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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs. 1364-1365 OF 2005

SEBI THROUGH  ITS CHAIRMAN         …APPELLANT

VERSUS

ROOFIT INDUSTRIES LTD.     …RESPONDENT  

WITH

CIVIL APPEAL NOs.1366-1367 OF 2005,

CIVIL APPEAL NOs.1368-1369 OF 2005,  

CIVIL APPEAL NOs.1370-1371 OF 2005,  

CIVIL APPEAL NOs.1372-1373 OF 2005,  

CIVIL APPEAL NOs.1374-1375 OF 2005,  

CIVIL APPEAL NOs.1376-1377 OF 2005  AND

CIVIL APPEAL NOs.1378-1379 OF 2005  

J U D G M E N T

VIKRAMAJIT SEN, J.

1 These  Appeals  lay  siege  to  the  decision  of  the  Securities  Appellate  

Tribunal  (SAT) which modified the order  of  the Adjudicating  Officer  under

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SEBI, reducing the penalty payable by the Respondent, Roofit Industries Ltd.,  

under Section 15A of the Securities And Exchange Board of India Act, 1992  

(SEBI Act) from Rs. 1 crore to Rs. 60,000. In the connected matters, the penalty  

imposed by the Appellant SEBI was reduced from Rs. 75,00,000 to Rs. 15,000  

in five cases and Rs.  60,000 in one case.   What formulae,  if  any,  has been  

followed in these reductions is not forthcoming, making the exercise pregnant  

to the possibility of arbitrariness if not inconsistency or caprice.   

2 The Appellant, having noticed allegations of share-price rigging by the  

Respondent,  initiated  an  investigation  into  the  shareholder  pattern  of  the  

Respondent  and  price  manipulation  thereof.  During  the  investigation,  the  

Appellant  issued  Summons  on  23.7.2002  to  the  Respondent  requiring  it  to  

procure  and  produce  certain  documents  and  also  for  submitting  additional  

information.  The  Respondent  sought  time  till  20.8.2002  to  provide  the  

documents  and  information  sought  by  the  Appellant,  and  thereafter  sought  

further time till 31.8.2002 and then 30.9.2002. After a reminder dated 5.9.2002,  

since the Summons were still not complied with and the information required  

was not provided by the Respondent, an Adjudicating Officer was appointed on  

23.6.2003 under Section 15I of the SEBI Act to conduct an enquiry. By Show-

Cause Notice dated 1.9.2003 for non-compliance of Summons dated 23.7.2002,  

the Adjudicating Officer granted the Respondent two opportunities of personal  

hearing on 25.2.2004 and 8.3.2004. The Respondent did not appear before the

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Adjudicating  Officer  despite  these  opportunities.  The  Adjudicating  Officer  

therefore  held,  on 29.3.2004,  that  there  was no material  to  suggest  that  the  

Respondent  had  complied  with  the  Summons  or  had  given  the  information  

sought for by SEBI despite extensions of time. In terms of Section 15A(a) of  

the SEBI Act, a penalty of Rs. 1 crore was imposed on the Respondent. In the  

connected  appeals,  a  penalty  of  Rs.  75  lakhs  was  imposed  on  each  of  the  

various Respondent companies. Aggrieved, the Respondent moved an Appeal  

before the SAT.  

3 The SAT, on 9.8.2004, came to the conclusion that there was no dispute  

that the Respondent was liable to answer the summons and produce whatever  

information was available with it. It noted that the penalty under Section 15A  

had been enhanced in 2002 to Rs. 1 lakh for each day of failure to furnish the  

required document, return or report, or Rs. 1 crore, whichever is less. It noted  

the submission of the Respondent that it had suffered deep financial setbacks  

and was on the verge of bankruptcy, and therefore most of its staff had left the  

service  of  the  Company.  The  SAT held  that  given  that  the  business  of  the  

Respondent had come to a dormancy, there would be no point in imposing high  

penalties  which  would  remain  paper  orders,  and  never  be  implemented.  It  

considered impecuniosity an additional factor to those listed under Section 15J  

in adjudicating the quantum of penalty, and found it fit to reduce the penalty to  

Rs. 60,000. The quantum of penalty in the connected appeals was also reduced

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for  the same reasons,  from Rs.  75 lakh to Rs.  15,000 in five cases and Rs.  

