Supreme Court remands SEBI settlement case to Division Bench after Single Judge wrongly quashed criminal proceedings

The SC set aside the Bombay HC Single Judge's order that quashed criminal proceedings based on SEBI settlement terms. The Court held that since the Division Bench initially heard and dismissed the writ petitions, the matter should have been heard by Division Bench in the second round rather than Single Judge. The case was remanded to Division Bench for independent determination on merits regarding quashing of criminal proceedings. SC granted interim stay of proceedings before Special Judge (CBI) for four weeks and directed Division Bench to dispose of matter within three months, considering the FIR was registered in 2006.

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Issues Involved:
1. Jurisdiction of Single Judge vs. Division Bench in the High Court.
2. Effect of SEBI consent order on criminal proceedings.
3. Validity of cognizance orders and subsequent criminal proceedings.

Detailed Analysis:

1. Jurisdiction of Single Judge vs. Division Bench in the High Court:

The appeals arose from the judgment and order dated 05.01.2022 by a Single Judge of the Bombay High Court. The primary issue was whether the Single Judge had the jurisdiction to hear the matter, given that the initial Writ Petition No. 406 of 2018 was disposed of by a Division Bench. According to Rule 2(II)(h) of the High Court Rules, applications for quashing an FIR and chargesheet fall outside the jurisdiction of a Single Judge and should be heard by a Division Bench. The respondent's fresh petitions (Writ Petition No. 245 of 2020 and Writ Petition No. 730 of 2020) challenged the cognizance orders instead of the FIR and chargesheet, which allowed the matter to be heard by a Single Judge under Rule 18(4). The Supreme Court noted that the matter should have been heard by a Division Bench, considering the earlier proceedings and the order permitting the withdrawal of the Special Leave Petition with liberty to file a fresh petition.

2. Effect of SEBI Consent Order on Criminal Proceedings:

The respondent had approached SEBI for a consent order, which was granted on 07.12.2009, directing the respondent to pay a sum including unjust profits and settlement charges. The respondent argued that this consent order should absolve them from criminal proceedings. The Single Judge quashed the criminal proceedings, reasoning that continuing them would be an abuse of the process of law, given the SEBI consent order. However, the Supreme Court refrained from commenting on the merits of this argument, leaving it to the Division Bench to decide independently.

3. Validity of Cognizance Orders and Subsequent Criminal Proceedings:

The respondent's fresh petitions specifically challenged the cognizance orders dated 10.03.2008 and 19.03.2008, which were not expressly challenged in the first round of litigation. The Single Judge quashed the criminal proceedings based on these cognizance orders. The Supreme Court noted that the respondent had not challenged these orders in the initial Writ Petition No. 406 of 2018, which only challenged the FIR and chargesheet. The Supreme Court decided to remit the matter to a Division Bench for an independent decision on whether the respondent had made out a case for quashing the proceedings.

Conclusion:

The Supreme Court set aside the impugned order dated 05.01.2022 and remitted the matter to the High Court of Judicature at Bombay to be heard by a Division Bench. The Division Bench is to decide the matter independently, without being influenced by previous observations or orders, including the present order. The Division Bench is requested to dispose of the writ petitions expeditiously, within three months. An interim stay of further proceedings in Special Case No. 47 of 2007 and Special Case No. 48 of 2007 was granted for four weeks, with parties at liberty to seek further orders from the Division Bench.

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