SIDDHARTH CHATURVEDI versus SECURITIES AND EXCHANGE BOARD OF INDIA
[2016] 2 S.C.R. 412, Supreme Court of India, 2016
Outcome: Matter referred to larger bench
Segment: Body
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[2016] 2 S.C.R.412 
SIDDHARTH CHATURVEDI 
v. 
SECURITIES AND EXCHANGE BOARD OF INDIA 
(Civil Appeal No.14730 of2015 etc.) 
MARCH 14, 2016 
[KURIAN JOSEPH AND ROHINTON FALi NARIMAN, JJ.] 
Securities and·Exehange Board of India Act, 1992 - ss. 15A 
(as amended in the year 2002) and I 5J - The questions whether s. 
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I 5A can be construed, in isolation, without regard to S.'J 5J - Whether 
the expression 'namely 'fixes the discretion only to the circumstances 
mentioned in the three clauses set out in s. I 5J, or whether it would 
also take into account other relevant circumstances - The questions 
referred to larger Bench for consideration. 
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SEBI Through its Chairman vs. Roofit Industries Limited 
2015 (12) SCALE 642; Julius v. Bishop of Oxford 
(19~0) LR 5 AC 21 (HL) - referred to. 
Case Law Reference 
2015 (12) SCALE 642 
(1980) LR 5 AC 21 (HL) 
referred to 
Para 7 
referred to 
Para 10 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 14730 
of2015 
From the Judgment and Order dated 04.08.2015 of the Securities 
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Appellate Tribunal, Mumbai in Appeal No. 436 of20 !'4 
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WITH 
C. A. Nos. 14728 & 14729 0f2015 
Purvish Jitendra Malkan, Jitendra M. Malkan, Ms. Dharita Malkan, 
Ms. Arunima Singh, Ms. Sangya Arora, Advs., for the Appellant. 
Chander Uday Singh, Sr. Adv., Pratap Venugopal, Ms. Surekha 
Raman, Purushottam Kumar Jha, Ms. Niharika (For Mis. K. J. John & 
Co.), Advs., with him for the Respondent. 
412
SIDDHARTH CHATURVEDI v. 
SECURITI~S AND 
413 
EXCHANGE BOARD OF INDIA 
The following order of the Court was delivered 
A 
ORDER 
I. These appeals rai~e an interesting question of the interplay 
between section 15A, as amended in the year 2002, and Section I 5J of 
th<; Securities and Exchange Board of India Act, 1992 (in short 'the 
SEBI Act'). 
2. The brief facts necessary to understand the present contro~ersy 
are that the appellants before us made certain purchases of shares of 
the Brijlaxmi Leasing and Finance Company between October and 
December, 2012: On 16m June, 2014, in Civil Appeal No.14730 of2015, 
a show cause notice came to be issued by the respondent SEBI to the 
appellant under Rule 4( I) of the Securities and Exchange Board of 
India (Procedure for holding inquiry and imposing penalty by adjudicating 
officer) Rules, 1995 for the alleged violation of the provisions of 
Reirnlations 13( 4), 13( 4A) and 13(5) of the Securities and Exchange 
Poard oflndia (Prohibition oflnsider Trading) Regulations, 1992. 
3. A detailed reply was filed by the appellant to the show cause 
notice, on 13'" August, 2014, submitting that there was no intention to 
violate any rule or regulation. The entire transaction value of purchases 
and sale of the shares did not exceed Rs.55,000/-. It was further submitted 
that the transaction was neither made with a view to make any 
disproportionate gain or unfair advantage nor was it for the purpose of 
causing any loss to investors. The
default, if any, was a technical default 
that did not call for any penal action. 
4. The Adjudicating Officer, by various orders imposed a penalty 
of Rs.5 lacs, 7 lacs and 11 lacs respectively, in the three civil appeals, 
. before us. An appeal made to the Securities Appellate Tribunal suffered 
the same fate, and was dismissed by the Tribunal stating that there is no 
dispute that there was violation of mandatory reg1,1Iations, and that in any 
case, a penalty of Rs.one crore could have been imposed on facts, 
whereas, iri fact, the Adjudicating Officer penalised the appellants with 
a penalty of Rs.5 lacs, 7 lacs and 11 lacs respectively, which cannot be 
said to be excessively harsh or unreasonable. 
