Absent established inter se connection, a broker’s joint and several penalty may be reduced to its pro-rata share.

SEBI’s Adjudicating Officer imposed a penalty of ₹7.50 lakh jointly and severally on the appellant and 14 other noticees for alleged circular trading in the “Darshan Orna” scrip on 7, 8 and 9 January 2019.

The appellant disputed engaging in circular trading and argued that the order established neither a connection with the other noticees nor any loss to a third party or unlawful gain by the appellant.

It sought permission to pay ₹50,000, representing a pro-rata share of the penalty.

SEBI opposed pro-rata payment, and stated that recovery proceedings had commenced but no recovery had been made.

The appellant appealed under Section 15T of the SEBI Act, 1992.

1. Whether the appellant could be required to pay the penalty jointly and severally with the other noticees when no inter se connection or specific basis for joint and several liability was established.

2. Whether the appellant could instead be permitted to discharge a pro-rata share of the penalty.

The appeal was brought under Section 15T of the SEBI Act, 1992, against an adjudication order concerning alleged violations of the SEBI Act and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.

The Tribunal relied on its decision in Surenderkaur Paramjeet Panesar v. SEBI, Appeal No. 703 of 2021 and connected appeals, decided on 18 May 2023, which it treated as supporting individual, pro-rata payment in comparable circumstances.

Applying that approach, the Tribunal held that pro-rata payment was appropriate where no connection between the parties was established and the appellant had offered to pay its proportionate share.

The Tribunal noted that the trades occurred on an exchange platform using screen-based, anonymous transactions, and that the impugned order disclosed no inter se connection between the appellant and the other 14 noticees.

SEBI also did not identify a specific finding supporting joint and several liability.

In those circumstances, and given the appellant’s offer to pay a pro-rata amount, the Tribunal followed Surenderkaur and considered it appropriate to permit payment of ₹50,000.

The direction imposing joint and several liability was modified as against the appellant, which was permitted to pay ₹50,000 as its pro-rata penalty within four weeks; the remainder of the order was left undisturbed.

Pending interlocutory applications were disposed of, with no order as to costs.