DKG BUILDCON PRIVATE LTDversusTHE ADJUDICATING & ENQUIRY OFFICER, S.E.B.I.

242                      [2022]REPORTS
               SUPREME COURT   19 S.C.R. 242               [2022] 19 S.C.R.


A                      DKG BUILDCON PRIVATE LTD.
                                        v.
           THE ADJUDICATING & ENQUIRY OFFICER, S.E.B.I.
                         (Civil Appeal No. 1742 of 2009)
B                            SEPTEMBER 14, 2022
            [AJAY RASTOGI AND B. V. NAGARATHNA, JJ.]
             Securities and Exchange Board of India Act, 1992 – ss.11C
      (3), 15A(a), 15J –Penalty of rupees one crore levied by the
C     Adjudicating Officer (AO), upheld by the Securities Appellate
      Tribunal (SAT) – Justification of – Held: Appellants had first violated
      the summons in August, 2001 and in June, 2002 – Thereafter, SEBI
      issued numerous summons, giving the appellants opportunities to
      appear and produce the documents and furnish the information as
      required – But, the appellants failed to respond to any of the summons
D     issued during the period of 2001-2002, during the course of the
      investigation – Thereafter, SEBI issued fresh summons on 1.04.2003
      in respect of the appellant in C.A.No. 1742 of 2009 and on
      09.04.2003 in respect to the appellant in C.A.No. 5833 of 2009 for
      the appellants to cooperate with the investigation –Thereafter, the
E     AO passed its order levying penalty on the appellants on 28.11.2003
      and on 31.12.2003 respectively – Non-compliance of the aforesaid
      fresh summons constituted a fresh offence committed by the
      appellants – Thus, the amended provisions of s.15A(a) as amended
      w.e.f. 29.10.2002 would apply when levying the penalty on the
      appellants in respect of the summons issued subsequent to the
F
      aforesaid amendment –Also, since the duration of the default of
      non-compliance committed by both the appellants was over a period
      of 100 days from the date of issue of the summons in each case, the
      AO rightly applied s.15A(a), more specifically in regard to the
      maximum limit of penalty that could be imposed under the provision,
G     i.e. rupees one crore– Penalty of rupees one crore as levied by the
      AO and upheld by the SAT is justified–Further, investigation by
      SEBI which had concluded that the appellants and other entities
      were involved in aiding and abetting ‘KP’ and his companies in
      rigging the securities market in the years 2000 and 2001 had not
      been challenged, at any point, by the appellants – Thus, the relevant
H
                                       242
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                        243
             ENQUIRY OFFICER, S.E.B.I.

order of SEBI had attained finality – Taking into consideration the      A
severity of offences found to have been committed by the appellants
and other entities, and the non-cooperative attitude of the appellants
during the course of the investigation in attempting to obstruct the
same, the quantum of penalty imposed u/s.15A(a) is justified and
with effective consideration of the factors listed in s.15J.
                                                                         B
      Securities and Exchange Board of India Act, 1992 –
Explanation to s.15J – Held: A bare reading of the Explanation in
the context of the present case creates a presumption in favor of the
Adjudicating Officer that he passed the Orders dated 28.11.2003
and 31.12.2003 against the appellants after due consideration of
the factors mentioned in s.15J.                                          C

       Securities and Exchange Board of India Act, 1992 – s.11C(3)
– “persons associated with the securities market in any manner” –
Held: A bare reading of s.11C (3) makes it clear that an Investigating
Authority appointed by SEBI to investigate the affairs of any persons
may require such person “associated with the securities market in        D
any manner to furnish such information to, or produce such books,
or registers, or other documents, or record before him or any person
authorized by it, in this behalf as it may consider necessary, if the
furnishing of such information or the production of such books, or
registers, or other documents, or record is relevant or necessary        E
for the purposes of its investigation” – In the present case, the
appellants were under investigation by SEBI for its alleged
involvement in aiding and abetting ‘KP’ and his companies in
manipulating the securities market –Thus, the appellants would
squarely fall under the scope of “persons associated with the
securities market in any manner” u/s.11C(3) –The authority of the        F
Investigating Authority to direct such persons to appear before him
and furnish information or produce documents as is required for
an investigation is provided in s.11C (3).
      Securities and Exchange Board of India Act, 1992 – ss.19,
15A(a), 11C(3) – Held: s.19 provides that the SEBI may delegate to       G
any member, officer of the SEBI or any other person, such of its
powers and functions under this Act (except the powers u/s.29) as
it may deem necessary – Thus, when the appellants failed to comply
with the directions issued u/s.11C(3)and failed to producethe
required documents and information, the Investigating Authority,         H
244           SUPREME COURT REPORTS                     [2022] 19 S.C.R.


A     being a delegated Authority of SEBI, was empowered to levy the
      penalty as provided in s.15A(a).
           Commissioner of Income Tax, Ahmedabad vs. Gold Coin
           Health Food Pvt. Ltd (2008) 9 SCC 622 : [2008] 12
           SCR 179, CJ Paul & Ors. vs. District Collector & Ors.
B          (2009) 14 SCC 564 : [2009] 12 SCR 233, Ritesh
           Agarwal & Ors. vs. Securities and Exchange Board of
           India & Ors. (2008) 8 SCC 205 : [2008] 8 SCR 553;
           Commissioner of Income Tax, Lucknow vs. M/s Onkar
           Saran and Son (1992) 2 SCC 514 : [1992] 2 SCR 514;
           Mr. Sandeep Kumar Gupta vs. SEBI (Appeal No. 102
C          of 2013); Iris Infrastructural Pvt. Ltd. vs. SEBI (Appeal
           No. 2 of 2006) –held inapplicable .
           Adjudicating Officer, Securities and Exchange Board
           of India vs. Bhavesh Pabari (2019) 5 SCC 90 : [2019]
           18 SCR 898, MBL and Company Limited vs. Securities
D          and Exchange Board of India (2022) SCC OnLine SC
           754 – relied on.
           Rose Valley Real Estates and Construction Ltd. vs.
           Securities and Exchange Board of India (Appeal No.
           106/2013); Padmini Technologies Ltd. vs. SEBI (Appeal
E          No. 36 of 2004); Vivek Nagpal vs. SEBI (Appeal No.
           37 of 2004); Mukesh Malhotra vs. SEBI (Appeal No.
           101/2004); Advance Hovercrafts & Composites India
           Ltd., Delhi vs. The Adjudicating and Enquiry Officer,
           SEBI (Appeal No. 61/05); Spectrum.com Pvt. Ltd. vs.
F          SEBI (Appeal No. 119 of 2006); and Zodiac.com
           Solutions Pvt. Ltd. vs. The Adjudicating and Enquiry
           Officer, SEBI (Appeal No. 105 of 2006) – referred to.
                            Case Law Reference
      (2008) 12 SCR 179            held inapplicable           Para 35
G
      (2009) 12 SCR 233            held inapplicable           Para 35
      (2008) 8 SCR 553             held inapplicable           Para 35
      (1992) 2 SCR 514             held inapplicable           Para 35
      (2019) 18 SCR 898            relied on                   Para 43
H
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                             245
             ENQUIRY OFFICER, S.E.B.I.