60,000 in one case. The Appellant’s application for review was dismissed on  

8.11.2004. The Appellant has now filed the present Appeal, contending that the  

SAT erred  in  reducing  the  penalty  imposed  by  the  Adjudicating  Officer  on  

wholly extraneous grounds including the inability of the Respondent to pay the  

penalty, a contingency which is not mentioned or featured in Section 15J of the  

SEBI Act.  

4 We  find  merit  in  the  contentions  of  Learned  Senior  Counsel  for  the  

Appellant that the penalty imposed by the Adjudicating Officer should not have  

been reduced on wholly extraneous grounds not mentioned in Section 15J of the  

SEBI Act. Section 15J reads thus:

15J. While adjudging quantum of penalty under Section 15-I, the  adjudicating officer shall have due regard to the following factors,  namely:- (a) the  amount  of  disproportionate  gain  or  unfair  advantage,  

wherever quantifiable, made as a result of the default; (b) the amount of loss caused to an investor or group of investors as  

a result of the default; (c) the repetitive nature of the default.  

The  use  of  the  word  “namely”  indicates  that  these  factors  alone  are  to  be  

considered  by  the  Adjudicating  Officer.  Black’s  Law  Dictionary  defines  

“namely” as “by name or particular mention. The term indicates what is to be  

included by name. By contrast,  including implies a partial  list  and indicates  

something  that  is  not  listed.”  In  this  context,  we  find  no  reason  to  read

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“namely” as “including”, as Learned Senior Counsel for the Respondent would  

have us do.  

5 It would be apposite for us to begin our analysis of the penalty to be  

imposed  by  laying  out  Section  15A(a)  as  it  stood  subsequent  to  the  2002  

amendment, for the facility of reference:

15A.  If any person, who is required under this Act or any rules or  regulations made thereunder,–

(a) to furnish any document, return or report to the Board,  fails to furnish the same, he shall be liable to a penalty  of  one  lakh  rupees  for  each  day  during  which  such  failure continues or one crore rupees, whichever is less; …………

In the connected appeals before us, the Appellant has imposed a penalty of Rs.  

75 lakhs despite the failure having continued for substantially more than 75  

days.  Learned  Senior  Counsel  for  the  Appellant  has  contended  that  the  

Appellant  has  discretion  to  impose  a  penalty  below the  number  of  days  of  

default regardless of the words “whichever is less”. He has argued that there  

would be no purpose to Section 15J if the Adjudicating Officer’s discretion to  

fix the quantum of penalty did not exist, and that such an interpretation would  

render certain Sections of the SEBI Act as expropriatory legislation due to the  

crippling penalties they would impose. We do not agree with these submissions.  

The clear intention of the amendment is to impose harsher penalties for certain  

offences, and we find no reason to water them down. The wording of the statute  

clarifies that the penalty to be imposed in case the offence continued for over

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one hundred days is  restricted to  Rs.  1  crore.  No scope has been given for  

discretion.  Prior  to  the amendment,  the Section provided for  a  penalty “not  

exceeding one lakh fifty thousand rupees for each such failure”, thus giving the  

Appellant the discretion to decide the appropriate amount of penalty. In this  

context, the change to language which does not repose any discretion is even  

more significant,  as it  indicates a legislative intent to recall  and remove the  

previously provided discretion. Additionally, Section 15J existed prior to the  

amendment and was relevant at that time for adjudging quantum of penalty.  

