CS Vinita Nair, Aditya Shah
Securities Law (Amendment) Bill, 2014 passed by Lok Sabha – Detailed comparison of Key changes made in SEBI Act, 1992
Preamble
The Securities Exchange Board of India (herein after referred as SEBI) is the securities market regulator in India. SEBI was established under Securities and Exchange Board of India Act, 1992[1] (hereinafter referred as the Act) and derives power, rights and authority from the Act. As the capital market dynamics are changing, it is also important to enhance the power of SEBI with changing capital market. In recent past Legislature were constantly endeavoring to push though the amendments to the SEBI Act, 1992 however due to some or the other reasons such amendments were not able to get through the Parliament. The Central Government tried to circumvent its inability to pass through the Parliament by promulgating the ordinance to amend the Act. The Central Government through President had issued ordinance to amend the SEBI Act in the year 2013 and 2014 and the new government was able to ensure that the Securities Law (Amendment) Bill, 2014 (herein after referred as Amendment Bill 2014) ,which includes the amendment to SEBI Act, Depositories Act, 1996 and Securities Contract (Regulation) Act, 1956, was passed on 6th August 2014 in Lok Sabha.
Changes made by the Amendment Bill, 2014
The Amendment Bill 2014 was different in color vis-a-vis the ordinance that was promulgated vide Securities Laws (Amendment) Ordinance, 2014 (hereinafter referred as Ordinance 2014). The changes that bill has bought about can be majorly classified as follows:-
i. validating the ordinance issued with effect from the date of the ordinance,
ii. rationalizing the penalties that can be imposed under the Act ,
iii. discarding the power to search and seizure that were conferred to the SEBI vide Ordinance, 2014,
iv. review the order and the proceeding conducted by Adjudicating Officer,
v. constitution of Special Court for the offence under the Act,
vi. power of disgorgement of amount earned in contravention of the provision of Act and recovery thereof has been granted to the Board.
Brief Details of the Key Changes
Disgorgement of Amount:- Section 11B of the Act empowers SEBI to disgorge an amount equivalent to the amount that have been earned by any person in contravention of the Act. Such amount may be the profit earned by any person or loss averted in contravention of the Act. In case if any person fails to pay such amount the Board of SEBI has been empowered to recover such amount under Section 28A(1) of the Act.
Discarding the Power to Search and Seizure:- The Ordinance 2014 interalia provided that where an investigating officer has reasons to believe that any person or enterprise, as the case may be, to whom a notice under Section 11C(3) (power of investigating office to furnish before him books, register or document) of the Act has been issued or might be issued, has omitted or failed to provide any document, book or register or any other record or may not provide such record or information or may destroy, falsify or alter such record or information than the Chairman of the Board may authorize the investigating authority to enter, search such place where such information or record are expected or believed to be kept or break upon any lock, door or safe, …..
Thus the ordinance gave unfettered power to the chairman of the SEBI Board to authorize such act which are normally empowered to be authorized by an Judicial Body and thus the Amendment to the Act, restores such power to the judicial body and discard ordinance in that respect. Now pursuant to the amendment the power of seizure, as the earlier provision of the SEBI Act, was shall be with the Magistrate or Judge of such designated court in Mumbai, as may be notified by the Central Government.
Establishment of Special Court: – The offence committed under the Act, prior to the Ordinance 2014 and the Amendment Act, 2014, were tried by Court of Session and by no inferior court. However, the Ordinance 2014 and the Amendment Act 2014 provided for constitution of Special Court consisting of single judge, who shall be judge of a rank of Session Judge or Additional Session Judge. The appointment of the judge shall be made by Central Government in concurrence with Chief Justice of the High Court within whose jurisdiction the judge being appointed. However a transitional provision has been provided for until such special court has been setup by the Government.
