said village were polluting the environment. The petitioner was the Mill owner who had now filed the instant petition against the order for imposition of penalty.

NGT passed an order, thereby directing the State Pollution Control Board to inspect and file its report. Subsequently, the State Pollution Control Board inspected the rice mills and found certain anomalies in the rice mill since the air filters were not working in the rice mill and the petitioner was asked to rectify his air pollution control system and the report was subsequently submitted to the NGT. In reply to which NGT asked the Board as to why a penalty was not imposed on the Mill for the pollution already caused. Hence, a penalty of Rs 3,37,500 was imposed on the abovementioned Mill.

Counsel for the petitioner, Subhash Upadhayaya argued that penalty was purely in an arbitrary manner. There had been no inspection of the rice mill after 08-05-2019 and even earlier to that, and permission had already been given to the rice mill of the petitioner for 90 days.

On the contrary counsel for the State, Aditya Pratap Singh had apprised that the fixation of the penalty/compensation was not done arbitrarily, but it was based on the guidelines issued by the Central Pollution Control Board.

The Court observed that though the matter was pending before NGT related to the quantum of the penalty the petition had no merits. It further noted that the respondent had also admitted that the compensation/penalty was not justified and the same will be refunded to the petitioner.[Bansal Industries v. Uttarakhand Environment Protection and Pollution Control Board, 2019 SCC OnLine Utt 627, decided on 18-07-2019]

Case BriefsHigh Courts

Sikkim High Court: A Division Bench of Vijai Kumar Bist, CJ and Meenakshi Madan Rai, J. dismissed a writ petition filed against the order of the Commissioner of Customs, Central Excise and Service Tax (Appeal I) whereby he had rejected the application for condonation of delay filed by the petitioner along with an appeal from the order of the Joint Commissioner imposing service tax, interest and penalty under provisions of the Finance Act, 1994, on the petitioner.

In the said application for condonation of delay, no efforts were made by the petitioner to explain the delay from 15-08-2015 till 7-10-2016 (the date of filing the appeal before the Commissioner). While rejecting the application, the Commissioner recorded that the reasons for delay assigned by the petitioner were flimsy, and the period delay was also calculated irresponsibly and inaccurably.

Sourav Sen and Rupa Dhakal, Advocates for the petitioner Cooperative Society submitted that the case be considered on merits to subserve the ends of justice. Per contra, B.K. Gupta, Advocate appearing for the Commissioner, supported the impugned order.

The High Court noted that the application for condonation of delay reflected a lackadaisical approach on the part of the petitioner. It was observed: We are conscious and aware that the law of limitation is sufficiently elastic to allow and enable the concerned Authorities to apply it for substantial justice, but at the same time it may be mentioned that merely because a non-pedantic approach should be adopted to an application for condonation of delay it is not essential that every delay including those in which the drafting has been done in a haphazard manner and with nary a care to detail or explanation pertaining to the delay with dates thereof be condoned.”

Reference was made to Supreme Court decision in Esha Bhattacharjee v. Raghunathpur Nafar Academy,(2013) 12 SCC 649, wherein it was, inter alia, held that an application for condonation of delay should be drafted with careful concern and not in a haphazard manner harbouring the notion that the courts are required to condone delay on the bedrock of the principle that adjudication of a lis on merits is seminal to justice dispensation system.

In such view of the matter, the Court was of the opinion that the impugned order suffered no infirmity. Resultantly it was held that the merits of the matter could not be looked into. The petition was thus dismissed.[Singbel GPU Construction Co-Operative Society Ltd. v. CCE, 2019 SCC OnLine Sikk 105, decided on 18-07-2019]

Business NewsNews

Press Release

The Reserve Bank of India (RBI) has imposed, by an order dated 15-07-2019, monetary penalty of 70 million on State Bank of India (the bank) for non-compliance with the directions issued by RBI on (i) Income Recognition and Asset Classification (IRAC) norms (ii) code of conduct for opening and operating current accounts and reporting of data on Central Repository of Information on Large Credits (CRILC), and (iii) fraud risk management and classification and reporting of frauds. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47A (1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949 (the Act).

