PRAKASH GUPTA versus SECURITIES AND EXCHANGE BOARD OF INDIA

Citation: [2021] 4 S.C.R. 862 · Decided: 23-07-2021 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Disposed off

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 4 S.C.R.
   [2021] 4 S.C.R. 862
862
PRAKASH GUPTA
v.
SECURITIES AND EXCHANGE BOARD OF INDIA
(Criminal Appeal No 569 Of 2021)
JULY 23, 2021
[DR. DHANANJAYA Y CHANDRACHUD
AND M. R. SHAH, JJ.]
Securities and Exchange Board of India Act, 1992:
ss. 24 and 24A – Compounding of offence under – On facts,
allegations against appellant-director of a company of price rigging
and insider trading in the scrip of the Company – Prosecution of
the appellant u/s. 24(1) – Appellant sought the compounding of the
offence u/s. 24A – Rejection of, by the trial judge upholding the
objection of the Securities and Exchange Board of India (SEBI)
that the offence could not be compounded without its consent –
Upheld by the High Court holding that the trial has reached the
stage of final arguments and the application for compounding cannot
be allowed without SEBI’s consent – On appeal, held: Power to
compound offences u/s. 24A rests exclusively with the Securities
Appellate Tribunal-SAT or a court before which such proceedings
are pending and SEBI’s consent for compounding offences is not
mandatory – However, the SAT or the concerned courts must seek
and consider the view of SEBI on matters related to the compounding
of offences – Allegations involved serious acts which impinged upon
the protection of investors and the stability of the securities’ market
– Thus, SEBI justified in opposing the request for the compounding
of the offences – Decision taken by SEBI is not mala fide nor does
it suffer from manifest arbitrariness – Thus, an order for
compounding not warranted – Order of the High Court is upheld.
Objects and reasons of enactment – Held: Is to provide for
the establishment of a Board to protect the interests of investors in
securities and to promote the development of and to regulate the
securities market.
s. 24A – Ingredients of – Explained.
s. 24A – Compounding of offence under – Held: s. 24A
specifies the authorities vested with the powers to compound offences
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under the SEBI Act – s. 24A, by incorporating a non-obstante
provision indicates a legislative intent to the effect that the power
to compound offences punishable under the SEBI Act is not
trammeled by the provisions of s. 320 CrPC – Power to compound
u/s. 24A is confined to offences punishable under the SEBI Act –
Power is entrusted solely to the SAT or to the Court, before which
the proceedings are pending – Hence, the non-obstante provision
contained in s. 24A must be given its natural meaning and effect.
s. 24A – Requirement of the consent of SEBI – Held: s. 24A
does not stipulate that the consent of SEBI is necessary for the SAT
or the Court before which such proceedings are pending to
compound an offence – Where Parliament intended that a
recommendation by SEBI is necessary, it has made specific provisions
in that regard in the same statute, as in s. 24B – Section 24A is
conspicuously silent in regard to the consent of SEBI before the
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
u/s. 24A.
Securities and Exchange Board of India – Power and
functions of – Held: SEBI has been ascribed role as a regulatory,
adjudicatory and prosecuting agency – Thus, 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 – Powers of the SAT and the Court would necessarily
have to align with SEBI’s larger existential purpose – Thus, in line
with the object of the SEBI Act, s. 24A to be interpreted in a manner
that furthers the statutory role of SEBI, rather than one which thwarts
its considered course of action – Therefore, before taking a decision
on whether to compound an offence punishable u/s. 24(1), the SAT
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 – 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.
PRAKASH GUPTA v. SECURITIES AND EXCHANGE BOARD
OF INDIA
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