Detailed Comparative
A detailed comparative table on the amendment to securities law with respect to the Act, the provision of the law prior to the ordinance, amendment by the ordinance and actual amendment to the Act, and impact thereon is as follows:-
| Section /Clause | SecuritiesAnd Exchange Board OfIndia Act,1992[2] | Ordinance 2014[3] | SecuritiesLaws (Amendment) Bill,2014[4] | Impact | Will come into effect from |
| Section 11(2)(ia) | calling for information and record from any bank or any other authority or board or corporation established or constituted by or under any Central, State or Provincial Act in respect of any transaction in securities which is under investigation or inquiry by the Board | calling for information and records from any person including any bank or any other authority or board or corporation established or constituted by or under any Central or State Act which, in the opinion of the Board, shall be relevant to any investigation or inquiry by the Board in respect of any transaction in securities; | calling for information and records from any person including any bank or any other authority or board or corporation established or constituted by or under any Central or State Act which, in the opinion of the Board, shall be relevant to any investigation or inquiry by the Board in respect of any transaction in securities; | SEBI has been empowered to call information and record from any person apart from banks and other authority established and constituted under the Central, State or Provisional Act while investigating or inquiring in respect of any transactions in securities. | 18th July, 2013. |
| 11(2)(ib) | New Insertion | calling for information from, or furnishing information to, other authorities, whether in India or outside India, having functions similar to those of the Board, in the matters relating to the prevention or detection of violations in respect of securities laws, subject to the provisions of other laws for the time being in force in this regard:Provided that the Board, for the purpose of furnishing any information to any authority outside India, may enter into an arrangement or agreement or understanding with such authority with the prior approval of the Central Government | calling for information from, or furnishing information to, other authorities, whether in India or outside India, having functions similar to those of the Board, in the matters relating to the prevention or detection of violations in respect of securities laws, subject to the provisions of other laws for the time being in force in this regard:Provided that the Board, for the purpose of furnishing any information to any authority outside India, may enter into an arrangement or agreement or understanding with such authority with the prior approval of the Central Government;’’ | Pursuant to the ordinance and its subsequent amendment SEBI will be authorized to call for information and furnish information to authorities in India and outside India and is further empowered with retrospective effect to enter into any arrangement or agreement with prior approval of Central Government. | 6th day of March, 1998 |
| 11(5) | New insertion | The amount disgorged, pursuant to a direction issued under section 11B or section 12A of the Securities Contracts (Regulation) Act, 1956 or section 19 of the Depositories Act, 1996, as the case may be, shall be credited to the Investor Protection and Education Fund established by the Board and such amount shall be utilized by the Board in accordance with the regulations made under this Ordinance. | (5) The amount disgorged, pursuant to a direction issued, under section 11B of this Act or section 12A of the Securities Contracts (Regulation) Act, 1956 or section 19 of the Depositories Act, 1996, as the case may be, shall be credited to the Investor Protection and Education Fund established by the Board and such amount shall be utilised by the Board in accordance with the regulations made under this Act.’’ | Pursuant to this new insertion, the amount received by SEBI by disgorging the amounts received after issuing directions to any persons or class of persons being capital market intermediaries or associated to securities market or listed or to be listed companies under Section 11B of SEBI Act or to any stock exchange or clearing corporation or person or class of persons associated with the securities market under Section 12 A of SCRA, 1956 or to any depository or participant or issuer under Section 19 of Depositories Act, 1996 , being an amount equivalent to amount of profit made or loss averted by any person who has indulged in transaction or activity which is in contravention of provision of respective Acts, shall be utilized by the Board in accordance with the regulation made under the SEBI Act. | 18th July, 2013. |
| Section 11AA(1) | Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) shall be a collective investment scheme. | Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) or sub-section (2A) shall be a collective investment scheme.Provided that any pooling of funds under any scheme or arrangement, which is not registered with the Board or is not covered under sub-section (3), involving a corpus amount of one hundred crore rupees or more shall be deemed to be a collective investment scheme. | Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) or sub-section (2A) shall be a collective investment scheme.Provided that any pooling of funds under any scheme or arrangement, which is not registered with the Board or is not covered under sub-section (3), involving a corpus amount of one hundred crore rupees or more shall be deemed to be a collective investment scheme. | Criteria for falling under the ambit of Collective Investment Scheme has been expanded to include any unregistered scheme with 100 crore corpus involving pooling of money under a scheme. | 18th July, 2013. |
