Holding

Interest on penalties and disgorgement under the SEBI Act is chargeable in equity under the Interest Act, 1978, but Section 28A’s interest provision operates only prospectively, so interest may be awarded from the date of cause of action but not retrospectively.

Summary

The petitioners, Dushyant N. Dalal and his wife, were ordered by SEBI to disgorge unlawful gains of Rs.4.05 crore and pay a penalty of Rs.6 crore, with a debarment of seven years if unpaid. They challenged the SEBI order, arguing that interest could not be levied retrospectively under Section 28A of the SEBI Act and that the SAT erred in holding that no interest was payable from the date the penalty became due. The Supreme Court examined the nature of interest under the Interest Act, 1978, held that interest is a matter of substantive law and therefore can only operate prospectively, but tribunals may award it in equity from the cause of action to the commencement of proceedings. The Court set aside the SAT’s finding that no interest could be charged and allowed the appeals, directing that interest be payable prospectively, while noting that no further interest is due where the debarment penalty is already imposed. The decision clarifies the interplay between Section 28A, the Income‑Tax Act, and the Interest Act in SEBI enforcement actions.

Issues considered

Whether interest can be recovered on SEBI penalty or disgorgement orders when the amounts remain unpaid.
Whether Section 28A of the SEBI Act can levy interest retrospectively.
Whether interest under Section 28A is substantive law and thus only prospective.
Whether the Interest Act, 1978 empowers tribunals to award interest in equity from the date of cause of action.
Whether the debarment penalty precludes the award of future interest.

Legislation cited

Code of Civil Procedures. 34
Income Tax Act, 1961s. 220(2)
Interest Act, 1978s. 1, s. 2, s. 4
Securities and Exchange Board of India Act, 1992s. 15JA, s. 28A
Securities Laws (Amendment) Act, 2014

Subjects

interestSEBI ActSection 28Adisgorgementpenaltyequityprospective applicationInterest Act 1978securities regulation

Judgment

(2017] ll S.C.R. 448

A DUSHYANT N. DALAL AND ANOTHER
v.
SECURITIES AND EXCHANGE BOARD OF INDIA
(Civil Appeal No. 5677 of2017)
B OCTOBER 04, 2017
[R. F. NARIMAN AND SANJAY KISHAN KAUL, JJ.J
Interest:
Whether i/1/erest can be recovered on orders uf penalzv issued
c under SEBI Act and/or orders of disgorgement of unlawful gains
when the said amounts have remained unpaid - Held: Interest Act
enables the Tribunals such as Securities Appellate Tribunal to mvard
interest in equity, ji·om the date on which cause of action arose, till
the date of commencement of proceedings for recovery of such
interest - In the present case, interest was payable in equity, because
D
all the penalties collected by SEBI were to be credited to the
Consolidatedfimd uls. 15JA ofSEBI Act i.e. public purpose - Such
interest would be chargeable uh. 28A of SEBI Act rlw. s.220(2) of
Income Tax Act only prospectively - Interest Act, 1978 - Securities
and Exchange Board of India Act. 1992 - ss.28A and J5JA -Income
E Tax Act, 1961 - s.220 - Equity.
Interest - Levy of - Whether can have retrospective operation
- Held: Interest belongs to the field uf substantive law and nut
JJroceclural lalV - There.fore, cannot have retrospective operation.
Securities and Exchange Board of India Act, 1992:
F
s.28A - Nature of and whether can have retrospective
operation - Held: s.28A belongs to the realm of procedural law
and would originally be retrospective - But when this provision
seeks to levy interest, which belongs to the realm of substantive law.
such interest would be chargeable only prospective(v.
G
Disposing of the appeals, the Court
HELD: I. The Interest Act of 1978 would enable Tribunals
such as Securities Appellate Tribunal to award interest from the
date on which the cause of action arose till the date of
commencement of proceedings for recovery of such interest in
H
448
DUSHYANT N. DALAL v. SECURITIES AND EXCHANGE 449
BOARD OF INDIA

equity. The present is a case where interest would be payable in A
equity for the reason that all penalties collected by SEBI would
be credited to the Consolidated Fund under Section l5JA of the
SEBI Act. There is no greater equity than such money being
used for public purposes. Despite the fact that Section 28A of
SEBI Act belongs to the realm of procedural law and would B
ordinarily be retrospective, when it seeks to levy interest, which
belongs to the realm of substantive law, the Tribunal is correct in
stating that such interest would be chargeable under Section 28A
of SEBI Act read with Section 220(2) of the Income Tax Act only
prospectively. However, since it has not taken into account the
I ntcrcst Act, 1978 at all, the Tribunal's findings that no interest C
could be charged from the date on which penalty became due is
set aside. [Para 28]{466-F-H; 467-A]
2. If there is default in payment of Rs. 6 crores within the
stipulated time, no future interest is payable inasmuch as a much
severer penalty of being debarred from the market for 7 years D
was instead imposed. The SAT was incorrect in stating that the
order dated 21.7.2009 contained an obligation to pay interest at
the rate of 12% per annum on the unlawful gain of Rs.4.05 crores
till payment. [Para 32)(469-D-E]
Clariant International Limited and Another v. Securities E
and Exchange Board of India (2004) 8 SCC 524 :
(2004] 3 Suppl. SCR 843; Tahazhathe Purayil Sarabi
& Ors. v. Union of India & Am: (2009) 7 SCC 372 :
(2009] 10 SCR 70; Ferro Alloys Corpn. Ltd. v. A.P. State
Electricity Board and Anr. (1993) Suppl. 4 SCC 136 :
(1993] 3SCR199; South Eastern Coalfield~ Ltd.~: State F
of MP. and Or.~. (2003) 8 SCC 648 : (2003) 4 Suppl.
SCR 651; Indian Council For Enviro-Legal Action v.
Union of India (2011) 8 SCC 161 : (2011] 9 SCR 146;
Union of India v. Tata Chemicals Limited (2014) 6 SCC
335 : (2014] 3 SCR 298; Life Insurance Corporation G
of India and Another v. Smt. S. Sindhu (2006) 5 SCC
258 : (2006) 1 Suppl. SCR 854 - relied on.
Prabhavati Ramgarih B. v. Divisional Railway Manager
(2010) 4 Mah LJ 691 - approved.
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450 SUPREME COURT REPORTS [2017] II S.C.R.

