Case BriefsHigh Courts

Delhi High Court: A Division Bench of Manmohan and Sanjeev Narula, JJ., stayed  the anti profiteering penalty proceedings against Samsonite South Asia Pvt. Ltd. till further orders.

The plaintiff had filed the petition, challenging the constitutionality and legality of the National Anti Profiteering Authority as well as Section 171 of the Central Goods and Services Tax Act and Rule 126 of the Central Goods and Services Tax Rules. The petitioner claimed breach of principle of natural justice because of absence of any methodology of the entire proceedings before the NAA. The petitioner also sought that it be allowed to deposit profiteered amount in instalments, in light of COVID-19 pandemic.

The plaintiff was represented by Rohan Shah, Advocate with Alok Yadav and Srisabari, Advocates. The respondents were represented by  Asheesh Jain, Advocate with Adarsh Kumar Gupta, Advocate and others.

The respondents objected the grant of instalments to the petitioner, but the court keeping in view the COVID-19 pandemic situation, directed the petitioner to deposit the principal profiteered amount i.e. Rs 21,81,20,748, in six equated monthly instalments. The interest amount and penalty proceeding were stayed by the Court. The court directed both the parties to file brief written submissions, while issuing notice to Central Government.

The matter will be taken up next on 24-08-2020, when the Court will be hearing 35 other similar matters.[Samsonite South Asia (P) Ltd v. Union Of India, 2020 SCC OnLine Del 794 , decided on 20-07-2020]

COVID 19Legislation UpdatesNotifications

Extension of time in filing ESI contribution

As a relief measure, the period for filing ESI contribution for the month of February and March was earlier extended to 15th April and 15th May, respectively. Now, considering the hardship being faced by employers, the period for filing ESI contribution for the month of February has been further extended from earlier extended period i.e. 15th April to 15th May, 2020.

No penalty or interest or damage will be levied on establishments during the extended period.

Besides these, following relief measures have been undertaken for Insured Persons and Beneficiaries:-

  1. In order to ease hardship of ESI Beneficiaries, purchase of medicines by ESI beneficiaries from private chemists during the lockdown period and its subsequent reimbursement by ESIC has been permitted.
  2. A provision has also been made for providing medical services to Insured Persons (IPs) and beneficiaries from Tie-up Hospitals, if an ESIC Hospital is declared as a dedicated Covid-19 Hospital to cater exclusively to Corona suspected/confirmed cases. ESI beneficiaries can be referred to tie-up Hospitals for providing prescribed secondary/SST consultation/admission/ investigation, during the period for which concerned ESIC Hospital functions as dedicated Covid-19 Hospital. ESI Beneficiary may also seek Emergency/non-Emergency medical treatment from tie-up hospital directly without referral letter, in accordance with his entitlement.
  3. Medical Benefit is provided under Rule 60-61 to the Insured persons who cease to be in insurable employment on account of permanent disablement and to the retired Insured Persons, on payment of advance lump-sum contribution for a year at the rate of Rs.10/- per month. Under the prevailing circumstances of lockdown, there may be cases where validity of the medical benefit cards issued to these beneficiaries expire as these beneficiaries are unable to deposit the advance annual lump-sum contribution due to lockdown. Such beneficiaries have been allowed to avail medical benefit under Rule 60 and 61 of ESI (Central Rules) till 30.06.2020.
  4. The payment of Rs 41.00 crore (approx.) in respect of Permanent Disablement Benefit and Dependants’ Benefit have been sent to the bank accounts of beneficiaries in the month of March, 2020.

Employees State Insurance Corporation

[Press release dt. 14-04-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Anil Choudhary (Judicial member) allowed an appeal filed against a common impugned Order-in-Appeal.

The appellant 1 were engaged in manufacture of MS Bars falling under Chapter 72 of the First Schedule to Central Excise Tariff Act, 1985 and there was another dealer who were engaged in the manufacture of M.S. Flat, Round etc. falling under Chapter 72, to which appellant- SRSDL supplied rejected MS Ingot. A search was conducted by Director General of Central Excise Intelligence (‘DGCEI’) in the factory of Bhiwadi RMPL at Bhiwadi on 06-09-2012 when the officers of DGCEI New Delhi, gathered information that Bhiwadi RMPL were indulging in clandestine removal and sale of finished goods manufactured by them without proper accounting and payment of Central Excise duty. Accordingly show cause notice was issued to all the three appellants. The Adjudicating Authority confirmed the demand of Rs 24,53,544 upon appellant No. 1 besides imposing penalty of equal amount. He also imposed penalty of Rs 2,50,000 each upon appellant 2 & 3. The Commissioner (Appeals) also upheld the Order-in-Original.

The Tribunal while allowing the appeal stated that whole of the case was based upon third party record. The director of appellant 1 specifically denied any clandestine clearance of Miss-Roll to BRMPL. The department had neither made investigation from the transporter or the truck drivers who transported the goods from the factory of the appellant 1. There was no corroborative evidence that SRSDL received raw material, manufactured and cleared the goods clandestinely. Hence allegations made against SRSDL and Sh. Ajay Kumar Malhotra, appellant 1 & 2 were not sustainable and their appeals were to be allowed. As regard appellant 3 the counsel argued that penalty under Rule 26 cannot be imposed upon a corporate body. The appellant is a private limited company hence penalty imposed was not sustainable. [Rathi Steel Dakshin Ltd. v. Commr. Of CE & CGST, Excise Appeal No. 50065 of 2019, decided on 17-03-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): A Two-Member Bench of Justice Tarun Agarwala (Presiding Officer) and Justice M.T. Joshi (Judicial Member) was hearing two appeals pertaining to the orders passed by Adjudicating Officer (AO) of Securities and Exchange Board of India (SEBI) imposing penalty over appellants.