| Section 11(2A) | New insertion | (2A) Any scheme or arrangement made or offered by any person satisfying the conditions as may be specified in accordance with the regulations made under this Ordinance. | (2A) Any scheme or arrangement made or offered by any person satisfying the conditions as may be specified in accordance with the regulations made under this Act. | 18th July, 2013. | |
| Section 11B | Insertion of Explanation | Explanation- For the removal of doubts, it is hereby declared that the power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention. | Explanation- For the removal of doubts, it is hereby declared that the power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention. | This clarifies that SEBI can issue directions directing to repay such amounts earned by way of wrongful gain or averting losses by contravening provisions of SEBI Act. | 18th July, 2013. |
| 11(C)(8) | Where in the course of investigation, the Investigating Authority has reasonable ground to believe that the books, registers, other documents and record of, or relating to, any intermediary or any person associated with securities market in any manner, may be destroyed, mutilated, altered, falsified or secreted, the Investigating Authority may make an application to the Judicial Magistrate of the first class having jurisdiction for an order for the seizure of such books, registers, other documents and record. | Where in the course of an investigation, the Investigating Authority has reason to believe that any person or enterprise, as the case may be, to whom a notice under sub-section (3) has been issued or might be issued, -(a) has omitted or failed to provide the information or produce documents as required in the notice; or(b) may not provide the information or produce documents which shall be useful for, or relevant to, the investigation; or(c) may destroy, mutilate, alter, falsify or secrete the information or documents useful for, or relevant to, the investigation, then, the Chairman may, after being satisfied that it is necessary so to do, after recording the reasons thereof in writing, authorize the Investigating Authority or any other officer of the Board (the officer so authorized being hereinafter referred to as the authorised officer), to-(i) enter and search, with such assistance, as may be required, the building, place, vessel, vehicle or aircraft where such information or documents are expected or believed to be kept;(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by sub-clause (i), where the keys thereof are not available;(iii) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorized officer has reason to suspect that such person has secreted about his person any such books of account or other documents;(iv) require any person who is found to be in possession or control of any books of account or other documents, maintained in the form of electronic record, to provide the authorised officer the necessary facility to inspect such books of account or other documents.
Explanation- For the purposes of this sub-clause, the expression “electronic record” shall have the meaning assigned to it in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000. (v) seize any such books of account or other documents found as a result of such search; (vi)place marks of identification on any books of account or other documents or make or cause to be made extracts or copies there from; (vii)record on oath the statement of any person who is found to be in possession or in control of the information or documents referred to in sub-clauses (i), (iii) and (iv).] |
“Where in the course of investigation, the Investigating Authority has reasonable ground to believe that the books, registers, other documents and record of, or relating to, any intermediary or any person associated with securities market in any manner, may be destroyed, mutilated, altered, falsified or secreted, the Investigating Authority may make an application to the Magistrate or Judge of such designated court in Mumbai, as may be notified by the Central Government for an order for the seizure of such books, registers, other documents and record” | Ordinance 2014 interalia provided that where an investigating officer has reasons to believe that any person or enterprise, as the case may be, to whom a notice under sub-section (3) has been issued or might be issued, has omitted or failed to provide any document, book or register or any other record or may not provide such record or information or may destroy, falsify or alter such record or information than the Chairman may authorize the investigating authority to enter, search such place where such information or record are expected or believed to be kept or break upon any lock, door or safe, …..Thus the ordinance gave unfettered power to the chairman of the SEBI Board to authorize such act which are normally empowered to be authorized by an Judicial Body and thus the Amendment to the Act, restores such power to the judicial body and discard ordinance in that respect. Now pursuant to the amendment the power of seizure, as the earlier provision of the SEBI Act, was shall be with the Magistrate or Judge of such designated court in Mumbai, as may be notified by the Central Government. | 18th July, 2013. |
| Section 11(C) (8A) | New Insertion | (8A) The authorised officer may requisition the services of any police officer or any office of the Central Government, or of both, to assist him for all or any of the purposes specified in sub section (8) and it shall be the duty of every such officer to comply with such requisition. | (8A) The authorised officer may requisition the services of any police officer or any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (8) and it shall be the duty of every such officer to comply with such requisition. | 28th March, 2014 | |