      (CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1742                    A
of 2009)
     From the Judgment and Orders dated 07.01.2009 of the Securities
Appellate Tribunal, Mumbai in Appeal No. 106 of 2006
      With
                                                                              B
      Civil Appeal No. 5833 of 2009.
      Ambhoj Kumar Sinha, Ms. Diksha Mishra, Abhay Kr. Das, Ms.
Deeksha Mishra, Debmalya C. Banerjee, Rohan Sharma, Kartik
Bhatnagar, Nicholas Choudhury, Anmol, Shreesh Chadha, Atul Sinha,
M/s. Karanjawala & Co., Advs. for the Appellant.                              C
       Chander Uday Singh, Sr. Adv., Pratap Venugopal, Ms. Surekha
Raman, Akhil Abraham Roy, Vijay Valsan, M/s. K J John And Co, Advs.
for the Respondent.
      The Judgment of the Court was delivered by
                                                                              D
      NAGARATHNA, J.
       1. These Civil Appeals arise out of common impugned Order dated
07.01.2009 passed by the Securities Appellate Tribunal, Mumbai (for
short, “SAT”).
       2. Since the questions of law and issues which arise to be dealt       E
with in both the above captioned Civil Appeals are similar, and the matters
are distinct only in their respective facts and events, these appeals are
being disposed of by this common judgment.
      3. The appellant in Civil Appeal No. 1742 of 2009 is a Private
Limited Company which was incorporated under the Companies Act,               F
1956 on 15.04.1997. The appellant in Civil Appeal No. 5833 of 2009 was
incorporated under the Companies Act, 1956 on 02.06.1997.
       4. An investigation was carried out by Securities and Exchange
Board of India (‘SEBI’, for short) in the matter of purchase and sale of
scrip and manipulation of share prices of M/s Shonkh Technology               G
International Ltd. (‘STIL’ for the sake of convenience), a Company in
which both the appellants had previously held shares. On noticing unusual
price movement in the shares of STIL, SEBI conducted an investigation
into the buying, selling and dealings in the shares of the Companies under
the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade
Practices relating to Securities Market) Regulations, 1995 (hereinafter       H
246             SUPREME COURT REPORTS                          [2022] 19 S.C.R.


A     referred to as ‘Regulations’). Investigations revealed that one M/s
      Shreejee Yatayat India Limited (for short,‘SYIL’), a listed company had
      acquired the entire Undertaking of STIL and in turn SYIL had allotted
      its shares to the shareholders of STIL. The appellant in Civil Appeal No.
      1742 of 2009 was allotted 10,00,000 shares of SYIL while the appellant
      in Civil Appeal No. 5833 of 2009 was allotted 1,43,000 shares. Having
B
      taken over the business activities of STIL, SYIL changed its name to
      STIL with effect from 27.07.2000.
             5. Investigations further revealed that the appellants had
      transferred the shares of STIL to a Company under the name and style
      of Sai Mangal Investrade Pvt. Ltd. (for short, ‘SMIPL’). Similarly, entities
C     like Classic Credit Limited, Goldfish Computers Ltd. and Luminant
      Investment Private Ltd. had also received shares of STIL from various
      entities which had been allotted shares by SYIL. SMIPL and the other
      entities referred to above were all controlled and managed by a person
      named, Ketan Parekh, who had rigged the securities market in the years
D     2000 and 2001.
             6. By an Order dated 12.12.2003 passed by SEBI, Ketan Parekh
      and the companies controlled by him had been prohibited from buying,
      selling or dealing in securities in any manner directly or indirectly for a
      period of fourteen years. That Order was upheld by SAT on 14.07.2006
E     and the appeal filed before this Court was also dismissed.
             7. In view of the aforesaid investigations, SEBI initiated
      proceedings against several entities including the appellants herein. By a
      separate Order dated 16.10.2007, SEBI found that large quantities of
      shares of STIL were made available to entities associated with Ketan
F     Parekh during the period between October, 2000 and April, 2001 and
      that facilitated them to create artificial volumes in the said scrip in the
      securities market. SEBI also found that the entities associated with Ketan
      Parekh had sold a large number of shares of STIL in the securities
      market in a synchronized manner with a view to create an artificial
      market in the said shares. SEBI came to the conclusion that the appellants
G     and other entities had facilitated Ketan Parekh and his companies in
      manipulating the securities market and had thereby violated Regulation
      4 of the Regulations. SEBI restrained them from accessing the securities
      market for a period of five years and also prohibited them from buying,
      selling or dealing in securities either directly or indirectly for the same
H     period. SEBI found that a series of unauthorized activities starting from
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                             247
    ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

the allotment of shares of STIL to various people including Ketan Parekh      A
entities through a web of transfers virtually wrecked the integrity of the
securities market with a view to make unfair gains.
      Re: Civil Appeal No. 1742/2009
       8. A letter dated 02.07.2001 was issued by the respondent – SEBI
whereby this appellant (DKG Buildcon Pvt. Ltd.) was asked to furnish          B
certain details and documents to SEBI. The details are as mentioned
below:
      “Annexure
      a)     The names of the directors and shareholders of your              C
             company since 1998.
      b)     Whether you were the original allottee of shares of Shonkh
             Technologies Ltd. If yes, please give complete details in
             this regard, such as name and percentage of shares allotted
             etc.                                                             D
      c)     No. and percentage of shares of Shonkh Technologies Ltd.
             Held by you alongwith the manner, price(s) and date(s) of
             acquisition(s) of such shares prior to the allotment to you of
             shares of Shreejee Yatayat India Ltd. In July, 2000.
      d)     Whether the shares acquired by you of Shreejee Yatayat           E
             India Ltd. on a preferential allotment basis were held
             beneficially for someone else. If yes, give details of the
             person concerned.
      e)     Whether the shares of Shonkh Technologies Ltd. were
             purchased from you own funds or after obtaining loan/ICDs        F
             from someone. If yes, give details of the person concerned,
             amount borrowed, interest paid, terms and conditions of
             repayment.
      f)     Whether you are still holding share of Shonkh Technologies
             International Ltd. or they have been disposed off. If the        G
             shares have been transferred, by way of pledge, sale, gift,
             exchange etc., please furnish the details thereof. These
             details should include amount borrowed/consideration
             received, cheque number/draft number, name of the pledge/
             buyer/donee, etc.
                                                                              H
248                SUPREME COURT REPORTS                        [2022] 19 S.C.R.


A           g)       Any other purchase/acquisition of Shonkh Technology
                     International Ltd. shares by the company/its subsidiaries/
                     directors. If yes, give details of the shares of Shonkh
                     Technologies International Ltd. acquired alongwith the
                     details of consideration paid, date of transaction, cheque
                     number/draft number, mode of acquisition, etc.”
B
             9. SEBI issued summons on 27.08.2001 requiring the following
      detailed information and documents to be submitted by this appellant:
            “Annexure
            (i)      The list of the directorships of other companies held by the
C                    directors of M/s DKG Buildcon Private Limited.
            (ii)     The details of holdings in the scrip of M/s Shreejee Yatayat
                     Limited as on March 31, 2000.
            (iii)    The details of the acquisition of the shares of M/s Shonkh
D                    Technologies Limited. The details shall contain.
                     •     The date of the acquisition.
                     •     The quantity and rate of the acquisition.
                     •     The name and address of the trading member through
                           whom the acquisition was made.
E
                     •     In case the acquisition was made off-market, the
                           name and address of the transferors.
            (iv)     The details of the acquisition of the shares of M/s Shonkh
                     Technologies International Limited. The details shall contain.
F                    •     The date of the acquisition.
                     •     The quantity and rate of the acquisition.
                     •     The name and address of the trading member through
                           whom the acquisition was made.
G                    •     In case the acquisition was made off-market, the
                           name and address of the transferors.
            (v)      The details of the trading in the scrip of M/s Shonkh
                     Technologies International Limited during the period from
                     August 1, 2000 to June 30, 2001. The details shall include.
H
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                               249
    ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

