9911796707
TMI Blog2021 (9) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... e Directors of a Company named Avani Plantation Ltd., incorporated on 14th January, 1997. Applicant No.4 resigned from the Board in the year 1999. Applicant Nos. 5 to 7 were nominal share holders of Avani Plantation Ltd. (Company for short). Respondent No.1 is Securities and Exchange Board of India; Respondent No.2 is Union of India and Respondent No.3 is State of Maharashtra. 5. The first Respondent filed Criminal Complaint No.47/S/2004 against the Applicants before the Additional Chief Metropolitan Magistrate, Mumbai, for alleged violation provisions of Sections 11(B), 12(1B) of SEBI Act, 1992 and Regulation 71 read with Regulations 9, 73 and 74 of SEBI (Collective Investment Schemes) Regulation 1999, which is punishable under Section 24(1) of Securities and Exchange Board of India Act, 1992. 6. Complainant case in brief is that, to protect the interest of investors and to regulate the securities market through appropriate measures a person, who immediately prior to the commencement of the said Regulation of 1999 (Regulation for short), operating a Collective Investment Scheme was required to make an application to SEBI for grant of registration within a period of two months fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that since the SEBI has decided not to compound the offence against the accused/Company, therefore, without the consent of SEBI it is not possible to compound the offence. 11. Aggrieved by order dated 28th August, 2019, Applicants have approached this Court in its inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 and would contend that although, all investors have been repaid, as is evident from winding up report dated 22nd February, 2019 (in terms of Regulation 73 and 74 of SEBI) Collective Investment Schemes Regulation 1999, and orders passed in Company petition, the learned Special Judge ignored the relevant material. Submission is that the learned Judge failed to appreciate import of provisions of Section 24-A of the SEBI Act, in as much, while declining to compound the offence, he has simply relied on the recommendation of HPAC and the approval granted by Panel of Whole Time Members of SEBI and thereby failed to exercise jurisdiction vested in the Special Court under Section 24-A of SEBI Act. Learned Counsel would submit that once the proceedings are instituted before the Court, which is seized of it, the Court has exclusive jurisdiction to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the consent of SEBI was necessary for compounding the offence under Section 24-A was not gone into. 14. Learned Counsel for the Applicant submitted that the Hon'ble Apex Court in the case of Prakash Gupta Vs. Securities and Exchange Board of India; ((Criminal Appeal No. 569/2021) has gone into this issue in Paragraphs 80 onwards and concluded in Paragraph No. 92 of the said judgment by drawing guidelines for compounding under Section 24A. It is submitted that the Hon'ble Apex Court has held, although the powers of compounding offences to SAT or to the Court, as the case may be, before which the proceedings are pending, the view of SEBI as an expert regulator must necessarily borne in mind by the SAT and the Court, and would be entitled to a degree of deference. Learned Counsel would largely rely on the observations Paragraph No.90 of the judgment to contend that before taking a decision on whether to compound an offence punishable under Section 24(1), the Court must obtain the views of SEBI for furnishing guidance to its ultimate decision. The Paragraph No.90 reads as under; "While the statue has entrusted the powers of compounding offences to SAT or to the Court, as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closure of full facts. 3. Gravity of charge i.e. charge like fraud, market manipulation or insider trading. 4. History of non-compliance. Good track record of the violator i.e. it had not been found guilty of similar or serious violations in the past. 5. Whether there were circumstances beyond the control of the party. 6. Violation is technical and/or minor in nature and whether violation warrants penalty. 7. Consideration of the amount of investors' harm or party's gain. 8. Processes which have been introduced since the violation to minimize future violations/lapses. 9. Compliance schedule proposed by the party. 10. Economic benefits accruing to a party from delayed or avoided compliance. 11. Conditions where necessary to deter future noncompliance by the same or another party. 12. Satisfaction of claim of investors regarding payment of money due to them or delivery of securities to them. 13. Compliance of the civil enforcement action by the accused. 14. Party has undergone any other regulatory enforcement action for the same violation. 15. Any other factors necessary in the facts and circumstances of the case." (ii) According to the circular dated 20 A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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