| Section 11C(9) | After considering the application and hearing the Investigating Authority, if necessary, the Magistrate may, by order, authorise the Investigating Authority—(a) to enter, with such assistance, as may be required, the place or places where such books, registers, other documents and record are kept;(b) to search that place or those places in the manner specified in the order; and(c) to seize books, registers, other documents and record, it considers necessary for the purposesof the investigation :Provided that the Magistrate shall not authorise seizure of books, registers, other documents and record, of any listed public company or a public company (not being the intermediaries specified under section 12) which intends to get its securities listed on any recognised stock exchange unless such company indulges in insider trading or market manipulation | (9) The Board may make regulations in relation to any search or seizure under this section; and in particular, without prejudice to the generality of the foregoing power, such regulations may provide for the procedure to be followed by the authorised Officer-(a) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available;(b) for ensuring safe custody of any books of account or other documents or assets seized.] | After considering the application and hearing the Investigating Authority, if necessary, the Magistrate or Judge of the Designated Court may, by order, authorise the Investigating Authority—(a) to enter, with such assistance, as may be required, the place or places where such books, registers, other documents and record are kept;(b) to search that place or those places in the manner specified in the order; and(c) to seize books, registers, other documents and record, it considers necessary for the purposesof the investigation :Provided that the Magistrate or Judge of the Designated Court shall not authorize seizure of books, registers, other documents and record, of any listed public company or a public company (not being the intermediaries specified under section 12) which intends to get its securities listed on any recognised stock exchange unless such company indulges in insider trading or market manipulation | Under the provision of the SEBI Act, prior to the amendment the Magistrate was authorized to allow search or seizure of information or record as may be required by the investigation officer,However the Ordinance empowered the Board to make regulation for such search and seizure under sub Section 8 as amended by the ordinance. Since sub-section 8 as amended by the ordinance was discarded in the Bill passed, sub section 9 of the ordinance was also changed and the earlier provisions have been restored. Additionally, Judge of the Designated Court is also empowered along with the Magistrate | 18th July, 2013. |
| 11C(10) | (10) The Investigating Authority shall keep in its custody the books, registers, other documentsand record seized under this section for such period not later than the conclusion of theinvestigation as it considers necessary and thereafter shall return the same to the company orthe other body corporate, or, as the case may be, to the managing director or the manager or anyother person, from whose custody or power they were seized and inform the Magistrate of such return | The Investigating Authority shall keep in its custody the books, registers, other documents and record seized under this section for such period not later than the conclusion of the investigation as it considers necessary and thereafter shall return the same to the company or the other body corporate, or, as the case may be, to the managing director or the manager or any other person, from whose custody or power they were seized | The Investigating Authority shall keep in its custody the books, registers, other documents and record seized under this section for such period not later than the conclusion of the investigation as it considers necessary and thereafter shall return the same to the company orthe other body corporate, or, as the case may be, to the managing director or the manager or anyother person, from whose custody or power they were seized and inform the Magistrate or Judge of the Designated Court of such return | The former provisions which required informing the Magistrate has been restored and Judge of Designated court has been inserted. | 18th July, 2013. |
| 15(A) (a),(b), (c) | a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less | Not included in Ordinance, 2014 | A penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees | Penalty rationalized for failure to furnish information, return, etc required under SEBI Act or any rules or regulations made thereunder | As the Central Government may appoint, bynotification in the Official Gazette. |
| Section 15(B) | of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less | Not included in Ordinance, 2014 | which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees | Penalty for failure by any person registered as an intermediary to enter into agreement with clients rationalized | As the Central Government may appoint, bynotification in the Official Gazette. |
| 15C | of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less | Not included in Ordinance, 2014 | which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees | Penalty for failure to redress investors’ grievances by any listed company or any person who is registered as an intermediary has been rationalized. | As the Central Government may appoint, bynotification in the Official Gazette. |
| 15D (a) | of one lakh rupees for each day during which he sponsors or carries on any collective investment scheme including mutual funds, or one crore rupees, whichever is less | Not included in Ordinance, 2014 | which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which he sponsors or carries on any such collective investment scheme including mutual funds subject to a maximum of one crore rupees. | Penalty rationalized for failure in obtaining registration for sponsoring or carrying on any collective investment scheme, including mutual funds. | As the Central Government may appoint, bynotification in the Official Gazette. |
