Summary
The Court considered interest on unpaid SEBI penalties and a disgorgement order. It held that statutory interest liability was substantive and prospective, but equitable interest under the Interest Act could support recovery from when penalties became due. Separately, the Dalals’ disgorgement order deliberately omitted future interest and instead imposed extended market debarment on default; the later interest demand could not rewrite that order.
Issues
- Whether Section 28A authorised retrospective interest on unpaid SEBI amounts.
- Whether equitable interest was independently recoverable on penalties.
- Whether the particular disgorgement order imposed future interest after its quantified demand.
Provisions considered
- Sections 28A and 15JA, Securities and Exchange Board of India Act, 1992Recovery machinery incorporated tax provisions; statutory interest was substantive and prospective, while penalties were destined for the Consolidated Fund. (¶¶ 8–13, 28, footnote4)
- Sections 2(a) and 4, Interest Act, 1978Court includes tribunals, and other rule of law preserves equitable interest; specified equitable situations supplement the general power. (¶ 16–28)
Held
- Although Section 28A concerned procedure, its incorporation of interest liability operated substantively and could not impose retrospective interest. The Court specifically clarified that statutory interest through Section 220 began only on 25 August 2014, since the preceding ordinances did not incorporate that section. (¶¶ 8–13, 28, footnote4)
- Section 4(1)’s other-rule-of-law language included equitable interest and extended to tribunals. Deprivation of unpaid penalty monies intended for the Consolidated Fund attracted equity. The SAT therefore erred in excluding interest from the dates penalties became due merely because statutory interest operated prospectively. (¶ 16–28)
- The Dalals’ order quantified unlawful gains and past interest at six crores, payable within forty-five days, and prescribed seven-year debarment on default. Unlike comparable orders, it did not reserve further interest until payment. The SAT incorrectly read such an obligation into it. Having undergone debarment and paid the quantified sum, they were not liable to the asserted future interest under that order. (¶¶ 2–3, 29–32)
Result
SEBI’s appeals in the penalty cases allowed on equitable-interest grounds. The Dalals’ appeal also allowed, setting aside the SAT’s judgment sustaining future interest on their particular disgorgement order.