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

Background

The statutory inspection of the bank with reference to its financial position as on 31-03-2017 revealed, inter alia, non-compliance with directions issued by RBI on IRAC norms, sharing of information about customers with other banks, reporting of data on CRILC, fraud risk management, and classification and reporting of frauds. Based on the inspection report and other relevant documents, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for non-compliance with directions issued by RBI. After considering the bank’s reply and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty.


[Press Release dt. 15-07-2019]

Reserve Bank of India

Case BriefsHigh Courts

Chhattisgarh High Court: Prashant Kumar Mishra, J. quashed criminal proceedings pending against the petitioner-assessee before the Chief Judicial Magistrate for the commission of offences under Section 276-C (willful attempt to evade tax) and Section 277 (false statement in verification) of the Income Tax Act, 1961.

The gravamen of the offence alleged against the petitioner was that it concealed its income for the assessment year 1990-1991. Consequent to that, a penalty was imposed upon him by the Commissioner of Income Tax. He also granted sanction for petitioner’s prosecution, pursuant to which the criminal case which the subject matter of the present petition, was registered. The petitioner filed an appeal before the appellate authority — CIT (Appeals) — which appeal was allowed and the penalty was set aside on the finding that the petitioner did not conceal its income.

S. Rajeshwara Rao and M.K. Sinha, Advocates for the petitioner, contended that in view of the position that the penalty levied on the petitioner was set aside, the criminal proceedings pending on the file of CJM may also be quashed. Per contra, Naushina Ali appearing on behalf of A. Choudhary, Standing Counsel for the Revenue, opposed the present petition.

The High Court relied on K.C. Builders v. CIT, (2004) 2 SCC 731, wherein the Supreme Court held that “once the finding of concealment and subsequent levy of penalties under Section 271 (1)(c) of the Act has been struck down by the Tribunal, the assessing officer has no other alternative except to correct his order under Section 154 of the Act as per the directions of the Tribunal.” It was further held in the said case that “the finding of the Appellate Tribunal was conclusive and the prosecution cannot be sustained since the penalty after having been decided by the complainant following the Appellate Tribunal’s order, no offence survives under the Income Tax Act and thus quashing of prosecution is automatic.”

In the matter at hand, the High Court, following the law laid down in K.C. Builders, held that it will an empty formality to direct the petitioner to approach the trial Magistrate, who had otherwise kept the application preferred by the petitioners pending since 15-01-2014. Resultantly, the Court exercised its inherent powers and quashed the criminal proceedings pending against the petitioner. The petition was allowed. [System (India) Castings v. CIT, 2019 SCC OnLine Chh 63, decided on 26-06-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): The Coram of Tarun Agarwala, J. (Presiding Officer), Dr C.K.G. Nair (Member), M.T. Joshi, J. (Judicial Member) partly allowed the appeal in the present case with no order on costs.

The facts of the case are that the appellant is a member broker in the Capital Market (CM), Futures and Options (F&O) and Currency Derivatives (CD) segments of the National Stock Exchange of India Limited (NSE). NSE on regular inspection of the books and records noticed that the appellant falsely reported margin amounting to Rs 2,05,43,947 in the CD segment in respect of two clients on two occasions on 26-04-2016 and 21-06-2016. Therefore, the Disciplinary Action Committee (DAC) of NSE imposed a penalty of Rs 2,05,43,900 on the appellant and one trading day’s suspension after giving three weeks’ notice. Earlier in appeal, this Tribunal quashed the said order and directed the appellant to file review application before DAC which was later rejected and hence this appeal had been filed.

Counsel for the appellant, Senior Advocate, P.N. Modi stated that the alleged violations were due to delayed crediting of margin money collected from the clients. It was also stated that DAC did not apply its mind when the matter came before it for reconsideration and had taken shelter behind SEBI circular dated August 10, 2011 and held that in view of the said circular the DAC had no discretion available with it in the matter once the violation was established. The Counsel contended that this particular stand was contrary to Rule 17 of NSE and that there had been no prior violation by the appellant. Moreover, the brokerage earned (Rs 3.1 lakh) by the appellant is almost 100 times less than the penalty imposed which is extremely harsh and disproportionate.

