Can the Stock Exchanges Exercise Liberty and Impose Separate Penalties for the Same Offence?

In the case of PVP Ventures Ltd. v. Bombay Stock Exchange Ltd the Securities Appellate Tribunal (“SAT”) was confronted with the issue of whether separate penalties for the same offence can be imposed by both stock exchanges separately?

The facts of the matter in brief are that an appeal had been filed against the orders passed by the Bombay Stock Exchange Ltd. (“BSE”) and National Stock Exchange of India Ltd. (“NSE”), whereby BSE and NSE have separately imposed a penalty of Rs. 12 lakhs for violation of regulation 17 and 19 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”). Since the penalty amount was not paid the stock exchanges suspended the trading activities of the appellant w.e.f. April 09, 2019.

In the instant case, the penalty imposed was for not complying with the provisions of regulations 17 which deal with Board of Directors of listed entity and Regulation 19 i.e., Nomination and remuneration committee of the LODR Regulations in two consecutive quarters. Placing reliance upon a decision in W.S. Industries (India) Limited vs. BSE Ltd. and Another, it was contended that since the appellant was only in partial default of second quarter and had complied for the remaining part of the second quarter and further that the violation was the same, therefore only one penalty could be imposed.

However, it was found that admittedly the default was made by the appellant in two consecutive quarters, i.e., from July 01, 2018 to September 30, 2018 and the second consecutive quarter was from October 01, 2018 onwards. This inter alia shows that regulations 17 and 19 of the LODR Regulations were violated.

Moreover, in the case of WS Industries (India) Limited the SAT directed SEBI to consider the fact as to whether one penalty or separate penalties could be imposed by the two stock exchanges. In light of the above, SEBI answered the question in affirmative and held that separate penalties by the stock exchanges could be imposed.