| 15D(b), (c), (d), (e) and (f) | of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less | Not included in Ordinance, 2014 | which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees | Penalty rationalized for failure on the part of registered collective investment scheme, including mutual funds to ensure the following:(a) to comply with the terms and conditions of certificate of registration;(b) make an application for listing of its schemes as provided for in the regulations governing such listing; (c)to despatch unit certificates of any scheme in the manner provided in the regulation governing such despatch;(d)to refund the application monies paid by the investors within the period specified in the regulations; or(e) to invest money collected by such collective investment schemes in the manner or within the period specified in the regulations | As the Central Government may appoint, bynotification in the Official Gazette. |
| 15 E | of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less | Not included in Ordinance, 2014 | which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees | Penalty rationalized for failure to observe rules and regulations by an asset management company | As the Central Government may appoint, bynotification in the Official Gazette. |
| 15F (a) | a penalty not exceeding five times the amount for which the contract note was required to be issued by that broker | Not included in Ordinance, 2014 | a penalty which shall not be less than one lakh rupees but which may extend to the amount for which the contract note was required to be issued by that broker | Penalty rationalized for failure by a registered stock broker to issue contract notes in the fom and manner specified by the stock exchange of which such broker is a member. | As the Central Government may appoint, bynotification in the Official Gazette. |
| 15F (b) | of one lakh rupees for each day during which such failure continues, or one crore rupees, whichever is less | Not included in Ordinance, 2014 | which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which he sponsors or carries on any such collective investment scheme including mutual funds subject to a maximum of one crore rupees | Penalty rationalized for failure to deliver any security or in making payment of the amount due to the investor in the manner within the period specified in the regulations. | As the Central Government may appoint, bynotification in the Official Gazette |
| 15F (c) | of one lakh rupees or five times the amount of brokerage charged in excess of the specified brokerage, whichever is higher | Not included in Ordinance, 2014 | which shall not be less than one lakh rupees but which may extend to five times the amount of brokerage charged in excess of the specified brokerage, whichever is higher | Penalty rationalized for charging excess brokerage by a registered stock broker | As the Central Government may appoint, bynotification in the Official Gazette. |
| 15G | of twenty-five crore rupees or three times the amount of profits made out of insider trading, whichever is higher | Not included in Ordinance, 2014 | which shall not be less than ten lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of insider trading, whichever is higher | Penalty for insider trading rationalized by specifying a minimum penalty of Rs. 10 lakhs subject to a maximum of Rs. 25 crores or 3 times the amounts of profits made. | As the Central Government may appoint, bynotification in the Official Gazette. |
| 15H | of twenty-five crore rupees or three times the amount of profits made out of such failure, whichever is higher | Not included in Ordinance, 2014 | which shall not be less than ten lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of such failure, whichever is higher | Penalty for non-disclosure of acquisition of shares and takeovers. rationalized by specifying a minimum penalty of Rs. 10 lakhs subject to a maximum of Rs. 25 crores or 3 times the amounts of profits made. | As the Central Government may appoint, bynotification in the Official Gazette. |
| 15HA | of twenty- five crore rupees or three times the amount of profits made out of such practices, whichever is higher | Not included in Ordinance, 2014 | which shall not be less than five lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of such practices, whichever is higher | Penalty for fraudulent and unfair trade practices rationalized by specifying a minimum penalty of Rs. 5 lakhs subject to a maximum of Rs. 25 crores or 3 times the amounts of profits made. | As the Central Government may appoint, bynotification in the Official Gazette |
| 15HB | liable to a penalty which may extend to one crore rupees | Not included in Ordinance, 2014 | liable to a penalty which shall not be less than one lakh rupees but which may extend to one crore rupees | Penalty for contravention of provisions of SEBI Act, rules or regulations made thereunder where no separate penalty has been provided has been rationalized by specifying a minimum penalty of Rs. 1 lakh subject to a maximum of Rs. 1 crore | As the Central Government may appoint, bynotification in the Official Gazette |
| 15I (3) | New Insertion of clause (3) | (3) The Board may call for and examine the record of any proceedings under this section and if it considers that the order passed by the adjudicating officer is erroneous to the extent it is not in the interests of the securities market, it may, after making or causing to be made such inquiry as it deems necessary, pass an order enhancing the quantum of penalty, if the circumstances of the case so justify:Provided that no such order shall be passed unless the person concerned has been given an opportunity of being heard in the matter:Provided further that nothing contained in this sub-section shall be applicable after an expiry of a period of three months from the date of the order passed by the adjudicating officer or disposal of the appeal under section 15T, whichever is earlier.’ | (3) The Board may call for and examine the record of any proceedings under this section and if it considers that the order passed by the adjudicating officer is erroneous to the extent it is not in the interests of the securities market, it may, after making or causing to be made such inquiry as it deems necessary, pass an order enhancing the quantum of penalty, if the circumstances of the case so justify:Provided that no such order shall be passed unless the person concerned has been given an opportunity of being heard in the matter:Provided further that nothing contained in this sub-section shall be applicable after an expiry of a period of three months from the date of the order passed by the adjudicating officer or disposal of the appeal under section 15T, whichever is earlier. | SEBI has been empowered to revisit the order passed by the adjudicating officer under Sections 15A to 15HB of SEBI Act, if the same is considered as incorrect or not in the interest of the securities market and after necessary inquiry SEBI can pass an order enhancing quantum of penalty where needed. | 28th day of March,2014 |