The appeals were filed by Subrata Bhattacharya and Gurmeet Singh, Directors of Pearl Agrotech Corporation Limited which was involved in mobilizing funds from the General Public by sponsoring schemes. SEBI found out that the schemes by the company are the Collective Investment Scheme (CIS) and was in violation with Section 15-HA of SEBI Act, 1992. Therefore, SEBI directed the company to wind up the CIS and return the money to the investors. The AO imposed a penalty of Rs 7,269,49,70,295 to be paid by appellants which was later quashed by the present tribunal back in 2016. Later after hearing the appellants, the AO revised the penalty to Rs 24,23,16,56,765. The Appeal was filed against this order of the AO.

The Counsel for the appellants, Kunal Katariya, Pulkit Sharma assisted by Pranav Shah submitted that the show cause notice was quashed by Rajasthan High Court and it held that the scheme was not CIS. The orders of High Court even though were set aside by the Supreme Court no interim order was passed, so the directors have not collected money illegally. The Counsel further submitted that there was no proof that the appellants have made profits from the scheme and the scheme floated was a valid scheme that did not require registration. Therefore, the penalty was imposed without considering the relevant factors.

The Counsel for the respondent, Shyam Mehta and Shehaab Roshan submitted that the appellants have unlawfully drawn the fund causing loss to investors.

The Tribunal relied on Regulation 4(2)(t) of Prohibition of Fraudulent and Unfair Trade Practices and observed that the collection made by the appellants was illegal and the total amount of collection amounts to illegal profits made by the appellants and the company and the amount was raised under CIS as not registered from SEBI. Further, it was observed that the orders of AO are in consideration with the law by placing reliance on Section 15-HA of SEBI Act, 1992.

In the view of above, the Tribunal dismissed the appeals.[Subrata Bhattacharya v. SEBI, 2020 SCC OnLine SAT 5, decided on 14-01-2020] 

Op EdsOP. ED.

Internet is to this century what oil was to the last[1]. The Government of India realising the impact of data has placed two strategic bills, the Personal Data Protection Bill, 2018 and the Draft National E-Commerce Policy (DEPC) to regulate the access and use of the data collected from individuals in our country. This is further strengthened by the fact that the United Nations has recognised access to the internet as a human right.[2] Therefore, fair usage and access to internet services is an ancillary right of the netizens. But is it really the case? Do netizens get a fair service? Are we able to use the internet without one or the other algorithmic prejudices? These questions are far from one’s contemplation? What happens, if one is denied the most basic internet service, of a general search? What does a biased search on the internet lead to? Would a bias in the search result in any manner reduce consumer experience or mislead them? Google Inc. is at the forefront of the answers to these questions. Antitrust agencies globally are or have been at some point arrested with the accusations of search bias against Google. This article is however limited to the effect of search bias in India. The Competition Commission of India (CCI/Commission), has by and large through its order (primary order)[3] against Google set the tone for intervention in the digital market whilst cautiously balancing market innovation and antitrust intervention. It is, however, through its recent (android investigation)[4] that the CCI seemingly took a sterner view in calling for a level playing field in digital markets.

The Primary Order

By way of background, Consim, now known as and Consumer Unity and Trust Society (CUTS) had filed an information with the CCI alleging inter alia that Google had created an uneven playing field by preferring its own services and partners by manually manipulating algorithmic search results to the advantage of its verticals. It further alleged that Google is leveraging its strong position in the various online search markets to enter into and enhance its position in ancillary markets.

Now let us understand the process, service providers with two-sided platforms like Google, display free services to users and earn revenue through sponsored advertisements by publishers. When a user enters a query, Google’s algorithm runs the query, crawls it through billions of pages, index it and then in accordance with its relevance, display it to the user. It is understood that topmost results are the most relevant and are the ones to capture maximum clicks. Websites compete for the top positions on the Search Engine Results Page (SERP), as that ensures their viability. It is at this stage that Google manually manipulates the algorithm and displays its own vertical services at the prominent locations of the SERP, denying competitors the business that they would have otherwise garnered, at the same instance misleading consumers into believing this relevance. A lot of our readers would be of the mind that Google offers free services and therefore shall be outside the purview of the competition law. As Google charges for placing ads on its platform, which is an economic activity, it can be called under the ambit of the Competition Act, 2002 (Act). Further, our Act also considers free services and there is no requirement of monetary considerations for an enterprise to be held liable under our Act. Since Google is significantly present in both general and specified search, the CCI marked (a) market for online general web search services in India; and (b) market for online search advertising services in India as relevant markets. Google was found dominant by the virtue of inter alia the volume of business, total revenue, market share and the high entry barriers in terms of scale and technology in India.

The Commission found Google to be abusing its dominant position on three counts, each explained below:

  1. Universal Results: Universal results are a group of results for a specific category. The CCI found the abuse of dominance until 2010, where universal results were shown only at the 1st, 4th and 10th places, irrespective of their relevance in the SERP. Post-2010, it is found to be on a free-floating basis. Since it was historic conduct the CCI did not choose to plunge on it further.
  2. Commercial Flight Units: The most interesting part of the search bias can be definitely the self-preferencing placement of Google’s own sponsored advertisement. Google displays Google Flights on the top of the SERP with the tag of sponsored that on clicking leads to Google’s own flight page, instead of a third-party page. This in the view of the majority is abusive conduct as it misleads the user and denies the competitor the coveted real estate taking away the chance to business or possibly driving them out of business. It is, however, the dissent order, interestingly, that highlights the lack of evidence in arriving at this decision as well as the fact that most of the decision on this very point is based on surmises of a third-party misery. It also brings to the fore that users being aware of such a search being sponsored will not click it, should they choose and therefore, the remedy of putting a disclaimer of the click leading to a third-party website can only do so much.

The majority order recognises down that asking Google to replace its commercial flights’ link and integrate third-party verticals shall be confusing to the users and difficult for Google. Google will not be in a position to algorithmically first few results and use an entirely different method to rank the following set of results. This is again a failure in rectifying a situation by the CCI, whereby it could have asked Google to rank its pages systematically in consonance with regard to the third-party pages, which it felt so strongly for.

