Case Law Details
SC grants controlled discretion to Adjudicating Officer under Section 15J of The SEBI Act
The Supreme Court of India ruled in Adjudicating Officer, SEBI v. Bhavesh Pabari (Bhavesh Pabari) granting back the discretionary power to Adjudicating Officer (AO) under supervision and scrutiny of the court. It overruled its previous decision in Roofit Industries v. SEBI ( Roofit Industries). The highlight of the case is that it provided with controlled discretionary power to the AO, granting them the authority to determine the quantum of the penalty when there is non-compliance of any rules mentioned in the Securities and Exchange Board of India (SEBI Act) or Securities Contract Regulation Act (SCR Act). The ruling expanded the scope of Section 15J of the SEBI Act, and stated the fact that the three factors mentioned in Section 15J have to be interpreted as illustrative and not exhaustive in nature; herein providing that the AO has the power to determine the penalty and not limiting it only to the factors mentioned in Section 15J. The court elaborated that the AO will no longer be restricted by the minimum penalty rule and can impose the penalty which is proportional to the gravity of the offense. The AO can impose less penalty than the minimum prescribed in the Section or completely waive it off, after comprehending the nature of the offense. Thus, the court removed irregularities of the section which were primarily caused due to Roofit Industries and paved a path where the penalty imposed is in congruence with the degree of the offense.
Background
Section 15J has been a part of SEBI since 1992. The section 15A to 15HA provides for heavy penal punishments as a consequence of non-compliance of any rules. The bottom line is that Section 15A to 15HA provides for the penalty and 15J assists in the determination of penalty amount. The three components of S. 15J are as follows:
a) amount of disproportionate gain or unfair advantage.
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