A Raghunath Rai Bareja and Am: v. Punjab National Bank
and Ors. (2007) 2 SCC 230 : [2006) 10 Suppl. SCR
287; J.K. Synthetics Ltd. v. Commercial Taxes Officer
(1994) 4 SCC 276; India Carbon Limited v. The State
of Assam (1997) 6 SCC 479 : [1997) 3 Suppl. SCR 1;
Purbanchal Cables & Conductors Pvt. Ltd. v. Assam
B
State Electricity Board & Am: (2012) 7 sec 462 :
[2012) 6 SCR 905; NTPC Ltd. v. MP. SEB (2011) 15
SCC 580 : [2011) 11 SCR 651; Bengal Nagur Railway
Co. Ltd. v. Ruttanji Ramji and Ors. AIR 1938 PC 67;
Satinder Singh v. Amrao Singh [1961) 3 SCR 676;
c Hirachand Kothari v. State ofRajasthan (1985) Supp
SCC 17 : [1985) Suppl. SCR 644 - referred to.
Case Law Reference
[2006) 10 Suppl. SCR 287 referred to Para 6

D (1994) 4 sec 216 referred to Para 11
[1997) 3 Suppl. SCR 1 referred to Para 12
[2012) 6 SCR 905 referred to Para 13
[2004] 3 Suppl. SCR 843 relied on Para 14
E [2009) 10 SCR 70 relied on Para 15
[1993) 3 SCR 199 relied on Para 15
[2011) 11 SCR 651 referred to Para 15
[2003) 4 Suppl. SCR 651 relied on Para 15
F
[2011) 9 SCR 146 relied on Para 15
[2014) 3 SCR 298 relied on Para 15
AIR 1938 PC 67 referred to Para 18
[1961) 3 SCR 676 referred to Para 19
G
[1985) Suppl. SCR 644 referred to Para 20
[2006) 1 Suppl. SCR 854 relied on Para 25
(2010) 4 Mah LJ 691 approved Para 27

H
DUSHYANT N. DALAL v. SECURITIES AND EXCHANGE 451
BOARD OF INDIA

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5677 A
of2017.
From the Judgment and Order dated 10.03.2017 of the Securities
Appel]ateTribunal (SAT) in Appeal No. 41 of2014.
WITH
B
C. A. No. 10410-10412 of2017.
Subramonium Prasad, Arvin<,! P. Datar, Sr. Advs., Abbay Kumar,
Ravichandra S. Hegde, Utkarsh Srivastava, Saurabh Mishra, Himanshu
Pal, Himanshu,Anip Sachthey, Ms. Anjali Chauhan, Ms. Ria Sachthey,
Ad vs. for the appearing parties. c
The Judgment of the Court was delivered by
R. F. NARIMAN, J. I. The present appeals raise an interesting
question under Section 28A of the Securities and Exchange Board of
India Act, 1992 (SEBI Act), namely, as to whether interest can be
recovered on orders of penalty issued under the Act and/or orders of D
disgorgement of unlawful gains, when the said amounts have remained
unpaid. In the penalty cases, it is SEBI who is before us as appellant,
whereas in the disgorgement case, it is private individuals who are before
us.
2. First, the facts in C.A. 5677 of 2017, the disgorgement case. E
By an order dated 21.7.2009, passed by a whole-time member ofSEBI,
the noticees, namely Shri Dushyant N. Dalal and Mrs. Puloma D. Dalal,
were found to have manipulated the demand for shares in the retail
individual investor category (RIJ) and thereby distorted the integrity of
the market. By doing this, they denied other RIIs of allotment of their
legitimate shares in initial public offers (JPOs) of various companies and F
made an unlawful gain ofRs.4,05,61,579/-to the detriment of othet RIL~.
The conclusion. therefore, was that they had employed fraudulent,
deceptive and manipulative practices to garner shares meant for RIIs in
the.aforesaid IPOs and hence violated Section 12A (a), (b) and (c) of
the SEBI Act, and Regulations 3 and 4( I) ofthe Securities and Exchange · G
Board of India (Prohibition of Fraudulent and Unfair Trade Practices·
Relating to Securities Markets) Regulations, 2003 (PFUTPRegulations).
Given this, the following directions were issued:

H
452 SUPREME COURT REPORTS [2017) l I S.C.R.

A "'a) The noticees [Mr. Dushyant Natwarlal Dalal (PAN AAAPD
5859Q) and Mrs. Puloma Dushyant Dalal (PAN AAEPD 2909B)]
shall not buy, sell or deal in the securities market in any manner
whatsoever or access the securities marker, directly or indirectly.
for a period of 45 days from the date of this order; and
B b) The noticees shall disgorge the unlawful gain ofRs.4.05 crores
(rounded off from Rs. 4,05,61,579).
c) The noticees shall also pay Rs.J.95 crores (rounded off from
Rs. 1,94,69,558), being the simple interest at the rate of 12% per
annum for 4 years (2005-09) on the unlawful gain Rs. 4,05,61,579.
c d) The noticees shall pay the above amount ofRs.6 crores (Rupees
six crores) within 45 (forty five) days from the date of this order
by way of crossed demand draft drawn in favour of "Securities
and Exchange Board oflndia", payable at Mumbai.
e) In case the aforesaid amount Rs.6 crores is nor paid within the
D specified time, the noticees shall be restrained from buying, selling
or dealing in securities market in any manner whatsoever or
accessing the securities market, directly or indirectly, for a further
period of seven years, without prejudice to SEBI's right to enforce
disgorgement."
E An appeal from this order was dismissed by the Securities Appellate
Tribunal (SAT) on 12.11.2010. An appeal from the order of the SAT to
this Court met with the same fate on 21.2.2011.
3. By a notice of demand dated 25.9.2013, Rs. 6 crores, along
with interest payable within 15 days of the receipt of the notice, was
F demanded, failing which recovery was to be made under Section 28A of
the SEBI Act. By a second demand notice dated 12.12.2013, stated to
be in continuation of the first demand notice, interest was demanded at
13% per annum from 21.7.2009 upto 12.12.2013 amounting to
Rs.2, 13,30.000/-. The appellants before us replied to the aforesaid notices
G of demand by a letter dated 13.1.2014, stating that the said amount of
interest was not payable in law. This was turned down by an order
dated 16.1.2014, passed by the Recovery Officer, SEBI, in which the
objections of the appellants were rejected and bank accounts of the
appellants were attached. By an interim order dated 6.9.2016, the SAT
noticed that the appellants had already undergone the full debarment
H
DUSHYANT N. DALAL v. SECURITIES AND EXCHANGE 453
BOARD OF INDIA [R. F. NARIMAN, J.)