  1. Syndicate Search Agreements: Under this head the CCI deliberated with the unfair terms in the negotiated intermediation agreement that Google induces the website publishers to adhere, should they wish to incorporate Google search/advertising services within their websites, to ease customer experience by not incorporating a search technology same or similar to Google. The CCI has asked Google to cease and desist from this practice while stating that it is an act of leveraging dominance in one field, namely, the two relevant markets to gain dominance in the syndicate search. However, as a practice that leveraging dominance in the other field requires delineating a separate relevant market which the CCI failed to define in this case[5].

The CCI imposed a paltry penalty of INR 135.86, which was a 5% penalty on Google’s average total revenue generated from India operations in three years.

The Hits and Misses

The order highlights the pro-innovation and limited intervention in the digital market stance of our regulator. At one point before dealing with the issues of abuse, the majority order claims of market behaviour to be self-correcting for a dominant enterprise, be it a digital enterprise, in a digital/virtual market. This according to me can be denied as given the lack of proper alternatives, with such organised search skills, it is highly doubtful if Google’s behaviour can be exposed to self-correction by the market. Albeit, the decision is heavily biased in favour of Google, with limited modifications, denying a lot of valid DG assertions, still can be said to be a guiding light for Indian jurisprudence in terms of digital markets. It, however, fails to do any justice to the claims of search bias in the view of the author, as the order could have easily been supported by empirical studies and evidence which could have gone a long way in making this a strong decision, holding Google’s conduct more sternly liable.

As the dissent note highlights most of the findings in the order are relied upon by Google’s public statements and Microsoft’s studies. The Commission’s sprawling economic wing did not get into finding evidence or conducting market studies, as its European counterpart so effectively did. There was no study of the click-through rate or loss of sales by the customer due to Google’s abusive behaviour. Google’s monopoly over internet search still remains a serious issue. Various hypotheticals and past conduct in different jurisdictions show how Google may still display its results first even after the order. This order has, however, paved the way for more such intervention in the digital space and set the difficulties that agencies worldwide grapple with while dealing with the dynamic markets.

The Android Investigation

The present information deals primarily with Android-related abuse against Google in India. The informants have placed reliance on the search bias in the primary order along with the order of the European Commission (EC)[6] on the same dispute. Being the innovator that it is, Google had realised quite early on the shift of the user base from PCs to mobile phones given the flexibility of use and ease of access. Google’s search engine is admittedly its primary source of revenue and also aids its process of revenue generation as witnessed in the analysis of the primary order by collecting data from its search services. It acquired Android in 2005, which is used by the majority of phone manufacturers in India. Google cajoles the manufactures to enter into an agreement to install Google Mobile Services (GMS), a collection of Google applications including Google Maps, Gmail, and YouTube, Play Store. Interestingly, the end-users will be unable to avail of such services directly. The aforesaid agreement inter alia stipulates, in exchange for a free licence to GMS, the manufacturer shall agree to the placement of the Google search widget, the play icon, and a folder with a selection of other Google apps (such as Chrome) on the default home screen. Though Google confesses such apps take very little space and can be uninstalled by the consumer/user at any point in time, it fails to consider the resultant dysfunctioning of various other non-Google Android applications.

In terms of search bias, the users are now better able to input search queries with the accessibility of mobile phone allowing Google to further accumulate its data bank. The CCI whilst ordering an investigation under Section 26(1) of the Act, noted such placement of the search engine as denying market access to other competing search engines. The order also recognises the data-driven scale effects of the search engines and raised apprehension regarding the impugned conduct of Google in perpetuating its dominance in the online search market.

Its Import in the Competition Jurisprudence

Albeit an investigation order, this step of the CCI is bold in recognising the perpetual possibilities of Google’s abusive conduct in search results. The order only spells denial of market access to the competitors and a possible stifling in innovation; it misses out the fact that given the preinstalled Google search will help in accumulating the data bank and a possibility of further search bias. The increased ability and chances of the users to give feedback on their phones towards the improvement in algorithmic search shall also contribute to furthering search-related display of related services. Google has appealed the primary order, its historic conduct worldwide, however, gives a glaring impression of faltering the guidelines imposed by the Commission. Finding an abuse against Google and levying a penalty under the Act can act as a deterrent. The EC had levied a penalty of €4.34 billion in the similar litigation referred above. The decision shall be quicker than expected if the investigation as envisaged by the CCI is completed in 150 days, though highly unlikely as the CCI takes multiple years to decide. This decision will be of further assistance in establishing a stronger sense of abuse against the Goliath when the National Company Law Appellate Tribunal (NCLAT) decides the appeal of the primary order.

The Road Ahead

In summary, CCI has a chance to prove itself to be a stern regulator, one that does not shy away from enabling businesses in the digital economy to thrive and grow while ensuring that innovation of the internet economy is not hindered. Of late, the CCI has given progressive decision in the disruptive market, be it suggesting online platforms to be a potential ground for resale price maintenance whilst ruling that resale price maintenance did not require actual resale or  showing  concerns[7] or  flagging  big  data  concerns  during  the  Bayer/Monsanto  merger[8] or questioning  the  price-fixing  algorithm  in  the  air  cargo  cartel[9] or  the  multiple  orders  on price-fixing, collusion as well as abuse of dominance against the online cab aggregators. Understandably, the battle against Google’s dominance shall go a long way in paving paths for many other groundbreaking steps in the regulation of big data companies. Also interesting will be to see the impact of the DPEC in these decisions which (whenever sees the light of day) is expected to inter alia regulates the conduct of search engines such as Google whilst seeking to create a level playing field against the digital companies as well as regulating the sale of data. The DEPC strongly condemns the self-preferencing model that Google is charged in both the cases, can be the propeller for setting new principles in correcting Google’s conduct. Time shall only tell the outcome of Google’s abusive conduct but history shall bear witness to struggle and efforts of the CCI in achieving a level playing field in digitised markets.

 †  Research Associate, Competition Law, Email id:

[1] <>.

[2] Human Rights Council, UN Doc. A/HRC/17/27 (16-5-2011), available at <>.

