SUPREME COURT UPHOLDS SEBI’S POWER TO SUMMON AND TO PENALISE FOR NON-COMPLIANCE

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THE Supreme Court has dismissed the appeal challenging Securities & Exchange Board of India’s order imposing penalty on a firm for noncompliance of the summons issued by the market regulator in connection with the irregularities in the scrip of Shree Yaax Pharma and Cosmetics (SYPCL) during 2004-05. It upheld the order of the Securities Appellate Tribunal which had said that Sebi will not be able to perform its statutory functions and duties if persons connected with the securities market did not responding to the summons of the regulator.

"It’s only summons. Why did you (appellant company) not responded to it. How does regulator discharge its functions," asked a bench comprising justices SH Kapadia and Swatanter Kumar dismissing the appeal of Kajol Impex filed through counsel Sanjay Jain.

Sebi had intiated investigations into the scrips of SYPCL which had fluctuated during June 11, 2004 and August 10, 2005 from a high of Rs 10.20 to Rs 0.48.

In connection with it, Sebi had issued three summons seeking details of the shareholding of the company as on March 31, 2004 along with other informations. The company, however, had filed consent application.

The adjucating officer on April 17, 2009 had imposed a penalty of Rs 25 lakh on the company saying it failed to comply with the summons issued on August 4, October 10, and November 16 of 2005 in accordance with provisions of Section 15A of the Sebi Act, 1992.

On October 8, 2009, the Securities Appellate Tribuanl had dismissed the appeal of the company.

"The market regulator under the provisions of the Act (Sebi Act, 1992) will not be able to perform its statutory functions and duties if persons connected with the securities market throttle the investigations by not responding to the summons issued to them,” the tribunal had said.

Aggrieved by the tribunal’s order, the company had came to the apex court.

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