Once this discretionary power of the adjudicating officer was withdrawn, the  

scope of Section 15J was drastically reduced, and it became relevant only to the  

Sections where the Adjudicating Officer retained his prior discretion, such as in  

Section 15F(a)  and Section 15HB. This ought to have been reflected in the  

language of Section 15I, but was clearly overlooked. Section 15J has become  

relevant once again, subsequent to the Securities Laws (Amendment) Act, 2014,  

which changed Section 15A(a), with effect from 8.9.2014, to read as follows:

15A. Penalty for failure to furnish information, return, etc. -  If  any  person,  who  is  required  under  this  Act  or  any  rules  or  regulations made thereunder,-

(a) to furnish any document, return or report to the Board, fails to  furnish the same, he shall be liable to 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;

The purpose of amendment was clearly to re-introduce the discretion of the  

Adjudicating Officer which was taken away by the  SEBI (Amendment) Act,

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2002. Had the failure of the Respondent taken place between 29.10.2002 and  

8.9.2014, the penalty ought to have been Rs. 1 crore, without the possibility of  

any discretion for reduction.

6 However, before imposing such a penalty, we must consider the date on  

which the amendment came into effect, i.e. 29.10.2002. Since the Appellant’s  

Summons to  furnish  the  required  documents  was  prior  to  this  date  and  the  

Respondent failed to do so till well after it, the question before us is when the  

failure or default took place. While this question does not appear to have been  

raised before the SAT, it is a question of law and can therefore be raised at any  

point.  As was held by this Court in  Chitturi  Subbanna vs Kudapa Subbanna  

(1965)  2  SCR 661,  a  pure  question  of  law,  which is  not  dependent  on  the  

determination of any question of fact, may be raised for the first time at the  

appellate or even the final stage, even though no reference to it had been made  

in the Courts below.

7 As  previously  discussed,  the  initial  Summons  to  the  Respondent  was  

dated  23.7.2002.  From  this  date  onwards,  there  was  an  obligation  on  the  

Respondent to produce the documents and information sought by the Appellant,  

but it failed to do so, even until the imposition of a penalty by the Adjudicating  

Officer on 29.3.2004. Instead, the Respondent sought extensions of time vide  

three letters.  After the third letter, the Appellant sent a reminder letter dated  

5.9.2002, which is reproduced below:

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URGENT

IES/ID9/SP/17502/02 September 5, 2002

SUJIT PRASAD DY. GENERAL MANAGER INVESTIGATIONS, ENFORCEMENT AND SURVEILLANCE DEPARTMENT email : sujitp@sebi.gov.in tel.no.:282981

M/s. Roofit Industries Ltd. 501, Sangli Bank Bldg. 296, Perin Nariman Street, Fort, Mumbai – 400001.

Dear Sirs,

Please refer to our summons dated July 23, 2002 advising you to  submit  certain  information  specified  at  Annexure  ‘A’ to  the  said  summons, by August 01, 2002.

In response, you had vide your letter dated July 26, 2002 requested  for  extension of  time  till  August  20,  2002 for  submission of  the  aforesaid information.

Further,  vide  you  letter  dated  August  12,  2002  you  had  again  requested for the extension of time till August 31, 2002 and now,  vide  your  letter  dated  August  28,  2002  you  have  once  again  requested for extension of time till September 30, 2002 to furnish the  information.

From the foregoing, it appears that you do not have any desire to  submit the information, as sought by us, and/or do not wish to co- operate  in  the  ongoing  investigation  in  the  scrip  of  M/s.  Roofit  Industries Ltd.

However,  before  initiating  action  in  terms  of  prosecution  under  Section  24  of  the  SEBI  Act,  1992  and/or  levying  penalty  under  Section 15A of the SEBI Act, 1992, you are once again advised to

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submit the information sought vide our above mentioned summons  by  September  16,  2002  failing  which  appropriate  action(s)  as  mentioned above would be initiated and no further communication  would be entertained from your end.

It is thus abundantly clear from a perusal of the letter that the Appellant had  

declined  the  request  for  a  further  extension  of  time beyond  16.9.2002.  The  

Respondent had failed to furnish the information by that date, resulting in the  

penalty under Section 15A becoming applicable. It would thus be palpable that  

the penalty prior to the amendment to Section 15A would be applicable, i.e. Rs.  

1.5 lakhs.