                 a.    The date of the transaction.                             A
                 b.    The name and address of the trading member through
                       whom the acquisition is entered into.
                 c.    In case of off-market transaction, please provide the
                       name and address of the counter party.
                                                                                B
                 d.    The quantity, rate and value of the transaction.
         (vi)    The details of the shares given in fiduciary capacity or
                 pledged (sic) with entity. The details shall contain:
                 •     The name and address of the party to whom shares
                       are given at fiduciary capacity or with whom shares      C
                       were pledged.
                 •     The quantity of the shares given in fiduciary capacity
                       or pledged.”
         However, according to this appellant the same was never received
                                                                                D
by it.
       10. The following are the communications exchanged between
appellant and respondent in Civil Appeal No. 1742 of 2009. Several
summons were also issued to this appellant, the details of which are as
under:
                                                                                E
         (i)     “Appellant vide letter dated 06.09.2001 provided detailed
                 information as requested in the letter of date 02.07.2001.
         (ii)    Another letter dated 10.06.2002 was issued by SEBI to the
                 appellant along with a copy of the summons, whereby the
                 appellant was again asked to furnish certain information       F
                 and documents by 19.06.2002.
         (iii)   On 18.06.2002 summons was issued by SEBI directing the
                 appellant to produce the details and documents as mentioned
                 therein on 21.06.2002 at SEBI’s office, Delhi.
         (iv)    Another summons dated 19.06.2002 was issuedby the              G
                 Investigating Officer to the appellant whereby the appellant
                 was directed to produce the said documents on 19.06.2002
                 at the Mumbai office of SEBI.
         (v)     Another Investigating Officer of SEBI issued summons
                 dated 04.03.2003 requiring the appellant’s personal            H
250            SUPREME COURT REPORTS                           [2022] 19 S.C.R.


A                   appearance on 20.03.2003 at SEBI’s office, New Delhi. It
                    was stated therein that the person who was to appear on
                    behalf of the appellant should be able to answer all questions
                    relating to the investigation. The appellant was also directed
                    to produce documents.
B           (vi)    Appellant vide letter dated 20.03.2003 in reply to the above
                    summons asked for postponement of the attendance as the
                    concerned Director, Mr. Navneet Kumar was out of station
                    and would return only by 30.03.2003 where after he would
                    be available to appear.
C           (vii)   The Investigating Officer issued another summons on
                    24.03.2003 to the appellant requiring attendance on
                    01.04.2003 at SEBI’s office, Mumbai.
            (viii) This was followed by another summons issued on 01.04.2003
                   requiring appellant’s attendance on 08.04.2003. It was
D                  mentioned that in default of appearance, SEBI will initiate
                   adjudication proceedings against the appellant, under which
                   the appellant could be levied a penalty of One Lakh rupees
                   for each day during which such failure occurs or continues
                   or one crore rupees, whichever is less.”

E            Subsequently, a Show Cause Noticedated 11.09.2003 was issued
      under Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing
      Penalties by Adjudicating Officer) Rules, 1995 (for short, ‘1995 Rules’)
      by the respondent to this appellant informing it that SEBI, vide its Order
      dated 26.06.2003 had appointed the respondent as the Adjudicating
      Officer (for short, ‘AO’) to inquire into and adjudicate alleged violation
F     by this appellant under Section 15A(a) of the Securities and Exchange
      Board of India Act, 1992 (for short, ‘1992 Act’) for non-compliance of
      summons issued by SEBI. This appellant was asked to show cause as to
      why an inquiry should not be held against it in terms of Rule 4 of the
      1995 Rules, and why penalty should not be imposed under Section 15A(a)
G     of the 1992 Act.
            11. An ex-parte Order dated 28.11.2003 was passed by the
      respondent whereby this appellant was held to have not complied with
      the requirements of SEBI’s summons dated 27.08.2001, 10.06.2002,
      18.06.2002 and 01.04.2003. Consequently, the AO imposed a penalty of
      rupees one crore on this appellant under Section 15A(a) of the 1992 Act
H
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                            251
    ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

on the ground that it had adopted dilatory tactics of stonewalling           A
investigations launched in the larger public interest which calls for a
deterrent penalty.
       12. This appellant preferred an Appeal No. 106 of 2006 on
06.11.2004 before the SAT against the aforesaid Order of the AO along
with an application for condonation of delay. SAT on 01.09.2006 dismissed    B
the application for condonation of delay as well as the appeal preferred
on the ground that the appeal was time barred and no satisfactory
explanation for the delay was given.
       13. Pursuant to this dismissal of the appeal by SAT, this appellant
preferred Civil Appeal No. 4975 of 2006 before this Court whereby            C
vide an Order dated 04.08.2008 this Court gave a direction that the
delay in filing the appeal before SAT is condoned subject to the appellant
depositing a sum of Rs.1,25,000/- as cost to SEBI within a period of six
weeks from the date of supply of a copy of the said Order to SAT. On
depositing the cost of Rs.1,25,000/-, SAT heard the Appeal No. 106 of
2006 and vide the impugned Order upheld SEBI -respondent’s Order             D
dated 28.11.2003 and dismissed the appeal.
      Re: Civil Appeal No. 5833 of 2009
      14. On 26.07.2001, the respondent herein issued the first summons
giving details of the information sought from this appellant (R. C. Gupta    E
& Co. Pvt. Ltd.). The appellant furnished the required information on
29.07.2001.
        15. Another summons was issued on 10.06.2002 and then on
18.06.2002 by the respondent, directing this appellant to supply the
required information and documents which was attached to the summons         F
by 21.06.2002. Some of the information sought were similar to that sought
in the summons dated 26.07.2001. However, additional information was
also sought but this appellant failed to respond to any of the above
summons.
       16. SEBI chose to issue another summons on 09.04.2003 giving
                                                                             G
the appellant another opportunity to comply with the directions mentioned
herein below and to appear on 12.04.2003, making it clear that the person
who had to appear on its behalf should be such who could answer all the
questions in relation to the investigations. The information and documents
sought from the appellant were crucial to the conduct of the investigation
by SEBI. Despite the repeated directions issued through the aforesaid        H
252              SUPREME COURT REPORTS                        [2022] 19 S.C.R.


A     summons, this appellant failed to respond. The information sought from
      this appellant was as follows:
            “Annexure
            1.     The details of holdings in the scrip of M/s Shreejee Yatayat
                   Limited as on March 31, 2000.
B
            2.     The details of the acquisition of the shares of M/s Shonkh
                   Technologies Limited. The details shall contain:
                   •     The date of the acquisition.
                   •     The quantity and rate of the acquisition.
C
                   •     The name and address of the trading member through
                         whom the acquisition was made.
                   •     In case the acquisition was made off-market, the
                         name and address of the transferors.
D           3.     The details of the acquisition of the shares of M/s Shonkh
                   Technologies International Limited. The details shall contain:
                   •     The date of the acquisition.
                   •     The quantity and rate of the acquisition.