period and hence, attachment levied on their demat accounts, except A
account No.40333429, was released. By the impugned judgment dated
10.3.2017, the SAT ultimately found that, with effect from 18.7.2013,
Section 28A read with Section 220 of the Income Tax Act, 1961
empowered SEBl to collect interest, but that so far as the appellants
were concerned, it was held that interest payable by the appellants could
B
not be quantified at the time of passing the order dated 21. 7 .2009 and,
therefore, it was held:
"'In Appeal No. 41 of2014 the directions given by the WTM of
SEBI on 21.07.2009 was to disgorge the unlawful gain of Rs.
4.05 crorcs with interest @ 12% per annum quantified at Rs.
I. 95 crores up to 2 I .07 .2009 within 45 days from 21.07 .2009 failing C
which, the appellants were debarred from entering the Securities
market for a period of 7 years without prejudice to the right of
SEBI to recover the unlawful gain with interest till payment. Since
the order passed by the WTM ofSEBI on 21.07.2009 contained
an obligation to pay interest @ 12% per annum on the unlawful D
gain of Rs. 4.05 crores till payment, the RO was justified in
demanding interest on the unlawful gain of Rs. 4.05 crores from
21.07.2009 till payment. Accordingly, Appeal No. 41 of2014 is
dismissed."
4. Insofar as the penalty orders arc concerned, the facts are E
similar. In SEBI v. AshokPanchariya, C.A. 10410 of2017, a penalty
order dated 13.11.2009 was passed for a sum of Rs. 25 lakhs under
Section ! SHA of the SEBIAct, which was made payable within 45 days
of the receipt of the said order. This was because it was found that
wrongful and misleading disclosures were made by the respondents to
the Bombay Stock Exchange, by which investors were deprived of F
important information at the relevant point of time. This was an unfair
trade practice for which the respondents were held liable, inasmuch as
Regulations 3(a) to 3(d), 4(1) and 4(2)(a) of the PFUTP Regulations
had been breached by the respondents. An appeal was carried against
the aforesaid order, which was dismissed by the SAT on 6.5.2010. By a G
recovery certificate dated 30.5.2014, the aforesaid amount of Rs. 25
lakhs was demanded, together with interest, under Section 28A of the
SEBI Act. On 3.6.2014, the amount of Rs. 25 lakhs was deposited by
the respondents, by way of demand drafts, with the SEBI. Acting on the
basis ofa show cause notice dated 10.7.2014, an order was passed by
H
454 SUPREME COURT REPORTS [2017] 11 S.C.R.

A the Recovery Officer, SEBI on 19.8.2014 directing the respondents to
pay interest at 12% per annum forthe periodof 13.11.2009 till 3.6.2014,
amounting to Rs. 13,66,849/-.
5. In an appeal to the SAT against the order of the Recovery
Officer, the SAT held that interest was payable on and from 18. 7.2013
B (i.e. the date of introduction of Section 28A by way of ordinance}, but
held that since the awarding ofinterest belongs to the realm of substantive
and not procedural law, the aforesaid provision could not be held to be
retrospective, and that, therefore, interest demands that were prior to
this date were set aside. It is against this part of the order that SEBI has
C appealed.
6. Shri Subramonium Prasad, learned counsel appearing on behalf
of the appellants in C.A.5677 of2017, has argued before us that, on his
facts, it was clear that the order dated 21. 7.2009 had, while awarding
interest for the years 2005 to 2009, not expressly awarded any future
interest and that this was done deliberately inasmuch as ifthe amount of
D Rs. 6 crores was not paid within 45 days from the date of the order, the
consequence was specified as being debarment for a further period of7
years which was so severe that further future interest was deliberately
not found necessary to be awarded. He brought to our notice certain
other orders passed by the same whole-time member of the SEBI in
E which, in similar circumstances, future interest was _also provided. He
pointed out that by an order dated 6.12.2013 passed by the SAT, the
appellants were permitted to sell their shares, as a result of which they
were able to make the payment of Rs. 6 crores on 6.1.2014.-He further
argued that their case should not have been segregatea from the penalty
cases by the: SAT and that, along with the other individuals in these
F cases, they should have been made to pay interest only on the unpaid
amount from 18.7.2013 and not otherwise. On law, Shri Prasad argued
that equity cannot override written law but can only supplement it and
cited Raghunath Rai Barcja and another v. Punjab National Bank
and others, (2007) 2 SCC 230 at 241-242, paragraphs 29-33. He also
G relied upon the principle that an executing Court cannot go behind' a
decree or add to it and that since future interest was expressly not provided
for in his case, the SAT was in error in going behind the order dated
21. 7.2009. He also argued that casus omissus cannot be filled by Courts,
but only by the Legislature.

H
DUSHYANT N. DALAL v. SECURITIES AND EXCHANGE 455
BOARD OF INDIA [R. F. NARIMAN, J.]

