SEBI prosecution powers remain independent; interim stay refused where statutory safeguards for directors and officers were available.

Prosecution under sections 24 and 26 of the SEBI Act was treated as an independent statutory remedy and was not stayed merely because adjudication or appeal was pending. The tribunal noted that section 27 protects directors and officers by requiring proof that they were in charge of, and responsible for, the company's conduct, or that they consented to, connived in, or neglected the default, and it also allows a defence of lack of knowledge or due diligence. Applying the interim relief test, it found no strong prima facie case, no balance of convenience, and no irreparable injury. Interim stay was refused and the prosecution direction remained operative.

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Issues: Whether an interim stay should be granted restraining the operation of the SEBI order insofar as it directed initiation of prosecution against the company and its officers.

Analysis: The appellate authority held that prosecution under sections 24 and 26 of the SEBI Act is an independent statutory course available to SEBI and is not circumscribed by the pendency of adjudication or appeal. It further noted that section 27 of the SEBI Act contains built-in safeguards for directors and officers, since liability depends on their being in charge of and responsible for the company's conduct, or on proof of consent, connivance, or neglect, and also permits them to establish lack of knowledge or due diligence. On the interim relief test, the authority found no strong prima facie case, no balance of convenience in favour of the applicants, and no irreparable injury, because prosecution itself is not a penalty and the applicants would have statutory and criminal law remedies in the prosecution proceedings.

Conclusion: Interim stay refused; the prosecution direction was not restrained.

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