MF fine: SC quashes SAT order against Sebi

The order is significant, coming at a time when the bourses are passing though a difficult phase. The court was hearing an appeal filed by SEBI against an order of the Securities Appellate Tribunal SAT quashing its order imposing fine on two mutual funds. They were charged with violating the terms and conditions of the Certificate of Registration.

The Appelate Tribunal had struck down the penalty imposed on them saying no mens rea could be established against them. But the SC did not agree. Setting aside the Tribunal8217;s order, it said 8220;the Sebi Act and Regulations are intended to regulate the Security Market and related aspects, the imposition of penalty, in the given facts and circumstances of the case, cannot be tested on the ground of no mens rea no penalty. For breaches of provisions of SEBI Act and Regulations, according to us, which are civil in nature, mens rea is not essential.8221;

8220;The impugned order sets 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,8221; the apex court said.