A mutual fund had repeatedly exceeded the permissible limits of transactions through its associate brokers in terms of Regulation 25(7)(a) of SEBI (Mutual Funds) Regulations. Consequently a penalty of Rupees Two lakh was

Yes, the penalty is justified. Reference to relevant case: SEBI v. Shriram Mutual Fund & Others - Appeal No. 9523-24 of 2003 A penalty of ₹ 2 lakh was imposed by Adjudicating Officer (AO) on Shriram Mutual Fund (SMF) as it had repeatedly exceeded the permissible limits of transactions through its associate broker, in terms of Regulation 25(7)(a) of SEBI (Mutual Funds) Regulations. On an appeal by SMF, SAT vide its final judgment and order dated August 21, 2003, set aside AO's order inter-alia on the ground that the limit was not exceeded intentionally. SEBI filed an appeal under Section 15Z of the SEBI Act in the Hon'ble Supreme Court. The Hon'ble Supreme Court pronounced its final judgment and order on May 23, 2006. Hon'ble Supreme Court set aside the judgment of SAT and settled the issues, as under: Mens rea is not an essential ingredient for contravention of the provisions of a Civil Act. Penalty is attracted as soon as contravention of the statutory obligation as contemplated by the Act is established, and therefore the intention of the parties committing such violation becomes immaterial. Unless the language of the statute indicated the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred. Once the contravention is established, the penalty has to follow and only the quantum of penalty is discretionary.