NEW DELHI: Observing that a wrongdoer cannot be allowed to use the plea of investors having gained, Supreme Court on Monday upheld Sebi’s action against Kotak Mahindra Asset Management Company (Kotak AMC), its trustee company, and senior executives, including MD Nilesh Shah, for violation of mutual fund rules over their handling of six Fixed Maturity Plan (FMP) schemes.The court warned the managers of AMCs/fund houses by coining the phrase “Mandate first, gains later; Sebi compliance, never falter”. A bench of Justices Dipankar Datta and Satish Chandra Sharma rejected the appeal filed by the AMC and its manager.It directed Kotak AMC and Kotak Trustee Company to bear costs assessed at Rs 30 lakh and 20 lakh respectively. The amount will be given to 10 accredited charitable organisations engaged in caring, supporting and uplifting the conditions of destitute children, children battling cancer, orphans, women in distress, mental patients and victims of crime etc.
Rejecting the contention of Kotak Mahindra AMC which took the defence that investors did not lose money, the court said, “The contention that no loss was caused to investors/unitholders and, on the contrary, they gained and, hence, action should not have been taken is no defence at all.“The 1996 Regulations make no distinction between a breach resulting in profit and a violation resulting in loss. Neither do we. Breaches of the regulatory framework, fortuitously, could ultimately result in gain but excusing a breach which led to profit is likely to incentivise the next breach.”