E                  •     The name and address of the trading member through
                         whom the acquisition was made.
                   •     In case the acquisition was made off-market, the
                         name and address of the transferors.
            4.     The details of the trading in the scrip of M/s Shonkh
F                  Technologies International Limited during the period from
                   August 1, 2000 to June 30, 2001. The details shall include:
                   •      The date of the transaction.
                   •      The name and address of the trading member
                         through whom the transaction is entered into.
G
                   •      In the case of off-market transaction, please provide
                         the name and address of the counterparty.
                   •      Quantity, rate and value of the transaction.”
            17. Due to the failure of this appellant to comply with the above
H     mentioned summons, SEBI initiated adjudication proceedings against this
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                             253
    ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

appellant. The Adjudicating Officer (AO) issued a Show Cause Notice           A
dated 15.09.2003 wherein this appellant was informed that it had become
liable for the imposition of penalty under Section 15A(a) of the 1992
Act. The Show Cause Notice also made a mention of some of the
information sought earlier through the summons, and this appellant filed
its reply dated 18.12.2003 wherein the appellant furnished the information
                                                                              B
on the points referred to in the Show Cause Notice.
       18. Thereafter, the AO, after considering the material on record,
passed an order on 31.12.2003 wherein it was found that this appellant
also did not comply with the summons. The AO imposed a penalty of
rupees one crore on this appellant under Section 15A(a) of the 1992
Act.                                                                          C

       19. This appellant also preferred an Appeal No. 133 of 2006 on
05.10.2004 before the SAT against the Order dated 31.12.2003 along
with an application for condonation of delay. The SAT on 10.11.2006
dismissed the application for condonation of delay as well as the appeal
preferred on the ground that the appeal was time barred and no                D
satisfactory explanation for the delay was given.
       20. Pursuant to this dismissal of the appeal by SAT, the appellant
preferred Civil Appeal No. 2289 of 2007 before this Court whereby this
Court gave a direction that the delay in filing the appeal before SAT is
condoned subject to the appellant depositing a sum of Rs.1,25,000/- as        E
cost to SEBI. On depositing the cost of Rs.1,25,000/-, the SAT heard
Appeal No. 133 of 2006 and by the impugned Order dated 07.01.2009
upheld the respondent’s Order dated 31.12.2003 and dismissed the appeal.
      21. The pertinent observations and decision of the SAT are
encapsulated as under:                                                        F
      (i)    That while the investigations were going on, the appellants
             and other entities involved in the manipulation tried to block
             the investigation by not responding to the summons issued
             to them.
                                                                              G
      (ii)   It is evident that apart from the fact that the statement of
             the representative of the appellants could not be recorded,
             it also failed to furnish the information as per the annexure
             of documents. That the appellants were bent upon not
             appearing before the Investigating Officer and was also
             determined not to furnish the information and produce the        H
254         SUPREME COURT REPORTS                       [2022] 19 S.C.R.


A             documents sought from it. SEBI initiated Adjudication
              Proceedings for not complying with the summons. The AO
              found that the appellants had willfully failed to respond to
              the summons and imposed a monetary penalty of rupees
              one crore on each of them under Section l5A(a) of the Act.
B     (iii)   SAT did not agree with the contention that the penalty could
              not exceed Rs. 1,50,000/-. Section 15A(a) of the Act, as it
              originally stood, provided for “a penalty not exceeding
              Rs.1,50,000/- for each such failure.” This provision was
              however amended by the amending Act of 2002 which was
              meant to make the penalty more deterrent and provided for
C
              a “penalty of rupees one lakh for each day during which,
              such failure continues or rupees one crore, whichever is
              less.”
                  The appellant in Civil Appeal No. 1742 of 2009 violated
              the summons for the first time in August, 2001 and it was
D
              open to SEBI to proceed against it for that non-compliance.
              The appellant again violated the summons in June, 2002.
              SEBI could have proceeded against it for that non-
              compliance as well. Had the SEBI proceeded against the
              appellant for those non-compliances which constituted two
E             separate wrongs, the penalty leviable would have been under
              the unamended provisions.
      (iv)    That SEBI not having proceeded against the appellant in
              Civil Appeal No. 1742 of 2009 for those non-compliances
              and having chosen to issue fresh summons in April 2003,
F             implied that it condoned the earlier lapses and gave the
              appellants a fresh opportunity to furnish the information and
              appear in person to make a statement. Had the appellants
              complied with the summons, it would not have been open
              to SEBI to proceed against them for the earlier non-
              compliances.
G
      (v)     Non-compliance of the summons issued on 01.04.2003 was
              a fresh offence committed by the appellant in Civil Appeal
              No. 1742 of 2009 for which SEBI proceeded, which
              proceedings culminated in the passing of the impugned order.
              Since this wrong was committed in April 2003 by which
H
DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                               255
  ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

           time the amended provisions were in place, penalty had to          A
           be levied in accordance with those provisions. SAT observed
           that no fault can, thus, be found with the action of the AO
           in levying the penalty under the amended provisions.
              For the same reason as stated above, the action of the
           AO in levying the penalty against the appellant in Civil           B
           Appeal No. 5833 of 2009 was held to be justified and no
           fault could be found.
   (vi)    Section 11C of the Act was introduced with effect from
           29.10.2002 and sub-Section (3) provides that the
           Investigating authority may require any person associated          C
           with the securities market “to furnish such information, or
           produce such books, or registers, or other documents, or
           record before him…”. The power to direct a person to
           furnish any information or record or documents includes
           the power to direct such person to make a statement and
           give clarifications with regard to the information and             D
           documents produced by him. In the absence of such a power,
           the purpose of the legislature in introducing Section 11C
           would be frustrated and SEBI will not be able to investigate
           properly the market irregularities and offences. Therefore,
           Section 11C (3) gives the power to the Investigating               E
           Authority to call upon any person to make a statement while
           furnishing any information, document or record.
   (vii)   That the Orders of AO dated 28.11.2003 and 31.12.2003
           did not record findings which were beyond the show cause
           notice.                                                            F
   (viii) That the penalty imposed was not excessive and that the
          same need not be reduced. That penalty cannot be reduced
          on the ground that it could be levied only under the
          unamended provisions of Section l5A(a) of the 1992 Act as
          the most vital part of the information that was being sought        G
          from the appellants was withheld knowingly.
   (ix)    That the appellants were aiding and abetting Ketan Parekh
           and his companies in manipulating the price of the scrip of
           STIL and it is for this reason that they were trying to obstruct
           and delay the investigations.
                                                                              H
256                SUPREME COURT REPORTS                        [2022] 19 S.C.R.


A           22. We have heard Ms. Deeksha Mishra, learned counsel for the
      appellants and Sri. C.U. Singh, learned senior counsel for the respondents
      duly assisted by their instructing counsel and perused the material on
      record.
            23. The submissions of learned counsel for the appellants herein
B     are summarised as follows:
            (i)      That the penalty of rupees one crorehas been imposed for
                     alleged non-compliance of summons dated 27.08.2001,
                     10.06.2002, 18.06.2002 and 01.04.2003 by the appellant in
                     Civil Appeal No. 1742 of 2009 and for the alleged non-
C                    compliance of summons dated 10.06.2002, 18.06.2002 and
                     09.04.2003 by the appellant in Civil Appeal No. 5833 of 2009.
                     The maximum penalty of Rs. 1,50,000/- ought to have been
                     imposed, if at all, as per the unamended Section 15A(a) of
                     the 1992 Act as it stood on the date when the summons were
                     issued. As regards the issue of summons dated 01.04.2003
D                    in Civil Appeal No. 1742 of 2009 and summons dated
                     09.04.2003 in Civil Appeal No. 5833 of 2009 is concerned, it
                     was submitted that it is in continuation of the earlier summons
                     issued and cannot be treated in a separate and disjunct manner.
                     That both the appellants herein had already replied to summons
E                    and were thus, under a bonafide belief that the requirements
                     of summons had been complied with.
            (ii)     That the record in Civil Appeal No. 1742 of 2009 clearly
                     shows that the summons dated 10.06.2002 and 18.06.2002
                     had been complied with inasmuch as all the documents and
F                    information requested to be furnished therein had been
                     supplied vide letter dated 30.07.2002 which was received
                     by SEBI on 31.07.2002. Similarly, in Civil Appeal No. 5833
                     of 2009, the first response and detailed reply dated
                     29.07.2001 of the appellant therein to the first summons
                     dated 26.07.2001 almost satisfied the queries raised by the
G                    Investigating Officer of SEBI. However, the same remained
                     unnoticed by the AO while passing the Order dated
                     31.12.2003. Since the AO had proceeded on a wrong
                     assumption, presuming that the appellant never complied
                     with any summon and never furnished any information to
H                    the Investigating Officer, he reached a wrong conclusion.
DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                              257
  ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