[3] Cases Nos. 7 and 30 of 2012, 8-2-2018, available at <>.

[4]  Case No. 39 of 2018, 16-4-2019, available at <>.

[5]  2015 SCC Online CCI 139: (2015) CCI 143 and 74 of 2015, available at <>.

[6]  European Commission – Press release, 18-7-2018, available at <>.

[7]  Case No. 61 of 2014, 15-1-2019 available at <>.

[8] Combination Registration No. C-2017/08/523, 14-6-2018, available at <>.

[9]  Press Trust of India, New Delhi, 1-11-2018, CCI lens on ticket-pricing algorithms used by airlines for fixing airfares available at <>.

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): The Coram of Justice Tarun Agarwala, (Presiding Officer) and Justice M. T. Joshi (Judicial Member), and Dr C. K. G. Nair (Member) dismissed the appeal filed by the appellant to modify the order passed by the National Commodity and Derivatives Exchange Limited.

On 21-09-2018, the respondent had imposed a penalty of Rs 25,53,000 on the appellant on three separate counts. Aggrieved by this order, the appellant filed an appeal with SAT.

As per the records, the respondent had carried out the inspection of the appellant trader in 2016. Through this inspection, it was found that the appellant had a wrongly reported margin provided by their client, particularly, on 26-10-2015 and 28-10-2015 for which a penalty of Rs 25 lakh was imposed. Secondly, it was found that the appellant had used the client’s bank account for the purpose other than specified by the exchange for its own use. Therefore, a penalty of Rs 50,000 was imposed. Lastly, a penalty of Rs 3,000 was imposed for misdeclaration given in the annual compliance report after the inspection.

Parties submitted that the appellant made wrong reporting of the margin of Rs 1,69,71,959 for the trading on the above referred two dates. As per the appellant, there were huge volatility in Dhaniya (coriander) contracts on October 26 and 27. The clients, however, had stocks held in the sister concern of the appellant. In the circumstances, though cheques were issued by the respective clients, at their request the cheques were not encashed and later on the accounts were squared off. The appellant by giving this explanation had admitted that there was a shortfall.

Advocate Rajesh Khandelwal on behalf the appellant argued that it was due to the volatility in the market that there was a margin shortfall and therefore wrong reporting of the margin in 22 cases had occurred. Since a sufficient margin of the same client was available with the sister concern in the form of security, wrong reporting of margin money was merely a technical error. Therefore, a lesser penalty should have been imposed.

Tribunal was of the opinion that the order of the respondent needed no interference. A huge shortfall in margin was wrongly reported by the appellant. In such circumstances, a 100% penalty could have also been imposed according to the relevant circulars SEBI. The explanation that the clients had requested for not encashing the cheques as they had provided securities to sister concern was not accepted by the Tribunal stating that the market integrity must be maintained at all costs. [Pumarth Commodities (P) Ltd. v. National Commodity and Derivatives Exchange Ltd., 2019 SCC OnLine SAT 199, decided on 07-11-2019]

Case BriefsHigh Courts

Bombay High Court: Sadhana S. Jadhav, allowed a criminal appeal filed against the order of the trial court whereby the appellant was convicted for offence punishable under Section 7 read with Section 3 of the Essential Commodities Act, 1955 for violating sub-clause (3) of clause 6 of the Liquified Petroleum Gas (Regulation of Supply and Distribution) Order, 1988.

The appellant was convicted as aforesaid for selling bogus/duplicate gas regulators. Y.M. Nakhwa, APP for the State, submitted that even if the regulators were genuine, the appellant was selling them without holding a license for possession, distribution or sale. Per contra, Anand Shivaki Patil, counsel for the appellant, submitted that the prosecution had not proved the ownership of the shop and neither they had seized the license and therefore, the conviction of the accused had resulted in grave injustice.

Perusing the record and giving due consideration to the submissions made on the behalf of the parties, the High Court was of the opinion that the conviction of the appellant was not proper. It was observed: “The accused-appellant was not a license holder. Since the appellant is not a holder of a valid license under Section 3 of the Essential Commodities Act, there could not be any conviction recorded under Section 7 of the Essential Commodities Act.”

Moreover, the Court noted that the said Order of 1988 contemplates search and seizure by a person not below the rank of Inspector authorised by such Government and notified by the Central Government or any officer, not below the rank of a Sales Officer of an Oil Company, or a person authorised by the Central Government or a State Government and notified by the Central government with a view to ensure compliance with the provisions of this Order, for the purpose of satisfying itself that this Order or any order made thereunder has been complied with. The issue, in Court’s opinion, was overlooked by the Special Judge while farming of charge.

The Court was of the view that in fact, no charge should have been framed against the appellant under Section 3 and no penalty could be imposed upon him under Section 7. Accordingly, the appeal was allowed and the appellant was acquitted of the charges levelled against him. [Jayendra Sadarmal Talreja v. State of Maharashtra, 2019 SCC OnLine Bom 3130, decided on 16-10-2019]

Case BriefsHigh Courts

Himachal Pradesh High Court: Tarlok Singh Chauhan, J. partly allowed the appeal of filed by an employer challenging the compensation granted to a deceased employee’s wife under the Employees Compensation Act, 1923 on the ground that before passing a penalty order against the employer, a reasonable opportunity must have been given to him to justify himself.

Appellant herein was the employer of the respondent’s husband (deceased employee) who was employed as a driver by the appellant and died in an accident. Respondent’s wife filed a petition against the appellant seeking payment of compensation along with interest and penalty against the appellant and other respondents towards their joint and severe liability under the Employees Compensation Act, 1923. The appellant in his reply denied the salary as claimed and requested the recovery of the insurance amount. However, the Employee’s Compensation Commissioner-II awarded the respondent with compensation and interest along with a penalty. Aggrieved by this award, the appellant filed the present appeal.

Navlesh Verma learned counsel for the appellant, contended that there was no employer-employee relationship between the appellant and the deceased employee; and secondly that no show-cause notice was issued on the appellant-employer before passing an adverse award against him.

