The Chairman, SEBI vs Shriram Mutual Fund Case

 The Chairman, SEBI vs Shriram Mutual Fund - Important Supreme Court Cases 2006

On 23rd May, 2006, a two Judges Bench in The Chairman, SEBI vs Shriram Mutual Fund & Anr. [Civil Appeal No.9523-9524 of 2003] considered the question as to whether once a Mutual Fund violates the terms of 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) and the statutory Regulations i.e. SEBI (Mutual Funds) Regulations, 1996, the imposition of penalty becomes a sine qua non of the violation. The Bench held that “penalty is attracted as soon as contravention of the statutory obligation as contemplated by the Act and the Regulation is established” and that “intention of the parties committing such violation” i.e. mens rea was wholly irrelevant.

The Bench held that the impugned judgment of the Securities Appellate Tribunal had “set the stage for various market players to violate statutory regulations with impunity and subsequently plead ignorance of law or lack of mens rea to escape the imposition of penalty.” It held that “imputing mens rea into the provisions of Chapter VI-A of the Act is against the plain language of the statute and frustrates entire purpose and object of introducing Chapter VIA to give teeth to the Securities and Exchange Board of India (SEBI) to secure strict compliance of the Act and the Regulations”.


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