Punitive measures must be proportionate; cancellation of registration for non-cooperation is excessively harsh and violative of Article 14.

The Appellant, a SEBI-registered Registrar to an Issue and Share Transfer Agent (RTA) since 1969

was subjected to an audit by SEBI-appointed auditors for the period 2013–2016

The auditors and subsequent SEBI inspection teams reported non-cooperation, alleging that the Appellant failed to provide requisite data, failed to maintain records, and failed to file half-yearly reports since 2013

Consequently, the Whole Time Member (WTM) of SEBI passed an order on June 11, 2021, cancelling the Appellant’s certificate of registration

The Appellant challenged this, arguing that records were only required to be maintained for three years under Regulation 15 of the RTA Regulations and that the penalty was disproportionate compared to sanctions imposed on other RTAs for more severe violations

1. Whether the Appellant’s conduct during the audit and inspection constituted a degree of non-cooperation warranting the cancellation of its registration

2. Whether the penalty of cancellation of registration was proportionate to the alleged violations under the doctrine of proportionality and Article 14 of the Constitution

The Tribunal applied Regulation 15 of the SEBI (Registrar to an Issue and Share Transfer Agents) Regulations, 1993, which mandates the maintenance of records for a period of three years

It further relied on Regulations 26 and 27 of the SEBI (Intermediaries) Regulations, which outline the measures to be taken by the competent authority for violations

Crucially, the Tribunal invoked the Doctrine of Proportionality as a facet of Article 14 of the Constitution of India, referencing Brickworks Ratings India Private Ltd. v. SEBI and Jindal Cotex Limited & Ors. v. SEBI, which establish that punitive measures must be commensurate with the gravity of the violation

The Tribunal observed that the Appellant had been operational since 1969 with a near-spotless record, receiving only one warning in 2011

Upon reviewing the correspondence, the Tribunal found the Appellant’s emails to be polite and cooperative regarding office timings, though the Appellant held a mistaken legal view that the auditors were not entitled to financial books of accounts as they were not a listed company

The Tribunal scrutinized a comparative table of SEBI’s actions against other RTAs, noting that entities involved in actual fraud (e.g., processing transfers based on fake signatures) received significantly lighter penalties, such as censures or short suspensions

It concluded that while there was a lapse in cooperation, the WTM’s decision to cancel the registration—effectively a "death penalty" for the business—was "extremely harsh" and lacked the necessary proportionality required by law

The Tribunal modified the WTM’s order dated June 11, 2021, replacing the cancellation with a restraint on the Appellant from onboarding or accepting any new clients for a period of one year from the date of the order

No costs were awarded