India News | Sebi Consent Not Mandatory for Compounding Offences Under Section 24A of Act: SC | LatestLY

New Delhi, Jul 23 (PTI) The Supreme Court Friday held that the consent of regulator Sebi is not mandatory for compounding offences under section 24A of the Sebi Act but taking views of the expert body is necessary for stability in the securities market as well as investor protection.

A bench headed by Justice D Y Chandrachud said though Sebi is not conferred with any authority to veto a decision for proceeding in trial offences, it is a regulatory and prosecuting agency and the Securities Appellate Tribunal (SAT) and the courts must obtain its views since it is an expert body.

The bench said it is clear that Sebi’s consent cannot be mandatory beforeT or the Court before which the proceeding is pending, for exercising the power of compounding under Section 24A.

The apex court, which elucidated some guidelines thatT or such courts must take into account while adjudicating an application under Section 24A, said however that eliciting of views of Sebi was necessary in the interest of the stability of the securities market and protection of investors.

The bench, also comprising Justice M R Shah, said the Securities and Exchange Board of India (Sebi) has vital functions to discharge in maintaining an orderly and stable market so as to protect the interests of investors.

Therefore, the Sebi Act and the rules, regulations and circulars made or issued under the legislation, are constantly evolving with a concerted aim to enforce order in the securities market and promote its healthy growth while protecting investor wealth, it said.

“Its wide regulatory and adjudicatory powers, coupled with its expertise and information gathering mechanisms, imprints its decisions with a degree of credibility. The powers of theT and the Court would necessarily have to align with SEBI’s larger existential purpose,” the bench said.

It said that the provisions of Section 24A must be read in a manner consistent with the object and purpose underlying the position of Sebi as an expert regulator.

Sebi, as the regulator, is entrusted with diverse roles and functions including the power to regulate the securities’ market, make regulations and to enforce the provisions of the Act, the top court said.

Observing that independent of initiating a prosecution, the bench said Sebi has been entrusted with wide ranging powers and functions including the power to investigate, to issue directions and levy penalties and make cease and desist orders.

While the statute has entrusted the powers of compounding offences toT 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 be borne in mind by theT and the Court, and would be entitled to a degree of deference, it said.

The considerations and others which Sebi may place before theT or the Court, would be of relevance in determining as to whether an application for compounding should be allowed, the apex court said.

“We, therefore, hold that before taking a decision on whether to compound an offence punishable under Section 24 (1), theT or the Court must obtain the views of SEBI for furnishing guidance to its ultimate decision.

“These views, unless manifestly arbitrary or mala fide, must be accorded a high degree of deference. The Court must be wary of substituting its own wisdom on the gravity of the offence or the impact on the markets, while discarding the expert opinion of the SEBI,” the bench said.

Section 24A in The Securities and Exchange Board of India Act, 1992 states that, “Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any offence punishable under this Act, not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may either before or after the institution of any proceeding, be compounded by a Securities Appellate Tribunal or a court before which such proceedings are pending.”

The apex court’s judgment came on an appeal filed against the Delhi High Court order by which application of one Prakash Gupta under Section 24A of the Sebi Act for compounding of offences was dismissed.

The apex court said allegations in the present case involved serious acts which impinged upon the protection of investors and the stability of the securities’ market.

“Such alleged acts of price rigging and manipulation of the prices of the shares have a vital bearing on investors’ wealth and the orderly functioning of the securities market. SEBI was, therefore, justified in opposing the request for the compounding of the offences,” it said.

The trial court had rejected the petitioner’s application under Section 24-A relying on the Supreme Court decision.

(This is an unedited and auto-generated story from Syndicated News feed, LatestLY Staff may not have modified or edited the content body)

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