The Court held that the records proved that there was a relationship of employer and employee between the appellant and the deceased.

With respect to the second contention, it was held that as per the judgment in Ved Prakash Garg v. Premi Devi, (1997) 8 SCC 1 penalty under Section 4-A(3)(b) of the Act can only be imposed when the employer is given a prior notice and an opportunity to defend himself against the same which was certainly not given to the appellant herein.

Hence, the court allowed the appeal and set aside the penalty imposed on the appellant. [Amandeep Singh v. Shaheena Parveen, 2019 SCC OnLine HP 1416, decided on 30-08-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS & PBPT Act: Justice Manmohan Singh (Chairman) allowed an appeal challenging the impugned Judgment wherein the appellants were penalized for abetting illegal transfer of money.

In the present case, the respondent had alleged that the appellant-Bank abettor in illegal and unauthorized dealing of foreign exchange. The appellant-Bank had cleared four cheques issued by the Bank of Economic Affairs (which were denominated in non-convertible Indian Rupees) totalling Rs 11 Crores, for the purpose of crediting the VOSTRO Account of Girobank Plc (convertible rupee account) maintained by ANZ Grindlays Bank. Thereafter, this money was freely transmitted outside India in foreign currency by Girobank Plc. The Adjudicating Authority issued show-cause notices in respect of four cheques and imposed penalties against the appellants.

The counsel representing the respondents, Ashok Kumar Panda submitted that on receipt of the said amount of Rs 3,00,00,000 from Canara Bank, the ANZ Grindlays Bank, an authorised dealer of Foreign Exchange in India credited to the non-resident-Girobank Plc, London. Thereby on the instructions from the Canara Bank, the non-convertible rupee funds of the Bank of Economic Affairs into the convertible funds and transferred the same in foreign exchange to Girobank Plc., London a person resident outside India.

Thus, Canara Bank, Bombay abetted ANZ Grindlays Bank in contravening the provisions of the Foreign Exchange Regulation Act, 1973. The respondents placed reliance on the Supreme Court’s statement on abetment in the case of State of Madhya Pradesh v. Mukesh, 2006 (10) SCALE 346 wherein the Apex Court stated “A person, it is trite, abets by aiding, then by any act done either prior to, or at the time of, the commission of an act, he intends to facilitate and does, in fact, facilitate, the commission thereof would attract the third clause of Section 107 of the Indian Penal Code. Doing something for the offender is not abetment. Doing something with knowledge so as to facilitate him to commit the crime or otherwise would constitute abetment.”

The counsel representing the appellant-Bank, Debarshi Bhuyan submitted that although cheques were honoured by the Canara Bank, they did not possess any knowledge of the fact that the cheques were to be remitted abroad. The appellants relied on Shri Ram vs. State of U.P., (1975) 3 SCC 495 wherein it was held that in order to constitute abetment it must be established that there were active complicity and intentional aiding. The appellant further submitted that it was not within the knowledge of the appellants that the money was to be transferred abroad.

High Court upon perusal of the facts and records allowed the appeal. The Court stated that ANZ Grindlays Bank had presented the drafts to the appellant for payment in normal clearance without being accompanied by the required form A3 and in these circumstances, the appellant had no reason whatsoever to believe or to apprehend that the proceeds of the said draft were to have been remitted outside India.

Further, Court mentioned that the adjudicating authority has without considering the role of the officers of the Canara Bank imposed a penalty on them and also considering the similarity in the appeals filed by Standard Chartered Bank in another appeal, wherein the issue of abetment has been seen not to arise, the appeals were allowed.[Canara Bank v. Special Director, 2019 SCC OnLine ATFEMA 16, decided on 20-09-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): A Division Bench of Justice Tarun Agarwala, (Presiding Officer) and Dr C.K.G. Nair (Member), upheld the order passed by the Adjudicating Officer which imposed a penalty on the appellant for violation of SEBI regulations.

SEBI, in this case, observed a large scale reversal of trade in Stock Options segment of BSE Ltd., leading to the creation of artificial volume. On investigation, it was found that trades executed in Stock Options segment of BSE were non-genuine trades creating artificial volume to the tune of 826.21 crore units or 54.68% of the total market volume in Stock Options segment of BSE and this was done in illiquid Stock Options. The appellant was one of the various entities which indulged in this. A show-cause notice was issued indicating that the appellant had indulged in reversal trades which were non-genuine and creating a false and misleading appearance of trading in terms of artificial volumes in Stock Options and, therefore, were manipulative and deceptive in nature, thus, violating the provision of Regulations 3 and 4 of the PFUTP Regulations. The Adjudicating Officer for this case imposed a penalty of Rs 5,50,000 for violation of the said Regulations on the appellant.

The appellant contended that he did not execute any trade and did not give any authority to the stockbroker to execute any trades on behalf of the appellant and contended that at the time of submission of the reply before the AO a specific relief was prayed that the authority should summon the stockbroker and question him as to how he had executed the trades.

The Tribunal was of the consideration that although the appellant claimed to have made this submission before the AO, he did not contend the same before the Tribunal. In fact, the stand taken by the appellant before the AO was that he was trapped by R.K. Stockholding Pvt. Ltd. who was their stockbroker and who gave a rosy picture of high volatility with high rate of return in securities market and succeeded to gain confidence of the appellant by opening a trading account after signing the account opening booklet the trades were performed in the account of the appellant under supervision of the stockbroker. Thus, it is clear that the appellant was doing trades which amounted to a violation of Regulations 3 and 4 of the PFUTP Regulations. In light of the same, the order passed by the AO was upheld.[Basic Clothing Pvt. Ltd. v. Securities and Exchange Board of India, 2019 SCC OnLine SAT 150, decided on 21-08-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT), Mumbai: Coram of Justice Tarun Agarwala, (Presiding Officer), Dr C.K.G. Nair (Member), and Justice M.T. Joshi, (Judicial Member) directed an Adjudicating Officer to look into a matter afresh since BSE waived off the penalty imposed by them on the appellants.