Counsel for the respondent, Rashid Boatwalla stated that the statements made by the appellant in regard to the delayed crediting were inconsistent. It was also contended that irrespective of the margin or number of times violations are done, as per SEBI circular, the penalty could be imposed 100%.

Taking note of the contentions, the tribunal held that this does not remain a technical violation as cheques collected from the clients were not credited to the account upfront. Upfront collection of margin is an important mechanism for ensuring prompt settlement and in promoting market integrity. But, discretion in the imposition of penalty can be exercised. While the SEBI circular is quite mechanical in directing the Exchanges to impose a fixed penalty but for an only violation imposing such a penalty is out of proportion and can ruin an entity. In conclusion, a penalty of Rupees Fifty Lakh and one-day suspension from the CD segment was decided. [GRD Securities Ltd. v. NSE, 2019 SCC OnLine SAT 36, decided on 10-06-2019]

Case BriefsHigh Courts

Uttaranchal High Court: Alok Singh, J. dismissed a writ petition filed by Sahak Nagar Adhikari, who was Public Information Officer under Right to Information Act, 2005.

The petitioner contended that, a show cause notice was issued upon him which sought an explanation as to why a penalty should not be imposed upon him for providing delayed information. He gave a brief reply of the said notice and administered information to the said officer. Thereafter, State Information Commissioner adjudged the matter and imposed a penalty of Rs 25,000 for delayed reply to the notice. He was aggrieved by the said order of the officer and therefore sought justice from the Court.

Mr Parikshit Saini, learned counsel for the petitioner, submitted that impugned order of the Information Officer was arbitrary and patently illegal, hence, was not maintainable. He argued that impugned order was ‘unreasonable’ and ‘non-speaking’, the officer failed to justify the penalty as he gave a brief reply as to why the delay was caused by him for discharging his duties. He relied on the judgment of Supreme Court, in Narendra Kumar v. CIC, 2014 (2) UD 72 where it was observed, “State Public Information Officer has decided any complaint or appeal without any reasonable cause, refused to receive an application for information or has not furnished information within the time etc., in that event penalty can be imposed. In the further opinion of this Court, if there was reasonable cause for furnishing the delayed information then Chief Information Commissioner should not impose penalty merely because there was some delay in supplying the information.”

The Court observed that judgment in case Narendra Kumar was not applicable in the aforementioned case, as in the referred case information was not supplied in time because of natural disaster but in the case of petitioner there was delay of one year in supply of the information whereas Act, 2005 mandates to provide information within thirty days. Cause shown by the petitioner for delay in supplying the information was the excessive workload. The Court stated that, petitioner has not explained his excessive work; this was no ground for the delay in providing the information. One year delay in providing information under the Right to Information Act was too high.

It further held that Commissioner has assigned the reason for the penalty. “Providing information after one year that too on filing of appeal in the State Information Commission amounts to denial of information.” Court found no illegality or perversity in the impugned order and directed the petitioner to pay the aforementioned penalty.[Chandrakant Bhatt v. Uttarakhand Information Commission, 2019 SCC OnLine Utt 356, decided on 10-05-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS & PBPT Act: Manmohan Singh, J. set aside Enforcement Directorate’s order imposing a penalty on a company for contravention of provisions of Foreign Exchange Management Act, 1999.

Appellant company which was engaged in the manufacturing of graphite electrodes, received an order from a company Padmaja Impex Ltd. for supply of carbon bricks On appellant’s insistence for full payment before delivery of carbon bricks, Padmaja got an overseas buyer to open a letter of credit (LC) in the appellant’s name, whereafter appellant delivered the bricks to Padmaja. The LC was encashed later on by the appellant. ED initiated investigation against certain exporters including Padmaja, and notice was issued to appellant alleging contravention of Section 3(a) for receiving USD 256,604 through encashing LC, from the overseas buyer; and subsequent to a hearing penalty was imposed on it. Thus, the present appeal.