   (iii)   That there was no violation of Section 15A(a) of the 1992         A
           Act since Section 15A(a) applies only with respect to
           documents statutorily required to be furnished to SEBI, and
           does not apply to documents required to be furnished to an
           Investigating Authority, pursuant to summons issued by it.
           The term “Board”, as defined in the 1992 Act, is the
                                                                             B
           Securities and Exchange Board of India established under
           Section 3 of the 1992 Act while the term “Investigating
           Authority” is defined under Section 11C of the 1992 Act as
           an officer directed by the SEBI to conduct an investigation
           and report to it. It cannot be said that the powers and
           functions of the Investigating Authority are co-extensive         C
           with that of the SEBI.
   (iv)    That the penalty imposed by the AO under Section l5A(a)
           of the1992 Act is excessive, abusive and untenable, and in
           complete disregard of the principle of proportionality. Section
           l5A(a) of the 1992 Act merely provides that if any person         D
           who is required under the Act or any rules or regulations
           made thereunder fails to furnish any document, return or
           report to the SEBI, he shall be liable to a penalty of rupees
           one lakhfor each day during which such failure continues
           or rupees one crore, whichever is less. The maximum penalty
           was augmented from rupees one lakh fifty thousand to              E
           rupees one crorewith effect from 29.10.2002. Prior to
           29.10.2002, the penalty leviable under this Section was
           restricted only to a sum not exceeding one lakh and fifty
           thousand rupees. Assuming, that the appellants had violated
           the provisions of Section l5A(a) of the 1992 Act, the             F
           maximum penalty that could have been levied must be
           calculated as per the unamended provisions, as was in force
           at the time when the offence was alleged to have been
           committed and summons were issued, and not the enhanced
           penalty as provided by a subsequent amendment which
           came into effect only from 29.10.2002.                            G
   (v)     Furthermore, the AO has, in imposing the aforesaid penalty,
           disregarded the provisions of Section 15J of the 1992 Act
           which reads as follows:
              “15J. Factors to be taken into account while
              adjudging quantum of penalty.—While adjudging the              H
258      SUPREME COURT REPORTS                         [2022] 19 S.C.R.


A               quantum of penalty under 15-I or Section 11 or Section
                11B, the Board or the adjudicating officer shall have
                due regard to the following factors, namely:—
                (a) the amount of disproportionate gain or unfair
                advan-tage, wherever quantifiable, made as a result of
B               the default;
                (b) the amount of loss caused to an investor or group of
                investors as a result of the default;
                (c) the repetitive nature of the default.”
C                Thus, the provisions of Section 15J make it mandatory
             for the AO to consider the factors stated in the relevant
             Section and reproduced hereinabove while computing the
             quantum of penalty, as is provided for by the use of the
             word ‘shall’ in the said Section. The Order dated 28.11.2003
             of the AO in Civil Appeal No. 1742 of 2009 and Order
D            dated 31.12.2003 in Civil Appeal No. 5833 of 2009 fails to
             attribute a motive to the appellants or any gains accruing to
             the appellants vis-à-vis the loss, if any, incurred by
             unsuspecting common investors in quantified terms on
             account of alleged violations by the appellants. Thus, it is
E            clear that the AO has failed to take into consideration the
             said factors while deciding the quantum of penalty,
             particularly so, when the appellants had already furnished
             the information called for by the Investigating Officer.
      (vi)   That the summons issued by the respondent to the appellants
F            under Section 11(3) of the 1992 Act are non-est in law as
             this Section does not empower SEBI to summon and compel
             the appearance of companies such as the appellants. Hence,
             no consequence can follow from the non-compliance of
             such summons. SEBI’s powers, prior to the amendment in
             2002, was limited to jurisdiction over stock exchanges,
G            mutual funds, other persons associated with the securities
             market, intermediaries and self-regulatory organizations.
             After the 2002 amendment, SEBI’s jurisdiction extended
             to listed companies or companies which propose to get their
             securities listed. However, in no event does Section 11(3)
H            empower SEBI to compel the appearance or production of
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                               259
    ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

              documents by companies such as the appellants herein since        A
              the appellantsare not registered with SEBI as a regulated
              intermediary. Furthermore, even under Section 11(3) of the
              1992 Act, the power of SEBI to compel appearance and
              production of documents is limited to the powers vested in
              a Civil Court under the Code of Civil Procedure, 1908, (CPC)
                                                                                B
              more specifically contained in Section 32 CPC which
              provides that the Court may compel the attendance of any
              person to whom summons has been issued under Section
              30 CPC and for that purpose, may issue a warrant for his
              arrest, attach and sell his property, impose a fine upon him
              not exceeding five hundred rupees, or order him to furnish        C
              security for his appearance and in default, commit him to
              the civil prison.
      (vii)   That the Orders dated 28.11.2003 and 31.12.2003 have been
              passed in violation of and in grave breach of the principles
              of natural justice and statutory procedure and a conscious        D
              disregard of the duties cast on the AO under the provisions
              of the 1992 Act. This is evidenced by the fact that the AO,
              in the absence of a report by an Investigating Officer, took
              upon himself the task of fact finding, investigating,
              conducting, hearing, researching, preparing a report and then
                                                                                E
              adjudicating thereon by himself. Thus, the investigating and
              adjudicating roles have been played by the same person.
      (viii) The respective Orders are bad in law and have been passed
             in violation of and in grave breach of the principles of natural
             justice, statutory procedure and conscious disregard of the
                                                                                F
             duties cast upon the respondent under the provisions of the
             1992 Act.
      24. The submissions of learned counsel for the respondent in both
the appeals are summarised as under:
      (i)     It has been clearly established that there has been no            G
              compliance whatsoever by the appellants of the summons
              dated 27.08.2001, 10.06.2002, 18.06.2002 and 01.04.2003
              in Civil Appeal No. 1742 of 2009 and the summons dated
              10.06.2002, 18.06.2002 and 09.04.2003 in Civil Appeal No.
              5833 of 2009 issued by the respondent for production of
                                                                                H
260          SUPREME COURT REPORTS                        [2022] 19 S.C.R.