| 15JB | New insertion
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15JB. (1) Notwithstanding anything contained in any other law for the time being in force, any person, against whom any proceedings have been initiated or may be initiated under section 11, section 11B, section 11D, sub-section (3) of section 12 or section 15-I, may file an application in writing to the Board proposing for settlement of the proceedings initiated or to be initiated for the alleged defaults.(2) The Board may, after taking into consideration the nature, gravity and impact of defaults, agree to the proposal for settlement, on payment of such sum by the defaulter or on such other terms as may be determined by the Board in accordance with the regulations made under this Act.(3) The settlement proceedings under this section shall be conducted in accordance with the procedure specified in the regulations made under this Act.(4) No appeal shall lie under section 15T against any order passed by the Board or adjudicating officer, as the case may be, under this section.’’. | 15JB. (1) Notwithstanding anything contained in any other law for the time being in force, any person, against whom any proceedings have been initiated or may be initiated under section 11, section 11B, section 11D, sub-section (3) of section 12 or section 15-I, may file an application in writing to the Board proposing for settlement of the proceedings initiated or to be initiated for the alleged defaults.(2) The Board may, after taking into consideration the nature, gravity and impact of defaults, agree to the proposal for settlement, on payment of such sum by the defaulter or on such other terms as may be determined by the Board in accordance with the regulations made under this Act.(3) The settlement proceedings under this section shall be conducted in accordance with the procedure specified in the regulations made under this Act.(4) No appeal shall lie under section 15T against any order passed by the Board or adjudicating officer, as the case may be, under this section.’’. | Settlement of proceeding initiated under prescribed sections which was introduced by the ordinance has been retained in the amendment bill. | 18th July, 2013 |
| Section 15T | (2) No appeal shall lie to the Securities Appellate Tribunal from an order made—(a) by the Board on and after the commencement of the Securities Laws (Second Amendment) Act, 1999;(b) by an adjudicating officer, with the consent of the parties.” | Sub-section (2) deleted | Sub-section (2) deleted | 18th July, 2013 | |
| Section 26A | New insertion | 26A. (1) The Central Government may, for the purpose of providing speedy trial of offences under this Act, by notification, establish or designate as many Special Courts as may be necessary.(2) A Special Court shall consist of a single judge who shall be appointed by the Central Government with the concurrence of the Chief Justice of the High Court within whose jurisdiction the judge to be appointed is working.(3) A person shall not be qualified for appointment as a judge of a Special Court unless he is, immediately before such appointment, holding the office of a Sessions Judge or an Additional Sessions Judge, as the case may be. | 26A. (1) The Central Government may, for the purpose of providing speedy trial of offences under this Act, by notification, establish or designate as many Special Courts as may be necessary.(2) A Special Court shall consist of a single judge who shall be appointed by the Central Government with the concurrence of the Chief Justice of the High Court within whose jurisdiction the judge to be appointed is working.(3) A person shall not be qualified for appointment as a judge of a Special Court unless he is, immediately before such appointment, holding the office of a Sessions Judge or an Additional Sessions Judge, as the case may be. | The amendment provides for establishment of Special Court for speedy trial of offence under the Act and framework of such special court. | 18th July, 2013 |
| Section 26B | New insertion | 26B. Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Act committed prior to the date of commencement of the Securities Laws (Amendment) Act, 2014 or on or after the date of such commencement, shall be taken cognizance of and tried by the Special Court established for the area in which the offence is committed or where there are more Special Courts than one for such area, by such one of them as may be specified in this behalf by the High Court concerned. | 26B. Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Act committed prior to the date of commencement of the Securities Laws (Amendment) Act, 2014 or on or after the date of such commencement, shall be taken cognizance of and tried by the Special Court established for the area in which the offence is committed or where there are more Special Courts than one for such area, by such one of them as may be specified in this behalf by the High Court concerned. | All offences under the SEBI Act shall be tried by the Special Courts established for the area concerned. | 18th July, 2013 |
