In a recent ruling, a solitary judge of the Madras High Court, while upholding the requirement to pay interest on a penalty imposed by the Securities and Exchange Board of India (SEBI) noted that PAN details serve as one means of identifying an individual, an incorrect PAN number in itself does not alter the individual’s identity, especially when the petitioner had paid the penalty without raising any objections. Therefore, the incorrect PAN cannot serve as a valid reason to avoid the interest payment.
The case revolved around an individual named G Moorthy, who had received an order from the Adjudicating Officer of the Securities and Exchange Board of India (SEBI) imposing a penalty of Rs. 25,52,781. Interestingly, the PAN number mentioned in the SEBI order did not belong to Moorthy but to another individual. Nevertheless, Moorthy opted to overlook this discrepancy and filed an appeal with the Securities Appellate Tribunal, which ultimately dismissed his appeal.
Pursuant to the order of this Court dated 10.04.2023, the petitioner had deposited Rs.25,52,781/-. Now the issue is all about the payment of interest. According to the first respondent, the petitioner is liable to pay Rs.17,34,791/- as interest on the penalty amount from 16.06.2017 till 11.05.2023.
Subsequently, the Recovery Officer (First Respondent) issued a notice attaching Moorthy’s two bank accounts and freezing their operation. In response, the petitioner’s counsel contested the claim of interest that accompanied the penalty.
He further argued that the interest amount, as per Explanation 4 of Section 28A of the SEBI Act, should align with Section 220 of the Income Tax Act. According to Section 220 of the Income Tax Act, any amount specified as payable in a notice of demand must be paid within 30 days of the notice’s service, to the person and place specified in the notice.
The Petitioner contended that the Recovery Officer could not legitimately demand interest, as the SEBI order imposing the penalty contained an incorrect PAN number. He asserted that interest should only apply when all the features that conclusively identify the person are met.
On the contrary, the authorities challenged the maintainability of Petitioner’s plea. The Department’s counsel argued that if the petitioner was dissatisfied with the Appellate Tribunal’s order, he should have approached the Supreme Court under Section 15-Z.
Furthermore, any challenges to orders issued by the Board or the Adjudicating officer should be directed to the SEBI Appellate Tribunal under Section 15T. They also contended that since Petitioner knew the order of penalty was issued against him when he approached the appellate tribunal, it was now too late for him to claim innocence.
The bench of Justice N. Seshasayee concurred with the authorities’ arguments. The High Court ruled that the regulatory order should have been contested through the avenues provided under the SEBI Act.
Subsequently, the court dismissed the writ petition, asserting that his obligation to pay interest remained, especially considering that the penalty had already been paid. The court underscored that PAN details serve as a mode of identification but are not the sole determinants of an individual’s responsibilities within a regulatory context.
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