Case Law Details
G. Moorthi Vs Recovery Officer (Madras High Court)
In the case of G. Moorthi vs. Recovery Officer, the Madras High Court deliberated on an issue related to a penalty imposed by the Securities and Exchange Board of India (SEBI). The case revolves around the incorrect mention of the Permanent Account Number (PAN) of the petitioner in the penalty order. Despite the incorrect PAN number, the petitioner was held liable for interest on the penalty. This article provides a detailed analysis of the court’s judgment.
Detailed Analysis:
1. Background of the Case: The Adjudicating Officer of SEBI imposed a penalty of Rs. 25,52,781 on the petitioner, even though the PAN mentioned in the order did not belong to the petitioner but to a third party. The petitioner chose to appeal this decision before the Securities Appellate Tribunal, which dismissed the appeal on 07.08.2019. Subsequently, the first respondent issued a notice attaching two of the petitioner’s bank accounts and freezing their operation, which prompted the petitioner to challenge this action through a writ petition.
2. Issue of Interest: After depositing the penalty amount pursuant to a court order, the issue revolved around the payment of interest. The first respondent claimed that the petitioner owed Rs. 17,34,791 as interest on the penalty amount from 16.06.2017 to 11.05.2023.
3. Arguments of the Petitioner: The petitioner’s counsel acknowledged that they did not seriously challenge the penalty’s imposition since it had already been paid. Their primary objection was related to the claim for interest. The petitioner’s position was that interest should not be payable since the penalty order carried the wrong PAN details, and it was not accurate in identifying the petitioner. They argued that interest should be levied only when all identifying features conclusively point to the liable individual.
4. Interpretation of SEBI Act and Income Tax Act: The first respondent’s counsel contended that if the petitioner disagreed with the appellate Tribunal’s decision, they should approach the Supreme Court under Section 15-Z. They argued that the incorrect PAN particulars did not change the individual’s identity, especially when the petitioner had paid the penalty without objection.
5. Court’s Decision: The Madras High Court agreed with the first respondent on two fronts. Firstly, it stated that the petitioner was not exempt from paying the interest component as demanded, given that the incorrect PAN number was only one means of identifying an individual. Secondly, the court held that the petitioner should have followed the statutory procedures outlined in the Act if they wished to challenge the matter, and it was now too late to claim innocence.
6. Conclusion of the Court: The Madras High Court dismissed the writ petition, emphasizing that the petitioner was not entitled to escape paying the demanded interest. It further clarified that the PAN details were not the sole basis for identifying an individual and that statutory remedies available under the Act should have been pursued.
7.cConclusion: The Madras High Court’s decision in G. Moorthi vs. Recovery Officer underscores the importance of adhering to statutory procedures when challenging regulatory actions. It clarifies that incorrect PAN details do not invalidate a penalty order, and interest may be levied if the penalty has been paid.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The Adjudicating Officer of SEBI vide its order dated 16.07.2017 has imposed the penalty of Rs.25,52,781/- on the petitioner vis-a-vis the petitioner’s PAN No. given in the order does not belong to him, but to a third party. But ignoring the same, the petitioner preferred an appeal to the Securities Appellate Tribunal. On 07.08.2019, it passed its order dismissing the petitioner’s appeal. Thereafter, the first respondent has come out with a notice attaching two bank accounts of the petitioner, and frozen its operation. This is now under challenge in this writ petition.
2. Pursuant to the order of this Court dated 10.04.2023, the petitioner had deposited Rs.25,52,781/-. Now the issue is all about the payment of interest. According to the first respondent, the petitioner is liable to pay Rs.17,34,791/- as interest on the penalty amount from 16.06.2017 till 11.05.2023.
3. The learned counsel for the petitioner submits that he has not seriously challenged the claim of penalty as he had already paid it, and hence he limits his challenge to the claim of interest.
4.1 The learned counsel submitted that the first respondent claims interest based on Explanation 4 of Section 28A of the SEBI Act, 1992. In terms of Explanation 4, the interest is required to be as per Sec. 220 of the Income Tax Act, 1961. Section 220 provides that where any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under Section 156, the same shall be paid within 30 days of the service of the notice at the place and to the person mentioned in the notice.
4.2 If the facts of this case is tested on the touchstone of Section 220 of the Income Tax Act, it will be evident that the first respondent cannot claim any interest, since the order of SEBI imposing the penalty carries a wrong PAN particulars. It may be that the petitioner might have chosen to challenge that order before the appellate Tribunal and also before this Court, but vis-a-vis the payment of interest, it must be fastened on the person satisfying all the features that goes to identify the person conclusively, argued the counsel.
5. The learned counsel for the first respondent submitted that if the petitioner is aggrieved by the order of the appellate Tribunal, he ought to approach the Hon’ble Supreme Court under Section 15-Z and challenge it. And if it is against such other orders of the Board or the adjudicating officer, then the petitioner ought to approach the SEBI Appellate Tribunal under Section 15T. Hence, the present writ is not entertainable. Secondly, so far as the present dispute itself is concerned, the petitioner knew against whom the order of penalty was passed, and it is hence he has to approach the appellate Tribunal, and it is too late in the day for the petitioner to plea innocence.
6. This Court concurs with the submission of the counsel for the first respondent on both the scores. It is not in dispute that the SEBI has imposed the penalty on the petitioner and he had also paid it. The interest is but incidental to it. Therefore, the petitioner cannot escape paying the interest component as is now demanded. The PAN particulars are, but one of the mode to identify an individual, and merely because a wrong PAN number is given, it does change the individual, more so when the petitioner had paid the penalty without demur. Turning to the maintainability, the petitioner ought to have challenged it in the manner provided under the Act.
7. To conclude, for the foregoing reasons, this petition is dismissed. No costs. Consequently, connected miscellaneous petition is closed.