A              certain documents and submission of information to the
               Investigating Authority with reference to its dealings in the
               scrip of STIL.
      (ii)     The appellants did not co-operate with the Investigating
               Officer and did not comply with the summons issued in a
B              matter involving a larger public interest as the information
               sought in terms of the summons was necessary in order to
               effectively investigate the price manipulation in the scrip of
               STIL and the role of the appellants against the backdrop of
               its acquisition of 10,00,000 shares of STIL at Rs.10/- per
C              share, when others were allotted at Rs.150/- per share; the
               circumstances leading to the delivery of 3,00,000 shares of
               STIL on 03.11.2000, details regarding the sale of 2,00,000
               shares to Goldfish Computers at Rs.160/- per shares, debit
               in the DEMAT Account on 2,00,000 shares in favour of
               Goldfish Computers on 02.11.2000 etc. have not been
D              furnished in the response to the said summons.
      (iii)    In view of the finding that the appellants were aiding and
               abetting Ketan Parekh and his companies in manipulating
               the price of the scrip of STIL and that the appellants herein
               weretrying to stonewall the investigations initiated by the
E              respondent, the quantum of penalty levied on the appellants
               are in conformity with the offence and warrants no
               interference with by this Court.
      (iv)     The provisions of Section 11C (3) of the 1992 Act empowers
               the respondent to call upon any person to make a statement
F
               while furnishing any information, document and record.
      (v)      Section 15A(a) of the 1992 Act finds mention in Chapter
               VI A of the 1992 Act, introduced in January, 1995. This
               provision was amended by the amending Act of 2002, which
               was intended to make the penalty more deterrent. This
G
               provision, amended with effect from 29.12.2002, provides
               for a penalty of Rs.1,00,000/- for each day during which
               such failure continues or rupees one crore, whichever is
               less. The penalty of rupees one crorehas rightly been
               imposed on the appellants herein.
H
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                                261
    ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

       (vi)    The summons which were not complied with by the                   A
               appellants had been issued in 01.04.2003 and 09.04.2003
               respectively. Hence, the penalty levied in the Orders dated
               28.11.2003 and 31.12.2003 respectively were in accordance
               with the amended provisions of Section 15A(a) of the 1992
               Act at the enhanced rate.
                                                                                 B
       (vii)   That no question of law as contemplated by Section 15Z of
               the 1992 Act arises for the consideration by this Court.
       25. Having heard the learned counsel for the respective parties, it
is noted that the appellants herein are challenging the Orders dated
07.01.2009 of the SAT, Mumbai in Appeal No. 106 of 2006 and Appeal               C
No. 133 of 2006 respectively upholding the Orders dated 28.11.2003
and 31.12.2003 passed by the AO respectively in each case, imposing a
monetary penalty of rupees one crore on each appellant under Section
15A(a) of the 1992 Act for failing to comply with the summons issued to
the appellants for the production of documents and furnishing of
information during the course of certain investigations being carried out        D
by SEBI during the period of 2000-2007 in relation to suspicious purchase
and sale of scrip and manipulation of share prices of STIL. For immediate
reference Section 15A(a) of the 1992 Act at the relevant point of time is
extracted as under:
       “15A. Penalty for failure to furnish information, return, etc.            E
       - If any person, who is required under this Act or any rules or
       regulations made thereunder,—
       (a) to furnish any document, return or report to the Board, fails to
       furnish the same, he shall be liable to a penalty of one lakh rupees
       for each day during which such failure continues or one crore             F
       rupees, whichever is less.”
       26. Before this Court deals with the issues at hand, it is pertinent
to mention that SEBI had, in due course of its investigation, concluded
that the appellants herein, along with several other entities, had facilitated
Ketan Parekh and his companies in manipulating the securities market             G
and had thereby violated Regulation 4 of the Regulations. SEBI had
observed in the relevant order that “the case history establishes all
the ingredients of how a series of unauthorized activities starting
from the allotment of shares of STIL to various people including
Ketan Parekh entities till the culmination of alluring and entrapping
                                                                                 H
262             SUPREME COURT REPORTS                            [2022] 19 S.C.R.


A     of the genuine investors by the entities through a web of transfers
      could virtually wreck the integrity of the securities market, undermine
      the system and provide for a fertile ground to wangle unfair gains.”
             27. While it has been noted that the appellants herein did not file
      any appeal against the aforesaid Order of SEBI which has now become
B     final qua the appellants, it must be borne in mind that the present dispute
      arisesin the background of the aforesaid investigation, wherein the
      Investigating Authority of SEBI had, in exercise of its powers under
      Section 11C(3) of the 1992 Act, called upon the appellants to furnish
      such information and produce such documents and records as were
      considered necessary for the purposes of the aforesaid investigation.
C
             28. The Investigating Authority had issued summons to the
      appellants herein on various dates as has been discussed herein above
      requiring the appellants to appear and produce certain documents and
      furnish information specifically listed in the Annexure to the summons.
      The appellants failed to respond to any of the summons issued, and
D
      failed to appear before the Investigating Authority with the required
      documents and information sought from it. Owing to the said non-
      compliance, SEBI initiated separate adjudication proceedings against the
      appellants. The AO passed Orders dated 28.11.2003 and 31.12.2003
      with the finding that the appellants herein had intentionally failed to respond
E     to the summons, and thus imposed a penalty of rupees one crore on
      each appellant under Section 15A(a) of the 1992 Act.
             29. Challenging the said Orders, the appellants filed Appeal No.
      106 of 2006 and Appeal No. 133 of 2006 with respective applications for
      condonation of delay before the SAT. Initially, SAT dismissed the
F     aforesaid applications and the appeals on the ground that the appeals
      were belated and time-barred and the appellants had failed to provide a
      satisfactory explanation to justify the delay in filing the appeals.
      Thereafter, this Court passed Orders dated 04.08.2008 in Civil Appeal
      No. 4975 of 2006 and Civil Appeal No. 2289 of 2007 directing SAT to
      condone the delay in filing the appeals, subject to the appellants herein
G
      depositing a sum of Rs. 1,25,000/- as cost to SEBI within a period of six
      weeks.
            30. Thus, Appeal No. 106 of 2006 and Appeal No. 133 of 2006
      were heard by the SAT which, hearing the matter, passed a reasoned
      common Order dated 07.01.2009 upholding the Orders of the AO dated
H
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                             263
    ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

28.11.2003 and 31.12.2003 respectively, and dismissing the appeals.           A
Challenging the aforesaid decision of the SAT dated 07.01.2009, the
appellants have filed the present Civil Appeals.
       31. The primary contention of the appellants is that the non-
compliance of summons is not a continuing wrong and that the summons
dated 01.04.2003 and summons dated 09.04.2003 respectively were issued        B
in continuation of the earlier summons, and cannot be treated in a separate
and disjunctive manner. Further, the appellantshave contended that the
penalty of rupees one crore levied by the AO for non-compliance of
summons is excessive, unsustainable and untenable, and is in complete
disregard of the principle of proportionality and of the confines of law.     C
The appellants have argued that a maximum penalty of Rs. 1,50,000/-
may be imposed, if at all, as per the unamended Section 15A(a) of the
1992 Act as it stood on the date when the summons were first issued.
The appellants have submitted that the maximum amount of penalty
under Section 15A(a) was amplified from Rupees One Lakh Fifty
Thousand to rupees one crore with effect from 29.10.2002 vide an              D
amendment to the 1992 Act and assuming that the appellants have violated
the provisions of Section l5A(a), the maximum penalty that could be
levied must be calculated as per the unamended provision and not the
enhanced penalty.
       32. On a perusal of the facts and circumstances of the case, it is     E
evident that the appellants had first violated the summons in August,
2001 and in June, 2002 respectively. Thereafter, SEBI issued numerous
summons, giving the appellants opportunities to appear and produce the
documents and furnish the information as required. But, the appellants
failed to respond to any of the summons issued during the period of           F
2001-2002, during the course of the investigation. Thereafter, SEBI issued
fresh summons on 1.04.2003 in respect of the appellant in Civil Appeal
No. 1742 of 2009 and on 09.04.2003 in respect to the appellant in Civil
Appeal No. 5833 of 2009 for the appellants to cooperate with the
investigation. The non-compliance of the fresh summons dated 01.04.2003
                                                                              G
and 09.04.2003 respectively, in our view, constituted a fresh offence
committed by the appellants. Thus, the amended provisions of Section
15A(a) of the 1992 Act as amended w.e.f. 29.10.2002 would apply when
levying the penalty on the appellants in respect of the summons issued
subsequent to the aforesaid amendment.
                                                                              H
264            SUPREME COURT REPORTS                          [2022] 19 S.C.R.