| Section 26C | New insertion | 26C. The High Court may exercise, so far as may be applicable, all the powers conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Session trying cases within the local limits of the jurisdiction of the High Court. | 26C. The High Court may exercise, so far as may be applicable, all the powers conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Session trying cases within the local limits of the jurisdiction of the High Court. | High Court are authorised for appeal and revision | 18th July, 2013 |
| Section 26D | New insertion | 26D. (1) Save as otherwise provided in this Act, the provisions of the Code of Criminal Procedure, 1973 shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conducting prosecution before a Special Court shall be deemed to be a Public Prosecutor within the meaning of clause (u) of section 2 of the Code of Criminal Procedure, 1973.(2) The person conducting prosecution referred to in sub-section (1) should have been in practice as an Advocate for not less than seven years or should have held a post, for a period of not less than seven years, under the Union or a State, requiring special knowledge of law. | 26D. (1) Save as otherwise provided in this Act, the provisions of the Code of Criminal Procedure, 1973 shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conducting prosecution before a Special Court shall be deemed to be a Public Prosecutor within the meaning of clause (u) of section 2 of the Code of Criminal Procedure, 1973.(2) The person conducting prosecution referred to in sub-section (1) should have been in practice as an Advocate for not less than seven years or should have held a post, for a period of not less than seven years, under the Union or a State, requiring special knowledge of law. | Special Courts shall be governed by the Code of criminal proceedings for proceedings before it. | 18th July, 2013 |
| Section 26E | New insertion | 26E. Any offence committed under this Act, which is triable by a Special Court shall, until a Special Court is established, be taken cognizance of and tried by a Court of Session exercising jurisdiction over the area, notwithstanding anything contained in the Code of Criminal Procedure, 1973:Provided that nothing contained in this section shall affect the powers of the High Court under section 407 of the Code of Criminal Procedure, 1973 to transfer any case or class of cases taken cognizance by a Court of Session under this section.”. | 26E. Any offence committed under this Act, which is triable by a Special Court shall, until a Special Court is established, be taken cognizance of and tried by a Court of Session exercising jurisdiction over the area, notwithstanding anything contained in the Code of Criminal Procedure, 1973:Provided that nothing contained in this section shall affect the powers of the High Court under section 407 of the Code of Criminal Procedure, 1973 to transfer any case or class of cases taken cognizance by a Court of Session under this section.”. | Transitional provisions authorise Court of Sessions to conduct trail for matters till Special Courts are established. | 18th July, 2013 |
| Section 28A | New Insertion | 28A. (1) 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 11B or fails to pay any fees due to the Board, 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 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;(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 221 to 227, 228A, 229, 232, the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, in so far as may be, apply with necessary modifications as if the said provisions and the rules made thereunder were the provisions of this Act and referred to the amount due under this ordinance instead of to income-tax under the Income-tax Act, 1961.Explanation 1.— For the 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 child, otherwise than for adequate consideration, and which is 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 after the date of attainment of majority by such minor child or son’s minor child, as the case may be, continue to be included in the person’s movable or immovable property 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 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, shall be construed as a reference to appeal before the Securities Appellate Tribunal under section 15T 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 (1). (3) Notwithstanding anything contained in any other law for the time being in force, the recovery of amounts by a Recovery Officer under sub-section (1), pursuant to non-compliance with any direction issued by the Board under section 11B, shall have precedence over any other claim against such person. (4) For the purposes of sub-sections (1), (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.’ |
28A. (1) 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 11B or fails to pay any fees due to the Board, 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 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;(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 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, in so far as may be, apply with necessary modifications as if the 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.Explanation 1.— For the 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 child, otherwise than for adequate consideration, and which is 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 after the date of attainment of majority by such minor child or son’s minor child, as the case may be, continue to be included in the person’s movable or immovable property 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 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, shall be construed as a reference to appeal before the Securities Appellate Tribunal under section 15T 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 (1). (3) Notwithstanding anything contained in any other law for the time being in force, the recovery of amounts by a Recovery Officer under sub-section (1), pursuant to non-compliance with any direction issued by the Board under section 11B, shall have precedence over any other claim against such person. (4) For the purposes of sub-sections (1), (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.’
