Decided on May 23,2006

CHAIRMAN, S.E.B.I. Appellant


AR.LAKSHMANAN, J. - (1.)THE Securities and Exchange Board of India (hereinafter referred to as 'the SEBF) is the appellant in the present appeal under Section 15-Z of the Securities and Exchange Board of India Act, 1992. This appeal was filed against the final judgment and order dated 21-08-2003 passed by the Securities Appellate Tribunal, Mumbai (hereinafter referred to as 'the Tribunal') in Appeal Nos. 50 of 2002 and 51 of 2002 raising an important question of law as to whether once it is conclusively established that the Mutual Fund has violated the terms of the Certificate of Registration and the statutory Regulations i.e. SEBI (Mutual Funds) Regulations, 1996 (hereinafter referred to as "the Regulations") the imposition of penalty becomes a sine qua non of the violation.
(2.)THE respondents have not chosen to enter appearance though they were served with the notice. Since the service is complete and the appeals are ready for hearing, the above appeals were listed for final hearing.
The Appellant-Board, a body corporate, has been established under the Securities and Exchange Board of India Act, 1992 by the Central Government, inter alia, to protect the interest of the investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith.

Shriram Mutual Fund was registered in the year 1994. It had floated 5 schemes. It conducted business through brokers associated with its sponsor in excess of the permissible limits prescribed under Regulation 25(7)(a) of the Regulations, 1996 on 12 occasions. The respondent failed to comply with the terms and conditions attached to the Certificate of Registration which are statutory in nature, as prescribed by Section 15-D(b) of the Securities and Exchange Board of India Act, 1992.

(3.)THE instances of excess transactions conducted by the respondents are as follows :- JUDGEMENT_2997_AIR(SCW)_2006Html1.htm
The Chairman, SEBI in exercise of the powers conferred on it under Section 15-1 of the said Act and Rule 3 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by Adjudicating Officer) Rules, 2005 appointed an Adjudicating Officer to enquire into the violations of exceeding by the respondents of the permissible limit of 5% of aggregate purchases and sales of securities made by the Mutual Fund in all its Schemes, as prohibited under Regulations 25(7)(a) of the said Regulations.

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