BEFORE THE
SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved on: 02.04.2019
Date of Decision
: 12.04.2019
Appeal No. 451 of 2018
PVP Global Ventures Private Limited
Plot No. 83 & 84, Punnaiah Plaza,
Road No. 2, Banjara Hills,
Hyderabad – 500 033.
….. Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai – 400 051.
… Respondent
Mr. P.R. Ramesh, Advocate for the Appellant.
Mr. Gaurav Joshi, Senior Advocate with Ms. Vidhi Jhawar,
Advocate i/b The Law Point for the Respondent.
WITH
Appeal No. 450 of 2018
PVP Ventures Limited
KRM Center, 9th Floor,
No. 2, Harrington Road,
Chetpet, Chennai – 600031.
….. Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai – 400 051.
…. Respondent
Mr. P.R. Ramesh, Advocate for the Appellant.
Mr. Gaurav Joshi, Senior Advocate with Ms. Vidhi Jhawar,
Advocate i/b The Law Point for the Respondent.
2
WITH
Appeal No. 452 of 2018
Prasad V. Potluri
KRM Center, 9th Floor,
No. 2, Harrington Road,
Chetpet, Chennai – 600031.
….. Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai – 400 051.
.… Respondent
Mr. P.R. Ramesh, Advocate for the Appellant.
Mr. Gaurav Joshi, Senior Advocate with Ms. Vidhi Jhawar,
Advocate i/b The Law Point for the Respondent.
CORAM : Justice Tarun Agarwala, Presiding Officer
Dr. C.K.G. Nair, Member
Justice M.T. Joshi, Judicial Member
Per : Justice Tarun Agarwala, Presiding Officer
1.
This batch of appeals involves a common issue and,
therefore, the same are being decided together. For facility,
the facts stated in Appeal No. 451 of 2018, PVP Global
Ventures Private Limited vs. Securities and Exchange Board
of India (‘SEBI’ for short) are being taken into consideration.
3
2.
The appellant is a private limited company and is
engaged in the business of investment and real estate.
Pursuant to a report received from National Stock Exchange
of India Limited (‘NSE’ for short) an investigation was
conducted by SEBI on its parent company PVP Ventures Ltd.,
a listed company and appellant in Appeal No. 450 of 2018,
for the period September 01, 2009 to October 30, 2009.
Pursuant to the said investigation, it was found that the
appellant had violated Section 12A(d) and (e) of the
Securities and Exchange Board of India Act, 1992 (‘SEBI
Act’ for short) and Regulation 3(i) and (ii) read with
Regulation 4 of SEBI (Prohibition of Insider Trading)
Regulations, 1992, pursuant to which the Adjudication
Officer of SEBI after making necessary enquiry and, after
providing an opportunity of hearing, passed an order dated
March 27, 2015 imposing a penalty upon the appellant. The
appellant being aggrieved filed an appeal before the Securities
Appellate Tribunal which was disposed off. Thereafter the
appellant filed a SLP before Supreme Court which was
dismissed on September 14, 2018.
3.
Thus, the penalty imposed by the Adjudicating Officer
became payable. The Recovery Officer issued a certificate
4
dated October 26, 2018 under section 28A of the SEBI Act
read with Section 222 of the Income Tax Act, 1961 certifying
that a sum of Rs. 21,45,53,425/- was payable which amount
included the penalty imposed by the Adjudicating Officer
along with interest from March 27, 2015 to October 25, 2018
@ 12% p.a. Subsequently, a notice of attachment of bank
account was issued by the Recovery Officer dated November
19, 2018. The appellant being aggrieved by this notice of
attachment of bank account has filed the present appeal
praying not only for quashing for the notice of attachment of
bank account but also praying that direction be issued to the
Recovery Officer to issue a fresh certificate after appropriate
computation of interest.
4.
We have heard Shri P.R. Ramesh, the learned counsel
for the appellant and Shri Gaurav Joshi, the learned senior
counsel along with Ms. Vidhi Jhawar for the respondent.
The contention of the learned counsel for the appellant is, that
the recovery certificate is wholly illegal in as much as a
certificate cannot be issued straightway under Section 28A of
the SEBI Act. It was urged that before issuing a certificate the
Recovery Officer was required to issue a notice of demand
under Section 220(1) of the Income Tax Act. It was also
5
urged in the alternative that calculation of interest was
incorrect in as much as when the penalty imposed was
reduced by this Tribunal, the interest was waived impliedly.
It was also contended that the interest thus cannot be imposed
with retrospective effect and interest, if any, could at best be
payable from the date of the Supreme Court order. In support
of his submission the learned counsel for the appellant has
placed reliance upon a decision of the Supreme Court in
Commissioner of Customs (Import), Mumbai vs. M/s. Dilip
Kumar and Company & Ors. (Civil Appeal No. 3327 of 2007
dated July 30, 2018) in which it has been held that a taxing
statute cannot be interpreted on any presumption or
assumption and that the taxing statute has to be interpreted
strictly.