7. Shri Arv ind Datar, on the other hand, argued that in the order A
dated 21.7.2009, the debarment for a period of 7 years was without
prejudice to SEBI's right to enforce disgorgement, which would
necessarily include future interest. He added that Section 28A belongs
to the realm of procedural law, and when Section 220(2) of the Income
Tax Act gets attracted, because of Section 28A, such interest belonging
B
to the realm of procedural law would necessarily be payable. Even
otherwise, according to learned counsel, interest is payable in equity.
Considering the larger public interest of disgorgement amoilnts and
penalty amounts not being paid within the stipulated time, interest would
certainly attach as public interest demands that such amounts be made
payable to the public exchequer. He referred to Section I SJ A of the c
SEBI Act, which makes it clear that all amounts realized by way of
penalties by SEBI are to be credited to the Consolidated Fund of India
and would, therefore, be public monies which can be utilized as such by
the Government. He cited a number of judgments to show that even
though there may be no direct statutory provision in the SEBIAct enabling D
SEBI to charge interest for the past period, interest may yet be awarded
in equity. He also referred to various authorities on the law of restitution,
to submit that interest is payable under this law because the defendant
has received a benefit unjustly, which the defendant is not entitled to,
and should, therefore, pay for the use of this unjust benefit by way of
interest. E
8. Having heard learned counsel for both sides, it is first important
to underline the genesis of Section 28A. The said Section was first
inserted by an ordinance dated 18.7.2013. As it then stood, Section28A.
did not refer to Section 220 of the Income Tax Act but only referred to
Sections 221 to 227, 228A and 229, 231 and 232 along with the Second F
and Third schedules to the said Act. Since this ordinance lapsed, a
second ordinance was promulgated on 16.9.2013, re-enacting the same
provision. The second ordinance also lapsed and a third ordinance dated
28.3.2014 was then promulgated with the same Section.
9. However, the Bill which led to the amendment of the SEBI G
Act, and which inserted Section 28A, eventually included Section 220 of
the Income Tax Act as well.'

1
Section 220 is an important provision, in that under sub-section (2) thereof, interest
is leviable in the circumstances mentioned therein.
H
456 SUPREME COURT REPORTS [2017] II S.C.R.

A I 0. Ultimately, Section 28A was enacted by the Securities Laws
(Amendment) Act of2014 by which this Section was brought into force,
with effect from the date of the first ordinance i.e. with effect from
18.7.2013.
Section 28A reads as follows:
B "28A. Recovery of Amounts.
( l) If a person fails to pay the penalty imposed by the adjudicating
officer or fails to comply with any direction of the Board for refund
of monies or fails to comply with a direction of disgorgement order
issued under section 11 B or fails to pay any fees due to the Board,
c the Recovery Officer may draw up under his signature a statement
in the specified form specifying the amount due from the person
(such statement being hereafter in this Chapter referred to as
certificate) and shall proceed to recover from such person the
amount specified in the certificate by one or more of the following
D modes, namely:-
( a) attachment and sale of the person's movable'Property;

(b) attachment of the person's bank accounts;
(c) attachment and sale of the person's immovable property;

E (d) arrest of the person and his detention in prison;
(e) appointing a receiver for the management of the person's
movable and immovable properties, and for this purpose, the
provisions of sections 220 to 227. 228A, 229, 232, the Second and
Third Schedules to the Income-tax Act. 1961 (43of1961) and the
F Income-tax (Certificate Proceedings) Rules, 1962, as in force from
time to time, in so far as may be, apply with necessary modifications.
as ifthe said provisions and the rules made thereunder were the
provisions of this Act and referred to the amount due under this
Act instead of to income-tax under the Income-tax Act, 1961.

G Explanation 1.-Forthe purposes of this sub-section, the person's
movable or immovable property or monies held in bank accounts
shall include any property or monies held in bank accounts which
has been transferred directly or indirectly on or after the date
when the amount specified in certificate had become due, by the
person to his spouse or minor child or son's wife or son's minor
H
DUSHYANT N. DALAL v. SECURITIES AND EXCHANGE 457
BOARD OF INDIA [R. F. NARIMAN, J.]

child, otherwise than for adequate consideration, and which is A
held by, or stands in the name of, any of the persons aforesaid;
and so far as the movable or immovable property or monies held
in bank accounts so transferred to his minor child or his son's
minor child is concerned, it shall, even atlcr the date ofattainment
of majority by such minor child or son's minor child, as the case
B
may be, continue to be included in the person's movable or
immovable prope1ty or monies held in bank accounts for recovering
any amount due from the person under this Act.
Explanation 2.- Any reference under the provisions of the
Second and Third Schedules to the Income-tax Act, 1961 (43 of C
1961) and the Income-tax (Certificate Proceedings) Rules, 1962
to the assessee shall be construed as a reference to the person
specified in the certificate.
Explanation 3.- Any reference to appeal in Chapter XVIID
and the Second Schedule to the Income-tax Act, 1961 (43 of 1961 ),
shall be construed as a reference to appeal before the Securities D
Appellate Tribunal under section I ST of this Act.
(2)The Recovery Officer shall be empowered to seek the
assistance of the local district administration while exercising the
powers under sub-section (J).
E
(3) Notwithstanding anything contained in any other law for the
time being in force, the recovery of amounts by a Recovery Otlicer
under sub-section (/), pursuant to non-compliance with any
direction issued by the Board under section 11 B, shall have
precedence over any other claim against such person.
F
( 4) For the purposes of sub-sections (/), (2) and (3), the
expression "Recovery Officer" means any officer of the Board
who may be authorised, by general or special order in writing, to
exercise the powers of a Recovery Officer."
11. A number of judgments have held that interest belongs to the
G
field of substantive and not procedural law. Foremost among these
judgments is J.K. Synthetics Ltd. v. Commercial Taxes Officer
(1994) 4 SCC 276 at 291, in which a Constitution Bench held:
"l 6. It is well-known that when a statute levies a tax it does so by
inserting a charging section by which a liability is created or fixed
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458 SUPREME COURT REPORTS (2017] II S.C.R.