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Section empowers the Recovery officer (any officer of the Board who may be authorised, by general or special order in writing, to exercise the powers of a Recovery Officer) to recover of penalty or amount disgorged by attaching person’s bank accounts, movable and immoveable property ,appointing receiver for management of such property and even cause imprisonment. | 18th July, 2013 |
| Section 30(2) | New insertion of clauses | (i)after clause (c), the following clauses shall be inserted, namely:—‘‘(ca) the utilisation of the amount credited under sub-section (5) of section 11;(cb) the fulfilment of other conditions relating to collective investment scheme under sub-section (2A) of section 11AA;(cc) the procedure to be followed by the authorized officer for search or seizure under sub-section (9) of section 11C;”(ii) after clause (d), the following clauses shall be inserted, namely:—‘‘(da) the terms determined by the Board for settlement of proceedings under sub-section (2) and the procedure for conducting of settlement proceedings under sub-section (3) of section 15JB;(db) any other matter which is required to be, or may be, specified by regulations or in respect of which provision is to be made by regulations.’’. | after clause (c), the following clauses shall be inserted, namely:—‘‘(ca) the utilisation of the amount credited under sub-section (5) of section 11;(cb) the fulfilment of other conditions relating to collective investment scheme under sub-section (2A) of section 11AA;”;(ii) after clause (d), the following clauses shall be inserted, namely:—‘‘(da) the terms determined by the Board for settlement of proceedings under sub-section (2) and the procedure for conducting of settlement proceedings under sub-section (3) of section 15JB;(db) any other matter which is required to be, or may be, specified by regulations or in respect of which provision is to be made by regulations.’’. | The insertion empowers the Board to make regulations providing for utilization of the amount credited to IEPF received under Section 11(5) of the Act, specifying other conditions to be fulfilled in relation to CIS, procedure for search and seizure, terms for settlement of proceedings and such other matter as may be required. | 18th July, 2013 |
| Section 34A | New Insertion | ‘‘34A. Any act or thing done or purporting to have been done under the principal Act, in respect of calling for information from, or furnishing information to, other authorities, whether in India or outside India, having functions similar to those of the Board and in respect of settlement of administrative and civil proceedings, shall, for all purposes, be deemed to be valid and effective as if the amendments made to the principal Act had been in force at all material times.’’. | ‘‘34A. Any act or thing done or purporting to have been done under the principal Act, in respect of calling for information from, or furnishing information to, other authorities, whether in India or outside India, having functions similar to those of the Board and in respect of settlement of administrative and civil proceedings, shall, for all purposes, be deemed to be valid and effective as if the amendments made to the principal Act had been in force at all material times.’’. | Section 34A validates any acts or things done under the SEBI Act in view of the amendments. | 18th July, 2013 |
[1] http://www.sebi.gov.in/cms/sebi_data/attachdocs/1379572440984.pdf
[2] Link to SEBI Act 1992 :- http://www.sebi.gov.in/cms/sebi_data/attachdocs/1379572440984.pdf
[3] Link to SEBI Ordinance dated 28th March 2014:- http://www.sebi.gov.in/cms/sebi_data/attachdocs/1396330987444.pdf
[4]Link to Securities Laws (Amendment) Bill, 2014:- http://www.prsindia.org/uploads/media/Securities%20(A)/Securities%20law%20(A)%20bill,%202014.pdf
[The above post is contributed by CS Vinita Nair and Aditya Shah at Vinod Kothari & Co. They can be contacted at vinita@vinodkothari.com and trainee@vinodkothari.com respectively]
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