5. It is these judgments of the Securities Appellate Tribunal, 
Mumbai that have come up before us in these appeals. 
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6. Learned counsel appearing on behalfof the appellants has argued 
that Section I SA, after its amendment in 2002, which was the law until 
the section was further amended in the year 2014, would undoubtedly 
apply to the present facts of the case. However, learned counsel 
~ubmitted that Section ! SA would, at all times, have to be read with 
Section ! SJ of the SEBI Act and that, this 'being so, it is clear that the 
violation of the regulations being only technical, and not involving any 
disproportionate gain to the appellant, or unfair ail vantage or loss to any 
investor, SEBI was not, in the first instance, correct in imposing any 
penalty at all. According to the learned counsel for the appellants, the 
defaults that were made were technical, and were made on three days 
only, and there was no repetitive nature of any default as well. 
7. Mr. C.U. Singh, learned senior counsel appearing on behalf of 
the respondent SEBI has placed before us a judgment of a Division 
Bench of this Court titled as SEBI Through its Chairman versus Roofit 
Industries Limited, reported in 201S (12) SCALE 642. Mr. Singh has 
pointed out,one may say fairly, to us that observations made in paragraph 
S of the said judgment would completely foreclose.the arguments made 
by the learned counsel for the appellants in the present cases, but that 
these observations may not constitute the ratio of the judgment for the 
reason
that the judgment ultimately construed Section ! SA prior to its 
amendment in the year 2002. 
8. It is necessary at this juncture.to set out paragraphs 4 and S of 
the aforesaid judgment in order to first ascertain as to what this Court 
has stated :-
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"4. We find merit in the contentions of learned senior counsel for 
the a[!pellant that the penalty imposed by the Adjudicating Officer 
should not have been reduced on wholly extraneous grounds not 
mentioned in Section. 1 SJ of the SEBI Act. Section 1 SJ reads 
thus: 
I SJ. While adjudging the quantum of penalty under Section 1 S-1, 
the adjudicating officer shall have due regard to the following 
facts, 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;
SIDDHARTH CHATURVEDI v. SECURITIES AND 
EXCHANGE BOARD OF INDIA 
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 "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 1 SA(a) as it stood subsequent 
to the 2002 amendment, for the facility of reference: 
!SA. If any person, who is required under this Act or any rules or 
regulations made thereunder,-
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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 
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··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. 7S lakhs despite the failure having continued .for 
substantially more than 7S days .. Learned senior counsel for the 
appellant has contended that the appellant has discretion to impose 
a penalty below the number of days ofdefault regardless of the · 
words '°whichever is less". He has argued that
there would be no 
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purpose to Section I SJ ifthe Adjudicating Officer's discretion to 
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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 contin.ued for over one hundred days is 
restricted to Rs. I crore. No scope has been given for discr.etion .. 
Prior. to the amendment, the section provided for a penalty "not 
exceeding one.lakh fifty thousand rupees for each such failure", 
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thus giving the app~llant the discretion to decide the appropriate 
amount of penalty. ln 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 151 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 151 was drastically 
reduced, and it became relevant only to the Sections where the 
Adjudicating Officer retained his prior discretion, such as in Section 
1 SF(a) AND Section l 5HB. This ought to have been reflected in 
the language of Section 15-1, but was clearly overlooked. Section 
151 has become relevant once again, subsequent to the Securities 
Laws (Amendment) Act, 2014, which changed Section l5A(a), 
with effect from 8.9.2014, to read as follows:-
l5A. 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, 2002. Had the··failure of the 
respondent taken place between 29.10.2002 and 8.9.2014, the 
penalty ought to have been Rs.l crore, without the possibility of 
any discretion for reduction." 