A and then proceeds to provide the machinery to make the liability
effective. It, therefore, provides the machinery for the assessment
of the liability already fixed by the charging section, and then
provides the mode for the recovery and collection of tax, including
penal provisions meant to deal with defaulters. Provision is also
made for charging interest on delayed payments, etc. Ordinarily
B
the charging scctio:i which fixes the liability is strictly construed
but that rule of strict construction is not extended to the machinery
provisions which are construed like any other statute. The
machinery provisions must, no doubt, be so construed as would
effectuate the object and purpose of the statute and not defeat
c the same. (See Whitney v. IRC (1926 AC 37 : 42 TLR
58], CITv. Mahaliram Ramjidas ((1940) 8 ITR 442 : AIR 1940
PC 124 : 67 IA 239], India United Mills Ltd. v. Commissioner
of Excess Profits Tax, Bombay ((1955) I SCR 810: AIR 1955
SC 79 : (1955) 27 !TR 20] and Gursahai Saigal v. CIT,
Punjab ((1963) 3 SCR 893: AIR 1963 SC 1062: (1963) 48 ITR
D
I]). But it must also be realised that provision by which the authority
is empowered to levy and collect interest, even if construed as
forming part of the machinery provisions, is substantive law for
the simple reason that in the absence of contract or usage interest
can be levied under law and it cannot be recovered by way of
E damages for wrongful detention of the amount. (See Bengal
Nagpur Railway Co. ltd. v. Ruttanji Ramji [AIR 1938 PC 67 :
65 IA 66 : 67 CLJ 153] and Union of India v. A.l. Rallia
Ram [(1964) 3 SCR 164. 185-90: AIR 1963 SC 1685]). Our
attention was, however, drawn by Mr. Sen to two cases. Even in
those cases, CIT v. M Chandra Sekhar [( 1985) I SCC 283 :
F
1985 SCC (Tax) 85: (1985) 151 ITR433] and Centml Provinces
Manganese Ore Co. Ltd. v. CIT[(1986) 3 SCC 461: 1986 SCC
(Tax) 601 : (1986) 160 !TR 961], all that the Court pointed out
was that provision for charging interest was, it seems, introduced
in order to compensate for the loss occasioned to the Revenue
G due to delay. But then interest was charged on the strength of a
statutory provision, may be its objective was to compensate the
Revenue for delay in payment of tax. But regardless of the reason
which impelled the Legislature to provide for charging interest,
the Court must give that meaning to it as is conveyed by the
language used and the purpose to be achieved. Therefore, any
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DUSHYANT N. DALAL v. SECURITIES AND EXCHANGE 459
BOARD OF INDIA [R. F. NARIMAN, J.]

provision made in a statute for charging or levying interest on A
delayed payment of tax must be construed as a substantive law
and not adjectival law. So construed and applying the normal rule
of interpretation of statutes, we find, as pointed out by us earlier
and by Bhagwati, J. in the Associated Cement Co. case [( 1981)
4 sec 578 : 1982 sec (Tax) 3 : (1981) 48 STC 466] , that if the
B
Revenue's contention is accepted it leads to conflicts and creates
certain anomalies which could never have been intended by the
Legislature."
12. This judgment has been repeatedly followed and the law
reiterated in a number of judgments. We need rcfrr to only one such
judgment, which is India Carbon Limited v. The State of Assam, c
(1997) 6 sec 479 at 482-483.
13. We were also referred to Purbanchal Callies & Conductors
Pvt. Ltd. v. Assam State Electricity Board & Another, (2012) 7
SCC 462 at 484, where this Court dealt with the Interest on Delayed
Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, D
as follows:-
"51. There is no doubt about the fact that the Act is a substantive
law as vested rights of entitlement to a higher rate of interest in
case of delayed payment accrues in favour of the supplier and a
corresponding liability is imposed on the buyer. This Court, time E
and again, has observed that any substantive law shall operate
prospectively unless retrospective operntion is clearly made out
in the language of the statute. Only a procedural or declaratory
law operates retrospectively as there is no vested right in
procedure: F
52. In the absence of any express legislative intendment of the
retrospective application of the Act, and by virtue of the fact that
the Act creates a new liability of a high rate of interest against the
buyer, the Act cannot be construed to have retrospective effect.
Since the Act envisages that the supplier has an accrued right to G
claim a higher rate of interest in terms of the Act, the same can
only be said to accrue for sale agreements after the date of
commencement of the Act i.e. 23-9-1992 and not any time prior."
14. However, Shri Arvind Datar brought to our notice several
judgments in which interest in equity could be awarded if the fact H
460 SUPREME COURT REPORTS (2017] ll S.C.R.

A circumstance so warranted. The first of these judgments is Clariant
International Limited and Another v. Securities and Exchange
Board of India, (2004) 8 SCC 524 at 539, where after noticing that
Regulation 44 of the 1997 SEBI Regulations was substituted with effect
from September 2002 so that interest could be statutorily charged, this
Court stated that interest could be awarded on equitable considerations
B
as follows:
"30. Interest can be awarded in terms of an agreement or statutory
provisions. It can also be awarded by reason of usage or trade
having the force of law or on equitable considerations. Interest
cannot be awarded by way of damages except in cases where
c money due is wrongfully withheld and there are equitable grounds
therefore, for which a written demand is mandatory."
15. He also referred us to Tahazhathe Purayil Sara bi & Ors. v.
Union oflndia & Another, (2009) 7 SCC 372 at 380-381, in the context
of death caused by a rail accident. The Court noticed that the Railway
D Acts do not grant any substantive power to levy interest, but went on to
state that interest could be awarded on principles contained in Section 3
of the Interest Act, 1978 and Section 34 of the Code of Civil Procedure.
The Court held:
"30. As we have indicated hcreinbefore, when there is no specific
E provision for grant of interest on any amount due, the court and
even tribunals have been held to be entitled to award interest in
their discretion, under the provisions of Section 3 of the Interest
Act and Section 34 of the Civil Procedure Code.
xxxxxxxxx
F
35. Though, both the two aforesaid cases were in relation to
awards having been made wulcr the Arbitration Act, a principle
has been enunciated that in cases where a money award is made,
the principles of Section 34 of the Civil Procedure Code and Section
3 of the Interest Act could be invoked to award interest from the
G date of the award till the realisation thereof."
Shri Datar then referred to. Ferro Alloys Corpn. Ltd. v. A.P. State
Electricity Board and :mother, (1993) Supp (4) SCC 136 at 178-181,
paragraphs 128-133 where, according to him, the Court upheld interest
payable in equity as a principle oflaw, though on the facts of that case,
H
DUSHYANT N. DALAL v. SECURITIES AND EXCHANGE 461
BOARD OF INDIA [R. F. NARIMAN, J.]