8 Learned Senior Counsel for the Appellant, however, has argued that this  

is a continuing default, as it did not end till well after the amendment, with the  

result that penalties both prior to and post the amendment would apply. He has  

relied  on  the  decision  of  the  Three-Judge  bench  in  Maya  Rani  Punj  vs  

Commissioner of Income Tax, Delhi (1986) 1 SCC 445, wherein it was held  

that where “a duty continues from day to day, the non-performance of that duty  

from day to day is a continuing wrong. Having perused Maya Rani Punj, we  

find that the facts therein were significantly different from those before us.  In  

that case, the Income Tax Act, 1961 applied instead of the Income Tax Act,  

1922 because the former statute stated that it would apply if the Assessment was  

made subsequent to 1.4.1962. On an analysis of the language in the 1961 Act, it  

is clear that the Legislature intended for non-compliance with the obligation of  

making a Return to be considered an infraction as long as the default continued.

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The facts before us are significantly different. The amendment to Section 15A  

did not indicate that the amended Section would apply to penalties imposed  

after 29.10.2002. The amendment was merely made with effect from that date,  

indicating that the change would be applicable for failures occurring after that  

date. The date on which the failure occurred was thus relevant for deciding the  

applicable law, not the date on which the penalty was imposed. The relevant  

version of the Act for us to consider would therefore be that before 29.10.2002,  

the language of which did not indicate a legislative intent to consider the default  

a continuing one.  

9 We find that the situation before us is more akin in its factual matrix to  

that  in  State  of  Bihar  v. Deokaran  Nenshi (1972)  2  SCC  890,  which  

distinguished between continuing offences and offences committed once and  

for all.

5. A  continuing  offence  is  one  which  is  susceptible  of  continuance and is distinguishable from the one which is committed  once and for all. It is one of those offences which arises out of a  failure to obey or comply with a rule or its requirement and which  involves a penalty, the liability for which continues until the rule  or its requirement is obeyed or complied with. On every occasion  that such disobedience or non-compliance occurs and recurs there is  the  offence  committed.  The distinction between the  two kinds  of  offences is between an act or omission which constitutes an offence  once  and  for  all  and  an  act  or  omission  which  continues  and  therefore,  constitutes  a  fresh  offence  every  time  or  occasion  on  which it continues. In the case of a continuing offence, there is thus  the ingredient of continuance of the offence which is absent in the  case of  an offence which takes place when an act  or omission is  committed once and for all.

(emphasis added)

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In that  case,  Regulation  3 read with Section 66 of  the Mines  Act  made the  

failure to file an Annual Return by the appropriate date an offence. It was held  

that  since  the  failure  was  to  file  the  Returns  by  the  stipulated  date,  the  

infringement  occurred  on  that  date  and  became  complete  on  that  date.  

Significantly,  this  case  was  discussed  in Maya  Rani  Punj but  was  not  

overruled.  

10 On the facts at hand, as in  Deokaran Nenshi,  the default was clearly  

complete on the failure to submit the requisite information by the date set by the  

Appellant, i.e. 16.9.2002. Had the Respondent furnished the information sought  

by the Appellant by that date, undoubtedly there would have been no culpability  

against it.  Thus the penalty first became applicable under the pre-amendment  

Section, which imposed “a penalty not exceeding one lakh fifty thousand rupees  

for each such failure”. The intention of the Section as it then stood was clearly  

not to consider it a continuing default. Such an intention can be read into the  

provision as it currently stands, as it imposes a penalty for each day for which  

the breach continues, but this was not the case prior to 29.10.2002. Facially, this  

was the reason and necessity for the amendment.  

11 As  the  failure  herein  was  complete  on  16.9.2002,  the  penalty  to  be  

imposed on the Respondent in C.A. No. 1364-65 of 2015 and on each of the  

Respondents in the connected Appeals is Rs. 1.5 lakhs. The impugned judgment

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of the SAT is set aside and the Appeals are allowed in these terms. The interim  

stay order dated 18.2.2005 is vacated. No orders as to costs.  

……………………......................J.            [VIKRAMAJIT SEN]  

                                   ……………………......................J.  

    [SHIVA KIRTI SINGH]      

NEW DELHI, NOVEMBER 26, 2015.