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2018 (12) TMI 99 - HC - Companies LawCompounding of offence - exercise of powers under Section 482 of Code of Criminal Procedure - Held that - Merely on the ground that the embargo laid down under Section 320 of Code of Criminal Procedure may not be applicable to the provision of Section 24A, it cannot be said that without the consent of SEBI the proceedings can be compounded. Or else the statutory authority will be rendered to be a mute spectator in the event of such an application is preferred by the accused for compounding. The discretion lies with the Court as well as with the prosecuting agency. The nature of the dispute which is the subject matter of the prosecution initiated by Respondent No.1 against the applicant/accused is not a private individual dispute. The prosecution is initiated for violations of the order passed by the Adjudicating Officer. Adjudicating Officer was required to pass such an order in the light of the factual matrix and for the reasons stated in the adjudication order. It cannot be accepted that the proceedings were in the nature of recovery and therefore the application for compounding ought to be allowed. The Special Judge has rightly rejected the application. The factual aspects and for all the reasons stated herein I am not inclined to allow the application for compounding in exercise of inherent powers under section 482 of Code of Criminal Procedure when the Respondent No.1 has not consented for compouding the said offence. Considering the aforesaid circumstances and more particularly in view of the observations of the Division Bench of this Court in the case of Shilpa Stock Broker 2013 (9) TMI 656 - HIGH COURT OF BOMBAY and also in the light of scope powers of Respondent No.1 being the regulatory authority or the statutory authority it cannot be said that the proceedings can be compounded in the absence of the consent of Respondent No.1. I do not find any infirmity in the order passed by the Special Court rejecting the application preferred by the petitioner. Considering factual the matrix and the observations made herein above even in exercise of powers under Section 482 of Code of Criminal Procedure, I am not inclined to grant any relief as prayed in the present petition. Hence, petition is devoid of merits and the same is dismissed.
Issues Involved:
1. Compounding of Offences under SEBI Act. 2. Interpretation of Section 24A of SEBI Act. 3. Role and Discretion of SEBI in Compounding Applications. 4. Comparison with Section 138 of Negotiable Instruments Act. Detailed Analysis: 1. Compounding of Offences under SEBI Act: The petitioners sought to quash the SEBI Special Court's order rejecting their application for compounding the offence under Section 24(2) of SEBI Act. The petitioners argued that the offence is compoundable under Section 24A of SEBI Act, which provides for compounding by the Court or Securities Appellate Tribunal without requiring SEBI's consent. The petitioners expressed willingness to pay the penalty with interest and costs as part of the compounding process. 2. Interpretation of Section 24A of SEBI Act: The petitioners contended that Section 24A does not mandate SEBI's consent for compounding and that the Court has unfettered power to compound the offence. They argued that unlike Section 320 of the Code of Criminal Procedure, Section 24A does not require the complainant's consent, indicating legislative intent to give the Court sole discretion. They relied on the Supreme Court's decision in Damodar Prabhu v. Sayed Babalal, which emphasized encouraging compounding in cheque dishonour cases under Section 138 of the Negotiable Instruments Act. 3. Role and Discretion of SEBI in Compounding Applications: SEBI opposed the compounding application, arguing that the petitioners had a history of non-compliance and multiple pending cases, making them habitual offenders. SEBI emphasized its role as a regulatory authority protecting investors' interests and argued that compounding should not be allowed merely to save litigation costs. The SEBI Special Court agreed with SEBI, stating that the Court cannot compel SEBI to compound the offence and that SEBI's refusal to compound cannot be adjudicated by the Court. 4. Comparison with Section 138 of Negotiable Instruments Act: The petitioners drew parallels between Section 24A of SEBI Act and Section 138 of the Negotiable Instruments Act, arguing that both provisions allow for compounding without the complainant's consent. They cited the Supreme Court's decision in Damodar Prabhu, which encouraged compounding in cheque dishonour cases to prioritize compensatory over punitive aspects. However, SEBI and the Court distinguished the two statutes, emphasizing that SEBI's role involves broader public interest considerations and regulatory compliance, unlike the private nature of disputes under the Negotiable Instruments Act. Conclusion: The Bombay High Court dismissed the petition, upholding the SEBI Special Court's order. The Court agreed with SEBI's discretion in opposing the compounding application and emphasized SEBI's role in protecting investors and ensuring regulatory compliance. The Court also noted that the petitioners' conduct and history of non-compliance justified SEBI's decision to refuse compounding. The Court concluded that Section 24A of SEBI Act does not override SEBI's discretion and that compelling SEBI to compound the offence would undermine its regulatory authority and public interest mandate. The petition was deemed devoid of merits and dismissed.
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