A            33. Section l5A(a) of the 1992 Act provides that if any person
      who is required under the Act or any Rules or Regulations made
      thereunder fails to furnish any document, return or report to the SEBI,
      he shall be liable to a penalty of rupees one lakh for each day of failure,
      and, if such failure continues it would be rupees one lakh per day of
      failure or rupees one crore, whichever is less. Thus, rupees one crore is
B
      the maximum penalty that can be levied if the failure as contemplated
      under the aforesaid provision crosses one hundred days; otherwise, it is
      as per the number of days of failure upto one hundred days.
              34. Thus, the penalty of rupees one crore as levied by the AO and
      upheld by the SAT is justified and within the precincts of the relevant
C     provision. Applying the said provision to the facts for the present cases,
      it is clear that the appellants had failed to comply with the summons
      dated 01.04.2003 and 09.04.2003 respectively. Thereafter, the AO had
      passed its order levying penalty on the appellants on 28.11.2003 and on
      31.12.2003 respectively. Since, the duration of the default of non-
D     compliance committed by both the appellants was over a period of 100
      days from the date of issue of the summons in each case, the AO had
      rightly applied Section 15A(a) of the 1992 Act, more specifically in regard
      to the maximum limit of penalty that could be imposed under the provision,
      i.e. rupees one crore.
E           35. Further,learned counsel for the appellants has placed reliance
      on certain judgments of this Court, in Commissioner of Income Tax,
      Ahmedabad vs. Gold Coin Health Food Pvt. Ltd. (2008) 9 SCC
      622; CJ Paul & Ors. vs. District Collector & Ors. (2009) 14 SCC
      564; Ritesh Agarwal & Ors. vs. Securities and Exchange Board of
      India & Ors. (2008) 8 SCC 205; and Commissioner of Income Tax,
F     Lucknow vs. M/s Onkar Saran and Son (1992) 2 SCC 514 and
      decisions of the SAT namely, Mr. Sandeep Kumar Gupta vs. SEBI
      (Appeal No. 102 of 2013); and Iris Infrastructural Pvt. Ltd. vs. SEBI
      (Appeal No. 2 of 2006) to submit that the penalty levied under the
      amended Section 15A(a) cannot apply to the said case since the offence
G     had been committed prior to coming of effect of the amended provision,
      and thus, the penalty of Rs. 1,50,000/- as provided in the unamended
      provision must be imposed. In other words, the amended provision cannot
      be given a retrospective effect.
            36. The said contention of the appellant has already been rejected
H     on the ground that the non-compliance of summons dated 01.04.2003
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                              265
    ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

issued by the Investigating Authority constituted a fresh offence and          A
would attract the provisions of the amended Section 15A(a) of the 1992
Act. In light of the facts of this case, no question of retrospective
application of a statute/provision of law arises and thus, the proposition
and legal principles raised in the aforesaid judgements would not apply
to the present case.
                                                                               B
       37. Next, learned counsel for the appellants placed reliance on
several orders of the SAT wherein SAT reduced the penalty levied under
Section 15A(a) of the 1992 Act on the ground that the AO had failed to
consider the specific factors as provided in Section 15J of the 1992 Act
in determining the quantum of punishment levied under the Act. These
cases are Rose Valley Real Estates and Construction Ltd. vs.                   C
Securities and Exchange Board of India (Appeal No. 106/2013);
Padmini Technologies Ltd. vs. SEBI (Appeal No. 36 of 2004); Vivek
Nagpal vs. SEBI (Appeal No. 37 of 2004); Mukesh Malhotra vs.
SEBI (Appeal No. 101/2004); Advance Hovercrafts & Composites
India Ltd., Delhi vs. The Adjudicating and Enquiry Officer, SEBI               D
(Appeal No. 61/05); Spectrum.com Pvt. Ltd. vs. SEBI (Appeal No.
119 of 2006); and Zodiac.com Solutions Pvt. Ltd. vs. The Adjudicating
and Enquiry Officer, SEBI (Appeal No. 105 of 2006).
        38. It has been noted herein above that the investigation by SEBI
which had concluded that the appellants and other entities were involved       E
in aiding and abetting Ketan Parekh and his companies in rigging the
securities market in the years 2000 and 2001 had not been challenged, at
any point, by the appellants. Thus, the relevant order of SEBI had attained
finality. The said investigation had found that the appellants were involved
in certain unauthorized transfer of shares starting from the allotment of
shares of STIL to various people including Ketan Parekh’s entities             F
through a web of transfers which could virtually wreck the integrity of
the securities market, undermine the system and provide for a fertile
ground to wangle unfair gains. The investigation had also concluded that
the appellants had played a role in facilitating such activities by
manipulating the market, and this finding of guilt remains unchallenged        G
by the appellants and is thus admitted.
      39. As has been rightly observed by the SAT in its Order dated
07.01.2009, non-furnishing of information by the appellantsin compliance
of summons cannot be viewed lightly, particularly,when the appellants
were involved in offences of such a grave nature being detrimental to          H
266             SUPREME COURT REPORTS                          [2022] 19 S.C.R.


A     the interest of genuine investors and to the smooth and secure functioning
      of the securities market.While the appellants have submitted that they
      had responded to the summons dated 02.07.2001 and 26.07.2001
      respectively and had furnished the information and documents as required
      therein, it has already been held that the summons dated 01.04.2003 and
      09.04.2003 respectively were issued as separate fresh directions to the
B
      appellants. By not responding to the said fresh summons and by not
      appearing before the Investigating Authority when directed to appear,
      the appellants’ statements could not be recorded and thishas hampered
      with the investigation. The appellants had failed to produce the documents
      and information as required vide summons dated 01.04.2003 and
C     09.04.2003 respectively and had, thus, affected the conduct of the
      investigation. The appellants’ compliance, if any, to one summons dated
      02.07.2001 and 26.07.2001 respectively, in no way, absolves the appellants
      of their responsibility to comply with the summons issued thereafter on
      multiple dates. The appellants were bound to fully co-operate with the
D     Investigating Authority and promptly produce all documents, records,
      and information as were required for the investigation from time-to-
      time.In failing to do so, the appellant sclearly obstructed and hindered
      the investigation.
             40. Taking into consideration the severity of offences found to
E     have been committed by the appellantsand other entities, and the non-
      cooperative attitude of the appellants during the course of the
      investigation in attempting to obstruct the same, the quantum of penalty
      imposed under Section 15A(a) of the 1992 Act is justified and with
      effective consideration of the factors listed in Section 15J of the 1992
      Act.
F
             41. In this context, the Explanation to Section 15J of the 1992 Act
      must also be referred to in order to reject the contention of the appellants
      regarding the consideration of factors under Section 15J of the 1992 Act
      in adjudging the quantum of penalty under Section 15A(a) of the 1992
      Act. The Explanation to Section 15J of the 1992 Act reads as under:
G
            “For the removal of doubts, it is clarified that the power to adjudge
            the quantum of penalty under Sections 15A to 15E, clauses (b)
            and (c) of Section 15F, 15G, 15H and 15HA shall be and shall
            always be deemed to have been exercised under the provisions
            of this Section.”
H
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                            267
    ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

