SEBI has power to delegate authority for imposing fine to stonewall investigation: SC [Read Order]

NEW DELHI: The Supreme Court has declared SEBI, the market regulator, has got statutory power to delegate its authority to a member for levying penalty for withholding information during the course of its investigation into rigging of shares prices.

The apex court upheld the order by the SEBI, imposing Rs one crore find each on DKG Buildcon and R C Gupta & Co for withholding information in alleged price rigging of the shares of Shonkh Technology International Ltd (STIL) in 2000-2001.

A bench of Justices Ajay Rastogi and B V Nagarathna dismissed the appeals filed by DKG Buildcon and R C Gupta & Co, saying Section 19 of the SEBI Act, 1992 provides that the regulator may delegate to any member, its officer or any other person such of its powers and functions as it may deem necessary.

When the appellants failed to comply with its directions and failed to produce the required documents and information, the investigating authority, being a delegated authority of Sebi was empowered to levy the penalty as provided in Section 15A(a), the court said.

The bench further said it is clear that the quantum of penalty was proportionate and within the confines of the provisions of Section 15A(a) read with Section 15J of the 1992 Act, and requires no interference by this court.

The court took into consideration the severity of offences found to have been committed by the appellants and other entities, and  their non-cooperative attitude during the course of the investigation in attempting to obstruct the same.

The apex court upheld the Securities Appellate Tribunals findings that SEBI had imposed a penalty of Rs one crore on the ground that they had adopted dilatory tactics of stonewalling investigations launched in the larger public interest which calls for a deterrent penalty.

In the course of investigations into purchase and sale of scrip and manipulation of share prices of STIL, SEBI found that the appellants, DKG Buildcon and R C Gupta & Co, had held shares in it.

It was further revealed that large quantities of shares of STIL were made available to entities associated with Ketan Parekh, who had rigged the securities market, in 2000 and 2001, which had sold a large number of shares of STIL in a synchronised manner to create artificial volumes in the said scrip in the securities market.

SEBI concluded that DKG, RC Gupta & Co and other entities had facilitated Parekh and his companies in manipulating the securities market and had thus violated Regulation 4 of the regulations.

Sebi restrained them from trading in the securities market for five years, after finding a series of 
unauthorised activities starting from the allotment of shares of STIL to various people including Ketan Parekh entities through a web of transfers which virtually wrecked the integrity of the securities market with a 
view to make unfair gains.

SEBI also prohibited Parekh and his companies for 14 years by an order on December 12, 2003.

The court heard Deeksha Mishra, for the appellants and senior advocate C U Singh on behalf of SEBI.

 [Read Order]