Court dismisses petition for SEBI settlement Scheme penalty payment, upholding strict eligibility criteria

The court dismissed the petition seeking directions for payment of penalty under the SEBI settlement Scheme of 2022. It held that the petitioner was ineligible for the Scheme's benefits as the enforcement proceedings had concluded with a penalty order, which barred settlement where monies due under securities laws are recoverable. The judgment emphasized the strict interpretation of the eligibility criteria, clarifying that the Scheme's benefits were limited to cases where enforcement proceedings were pending before relevant authorities. The court upheld the regulatory framework's integrity by enforcing the eligibility requirements strictly in cases with finalized penalty orders under securities laws.

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Issues:
1. Petition seeking directions for payment of penalty under SEBI settlement Scheme of 2022.
2. Interpretation of the eligibility criteria under the SEBI settlement Scheme of 2022.

Analysis:

Issue 1: Petition seeking directions for payment of penalty under SEBI settlement Scheme of 2022
The petitioner sought directions to open the link for payment of penalty under the SEBI settlement Scheme of 2022. The petitioner was alleged to have carried out non-genuine trades in liquid stock options, leading to a penalty imposition of Rs.5,00,000. Despite attempts to settle through the Scheme, the respondent did not accept the payment, causing the petitioner to file a petition seeking mandamus for payment acceptance before the Scheme's closure. The petitioner argued that non-acceptance of payment was against the Scheme's mandate, affecting the petitioner's right to settle. However, the respondent contended that the case had reached finality, and the Scheme could not be applied retroactively to cases with concluded proceedings.

Issue 2: Interpretation of the eligibility criteria under the SEBI settlement Scheme of 2022
The eligibility criteria of the SEBI settlement Scheme of 2022 required entities involved in non-genuine trades/trade reversals on the stock option segment of BSE between April 01, 2014, and September 30, 2015, with pending enforcement proceedings to avail the settlement opportunity. The court analyzed the regulations and the eligibility clause, emphasizing that the Scheme's benefit was limited to cases where enforcement proceedings were approved or initiated and pending before relevant authorities. In this case, the enforcement proceedings had been approved, initiated, and concluded with a penalty order, making the petitioner ineligible for the Scheme's benefits. The court cited Regulation 5 of SEBI (Settlement Proceedings) Regulations 2018, which prohibits settlement where monies due under securities laws are recoverable, as a specific bar to the petitioner's case. Consequently, the court dismissed the petition and pending applications, as the petitioner did not meet the Scheme's eligibility requirements due to the finalized penalty order under securities laws.

In conclusion, the judgment clarified the limitations of the SEBI settlement Scheme of 2022 and upheld the regulatory framework's integrity by interpreting the eligibility criteria strictly in cases where enforcement proceedings had concluded with monetary penalties due under securities laws.

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