TMI Blog2021 (9) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... Pan India Legal Services, Advocate for the Applicants. Ms. Anubha Rastogi a/w Kumar SEBI Officer for SEBI Respondent No.1. Mr. Chintan Shah h/f Sandesh Patil, Advocate for Respondent CBI. Smt. Sharmila Kaushik, APP for State. Oral Judgment : - 1. Rule. 2. Rule made returnable forthwith. Heard, finally with the consent of the parties. 3. Although, this application under Section 482 of the Code of Criminal Procedure, 1973 seeks to quash proceedings in SEBI Special Case No. 51/2014, essentially it challenges the order dated 28th August, 2019 in the said SEBI case, whereby, application under Section 24A of Securities and Exchange Board of India Act, seeking compounding of offence was rejected by the SEBI Special Court. 4. Facts Essential for decision of this application, are as follows; Applicant Nos. 1 to 4 were 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 Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was numbered as Special Case No. 51/2014. Pending case, vide application below Exhibit 11, Applicants moved an application under Section 24-A of the SEBI for seeking composition of the offence and submitted that the accused/Company has wound up and refunded the entire amount collected under scheme to all their share holders/ creditors. 9. The application was opposed by the SEBI contending that composition application moved by the accused/Company was placed before the High-powered Advisory Committee (HPAC), which recommended that the matter may not be compounded and the said recommendation was approved by the Panel of Whole Time Members of SEBI. On these grounds, the SEBI sought rejection of the application, seeking composition of offences. 10. The learned SEBI Special Judge vide order dated 28th August, 2019 declined to compound the offence, on the ground 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 Cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his matter, 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. (emphasis supplied) 13. From the observations made in Paragraph No.8 (reproduced), it is obvious, the learned Judge has largely relied on the judgment of this Court in the Case of N H Securities Limited Vs. Securities and Exchange Board of India; 2018 SCC OnLine Bom 4040; wherein it was held that consent of SEBI was necessary before an application of compounding under Section 24-A. A Special Leave Petition challenging this judgment was disposed of by the two Judge Bench of the Hon ble Apex Court through an order dated 17th September, 2019, wherein SEBI agreed to compounding of the offence subject to penalty which may be imposed under Section 24(2) of the SEBI Act. However the question, whether 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 24A only provides the SAT or the Court before which proceedings are pending with the power to compound the offences, 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 24A: (i) They should consider the factors enumerated in SEBI s circular dated 20 April 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 ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committed by the party submitting the application under Section 24A is private in nature, or it is of a public character, the non-prosecution of which will affect others at large. As such, the latter should not be compounded, even if restitution has taken place. In light of these observations of the Hon ble Apex Court, Counsel would submit that, in affidavit-in-reply, SEBI, would largely rely on the judgment of the B ombay High Court in the case of N H Securities Limited (supra) , however, the HPAC s decision on the application, was not placed before the Special Judge. 16. Indisputably, the learned Judge neither referred to wind up repayment report dated 22nd February, 2019, nor the orders passed by this Court in Company Petition; nor SEBIs circular dated 20th April, 2007, nor the Court obtained the views of SEBI before denying to compound the offence. 17. In consideration of the facts aforestated and for the reasons, the order dated 28th August, 2019 below Exhibit 11 in SEBI Special Case No. 51/2014 passed by learned SEBI Special Judge is quash and set aside. 18. As a consequence, learned Judge shall decide the application below Exhibit-11, in accordance with gu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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