       42. A bare reading of the Explanation in the context of the present   A
case creates a presumption in favor of the AO that he has passed the
Orders dated 28.11.2003 and 31.12.2003 against the appellants here in
after due consideration of the factors mentioned in Section 15J of the
1992 Act.
       43. In the case of Adjudicating Officer, Securities and               B
Exchange Board of India vs. Bhavesh Pabari (2019) 5 SCC 90,a
three Judge Bench of this Court held that –
      “5. …Sections 15A (a) to 15-HA have to be read along with Section
      15-J in a manner to avoid any inconsistency or repugnancy. We
      must avoid conflict and head-on-clash and construe the said            C
      provisions harmoniously. Provision of one Section cannot be used
      to nullify and obtrude another unless it is impossible to reconcile
      the two provisions. The Explanation to Section 15-J of the SEBI
      Act added by Act 7 of 2017, quoted above, has clarified and vested
      in the adjudicating officer a discretion under Section 15-J on the
      quantum of penalty to be imposed while adjudicating defaults under     D
      Sections 15-A to 15-HA…
      9. … the circumstances enumerated in clauses (a), (b) and (c) of
      Section 15-J of the SEBI Act may have no relevance and may
      never arise in case of contraventions contemplated by certain
      provisions of the SEBI Act, for instance Sections 15-A, 15-B or        E
      15-C of the SEBI Act. Failure to furnish information, return, etc.;
      failure to enter into agreement with clients; and failure to redress
      investors’ grievances cannot give rise to the circumstances set
      out in clauses (a), (b) and (c) of Section 15-J.
      10. … We, therefore, hold and take the view that conditions            F
      stipulated in clauses (a), (b) and (c) of Section 15-J are not
      exhaustive and in the given facts of a case, there can be
      circumstances beyond those enumerated by clauses (a), (b) and
      (c) of Section 15-J which can be taken note of by the adjudicating
      officer while determining the quantum of penalty.                      G
      11. At this stage, we must also deal with and reject the argument
      raised by some of the private appellants that the conditions
      stipulated in clauses (a) to (c) of Section 15-J are mandatory
      conditions which must be read into Sections 15-A to 15-HA in the
      sense that unless the conditions specified in clauses (a) to (c) are
                                                                             H
268            SUPREME COURT REPORTS                         [2022] 19 S.C.R.


A           satisfied, penalty cannot be imposed by the adjudicating officer
            under the substantive provisions of Sections 15-A to 15-HA of
            the SEBI Act. The argument is too far-fetched to be accepted.
            Section 15-J of the SEBI Act enumerates by way of illustration(s)
            the factors which the adjudicating officer should take into
            consideration for determining the quantum of penalty imposable.
B
            The imposition of penalty depends upon satisfaction of the
            substantive provisions as contained in Section 15-A to Section 15-
            HA of the SEBI Act.”
             44. The learned counsel for the respondent has also rightly placed
      reliance on the decision of this Court in MBL and Company Limited
C     vs. Securities and Exchange Board of India (2022) SCC OnLine
      SC 754 to submit that the quantum of penalty of rupees one crore levied
      by the AO under Section 15A(a) of the 1992 Act was justified,
      proportionate and in conformity with the omissions on the part of the
      appellants in as much as the appellants had repeatedly adopted escapist
D     tactics to effectively frustrate the investigations of SEBI, and thus
      requires no interference by this Court in exercise of its powers under
      Section 15Z of the 1992 Act.
             In the MBL and Company Limited case (supra), a Bench of
      this Court held that:
E           “11. In a judgment of a three-Judge Bench of this Court in
            Adjudicating Officer, Securities and Exchange Board of India
            vs. Bhavesh Pabar, it has been observed that:
               34. This Court, in the exercise of its jurisdiction under Section
               15-Z of the SEBI Act, cannot go into the proportionality and
F              quantum of the penalty imposed, unless the same is distinctly
               disproportionate to the nature of the violation which makes it
               offensive, tyrannous or intolerable. Penalty by the very nature
               of the provision is penal. We can interfere only where the
               quantum is wholly arbitrary and harsh which no reasonable
G              man would award. In the instant case, the factual findings are
               not denied and, thus, we are not inclined to intermeddle with
               the quantum of penalty. The penalty imposed is just, fair and
               reasonable and, thus, upheld.
            12. The above observations make it clear that the imposition of a
            penalty is subject to interference under Section 15Z of the SEBI
H
  DKG BUILDCON PRIVATE LTD. v. THE ADJUDICATING &                             269
    ENQUIRY OFFICER, S.E.B.I. [B. V. NAGARATHNA, J.]

      Act only where the quantum is found to be wholly arbitrary and          A
      harshor distinctly disproportionate to the nature of the violation.
      13. In the present case, the WTM, while imposing an order of
      debarment, has specifically applied her mind to the issue as regards
      the impact of such a manipulation. While dealing with this aspect,
      the WTM has observed that the manipulation of the price of scrips       B
      seriously impinges upon other counter parties in the securities
      market. In other words, the impact of a manipulation which is
      carried out by a participant in the securities market cannot be
      assessed only in terms of the gain which has been caused to the
      participants themselves, but in terms of the wider consequences
      of the action on the securities market.                                 C

      15. The securities market deals with the wealth of investors. Any
      such manipulation is liable to cause serious detriment to investors’
      wealth. In this backdrop, the order which has been passed by the
      WTM cannot be regarded as disproportionate so as to result in
      the interference of this Court in the exercise of its jurisdiction      D
      under Section 15Z of the SEBI Act.”
       Thus, based on the aforesaid judgements relied on by the learned
counsel for the respondent, it is clear that the quantum of penalty imposed
by the AO is proportionate and within the confines of the provisions of
Section 15A(a) read with Section 15J of the 1992 Act, and requires no         E
interference by this Court.
       45. Furthermore, a bare reading of Section 11C(3) of the 1992
Act makes it clear that an Investigating Authority appointed by SEBI to
investigate the affairs of any persons may require such person
“associated with the securities market in any manner to furnish               F
such information to, or produce such books, or registers, or other
documents, or record before him or any person authorized by it, in
this behalf as it may consider necessary, if the furnishing of such
information or the production of such books, or registers, or other
documents, or record is relevant or necessary for the purposes of             G
its investigation”. In the present case, the appellants were under
investigation by SEBI for its alleged involvement in aiding and abetting
Ketan Parekh and his companies in manipulating the securities market.
In view of the same, the appellants would squarely fall under the scope
of “persons associated with the securities market in any manner” under
Section 11C(3) of the 1992 Act. The authority of the Investigating            H
270             SUPREME COURT REPORTS                       [2022] 19 S.C.R.


A     Authority to direct such persons to appear before him and furnish
      information or produce documents as is required for an investigation is
      provided in Section 11C (3) of the 1992 Act.
            46. It is also pertinent to mention that Section 19 of the 1992 Act
      provides that the SEBI may delegate to any member, officer of the SEBI
B     or any other person, such of its powers and functions under this Act
      (except the powers under Section 29) as it may deem necessary. Thus,
      when the appellants failed to comply with the directions issued under
      Section 11C (3) of the 1992 Act and failed to produce the required
      documents and information, the Investigating Authority, being a delegated
      Authority of SEBI, was empowered to levy the penalty as provided in
C     Section 15A(a) of the 1992 Act. Hence, we find no merit in these appeals.
      The appeals are dismissed.
             47. Parties to bear their respective costs.


D     Divya Pandey                                             Appeals dismissed.
      (Assisted by : Rahul Kumar, LCRA)




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