equity was not attracted so as to enable electricity boards to charge A
interest on security deposits. He also sought to rely upon NTPC Ltd. v.
M.P. SEB (2011) 15 SCC 580, in which interest was not awarded on
equitable grounds only because, on facts, it was held that it cannot be
said that NTPC held on to excess amounts in an unjust way, so as to .
justify the claim of electricity boards for interest on these amounts. Shri
B
Datar also cited South Eastern Coalfields Ltd. v. State of M.P. and
others, (2003) 8 SCC 648, Indian Council For Enviro-LegalAction
v. Union of India, (2011) 8 SCC 161 and Union of India v. Tata
Chemicals Limited. (2014) 6 SCC 335 at 350, paragraphs 38-39 to
buttress his submission that interest can always be granted on equitable
considerations. c
16. We are of the view that an examination of the Interest Act.
1978 would clearly establish that interest can be granted in equity for
causes of action from the date on which such cause of action arose till
the date of institution of proceedings.
17. Section 1 of the old Interest Act, 1839 read as follows:- D

"Power of Court to .allow interest. It is, therefore, hereby
enacted that. upon all debts or sums certain payable at a certain
time or otherwise, the Court before which such debts or sums
may be recovered may, if it shall think fit, allow interest to the
creditor at a rate not exceeding the current rate of interest from E
the time when such debts or su.ms certain were payable, if such
debts or sums be payable by virtue of some written instrument at
a certain time; or if payable otherwise, then from the time when
demand of payment shall have been made in writing, so as such
demand shall give notice to the debtor that interest will be claimed F
from the date of such demand until the time of payment: provided
that interest shall be payable in all cases in which it is now payable
by law."
18. The judgment of the Privy Council in Bengal Nagur Railway
Co. Ltd. v. Ruttanji Ramji and others, AIR _1938 PC 67 at 70, while
G
referring to Section 1 proviso held:
"The Interest Act however contains a proviso that "interest shall
be payable in all cases in which it is now payable by law". This
proviso applies to cases in which the Court of equity exercises
jurisdiction to allow interest. As observed by Lord Tomlin in Maine H
462 SUPREME COURT REPORTS [2017] l l S.C.R.

A and New Brunswick Electrical Power Co. v. Hart ( 1929 AC
631):
"In order to invoke a rule of equity, it is necessary in the first
instance to establish the existence of a state of circumstances
which attracts the equitable jurisdiction, as. for example, the
B non-performance ofa contract ofwhich equity can give specific
performance."
19. This view of the law has since been followed in a number of
judgments. In Satindcr Singh v. Amrao Singh, (1961) 3 SCR 676 at
697, this Court held as under:
c "The power to award interest on equitable grounds or under any
other provisions of the law is expressly saved by the proviso to s.
I. This question was considered by the Privy Council in Bengal-
Nagpur Railway Co. ltd. V.. Ruttanji Ramji [65 IA 66 SC : AIR
1938 PC 67]. Referring to the proviso to s. l of the Act the Privy
D Council observed "this proviso applies to cases in which the Court
of equity exercises its juri;diction to allow interest". ·
20. In Hirachand Kothari v. State of Rajasthan, 1985 Supp
SCC 17 at 25-26, this Court held:
"It was further held in Amrao Singh case [AIR 196 l SC 908 :
E (1961) 3 SCR 676: (1961)2 SCJ 372] that the Court had ample
power under proviso to Section 1 of the Interest Act, 1839 to
award interest on equitable grounds."
21. The 63"' Law Commission on the Interest Act, 1839 went into
the aspect of grant of interest from the date of cause of action till the
F date ofinstitution of proceedings in great detail. After setting out Section
I, together with the proviso, of the 1839 Act, the Law Commission
recommended in paragraph 4.4A as under:
"4.4A. But, in general, proceedings, other than suits would be
outside the section. We arc of the view that the section should be
G widened to cover proceedings other than suits. The discretion to
award interest is as much needed in relation to other proceedings,
as in relation to an ordinary civil suit. We arc recommending an
amendment of the section for the purpose."
22.Aftcr examining the proviso to Section l, the Law Commission
H found that:
DUSHYANT N. DALAL v. SECURITIES AND EXCHANGE 463
BOARD OF INDIA [R. F. NARIMAN, J.]

"7.2 Broadly speaking, courts have, in cases decided in reliance. A
on the proviso to section l, awarded interest where the equity of
the case so required. For example. where immovable property is
purchased or acquired, and the price or compensation (as the
case may be) has not yet been paid, there is readiness to award
interest. Same is the position where there is a fiduciaiy relationship.
B
7.3. The Supreme Court has observed', with reference.to the
words "interest shall be payable in all cases in which it is now
payable by law", occurring in the proviso to section l, that the
proviso applies to cases in which the courts of Equity exercised
jurisdiction to allow interest. c
xxxxxxxxx
7 .5. A similar approach is illustrated by a Nagpur case', where it
was stated:
"We are of opinion that we arc exercising equitable powers in D
maintenance cases where a charge has been created by a decree."
xxxxxxxxx

7.8. Having carefully considered this aspect of the matter, we
have come to the conclusion that it would be just and fair to provide
for certain particular situations, without, of course, impairing the E
gcneralitv of the power preserved by the proviso. A few important
situations arc, accordingly, considered below.
xxxxxx xxx
7 .15. lntercst may also be recovered in equity in some other cases; F
for example, where a particular relationship exists between the
creditor and the debtor, such as, mortgagor and mortgagee, obligor
and obligee on a bond, executor and beneficiary, principal and
agent, principal and surety, trustee and cestui que tn1st, vendor
and pmdiaser, or in the case of arrears and annuities. These cases
need not be provided for by specific provisions. The general G
provision in the proviso to section l will continue to take care of
them.

2
Mahabir Prasad v. Durga Dutt, ( 1961) 3 SCR 639; AIR 1961 SC 990.
'Sitaram v. Wamurad, AIR 1948 Nagpur 49, 50 para 6.
H
464 SUPREME COURT REPORTS [2017] l l S.C.R.

