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TMI Blog2025 (1) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... BI Board before it comes to the conclusion, to agree for compounding or not to agree for compounding of the offence. Under Regulation 29 of the Settlement Regulation, the decision taken by the Board is not binding on the Court even if HPAC recommends for compounding of the offence. The Court can take a different view and reject the compounding if they do not meet the guidelines as laid down by the Apex Court as laid down in Prakash Gupta [ 2021 (7) TMI 971 - SUPREME COURT ] The materials sought by the Petitioner become exceedingly important for the Court to take a decision as to allow or not allow the compounding application of the Petitioner. This Court is inclined to set aside the Order passed by the Ld. Additional Sessions Judge, Tiz Hazari, dismissing an application filed by the Petitioner under Section 91 Cr.P.C. The SEBI is directed to produce all the documents before the Court. These documents can be given in a sealed cover and it is for the Court to take a decision as to whether these documents should be supplied to the Petitioner or not. - HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD For the Petitioner Through: Mr. Jagdeep Singh Bakshi, Sr. Advocate with Ms. Anshika Mahesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company and did not know Mr. Alok Khetan. The signatures of Mr. R. K. Surinder Kumar Verma, one of the Directors of M/s Shivesh Computers Pvt. Ltd. was also found to have been forged on the sale bill. It is stated that a separate complaint has also been filed by the Complainant against M/s Padmini Technologies and various other entities including accused persons herein, for violation of Regulations 3, 4 and 6 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1995 and Section 23 (1) (b) of Securities Contracts (Regulations) Act, 1956. c. It is stated that during the pendency of the complaint, the Petitioner filed an application under Section 24-A of the SEBI Act seeking compounding of offences in the criminal complaint pending before the Ld. Trial Court for alleged violation of Section 11C (6) of SEBI Act, 1992. SEBI (Settlement Proceedings) Regulations, 2018 has been framed for the purpose of compounding. It is stated that a High Powered Advisory Committee (HPAC) has been constituted under Section 11C (6) of the SEBI Act. The HPAC gave its opinion on the compounding of the offences. It transpires that the HPAC after considering the compounding application, reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication under Section 24A of the SEBI Act. He states that for placing an effective challenge, the Petitioner has to peruse the recommendations of the HPAC. Learned Senior Counsel for the Petitioner places reliance on the judgment passed by the Apex Court in Prakash Gupta vs. SEBI, (2021) 17 SCC 451 and T. Takano v. SEBI, (2022) 8 SCC 162. He contends that the Apex Court in T. Takano (supra) has held that it is the duty of SEBI to disclose investigative material and all the information which is relevant to the proceedings initiated against a person as a matter of right. The learned Senior Counsel for the Petitioner places reliance on a Judgment passed by the High Court of Bombay in Vasant Jagivandas Kotak and Others vs. SEBI and Ors., 2021 OnLine Bom 2931 , where the SEBI has agreed to place on record documents relied upon by the HPAC before the High Court of Bombay. He states that in the present case, the SEBI has taken a contrary stand by refusing to do the same. 5. Per contra, learned Senior Counsel appearing for the SEBI contends that the entire decision of the Panel of Whole Time Members of SEBI has been placed in the form of reply to compounding application along with the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from prosecution on the recommendation of SEBI. In contrast, Section 24-A is conspicuously silent in regard to the consent of SEBI before SAT or, as the case may be, the court before which the proceeding is pending can exercise the power. Hence, it is clear that SEBI's consent cannot be mandatory before SAT or the court before which the proceeding is pending, for exercising the power of compounding under Section 24-A. 94. However, it is also important to remember that proceedings for the trial of offences under the SEBI Act are initiated on a complaint made by SEBI by virtue of Section 26 of the SEBI Act. SEBI is a regulatory and prosecuting agency under the legislation. Hence, while the statutory provisions do not entrust SEBI with an authority in the nature of a veto under the provisions of Section 24-A, it is equally necessary to understand the importance of its role and position. 8. In the abovementioned Judgment, the Apex Court, after making the aforesaid observation, has further observed that due weightage has to be given to the opinion of the Committee and the Court must be wary of giving its own wisdom on the gravity of the offence or the impact on the markets while dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without providing any guideline as to when should this take place. Hence, we deem it necessary to elucidate upon some guidelines which SAT or such courts must take into account while adjudicating an application under Section 24-A: 104.1. They should consider the factors enumerated in SEBI's Circular dated 20-4-2007 and the accompanying FAQs, while deciding whether to allow an application for a consent order or an application for compounding. These factors, which are non-exhaustive, are: Following factors, which are only indicative, may be taken into consideration for the purpose of passing Consent Orders and also in the context of compounding of offences under the respective statute: 1. Whether violation is intentional. 2. Party's conduct in the investigation and disclosure 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. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken place. 10. The fact that there is no direction by the Supreme Court to the SEBI in Prakash Gupta (supra) to produce the documents does not mean that the Court does not have the power under Section 91 to summon these documents. In fact, the SEBI, in its reply, has stated that it does not have any objection in producing the documents before the Court if the Court wants to see the documents. In the considered opinion of this Court, the documents will be necessary for the Court to consider the application of the Petitioner to quash the complaint in view of the guidelines laid down by the Apex Court. 11. The issue as to whether these documents should be supplied to the Petitioner or not, does it contain such sensitive material, which, according to the SEBI, cannot be shared with the Petitioner herein, is a fact that the competent Court has to consider while dealing the application by the accused challenging the opinion of the HPAC. In any event, the documents are only relevant for the purpose of compounding the offence. 12. Learned Counsel for the SEBI has placed reliance on Regulation 29 of the Settlement Regulation which reads as under: 29. (1) All information submitted and di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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