5.
On the other hand, the learned senior counsel for the
respondent Shri Gaurav Joshi contended that the controversy
raised in the present appeal is squarely covered by a decision
of this Tribunal in Mr. Dushyant N. Dalal & Anr. vs. SEBI
decided on March 10, 2017 (Appeal No. 41 of 2014) which
judgment was affirmed by the Supreme Court reported in
2017 SCC OnLine SC 1188. The learned senior counsel
6
contended that in the light of the aforesaid decision all the
appeals are devoid of any merit and liable to be dismissed.
6.
Before dealing with the rival contentions it would be
appropriate to quote section 28A of SEBI Act (to the extent
relevant) and Section 220 of the Income Tax Act, 1961,
which read thus:Section 28A of SEBI Act, 1992 w. r. e. f. 18/07/2013
“Recovery of amounts.
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;
7
(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.-………….
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
8
the Securities Appellate Tribunal under section 15T of
this Act.
(2) ………..
(3) ………..
(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.]”
Section 220 of Income Tax Act, 1961
“When tax payable and when assessee deemed in
default.
220. (1) Any amount, otherwise than by way of advance
tax, specified as payable in a notice of demand under
section 156 shall be paid within thirty days of the service
of the notice at the place and to the person mentioned in
the notice :
Provided that, where the Assessing Officer has any
reason to believe that it will be detrimental to revenue if
the full period of thirty days aforesaid is allowed, he
may,
with
the
previous
approval
of
the
Joint
Commissioner, direct that the sum specified in the notice
of demand shall be paid within such period being a
9
period less than the period of thirty days aforesaid, as
may be specified by him in the notice of demand.
(2) If the amount specified in any notice of demand under
section 156 is not paid within the period limited under
sub-section (1), the assessee shall be liable to pay simple
interest at one per cent for every month or part of a
month comprised in the period commencing from the day
immediately following the end of the period mentioned in
sub-section (1) and ending with the day on which the
amount is paid :
Provided that, where as a result of an order under
section 154, or section 155, or section 250, or section
254, or section 260, or section 262, or section 264 or an
order of the Settlement Commission under subsection (4)
of section 245D, the amount on which interest was
payable under this section had been reduced, the interest
shall be reduced accordingly and the excess interest
paid, if any, shall be refunded :
Provided further that in respect of any period
commencing on or before the 31st day of March, 1989
and ending after that date, such interest shall, in respect
of so much of such period as falls after that date, be
calculated at the rate of one and one-half per cent for
every month or part of a month.
10
(2A) Notwithstanding anything contained in sub-section
(2), the Chief Commissioner or Commissioner may
reduce or waive the amount of interest paid or payable
by an assessee under the said sub-section If he is
satisfied that-
(i)
payment of such amount has caused or
would cause genuine hardship to the
assessee;
(ii)
default in the payment of the amount on
which interest has been paid or was payable
under the said sub-section was due to
circumstances beyond the control of the
assessee; and
(iii)
the assessee has co-operated in any inquiry
relating to the assessment or any proceeding
for the recovery of any amount due from
him].
(2B) Notwithstanding anything contained in subsection
(2), where interest is charged under subsection (1A) of
section 201 on the amount of tax specified in the
intimation issued under sub-section (1) of section 200A
for any period, then, no interest shall be charged under
sub-section (2) on the same amount for the same period.
11
(3) Without prejudice to the provisions contained in
subsection (2), on an application made by the assessee
before the expiry of the due date under sub-section (1),
the Assessing Officer may extend the time for payment or
allow payment by instalments, subject to such conditions
as he may think fit to impose in the circumstances of the
case.
(4) If the amount is not paid within the time limited under
sub-section (1) or extended under sub-section (3), as the
case may be, at the place and to the person mentioned in
the said notice the assessee shall be deemed to be in
default.
(5) If, in a case where payment by instalments is allowed
under sub-section (3), the assessee commits defaults in
paying any one of the instalments within the time fixed
under that sub-section, the assessee shall be deemed to
be in default as to the whole of the amount then
outstanding, and the other instalment or instalments shall
be deemed to have been due on the same date as the
instalment actually in default.
(6) Where an assessee has presented an appeal under
section 246 or section 246A the Assessing Officer may, in
his discretion and subject to such conditions as he may
think fit to impose in the circumstances of the case, treat
12
the assessee as not being in default in respect of the
amount in dispute in the appeal, even though the time for
payment has expired, as long as such appeal remains
undisposed of.
(7) Where an assessee has been assessed in respect of
income arising outside India in a country the laws of
which prohibit or restrict the remittance of money to
India, the Assessing Officer shall not treat the assessee
as in default in respect of that part of the tax which is due
in respect of that amount of his income which, by reason
of such prohibition or restriction, cannot be brought into
India, and shall continue to treat the assessee as not in
default in respect of such part of the tax until the
prohibition or restriction is removed.