Appellant submitted that Regulation 12 of the Foreign Exchange Management (Export of Goods & Services) Regulation, 2000 allows a person other than exporter to receive a foreign exchange, subject to fulfillment of certain conditions by the Authorized Dealer of the constituent. It was submitted that ED’s sole reason for dismissing Regulation 12 was the presumption that Padmaja had not furnished any proof of filing declaration (SDF). However, mere failure to submit proof of filing of SDF by Padmaja could not lead to a conclusion that no such SDF was filed by Padmaja at the time of export of goods. No enquiry was conducted to ascertain factual position with respect to filing of SDF.

The Tribunal noted that it was a matter of fact that LC opened by the overseas buyer was negotiated by the Authorised Dealer against a shipping bill. Therefore, the presumption must be that all conditions prescribed under Regulation 12 had duly complied including the condition with respect to SDF. In absence of any evidence, it could not be assumed that Authorised Dealer had accepted shipping documents without SDF. It was observed that the onus was on the ED to prove that Padmaja was allowed export without filing of SDF, and also that the documents were negotiated by the Authorised Dealer without SDF.

In view of the above, the appeal was allowed.[Graphite India Ltd. v. Joint Director, Directorate of Enforcement, Chennai, FPA-FE-12-13/CHN/2016, decided on 26-03-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal, Mumbai: The Coram of Tarun Agarwala, J., (Presiding Officer), Dr C.K.G. Nair, (Member), M.T. Joshi, J., (Judicial Member) dismissed the appeals which were filed against the order which imposed a penalty on the appellants for not following Regulation 7(2) (a) of the Securities and Exchange Board of India (Prohibition of Insider Trading (PIT) Regulations, 2015

The appellant was a promoter of a company incorporated under the Companies Act, 1956. As per Regulation 7(2)(a) of the PIT Regulations, 2015 every promoter, was required to disclose to the company the number of such shares acquired or disposed of within two trading days of such transaction if the value of the shares traded, whether in one transaction or a series of transactions over any calendar quarter, aggregated to a traded value in excess of 10 lakh rupees. The said Regulation was not followed by the appellant and accordingly a show cause notice was issued to him for having failed to make the relevant disclosure under the provisions of Regulation 7(2)(a) of the PIT Regulations. The Adjudicating Officer passed an order holding him guilty of violating the provision of Regulation 7(2)(a) of the PIT Regulations and accordingly imposed a penalty of Rs 5,00,000 under Section 15A(b) of SEBI Act. The said appellants being aggrieved by the imposition of penalty filed the appeal.

The Court found that no disproportionate gain or unfair advantage was made by the appellants while undertaking the transactions in the shares of the Company nor any loss was caused to the investors as a result of non-disclosure. Thus the violation was only technical in nature. The Court thus reduced the penalty by declaring it disproportionate and excessive. Further, it was held that imposition of higher penalty amounted to discrimination especially when it was the first offence made by them. The appellants had violated Regulation 7(2)(a) of the PIT Regulations and consequently, the minimum penalty was justifiable. These three appeals failed and were dismissed. [Nitin Agrawal v. SEBI, 2019 SCC OnLine SAT 18, decided on 25-03-2019]

Case BriefsHigh Courts

Karnataka High Court: A Division Bench comprising of CJ Dinesh Maheshwari and S. Sujatha, J. allowed a civil writ petition challenging the imposition of penalty on the petitioner for carrying out illegal mining.

Petitioner, a mining leaseholder for a particular tract of land, preferred the instant petition being aggrieved of the notice-cum-order issued by the respondent demanded a sum of Rs 3 lakh as penalty for conducting illegal mining activity outside the leased area.

The Court noted the undisputed fact that before calling upon the petitioner to remit the penalty by way of the impugned order, he was not served with a prior notice of the demand sought to be made. It was observed that the impugned notice was issued without extending an opportunity of hearing to the petitioner. Thus, it was held that the respondent could not recover penalty under the impugned notice.

