2024 (12) TMI 413 - HC - SEBI

Settlement Applications rejected by SEBI - documents submitted by the Petitioner were deficient and that the Petitioner did not maintain its worth for the Financial years ended March 31, 2019, March 31, 2020, and March 31, 2021 - number of opportunities granted to the Petitioner and the lack of compliance HELD THAT - As noted earlier, the petitioner has not even alleged any mala fides or breaches of the SEBI Act or the Settlement Regulations. The argument based upon alleged unfairness is not supported by the record. The petitioner cannot be assisted in simply keeping its settlement application pending and disabling the SEBI from effectively passing final orders on the show-cause notices issued to the Petitioner. Despite the indulgence on the first occasion, the Petitioner persisted in supplying deficient documentation and did not comply with the net-worth requirements. Court held that the question as to whether a dispute should be resolved by a consensual settlement does not merely involve a private lis between the violator and the regulator but involves a consideration of wider issues of public interest. The Court also held that the whole purpose of the settlement guidelines which were the subject matter of the said decision was to ensure that the time and effort of the regulator is devoted to cases which duly merit trial and enforcement. SEBI has devoted sufficient time to the Petitioner s settlement proposal. The same was rejected earlier but, by way of indulgence, the Petitioner was granted further opportunity in March 2024. From April to October, the Petitioner supplied documents or certificates that were found to be deficient upon examination. The impugned communication also refers to the inter se correspondence, which gives an idea of the time spent by SEBI in considering the Petitioner s settlement proposal. At this stage, Mr Doctor, on behalf of SEBI, is therefore justified in contending that enough was enough and no further indulgence was deserved by the petitioner. We are satisfied that the Petitioner s proposal was fairly considered and rejected. There is no arbitrariness involved. The petitioner was given ample opportunities; in that sense, no breach of natural justice was involved. The decision-making process was not defective. Accordingly, we are satisfied that no case has been made to interfere with the impugned communication.

Summary

Issues:
Challenge to rejection of settlement applications by SEBI based on alleged deficiencies in documents and failure to maintain net worth.

Analysis:
The Petitioner challenged the rejection of their Settlement Applications by SEBI, alleging that the rejection was based on deficient documents and failure to maintain net worth for specific financial years. The Petitioner argued that they had provided the documents requested, including a Chartered Accountant's certificate on net worth, and that the rejection lacked valid reasons. The Petitioner contended that the settlement proceedings aim to rectify defaults, but their proposals were not fairly considered, and the decision-making process leading to rejection was deficient.

SEBI, represented by a Senior Advocate, countered that the Petitioner had a history of delays and deficiencies in document submissions despite multiple opportunities. The Petitioner's net worth requirement was also not met. SEBI's Internal Committee and Whole Time Members thoroughly examined the documents and provided ample chances for compliance, but the Petitioner failed to rectify the deficiencies. Two show-cause notices were issued to the Petitioner, and keeping the Settlement Applications pending was in the Petitioner's interest until final orders were made on the notices.

The Court clarified that the Petitioner has no vested right for SEBI to accept their settlement proposal but emphasized that fair consideration is crucial. In a previous order, the Court had granted the Petitioner an additional opportunity due to delays, but this was a one-time indulgence. The Court noted the correspondence between the parties regarding document deficiencies and the Petitioner's net worth. The rejection of the settlement proposal was based on thorough examination by SEBI's committees, and there were no allegations of mala fides.

The Court reviewed the impugned communication detailing the deficiencies in the Petitioner's submissions and the reasons for rejection. It acknowledged the numerous opportunities given to the Petitioner and the lack of compliance. The Court deferred to the expertise of SEBI's committees and upheld the rejection, stating that no arbitrariness or unfairness was involved in the decision-making process. The Court cited previous judgments emphasizing SEBI's discretion in resolving disputes and the public interest in regulatory compliance.

In conclusion, the Court found that the Petitioner's proposal was fairly considered and rejected, with no breach of natural justice or defective decision-making process. The Court dismissed the Petition without costs, affirming SEBI's decision to reject the Settlement Applications.