Explanation.—For the purposes of this section, income
shall be deemed to have been brought into India if it has
been utilised or could have been utilised for the purposes
of any expenditure actually incurred by the assessee
outside India or if the income, whether capitalised or not,
has been brought into India in any form.”
7.
The object and intention of inserting Section 28A to the
SEBI Act was to provide a mechanism for recovery of the
amount due to SEBI. Instead of prescribing an independent
mechanism for collection and recovery of the amounts due to
13
SEBI, the legislature deemed it fit to follow the mechanism
provided under the Income Tax Act and accordingly inserted
Section 28A to SEBI Act wherein the provisions of the
Income Tax Act relating to collection and recovery have been
incorporated. Thus, the legislature by inserting Section 28A to
SEBI Act has provided that if a person fails to pay the
amounts referred in Section 28A, then the Recovery Officer
shall draw up a statement/certificate and proceed to recover
the amounts specified in the certificate by any one or more of
the five modes specified therein and for that purpose the
provisions of Section 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, would apply with
necessary modifications as if the said provisions and the rules
made thereunder were the provisions of SEBI Act and
referred to the amount due to SEBI under the SEBI Act.
8.
The Tribunal in Dushyant Dalal’s case after considering
the provision of Section 28A of SEBI Act read with Section
220 of the Income Tax Act held:“It is relevant to note that Section 220(1) of the Income
Tax Act does not contemplate issuance of any notice of
14
demand, but refers to the notice of demand served under
Section 156 and mandates that the amount specified in
the said notice of demand shall be paid within 30 days
failing which interest @ 12% per annum would be
payable under Section 220(2) on the amounts set out in
the notice of demand from the end of the period
mentioned under Section 220(1). Since Section 156 of the
Income Tax Act is not incorporated in Section 28A of
SEBI Act, the expression ‘notice of demand’ referred to
in Section 220(1) for the purposes of recovery under the
SEBI Act would be referable to the amounts demanded by
SEBI under the disgorgement orders passed under
Section 11B or under the penalty orders passed under
Chapter VIA of the SEBI Act. Thus, on insertion of
Section 28A with retrospective effect from 18.07.2013,
the amounts demanded by SEBI which are enumerated in
Section 28A, must be paid within 30 days, failing which
the amounts demanded are liable to be recovered with
interest @ 12% per annum.
Fact that Section 28A of SEBI Act does not specifically
mention the interest liability for the delayed payment of
the amounts specified therein cannot be a ground to hold
that there is no substantive provision in the SEBI Act to
demand interest on delayed payments. By incorporating
Section 220 of the Income Tax Act in Section 28A of SEBI
15
Act, the legislature has statutorily imposed interest
liability on the delayed payment of the amounts set out in
Section 28A of the SEBI Act. In other words, the liability
to pay interest under Section 28A read with Section 220
is automatic and arises by operation of law. Therefore,
the argument of the appellants that there is no
substantive provision in the SEBI Act to demand interest
and hence, the RO, could not demand interest for the
delayed payment cannot be accepted.”
9.
The order of the Tribunal holding that no separate notice
is required to be issued under Section 28A read with 220 of
Income Tax Act was affirmed by the Supreme Court in the
appeal filed by Dushyant N. Dalal.
10. We further find that the Adjudicating Officer in its order
while imposing penalty had also directed the appellant to pay
the penalty amount within 45 days. In our view this order of
penalty would also be deemed to include a notice of demand
and thus a formal requirement for issuance of a separate
notice of demand pursuant to the order of penalty is no longer
required. Thus, the contention raised by the appellant is not
sustainable and is rejected.
16
11. The contention that interest was impliedly waived when
the penalty was reduced by the Tribunal or that interest
cannot be imposed with retrospective effect is patently
misconceived. Hon’ble Supreme Court while affirming the
judgment of this Tribunal in Dushyant Dalal’s matter held as
under:“We agree with the aforesaid statement of the law. It is
clear, therefore, that the Interest Act of 1978 would
enable Tribunals such as 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 15JA of the 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 would be
chargeable under Section 28A read with Section 220(2)
of the Income Tax Act only prospectively. However, since
it has not taken 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.”
17
12. From the aforesaid, it becomes clear that interest was
not only chargeable under Section 28A read with Section
220(2) of the Income Tax Act but the provisions of Interest
Act, 1978 could also be taken into consideration and interest
could be charged from the date on which the penalty became
due.
13. In the light of the aforesaid, we are of the view that the
Recovery Officer was justified in charging interest from the
date of the order passed by the Adjudicating Officer.
14. In view of the aforesaid, we find no merit in these
appeals and are dismissed. In the circumstances there shall be
no order on costs.
Sd/Justice Tarun Agarwala
Presiding Officer
Sd/Dr. C.K.G. Nair
Member
Sd/Justice M.T. Joshi
Judicial Member
12.04.2019
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