2013 (9) TMI 656 - HC - Companies Law

Re-Opening of proceedings - Held that - The Guidelines do not confer a vested right in any person to insist on the acceptance of a proposed settlement - the adjudication which was initiated by SEBI had attained finality before the Supreme Court - A proceeding which had attained finality, cannot be reopened and the attempt to enforce terms of consent would result in nullifying the effect of the order of the Supreme Court which was impermissible - There was no merit in the submissions that were urged on behalf of the Petitioners - The Guidelines in so far as they mandate that proceedings should either be in contemplation or be pending before they can be resolved, were based on a valid rationale - The whole purpose of the Guidelines was to ensure that the time and effort of the regulator was devoted to cases which duly merit trial and enforcement - The Guidelines thus recognize an enabling power in SEBI to resolve certain cases which in the view of SEBI can be set at rest without compromising either an issue of principle or public interest. The High Court in the exercise of its jurisdiction under Article 226 of the Constitution would not be justified in issuing a mandamus to SEBI to act upon a settlement or to accept a settlement as proposed - The guidelines which have been framed by SEBI are administrative in character - it had been a settled principle of law that if administrative guidelines issued by an authority have no statutory force, they can confer no right on an individual that could be enforced by a writ of mandamus - it is equally fundamental, while analyzing the provisions of the guidelines to emphasise that where the guidelines have conferred a discretionary power upon SEBI to resolve a dispute which has still not reached the stage of adjudication or criminal action, or a dispute for that matter which is pending proceeding, it is for SEBI, on a considered view of all the circumstances of each case, to determine as to whether the dispute merits an amicable solution.

Issues Involved:
1. Validity of SEBI Guidelines for Consent Orders.
2. Jurisdiction of SEBI to entertain consent applications post-adjudication finality.
3. Applicability of the doctrine of merger.
4. SEBI's discretion in accepting or rejecting consent applications.
5. High Court's authority to issue a mandamus directing SEBI.

Issue-wise Detailed Analysis:

1. Validity of SEBI Guidelines for Consent Orders:
The Petitioners challenged the requirement of the pendency of court proceedings or adjudication in clauses 8, 11, and 17 of the SEBI Guidelines for Consent Orders, arguing it was arbitrary and violative of Article 14 of the Constitution. The court upheld the validity of these clauses, stating that the guidelines are administrative in nature and aim to reduce regulatory costs and save time and effort in pursuing enforcement actions, allowing SEBI to focus on cases requiring full enforcement action.

2. Jurisdiction of SEBI to Entertain Consent Applications Post-Adjudication Finality:
The Petitioners argued that SEBI has jurisdiction to entertain their consent application even after the adjudication proceedings had reached finality in the Supreme Court. They contended that under clause 7 of the Guidelines, SEBI's power to institute a criminal prosecution implies it can entertain consent applications at any stage. The court disagreed, stating that once proceedings have attained finality, SEBI cannot reopen them for settlement, as this would negate the final judicial order.

3. Applicability of the Doctrine of Merger:
The Petitioners contended that the doctrine of merger did not apply as the Supreme Court did not consider whether the penalty imposed by SEBI would survive once one of the charges was not established. The court held that the Supreme Court's judgment resulted in a merger, restoring SEBI's original order. Therefore, the proposal for settlement could not be accepted once the proceeding had attained finality.

4. SEBI's Discretion in Accepting or Rejecting Consent Applications:
The court emphasized that SEBI, as a regulator, has the discretion to settle disputes based on factors outlined in clause 11 of the Guidelines, such as the gravity of the charge, the conduct of the party, and the public interest. The court stated that a person against whom action has been initiated has no vested right to insist on a settlement. SEBI's decision must be guided by public interest considerations, and the guidelines do not confer a right to enforce a proposed settlement.

5. High Court's Authority to Issue a Mandamus Directing SEBI:
The court ruled that it would not be justified in issuing a mandamus to SEBI to act upon or accept a settlement. The guidelines are administrative and do not have statutory force, thus conferring no enforceable right on an individual. The court concluded that SEBI's refusal to settle a dispute that has attained finality is justified and in line with the purpose of the guidelines, which is to avoid time-consuming litigation.

Conclusion:
The court dismissed the Petition, affirming that the SEBI Guidelines do not confer a vested right to insist on a settlement, and once adjudication has attained finality, the proceedings cannot be reopened. The attempt to enforce consent terms post-finality would nullify the Supreme Court's order, which is impermissible. The court also refused the Petitioners' request for a stay of the judgment.

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