In the interest of justice, the Court converted the impugned notice/order into a show cause notice and the petitioner was directed to make part payment of penalty in order to avail the opportunity of hearing. Respondents were directed to not adopt coercive recovery proceedings against the petitioner in relation to the remaining amount until a final decision was issued in the matter.

The petition was disposed of with a direction that if the petitioner submits Rs 1 lakh with the Director of Mines and Geology, the impugned demand notice shall be treated as show cause notice. The respondent was directed to take a final decision on the matter after hearing submissions of the petitioner, at the earliest.[G. Basavaraju v. State of Karnataka, 2018 SCC OnLine Kar 2706, decided on 29-11-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Green Tribunal (NGT): The Bench comprising of S.P. Wangdi (JM), K. Ramakrishnan (JM) and Dr Nagin Nanda (EM) imposed Rs 5 Crores as interim environmental compensation on State of West Bengal following the ‘Polluter Pays Principle’ due to the adverse air quality.

The present order was followed to be read out due to the alarming adverse air quality of the Kolkata city. Principal reason for bad ambient and air quality was identified to be auto emission apart from road dust, construction activities, burning of municipal waste and industrial wastes including plastics, population of DG sets and industrial emissions. For the stated issue, State had failed to take any effective measures.

NGT was compelled to pass the present order, as specific directions had been issued for phasing out vehicles which were more than 15 years old, further it was also observed by the Tribunal that the judgment passed by the Tribunal for the issue of air pollution was far from being complied. NGT had also directed the State respondents to introduce some mechanism in order to check the emissions of moving overloaded vehicles. All commercial transport vehicles were asked to be converted to CNG.

In spite of more than 7 months having being elapsed, no tangible action was taken by the State and placed before the Tribunal and State Pollution Control Board had remained blissfully silent. Reliance was placed on M.C. Mehta v. Union of India, (2004) 12 SCC 118, in which it was stated that “If the regulatory authorities either connive or act negligently by not taking prompt action to prevent, avoid or control damage to environment, natural resources, people’s health and property, the principle of accountability for restoration and compensation have to be applied.”

Thus, State of West Bengal was directed to pay compensation of Rs 5 Crores and on delay, Rs 1 Crore per month by following the ‘Polluter Pays Principle’ in terms of Section 20 of the National Green Tribunal Act, 2010. The matter is further listed for 08-01-2019. [Subhas Datta v. State of West Bengal,2018 SCC OnLine NGT 345, Order dated 27-11-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

Central Information Commission (CIC): The Bench comprising of Mr. Radha Krishna Mathur (Chief Information Commissioner), while hearing the second appeal with respect to an RTI applicant’s Bar enrollment request, imposed a penalty of Rs 5000 on Bar Council of Delhi for non-compliance of its orders.

The appellant – Shashi – had filed RTI application on 02-01-2017 seeking information as to whether the Bar Council of Delhi (BCD) had received her request application submitted in December 2016; and seeking documents such as letters communicated and decision taken with respect to her request application, current status of her application; copy of resolutions and file notings in respect of fixation of fees for enrolment under different categories, etc. The instant second appeal is the result of no response being received by the appellant. Along with the grievance of receiving no reply, the appellant also pleaded that the BCD did not contain basic information/link pertaining to Right to Information.

Vide interim order dated 13-04-2018, CIC had ordered BCD to give a reply to the appellant within 15 days and directed CPIO to submit a report regarding non-compliance of suo-moto disclosure on BCD website as per Section 4 of the Right to Information Act, 2005. On the next date of hearing, it was noted that the Commission’s order had not been complied with despite ample opportunity being given for the same.

