28A(1) (d) SEBI's power to order Arrest and Civil Prison is Subject Judicial Precedents under Income Tax & Other Laws
Since August, 2014, SEBI's Recovery Officer is given power to order Civil Prison of defaulter.
The provision further says that this provisions is subject to other provisions of Income Tax Act etc.
The provision itself does not contain any guideline about
1) Length of such Detention and
2) Findings which are necessary to be recorded by Recovery officer before ordering Arrest and Civil Prison.
The section only speaks about purpose of Arrest and Detention.. --That is to enforce recovery of dues of SEBI.
SIMILAR PROVISIONS IN OTHER LAWS.
There are similar provisions in other laws. Namely, in Civil Procedure Code and Income Tax Act.
Validities of such provisions have been challenged upto Supreme Court and the Law is by and large settled by Supreme Court decisions in this area,...
mainly on following THREE POINTS.
Point 1 : India is a signatory to International Convention where it has signed that in India, no one will be sent to jail on ground that he has no money to pay debt.
Point 2 : If a person has no money to pay, he cannot be sent to jail for inability to pay debt.
Point 3 : Even if a person has no money to pay debt, he can be sent to jail if it is found that in order to avoid payment of debt, he had malafidely disposed off all his money and properties.
CONCLUSION
As per judicial precedents, the Recovery officer can arrest and detain a person only if he records findings that
1) Though defaulter had means to pay dues, he has malafidely disposed off his properties to avoid payment of SEBI dues
2) Though he has means to pay, he is avoiding payment.
PROCEDURE
Before ordering Arrest, Recovery Officer issues a notice to Defaulter.
In reply, the Defaulter should produce all details to support his stand that he has actually no property to pay dues, and he has done nothing to malafidely disposed off his properties to avoid debt, and he has bonafidely no means to pay.
If inspite of such facts, Recovery and Arrest are ordered, then Defaulter should take appropriate legal remedy to challenge vires of this provision after taking suitable legal advice.
The views expressed above are in general nature and is not a legal advice.
Haresh Raichura
31/12/14
Copyright : Haresh Raichura 2014. All Rights reserved.