The appellant, in this case, failed to comply with the provisions of Rule 19 of the Securities Contract (Regulation) Rules, 1957 (SCRR) with regard to the continuous listing.  An Adjudicating Officer, therefore, imposed a penalty of Rs 4 lakhs under Section 23-E of the Securities Contracts (Regulation) Act, 1956 (SCRA). The said penalty was imposed inspite of the fact that the appellant had contended that the MPS requirement was not required to be done in view of the order passed by Board for Industrial and Financial Reconstruction (BIFR) pursuant to the scheme of rehabilitation.

Subsequent to the passing of the impugned order, SEBI issued a letter advising the appellant to file the correct shareholding pattern with the stock exchange as directed by a BIFR order back in 2014. Based on the fresh shareholding pattern filed by the appellant, BSE withdrew the fines imposed upon the appellant with regard to the non-compliance of the MPS requirements.

Based on the facts, the Tribunal directed the Adjudicating Officer to reconsider the matter afresh. They set aside the older order by the Adjudicating Officer so that he/she can pass a fresh order after giving an opportunity of hearing to the appellant. The decision as for the amount of penalty already deposited by the appellant would be decided by fresh orders passed by the Adjudicating Officer.[Smiths & Founders India Ltd. v. Securities & Exchange Board of India, 2019 SCC OnLine SAT 133, decided on 07-08-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): Justice Tarun Agarwala (Presiding Officer) and Dr C.K.G. Nair (Member) justified the penalty imposed by SEBI on the appellants under Section 15-J of SEBI Act.

The appellants challenged the order of the Adjudicating Officer (AO) of SEBI. The order directed them to pay a penalty of Rs 25 Lakhs for running a Collective Investment Scheme (CIS) without SEBI registration and thereby violating Section 12(1-B) of the SEBI Act, 1992 and Regulation 3 of the SEBI (Collective Investment Scheme) Regulations, 1999 (CIS Regulations).

The appellants collected money from a large number of investors for a solar power project in Rubavali village as a joint venture project/scheme. SEBI asked them to furnish details and documents of the project since the appellants were involved in mobilizing funds without obtaining SEBI registration under CIS Regulations, 1999. The appellants denied running a CIS post which SEBI sought further documents regardless of the scheme being CIS or not. SEBI later passed an ex-parte ad-interim order under Section 11 and 11-B of the SEBI and passed the final order concluding that the appellants were engaged in activities covered under CIS without obtaining registration. This order was challenged by the appellants. The Tribunal directed the appellants to file a proposal for the refund of the entire amount before the Recovery Officer without going into the question of whether they are covered under the CIS Regulations, 1999 as sought by the appellants. They submitted original documents of land to SEBI and the auction process was initiated. Later, the AO issued a show cause notice seeking why an enquiry should not be held and penalty be not imposed under Section 15-D(a) of the SEBI Act and Regulation 3 of CIS Regulations, 1999.

The appellant argued that they entered into agreements with investors to expand their business. They further contended that the appellants and the other parties were collectively managing the business, and therefore they were not running any CIS. On the same grounds, SEBI had no jurisdiction in the matter. A substantial amount has already been recovered by SEBI through auctions. Their final contention was that a penalty of Rs 25 was too harsh. SEBI submitted that the penalty imposed is reasonable as under Section 15-D(a) as the penalty imposable at the relevant time was Rs 1 lakh for each day subject to a maximum of Rs 1 crore and therefore the penalty is just and reasonable.

The Tribunal dismissed the appeal and directed the appellants to pay the penalty. They held that the law does not prevent SEBI from initiating parallel proceedings to direct the appellants to complete the process of repayment to the investors. They further held that submission of joint venture agreement is not proof of joint management of the business since the investors will have no say in the management of the business. The appellants were running CIS in terms of its definition under Section 11-AA(2), 12(1-B) of SEBI Act, 1992 without obtaining a certificate of registration for running such a scheme.[Shree Sai Space Creations Ltd. v. Securities & Exchange Board of India, 2019 SCC OnLine SAT 105, decided on 01-08-2019]

Business NewsNews

Reserve Bank of India (RBI) has, by an order dated July 31, 2019, imposed monetary penalty on seven banks for non-compliance with certain provisions of directions issued by RBI on “Code of Conduct for Opening and Operating Current Accounts”, “Opening of Current Accounts by Banks – Need for Discipline”, “Discounting/ Rediscounting of Bills by Banks”, “Reserve Bank of India (Frauds classification and reporting by commercial banks and select FIs) directions 2016”, “End Use of Funds – Monitoring ” and “Deposits on Balance Sheet Date”, as detailed below:

Sl. No. Name of the bank Amount of penalty
(Rs in crore)
1. Allahabad Bank 2.0
2. Bank of Baroda 1.5
3. Bank of India 1.5
4. Bank of Maharashtra 2.0
5. Indian Overseas Bank 1.5
6. Oriental Bank of Commerce 1.0
7. Union Bank of India 1.5

The penalties have been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949, taking into account the failure of the banks to adhere to the aforesaid directions issued by RBI. This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers.


A scrutiny was carried out by RBI in the accounts of the companies of a Group and it was observed that the banks had failed to comply with provisions of one or more of the directions issued by RBI as mentioned above. Based on the findings of the scrutiny, Notices were issued to the banks advising them to show cause as to why penalty should not be imposed for non-compliance with the directions. After considering the replies received from the banks, oral submissions made in the personal hearings, where sought by the banks, and examination of additional submissions, if any, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions were sustained and warranted imposition of monetary penalty on aforementioned seven banks, based on the extent of non-compliance in each bank.

[Press release dt. 02-08-2019]

Reserve Bank of India

Business NewsNews

In exercise of powers vested under Section 30 of the Payment and Settlement Systems Act, 2007, the Reserve Bank of India has imposed a monetary penalty on the following Prepaid Payment Instrument (PPI) issuers for non-compliance of regulatory guidelines.