A xxxxxxxxx
7.17 This concludes consideration of points of substance as to the
power to award interest under the proviso. We now deal with a
verbal point arising from the words ··now payable by law". We
are of the view that the word ••now" should be omitted from the
B proviso. The word is confusing, and, from the point of view of
drafting, inaccurate. We, therefore, recommend its deletion."
We also recommend that the words "enactment or other rule of
law or usage having the force of law" should be substituted for
the word "law'', in this part of the proviso."
c (Emphasis supplied)
23. Parliament accepted the recommendation of the Law
Commission and enacted the Interest Act of 1978.
Section 2(a) reads as under:
D "Section 2 - Definitions
In this Act, unless the context otherwise requires,-
( a) "court" includes a tribunal and an arbitrator;"
The Act has, therefore, been expanded to cover not merely civil
E courts but Tribunals as well.
24. We are directly concerned with Section 4 of the Act which
reads as follows:-
"Section 4 - Interest payable under certain enactments
F (I) Notwithstanding anything contained in section 3, interest shall
be payable in all cases in which it is payable by virtue of any
enactment or other rule oflaw or usage having the force oflaw.
(2) Notwithstanding as aforesaid, and without prejudice to the
generality of the provisions of sub-section (I), the court shall, in
G each of the following cases, allow interest from the date specified
below to the date of institution of the proceedings at such rate as
the court may consider reasonable, unless the court is satisfied
that there are special reasons why interest should not be allowed,
namely:-

H
DUSHYANT N. DALAL v. SECURITIES AND EXCHANGE 465
BOARD OF INDIA [R. F. NARIMAN, J.]

(a) where money or other property has been deposited as security A
for the performance of an obligation imposed by law or contract,
from the date of the deposit;
(b) where the obligation to pay money or restore any property
arises by virtue of a fiduciary relationship, from the date of the
cause of action; B
( c) where money or other property is obtained or retained by
fraud, from the date of the cause of action;
( d) where the claim is for dower or maintenance, from the date of
the cause of action."
c
By Section 6(1 ), the Interest Act of 1839 was repealed.
25. This Court in Life Insurance Corporation of India and
Another v. Smt. S. Sindhu, (2006) 5 SCC 258 at 263-264, while
· considering the changes made by the Interest Act, 1978, stated as follows:
"15. Even assuming that interest can be awarded on grounds of D
equity, it can be awarded only on the reduced sum to be quantified
and paid from the date wh~n it becomes due under the policy
(that is on the date of death of the assured) and not from any
earlier date. We do not propose to examine the question as to
whether interest can be awarded at all, on equitable grounds, in E
view of the enactment of the Interest Act, 1978 making a
significant departure from the old Interest Act (32 of 1839). The
present Act does not contain the following provision contained in
the proviso to Section 1 of the old Act "interest shall be payable
in all cases in which it is now payable by law''. How far the
decisions of this Court in Satinder Singh v. Amrao Singh [(1961) F
3 SCR 676: AIR 1961 SC 908] and Hirachand Kothari v. State
. ofRajasthan [1985 Supp SCC 17] and the decision of the Privy
Council in Bengal Nagpur Rly. Co. Ltd. v. Ruttanji Ramji [( 1937-
38) 65 IA 66 : AIR 1938 PC 67] holding that interest can be
awarded on equitable grounds, all rendered with £eference to the G
said proviso to Section I of the old Interest Act (Act of 1839), will
be useful to interpret the provisions oft he new Act (Act of 1978) .
may require detailed examination in an appropriate case."
26. The important question which ha.~ to be answered in the present
case is as to whether the expression "other rule of law" contained in
H
466 SUPREME COURT REPORTS [2017] I I S.C.R.

A · Section 4( l) would enable the Court to continue with the position as it
was under the proviso to Section l of the 1839 Act - namely. whether
this expression would subsume interest being awarded in equity.
27. We find that a learned single Judge of the Bombay High Court
has, in Prabhavati Ramgarib B. v. Divisional Railway Manager.
B (20 I 0) 4 Mah LJ 691 at 702-703, specifically held as follows:
"35. The petitioner's claim for interest would fall within the ambit
of the words "or other rule oflaw" in section 4( I). The other rule
of law being on grounds of equity. Even under the Interest Act,
1839, interest was payable under the proviso to section 1 which
c reads: "Provided that interest shall be payable in all cases in which
it is now payable by law." Interest was payabk by law under that
Act in equity. This was recognized in a series of j udgmcnts. For
instance in Trojan and Co. v. Nagappa Chettiar, 1953 SCR 789,
the Supreme Court, in paragraph 23, observed that it was well
settled that interest is allowed by a Court of equity in the case of
D money obtained or retained by fraud. Interest was, therefore,
awarded in equity.
36. The position is not difforcnt under the Interest Act, 1978.
The words, in section 4( I) "or other rule of law" would include
interest payable in equity. In fact, interest has been awarded by
E our Cou1is in equity as well as on principles analogous to section
34 of the Code of Civil Procedure on the basis that section 34 is
based upon principles ofjustice, equity and good conscience."
28. We agree with the aforesaid statement of the law. It is clear,
therefore, that the Interest Act of 1978 would enable Tribunals such as
F the SAT to award interest from the date on which the cause of action
arose till the date of commencement of proceedings for recovery of
such interest in equity. The present is a case where interest would be
payable in equity for the reason that all penalties collected by SEBI
would be credited to the Consolidated Fund under Section l 5JA of the
G SEBI Act. There is no greater equity than such money being used for
public purposes. Deprivation of the use of such money would, therefore,
sound in equity. This being the case, it is clear that, despite the fact that
Section 28A belongs to the realm of procedural law and would ordinarily
be retrospective, when it seeks to levy interest, which belongs to the
realm of substantive law, the Tribunal is correct in stating that such interest
H would be chargeable under Section 28A read with Section 220(2) of the
DUSHYANT N. DALAL v. SECURITIES AND EXCHANGE 467
BOARD OF INDIA (R. F. NARIMAN, J.]