It was observed that the CPIO, BCD was repeatedly making excuses for delay in giving information and he had also absented himself on multiple occasions from the hearings without affording any explanation for the same. The Commissioner observed that such lack of responsibility on the part of CPIO, BCD reflected his utter disregard for law. It was, therefore, concluded that the present case warranted the imposition of a penalty of Rs. 5000 on the CPIO, BCD for non-compliance of CIC’s order within the timeline prescribed under RTI Act. As the appellant had not explained any loss/ detriment suffered by her due to non-supply of information, therefore no compensation was awarded to her.[Shashi v. CPIO, BCD, Second Appeal No.CIC/MOLAJ/A/2017/140993 , decided on 09-10-2018]

Case BriefsHigh Courts

Karnataka High Court: A Single Judge Bench comprising of Vineet Kothari, J., decided a writ petition filed under Articles 226 and 227 of the Constitution, wherein the Court quashed the penalty imposed by the Karnataka State Human Rights Commission upon the petitioner-Inspector of Police; holding such power to be ultra vires.

A penalty of Rupees Ten thousand was imposed on the petitioner on the ground of service deficiency in arresting two juveniles and producing them as adults before the competent court instead of the Juvenile Justice Board. Learned counsel for the petitioner argued that Section 18 of the Protection of Human Rights Act, 1993, permits the Human Rights Commission only to recommend the government or authority concerned to make payment of compensation to the victim or his family. However, vide the impugned order, the Commission imposed a penalty of Rupees Ten thousand and further directed it to be deducted from salary of the petitioner. The counsel prayed for quashing of the said order.

The High Court perused the record and considered the submissions made on behalf of the parties. The Court also perused Section 18 of the said Act and found favour with the contentions of learned counsel for the petitioner mentioned hereinabove. The Court was of the opinion that the impugned order passed by the Commission could not be construed to be in the nature of mere recommendations as envisaged in the section. On the contrary, it imposed penalty and directed its recovery from the petitioner, which power is not conferred to the Commission under Section 18 of the Act.

Consequently, the Court allowed the writ petition and quashed the impugned order. [Venkatesh v. State of Karnataka, WP No. 55766 of 2016 (GM-RES), order dated 13.2.2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (‘CCI’): CCI has imposed penalties on 7 cement companies for bid rigging of a tender floated by the Director, Supplies & Disposals, Haryana, in the year 2012, for procurement of cement to be supplied to Government Departments/ Boards/ Corporations in the State of Haryana. A final order has been passed by CCI pursuant to a reference filed under Section 19(1)(b) of the Competition Act, 2002 (‘the Act’) by the Director, Supplies & Disposals, Haryana.

 CCI has held that the cement companies, through their impugned conduct, have engaged in bid-rigging, in contravention of the provisions of Section 3(3)(d) read with Section 3(1) of the Act, which eliminated and lessened competition and manipulated the bidding process in respect of the impugned tender. The bid-rigging has been established from quoting of unusually higher rates in the impugned tender (than rates quoted in tenders of previous years), determining different basic prices for supply of cement at the same destination through reverse calculation, quoting of quantities in the impugned tender such that the total bid quantity almost equalled the total tendered quantity, quoting of rates for the districts in a manner that all cement companies acquired L1 status at some of the destination(s) etc. The anti-competitive conduct was re-affirmed through SMS exchanged and calls made amongst the officials of the cement companies.

 Accordingly, penalty of  Rs. 18.44 crore, Rs. 68.30 crore, Rs. 38.02 crore, Rs. 9.26 crore, Rs. 29.84 crore, Rs. 35.32 crore and Rs. 6.55 crore has been imposed upon Shree Cement Limited, UltraTech Cement Limited, Jaiprakash Associates Limited, J.K. Cement Limited, Ambuja Cements Limited, ACC Limited and J.K. Lakshmi Cement Limited. The penalty has been levied @ 0.3% of the average turnover of the cement companies of preceding three years. While imposing penalties, Commission took note of potential delay which would have occurred in the execution of public infrastructure projects due to cancellation of the impugned tender. At the same time, due consideration was given to factors such as peculiarity of the tender process which created uncertainty in procurement, total size of the impugned tender and competition compliance programmes put in place by some companies while determining the quantum of penalty. The cement companies have been directed to cease and desist from indulging in the acts/ conduct which have been held to be in contravention of the provisions of the Act. [Director, Supplies & Disposals, Haryana v. Shree Cement Ltd., 2017 SCC OnLine CCI 2, decided on 19-01-2017]