S. No. Name of the PPI Issuer Speaking Order Dt. Penalty (Lakh)
1. One Mobikwik Systems (P) Ltd. 17-05-2019 Rs 15.00
2. Hip Bar (P) Ltd. 24-05-2019 Rs 10.85

Press Release: 2019-2020/273

[Press Release dt. 29-07-2019]

Reserve Bank of India

Case BriefsHigh Courts

Uttaranchal High Court: Sudhanshu Dhulia, J. contemplated a writ petition where the residents of village Danpur in Rudrapur moved a petition before the National Green Tribunal and informed that the rice mills which were operated in the said village were polluting the environment. The petitioner was the Mill owner who had now filed the instant petition against the order for imposition of penalty.

NGT passed an order, thereby directing the State Pollution Control Board to inspect and file its report. Subsequently, the State Pollution Control Board inspected the rice mills and found certain anomalies in the rice mill since the air filters were not working in the rice mill and the petitioner was asked to rectify his air pollution control system and the report was subsequently submitted to the NGT. In reply to which NGT asked the Board as to why a penalty was not imposed on the Mill for the pollution already caused. Hence, a penalty of Rs 3,37,500 was imposed on the abovementioned Mill.

Counsel for the petitioner, Subhash Upadhayaya argued that penalty was purely in an arbitrary manner. There had been no inspection of the rice mill after 08-05-2019 and even earlier to that, and permission had already been given to the rice mill of the petitioner for 90 days.

On the contrary counsel for the State, Aditya Pratap Singh had apprised that the fixation of the penalty/compensation was not done arbitrarily, but it was based on the guidelines issued by the Central Pollution Control Board.

The Court observed that though the matter was pending before NGT related to the quantum of the penalty the petition had no merits. It further noted that the respondent had also admitted that the compensation/penalty was not justified and the same will be refunded to the petitioner.[Bansal Industries v. Uttarakhand Environment Protection and Pollution Control Board, 2019 SCC OnLine Utt 627, decided on 18-07-2019]

Case BriefsHigh Courts

Sikkim High Court: A Division Bench of Vijai Kumar Bist, CJ and Meenakshi Madan Rai, J. dismissed a writ petition filed against the order of the Commissioner of Customs, Central Excise and Service Tax (Appeal I) whereby he had rejected the application for condonation of delay filed by the petitioner along with an appeal from the order of the Joint Commissioner imposing service tax, interest and penalty under provisions of the Finance Act, 1994, on the petitioner.

In the said application for condonation of delay, no efforts were made by the petitioner to explain the delay from 15-08-2015 till 7-10-2016 (the date of filing the appeal before the Commissioner). While rejecting the application, the Commissioner recorded that the reasons for delay assigned by the petitioner were flimsy, and the period delay was also calculated irresponsibly and inaccurably.

Sourav Sen and Rupa Dhakal, Advocates for the petitioner Cooperative Society submitted that the case be considered on merits to subserve the ends of justice. Per contra, B.K. Gupta, Advocate appearing for the Commissioner, supported the impugned order.

The High Court noted that the application for condonation of delay reflected a lackadaisical approach on the part of the petitioner. It was observed: We are conscious and aware that the law of limitation is sufficiently elastic to allow and enable the concerned Authorities to apply it for substantial justice, but at the same time it may be mentioned that merely because a non-pedantic approach should be adopted to an application for condonation of delay it is not essential that every delay including those in which the drafting has been done in a haphazard manner and with nary a care to detail or explanation pertaining to the delay with dates thereof be condoned.”

Reference was made to Supreme Court decision in Esha Bhattacharjee v. Raghunathpur Nafar Academy,(2013) 12 SCC 649, wherein it was, inter alia, held that an application for condonation of delay should be drafted with careful concern and not in a haphazard manner harbouring the notion that the courts are required to condone delay on the bedrock of the principle that adjudication of a lis on merits is seminal to justice dispensation system.

In such view of the matter, the Court was of the opinion that the impugned order suffered no infirmity. Resultantly it was held that the merits of the matter could not be looked into. The petition was thus dismissed.[Singbel GPU Construction Co-Operative Society Ltd. v. CCE, 2019 SCC OnLine Sikk 105, decided on 18-07-2019]

Business NewsNews

Press Release

The Reserve Bank of India (RBI) has imposed, by an order dated 15-07-2019, monetary penalty of 70 million on State Bank of India (the bank) for non-compliance with the directions issued by RBI on (i) Income Recognition and Asset Classification (IRAC) norms (ii) code of conduct for opening and operating current accounts and reporting of data on Central Repository of Information on Large Credits (CRILC), and (iii) fraud risk management and classification and reporting of frauds. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47A (1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949 (the Act).

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.


The statutory inspection of the bank with reference to its financial position as on 31-03-2017 revealed, inter alia, non-compliance with directions issued by RBI on IRAC norms, sharing of information about customers with other banks, reporting of data on CRILC, fraud risk management, and classification and reporting of frauds. Based on the inspection report and other relevant documents, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for non-compliance with directions issued by RBI. After considering the bank’s reply and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty.

[Press Release dt. 15-07-2019]

Reserve Bank of India

Case BriefsHigh Courts

Chhattisgarh High Court: Prashant Kumar Mishra, J. quashed criminal proceedings pending against the petitioner-assessee before the Chief Judicial Magistrate for the commission of offences under Section 276-C (willful attempt to evade tax) and Section 277 (false statement in verification) of the Income Tax Act, 1961.

The gravamen of the offence alleged against the petitioner was that it concealed its income for the assessment year 1990-1991. Consequent to that, a penalty was imposed upon him by the Commissioner of Income Tax. He also granted sanction for petitioner’s prosecution, pursuant to which the criminal case which the subject matter of the present petition, was registered. The petitioner filed an appeal before the appellate authority — CIT (Appeals) — which appeal was allowed and the penalty was set aside on the finding that the petitioner did not conceal its income.

