The Delhi high court on Friday issued notices to Securities and Exchange Board of India (SEBI) and the Centre on a petition alleging a R50,000-crore scam in Sebi's penalty adjudication process since 2002.
The plea said the discretionary process of levying penalties, which was done away with after the sensational Harshad Mehta scam after an amendment in 2002, continued to be in force.
"As a result, Sebi has short-collected penalties of around Rs 40-50,000 crore since 2002, leading to a colossal loss of revenue for the Centre," the petition, filed by an entrepreneur Deepak Khosla, said.
Seeking a response from Sebi and the Centre within six weeks, a bench headed by justice AK Sikri has fixed September 28 as the next date of hearing.
As per the amendments, the complete system of levying of penalties was revamped, and not only were the penalties hiked by as much as up to 500 times and a minimum of Rs 25 crore, but the "subjective" and "discretionary" system previously existing was totally done away with, and replaced with an "objective" system of penalties, where the Adjudicating Officer now had no discretion whatsoever in computing the quantum.
Before the Harshad Mehta scam the fine was maximum Rs 5 lakh. After the amendment, the minimum penalty is Rs 25 crore.
"Despite this clarity in the amendment of 2002, Sebi officials continue to impose very minor penalties, and whose quantum is again calculated as per the subjective discretion of the Adjudicating Officers. This gave rise to huge scope for corruption in the adjudication process, not to mention people who should have been imposed with penalties of, say, Rs 25 crore are penalised with a mere Rs 15,000," Khosla said.