Income Tax Act only prospectively. 4 However, since it has not taken A
into account the Interest Act, 1978 at all, we set aside the Tribunal's
findings that no interest could be charged from the date on which penalty
became due. The Civil Appeals 10410-10412 of 2017 are allowed insofar
as the penalty cases are concerned.
29. However, going to the facts in Civil Appeal No. 5677 of2017, B
we feel that Shri Subramonium Prasad is on firm ground. He has pointed
out similar orders that have been passed by the same whole-time member
of SEB.I. Thus, in Mr. Dhaval A. Mehta v. Securities and Exchange
.Board of India, the order passed by the same whole-time member
reads as follows:
c
"I I ... Accordingly, in exercise of powers conferred upon me under
Section 19 read with Sections 11, 11(4) and l lB of the SEB!Act,
1992 and atler taking into account the period of prohibition already
undergone by the Noticee pursuant to the interim Order, I hereby
direct that the Noticee, Mr. Dhaval A. Mehta (PAN No. ALKPM
26110): (a) to disgorge the above unlawful gain of Rs. 72 lakhs D
and interest thereon@ 10% from the date of listing (August 12,
2005) of the IDFC IPO till the date of actual disgorgcment, within
45 days of passing of this Order, by remitting the amount by a
crossed demand draft in favour of SE131, (b) be restrained from
buying, selling or dealing in securities market in whatsoever manner E
or accessing securities market in any manner, directly or indirectly,
for a further period of 2 years from the date of issuance of this
Order. In case the amount is not disgorged within the specified
time, the Noticee shall be restrained from buying, selling or dealing
in securities market in whatsoever manner or accessing securities
market, directly or indirectly, for an additional period of 5 years F
without prejudice to SEBI's right to enforce disgorgement."
(Emphasis supplied)
30,'._Similarly, in Nctanand Bhambu's case, by an order dated
7.5.2009, the same gentleman passed the following order:
G
4
The sa1nc 2014 1\1nendment \vhich introduced Section 28A, with effect from 18. 7.2013,
also introduced Section ISJB retrospectively,_.with effect from 20.4.2007. This is a
positive indication that Section 28A \1/·as intended only to have prospective application.
It must be clarified, however, that interest is chargeable only with effect from 25.8.2014,
as Section 2~0 \\'US. not referred to, \Vhilc enacting Section 28A. in any of the three
Ordinances preceding the Amendment Act of2014. H
468 SUPREME COURT REPORTS [2017] l l S.C.R.

A "14 ... b. Mr. Netanand Bhambu (PAN: ACVPBB753A).
Netanand Surajram Bhambu-HUF (PAN: AADHN2778P),Anand
Nctanand Choudhary-HUF (PAN: AAEHA7368H). Ms. Sarvani
Choudhary (PAN: ACSPC7691P) and Ms. Vinita A. Choudhary
(PAN: AEFPC l269F) shall disgorge the unlawful gain, as indicated
in column 11 of the table under Para 8 above. against their names,
B
totaling to Rs. 9,58.950 (Rupees nine lakhs fifty eight thousand
nine hundred and fifty only). They shall also pay the interest on
this unlawful gain at the rate of l 0% (ten percent) per annum
from the date of listing of the IPOs ofNandan and FCS. till the
date of payment. The noticees shall disgorge the amount within
c 45 (forty five) days from the date of this order by way of crossed
demand draft drawn in favor of"Securities and Exchange Board
oflndia", payable at Mumbai. In case the aforesaid amount is not
paid within the specified time, the noticees shall be restrained
from buying, selling or dealing in securities market in any manner
whatsoever or accessing the securities market, directly or indirectly,
D
for a further period of five years, without prejudice to SEBI's
right to enforce disgorgement."
(Emphasis supplied)
31. On 10.5.2010, in Chandrakant Amratlal Parekh v.
Securities and Exchange Board of India, the same whole-time
E member passed the following order:
"12 a) Chandrakant Amratlal Parekh (PAN: AHXPP5708J) be
restrained from buying, selling or dealing in the securities market
in any manner whatsoever or accessing the securities market,
directly or indirectly, for a period of one year from the date of this
F Order; and
b) Chandrakant Amratlal Parekh shall disgorge the unlawful
gain of Rs.24,29,340 (Rupees twenty four lakhs twenty nine
thousand three hundred and forty only). He shall also pay the
interest on this unlawful gain at the rate of 6% (six percent) per
G annum for4 Y, years (October 2005-April 2010, i.e. from the
date oflisting of the !PO ofSuzlon till this Order), amounting to
Rs.6,55,922. He shall thus disgorge a total amount ofRs.30,85,262
within 45 (forty five) days from the date of this Order by way of
crossed demand draft drawn in favour of"Secw·ities and Exchange
Board oflndia", payable at Mumbai. In case the aforesaid amount
H
DUSHYANT N. DALAL v. SECURITIES AND EX~HANGE 469
BOARD OF INDIA [R. F. NARIMAN, J.]

is not paid within the specified time, he shall be restrained A
from buying, selling or dealing in securities market in any
manner whatsoever or accessing the securities market, directly
or indirectly, for a further period of seven years without
prejudice to SEBJ's right to enforce disgorgement along with
further interest till actual payment is made."
B
(Emphasis supplied)
32. All the aforesaid orders show that the said whole-time member
was fully cognizant of his power to grant future interest which he did in
all the aforesaid cases. In fact, in the last mentioned case, whose facts
arc very similar to the facts of the present case, the order was passed
"without prejudice to SEBI's right to enforce disgorgement along with
c
fmther interest till actual payment is made." The words "along with
further interest till actual payment is made" are conspicuous by their
absence in the order dated 21.7.2009. In the circmnstanccs, we arc of
the view that Shri Subramonium Prasad is correct in his submission. If
there is default in payment of Rs. 6 crores within the stipulated time, no D
future interest is payable inasmuch as a much severer penalty of being
debarred from the market for 7 years was instead imposed. We have
noticed how the appellant has, in fact, suffered the aforesaid debarment
and how he made payment of Rs. 6 crores on 6.1.2014 from the sale of
shares. The SAT was incorrect in stating that the order dated 21. 7.2009
contained an obligation to pay interest at the rate of 12% per annum on E
the unlawful gain ofRs.4.05 crores till payment. We, therefore, allow
C.A. 5677 of 2017 and set aside the SAT's judgment in this appeal as
well.

Kalpana K. Tripathy App~ls disposed of.