Compounding under securities law requires independent judicial assessment; regulator's view is relevant but not a veto.

In compounding proceedings under the securities law, the court must independently assess the statutory framework, the material on record and the circumstances of the case; the regulator's views are relevant as expert input but are not a veto. The rejection of the compounding request was unsustainable because it proceeded on the mistaken basis that regulatory consent was indispensable and did not properly consider repayment material, the winding-up report or the applicable guidance. The compounding decision had to be made by judicial application of the governing factors, not by treating the regulator's recommendation as determinative.

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Issues: Whether the order refusing compounding of the offence under the securities law was unsustainable for failing to independently consider the material on record and the views of SEBI in the light of the governing compounding framework.

Analysis: The application under Section 24A of the Securities and Exchange Board of India Act, 1992 was rejected by the Special Court principally on the footing that SEBI had not consented to compounding. The impugned order did not independently evaluate the repayment material, the winding-up report, or the relevant regulatory guidance. The governing principles require the Court dealing with compounding to consider SEBI's views as those of an expert regulator, but such views are not a veto and must be weighed along with the statutory factors and the circumstances of the case. The Court must apply the compounding framework itself and not treat SEBI's recommendation as determinative.

Conclusion: The refusal to compound could not stand as it was based on an erroneous understanding that SEBI's consent was indispensable and without a proper judicial evaluation of the compounding request.

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