S. Rajeshwara Rao and M.K. Sinha, Advocates for the petitioner, contended that in view of the position that the penalty levied on the petitioner was set aside, the criminal proceedings pending on the file of CJM may also be quashed. Per contra, Naushina Ali appearing on behalf of A. Choudhary, Standing Counsel for the Revenue, opposed the present petition.

The High Court relied on K.C. Builders v. CIT, (2004) 2 SCC 731, wherein the Supreme Court held that “once the finding of concealment and subsequent levy of penalties under Section 271 (1)(c) of the Act has been struck down by the Tribunal, the assessing officer has no other alternative except to correct his order under Section 154 of the Act as per the directions of the Tribunal.” It was further held in the said case that “the finding of the Appellate Tribunal was conclusive and the prosecution cannot be sustained since the penalty after having been decided by the complainant following the Appellate Tribunal’s order, no offence survives under the Income Tax Act and thus quashing of prosecution is automatic.”

In the matter at hand, the High Court, following the law laid down in K.C. Builders, held that it will an empty formality to direct the petitioner to approach the trial Magistrate, who had otherwise kept the application preferred by the petitioners pending since 15-01-2014. Resultantly, the Court exercised its inherent powers and quashed the criminal proceedings pending against the petitioner. The petition was allowed. [System (India) Castings v. CIT, 2019 SCC OnLine Chh 63, decided on 26-06-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): The Coram of Tarun Agarwala, J. (Presiding Officer), Dr C.K.G. Nair (Member), M.T. Joshi, J. (Judicial Member) partly allowed the appeal in the present case with no order on costs.

The facts of the case are that the appellant is a member broker in the Capital Market (CM), Futures and Options (F&O) and Currency Derivatives (CD) segments of the National Stock Exchange of India Limited (NSE). NSE on regular inspection of the books and records noticed that the appellant falsely reported margin amounting to Rs 2,05,43,947 in the CD segment in respect of two clients on two occasions on 26-04-2016 and 21-06-2016. Therefore, the Disciplinary Action Committee (DAC) of NSE imposed a penalty of Rs 2,05,43,900 on the appellant and one trading day’s suspension after giving three weeks’ notice. Earlier in appeal, this Tribunal quashed the said order and directed the appellant to file review application before DAC which was later rejected and hence this appeal had been filed.

Counsel for the appellant, Senior Advocate, P.N. Modi stated that the alleged violations were due to delayed crediting of margin money collected from the clients. It was also stated that DAC did not apply its mind when the matter came before it for reconsideration and had taken shelter behind SEBI circular dated August 10, 2011 and held that in view of the said circular the DAC had no discretion available with it in the matter once the violation was established. The Counsel contended that this particular stand was contrary to Rule 17 of NSE and that there had been no prior violation by the appellant. Moreover, the brokerage earned (Rs 3.1 lakh) by the appellant is almost 100 times less than the penalty imposed which is extremely harsh and disproportionate.

Counsel for the respondent, Rashid Boatwalla stated that the statements made by the appellant in regard to the delayed crediting were inconsistent. It was also contended that irrespective of the margin or number of times violations are done, as per SEBI circular, the penalty could be imposed 100%.

Taking note of the contentions, the tribunal held that this does not remain a technical violation as cheques collected from the clients were not credited to the account upfront. Upfront collection of margin is an important mechanism for ensuring prompt settlement and in promoting market integrity. But, discretion in the imposition of penalty can be exercised. While the SEBI circular is quite mechanical in directing the Exchanges to impose a fixed penalty but for an only violation imposing such a penalty is out of proportion and can ruin an entity. In conclusion, a penalty of Rupees Fifty Lakh and one-day suspension from the CD segment was decided. [GRD Securities Ltd. v. NSE, 2019 SCC OnLine SAT 36, decided on 10-06-2019]

Case BriefsHigh Courts

Uttaranchal High Court: Alok Singh, J. dismissed a writ petition filed by Sahak Nagar Adhikari, who was Public Information Officer under Right to Information Act, 2005.

The petitioner contended that, a show cause notice was issued upon him which sought an explanation as to why a penalty should not be imposed upon him for providing delayed information. He gave a brief reply of the said notice and administered information to the said officer. Thereafter, State Information Commissioner adjudged the matter and imposed a penalty of Rs 25,000 for delayed reply to the notice. He was aggrieved by the said order of the officer and therefore sought justice from the Court.

Mr Parikshit Saini, learned counsel for the petitioner, submitted that impugned order of the Information Officer was arbitrary and patently illegal, hence, was not maintainable. He argued that impugned order was ‘unreasonable’ and ‘non-speaking’, the officer failed to justify the penalty as he gave a brief reply as to why the delay was caused by him for discharging his duties. He relied on the judgment of Supreme Court, in Narendra Kumar v. CIC, 2014 (2) UD 72 where it was observed, “State Public Information Officer has decided any complaint or appeal without any reasonable cause, refused to receive an application for information or has not furnished information within the time etc., in that event penalty can be imposed. In the further opinion of this Court, if there was reasonable cause for furnishing the delayed information then Chief Information Commissioner should not impose penalty merely because there was some delay in supplying the information.”

The Court observed that judgment in case Narendra Kumar was not applicable in the aforementioned case, as in the referred case information was not supplied in time because of natural disaster but in the case of petitioner there was delay of one year in supply of the information whereas Act, 2005 mandates to provide information within thirty days. Cause shown by the petitioner for delay in supplying the information was the excessive workload. The Court stated that, petitioner has not explained his excessive work; this was no ground for the delay in providing the information. One year delay in providing information under the Right to Information Act was too high.

It further held that Commissioner has assigned the reason for the penalty. “Providing information after one year that too on filing of appeal in the State Information Commission amounts to denial of information.” Court found no illegality or perversity in the impugned order and directed the petitioner to pay the aforementioned penalty.[Chandrakant Bhatt v. Uttarakhand Information Commission, 2019 SCC OnLine Utt 356, decided on 10-05-2019]