TMI Blog2013 (9) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... inciple 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. - WRIT PETITION NO. 2120 OF 2011 - - - Dated:- 17-1-2012 - DR. D.Y. CHANDRACHUD AND A.A. SAYED, JJ. Janak Dwarkadas, Zerick Dastur and Ms. Sneha Sheth for the Petitioner. Darius J. Khambata, Dr. Poorn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector of SEBI for a settlement. The Review Petition was dismissed by the Supreme Court on 31 March 2010 both on the ground of limitation and on merits. By a communication dated 18 August 2010 SEBI informed the First Petitioner that the application filed for a consensual resolution was recommended by a High Powered Advisory Committee and was approved by a panel consisting of Whole Time Members of SEBI. However, since the Review Application was dismissed by the Supreme Court, the First Petitioner was advised to take appropriate steps if it wished to settle the matter under the Consent Scheme. The First Petitioner thereupon filed an Application for "permission/clarification" before the Supreme Court specifically stating therein that though the procedure for a settlement had been initiated during the pendency of the proceedings in the Review Petition, the Review Petition was dismissed before the out-come of the Consent Application could be communicated. The Application which was moved before the Supreme Court was dismissed as withdrawn by an order dated 21 January 2011. Following this, proceedings have been instituted before this Court under Article 226 of the Constitution on 18 Octo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g has not resulted in finality and remains pending. Consequently, the Guidelines contemplate that a settlement can be recorded before the Securities Appellate Tribunal or before any other Court in which a proceeding is pending. The pendeny of proceeding constitutes a valid basis upon which the power to record terms of settlement is founded. Once proceedings have come to an end and have attained finality, as in the present case, upon the resolution of the civil appeal before the Supreme Court, there can be no occasion to file any terms; and (iii) The Guidelines which have been framed by SEBI are administrative in nature. The Guidelines only confer powers upon SEBI in appropriate cases to consent to the resolution of a dispute. No writ of mandamus can be issued under Article 226 of the Constitution directing SEBI either to compromise a proceeding or to resolve the dispute. SEBI as a regulator is required to consider an application for settlement in terms of the factors which are elucidated in Regulation 11 on the facts of each case. The rival submissions now fall for consideration. 5. The legislative enactments which SEBI enforces as a regulator contemplate two streams of enforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded after a criminal complaint is filed by SEBI. Where however a criminal complaint has not yet been filed but "is envisaged", the process for consent orders will be followed. Clause 8 deals with the procedure for consent orders where adjudicating proceedings are pending. A proposal by a person against whom proceedings have been initiated is to be referred to a High Powered Committee consisting of a retired Judge of the High Court and two external experts. The Committee has for its guidelines certain factors which are set out in Clause 11 of the Guidelines. Where the Committee finds that the terms of passing a consent order are acceptable, it has to forward them to the Adjudicating Officer for an order in terms of the consent terms. Clause 9 lays down the procedure for consent in other cases. Sub-clauses (I) and (II) of Clause 9 are as follows : (I) Any person (party) who is notified or who has reasonable grounds to believe that a civil/ administrative proceeding may or will be instituted against him/her, or any party to a proceeding already instituted, may, at any time, propose in writing along with requisite waivers for an offer of consent. All communications in this regard sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able ground to believe that a criminal proceeding may or will be instituted against him, may, before the filing of a criminal complaint by SEBI, propose a consentual resolution. Once a criminal complaint is filed it can only be compounded in accordance with law. Before a complaint is filed a person who has reasonable grounds to believe that he would be subject to criminal action, can move SEBI with an offer of settlement that will, if accepted, obviate the filing of a complaint. During the pendency of proceedings either before the Securities Appellate Tribunal or before a Court, the same consent process can be undertaken. SEBI, as a regulator has an enabling power to settle a dispute. The guidelines merely streamline the exercise of a power which already vests in a regulator. But SEBI cannot be compelled to settle a dispute. The object and purpose of the Guidelines is to enable SEBI to resolve disputes where the regulator does not consider it necessary to pursue adjudicatory or criminal remedies. The exercise of the discretion which is conferred on SEBI is structured by the considerations which are elaborated in Clause 11 of the Guidelines. The factors which are to be considered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the power that is exercised. Amongst the circumstances which are to be borne in mind is whether the violation is intentional, the conduct of the party during the course of investigation, the gravity of the charge, the track record of the violator, whether a violation is technical or minor, the extent of harm that may be caused to investors, processes which have been adopted to minimize future violations, proposed compliance schedule, economic benefits that have accrued from delayed or failure in compliance, conditions necessary to deter future non-compliance, satisfaction of claims of investors and compliance of civil enforcement action. These factors indicate 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 securities market impinges upon investor wealth. Investors as a body represent the collective wealth of numerous individual investors. Trading on the Stock Exchanges and the business conducted by Stock Exchanges has a material impact on investors, both institutional and individual. Actions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was a merger which resulted from the decision of the Supreme Court in the civil appeal. The First Petitioner moved the Supreme Court in a Review Petition and, during the pendency of the Petition, applied to SEBI for a settlement of the dispute. After the Review Petition was dismissed both on merits and on limitation, SEBI intimated to the First Petitioner that while it had approved the consent terms the First Petitioner may take appropriate steps if it desired to settle the matter under the Consent Scheme. SEBI acted fairly in the matter. The First Petitioner thereupon moved the Supreme Court in an Interim Application for that purpose which was also dismissed as withdrawn on 21 January 2011. The proceedings attained finality before the Supreme Court. The effect of the action which the First Petitioner now proposes before SEBI would be to negate the final judgment of the Supreme Court which has restored the penalty imposed by SEBI. SEBI, in our view, is justified in coming to the conclusion that since the Petitioner had canvassed its remedies against the order of suspension upto the Supreme Court, the proposal for settlement cannot be accepted once the proceeding had attained fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... launch any criminal prosecution. But, in any event, once the proceedings which have been instituted by SEBI culminated in a final order (in the present case of the Supreme Court), the plain consequence of that order must follow. A proceeding which has attained finality cannot be reopened in purported exercise of power to arrive at a settlement. A construction as is proposed by the Petitioners would also militate against the rationale for the guidelines. The guidelines are intended to enable SEBI to obviate recourse to time consuming proceedings in appropriate cases, so that its time and effort can be devoted to those cases which truly merit its attention. The guidelines do not become available to overturn a judicial verdict which has attained finality. Besides that would not advance the basic purpose of the guidelines, which was to obviate the time and effort of SEBI being spent in pursuing adjudication and litigation. Once litigation has taken place and a final judicial order has been passed by the Supreme Court, a settlement which would negate that order cannot be foisted on SEBI. 10. For these reasons, we are of the view that there is no merit in either of the submissions that ..... 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