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SEBI v. Roofit Industries Ltd.

Civil Appeal · Neutral citation not assigned (Civil Appeal Nos. 1364-1365 of 2005)Decided 26 Nov 2015
Civil Appeal Nos. 1364-1365 of 2005
Justice Vikramajit Sen · Justice Shiva Kirti Singh

Background

SEBI investigated allegations of share-price rigging against Roofit Industries and summoned it to produce documents in July 2002. The company repeatedly sought extensions, did not comply, and was penalised Rs 1 crore by an adjudicating officer. The Securities Appellate Tribunal (SAT) later reduced the penalty to Rs 60,000, mainly because the company was financially distressed and could not pay.

Decision Breakdown

The Supreme Court held that inability to pay is not one of the factors the law lists for deciding a penalty, so the SAT was wrong to reduce it on that ground. It also held that the default was complete on 16 September 2002, when SEBI's final deadline expired, which was before the 2002 amendment that raised the penalty for continuing defaults. The older provision therefore applied, and the Court fixed the penalty at Rs 1.5 lakh for the company and for each respondent in the connected appeals. The SAT's order was set aside, the appeals were allowed, the interim stay was vacated, and no costs were awarded.

Lesson Learnt

Ignoring a regulator's summons is costly, and the penalty is judged under the rule that applied when the default happened. Financial hardship is not, by itself, a reason to reduce a penalty under this law.

Official source (sci.gov.in)View Judgment (PDF)

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