9. Two things have been clearly stated by this Court in so far as 
the amended Section I 5A read with Section 151 is concerned. First, this 
Court has indicated that by the use of the expression "namely" in Section 
151, SEBl in adjudging the quantum of penalty under Section 15A can 
have due regard only to the three factors set out therein and not to other~ 
relevant factors as the expression "namely" cannot be equated with the ' 
expression "including", being an exhaustive provision on the subject matter 
covered by the provision. This Court has also clearly held that Section 
151 would suffer an eclipse for the period2002 to 2014 inasmuch as the
SIDDHARTH CHATURVEDI v. SECURITIES AND 
EXCHANGE BOARD OF INDIA 
intention.of the Legislature, by amending Section I 5A, seems to be that 
no scope for any discretion for this period is to be exercised, if in fact, 
there is any infraction of Rules or Regulations. This Court clearly held 
that the discretionary power of the Adjudicating Officer having been 
withdrawn, .the scope of Section- l 5J would correspondingly stand 
drastically reduced. 
I 0. Prima facie, we find it a little difficult to subscribe to both the 
views contained in paragraph 4 as well as in paragraph 5 of t_he said 
judgment .. The expression "shall have due regard to" is a very known 
legislative device usect' from the time of Julius v Bishop of Oxford 
(1880) LR 5 AC 214 (HL), and followed in many judgments both English 
as well as ofour Courts as words vesting a discretion in an Adjudicating 
Officer. The question which arises in the present appeals is whether the 
expression "namely" fixes the discretion which c~n be exercised only in 
the circumstances mentioned in the three clauses set out in Section I 5J, 
or whether it would also take into account other relevant circumstances, 
having particular regard to the fact that it is a penalty provision that the 
Court is construing. As this needs to be authoritatively decided for the· 
future, it would be better if we refer it to a larger Bench for such 
authoritative pronouncement. 
11. We also find it a little difficult to accept what is stated in
paragraph 5 of the judgment. It is very difficult, keeping in view, 
particularly; two important legal facets- one the doctrine of harmonious 
construction of a statute; and two, the fact that we are construing a 
penalty provision of a statute which is to be strictly construed, Section 
I SA, post amendment in 2002, is suddenly given a pride of place, and 
Section l 5J is made to yield entirely to it. The familiar expression 
"notwithstanding anything contained" does not appear in the amended 
Section I SA. This being the case, it is a little difficult to appreciate as to 
how one can construe Section l 5A, as amended, in i~olation, without 
regard to Section !SJ. In fact, the facts of the present case would go te 
show that where there is allegedly only a technical default, and the three 
parameters of Section l 5J would allegedly be satisfied by the appellants, 
namely, tha(no disproportionate or unfair advantage has been made as a 
result of the default; no loss has been caused to an investor or group of 
investors as ll result of the default; and there is in fact, no repetitive 
nature of default, no penalty at all ought to be imposed. What has been · 
done by the appellants here is to fail to adhere to Regulation 13, as 
alleged in the show cause notice, which failure has occurred on three 
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days and consequently, has allegedly not been repeated by the appellants 
anytime thereafter. If we were to read Section I SA, as amended in 
2002, in the manner suggested by the Division Bench of this Court, it 
may lead to anomalous results in that the effect of continuing failure to 
adhere to statutory regulations alleged to have been continued well 
beyond the period of three days, and which continues till this day, has 
Rs. I lakh per day as the minimum mandatory penalty under the provisions, 
which would culminate in the appellants herein having to pay Rs. I crore 
in each of the three appeals. We do not think that this could have been 
the intention of the Parliament in enacting Seetion I SA, as amended in 
2002. We also feel that on the assumption that paragraph S of the 
judgment is correct, it would be very difficult for Section I SA to be 
construed as a reasonable provision, as it would then arbitrarily and 
disproportionately invade the appellants' fundamental rights. This being 
the case, on both the conclusions reached by this Court in paragraphs 4 
and S, as stated by us hereinabove, these matters deserve consideration 
at the hands of a larger Bench. The Registry is, accordingly, directed to 
place the papers of these appeals before Hon 'ble the Chief Justice of 
India for placi_ng these matters before a larger Bench. 
12. Interim orders passed by this Court shall continue to operate. 
Kalpana K.
Tripathy 
Matter referred tO larger bench.