SEBI compounding proceedings allow court scrutiny of regulator material, despite settlement confidentiality limits.

In SEBI Act compounding proceedings, the Court may examine the material considered by SEBI's HPAC and Whole Time Members to assess whether the applicant meets the recognised compounding guidelines, including the gravity of the violation, conduct of the applicant, and the public character of the offence. Regulation 29 of the SEBI (Settlement Proceedings) Regulations, 2018 does not bar such limited judicial scrutiny, although confidentiality may still be protected through sealed cover. The applicant's request for production was therefore allowed, and the refusal to entertain the Section 91 request was set aside, with the trial court left to decide whether the documents should be supplied to the applicant.

---

---

Issues: Whether the accused was entitled, in proceedings for compounding of offences under the SEBI Act, to seek production of the material considered by the HPAC and SEBI's Whole Time Members, and whether Regulation 29 of the SEBI (Settlement Proceedings) Regulations, 2018 barred the Court from calling for or perusing such material.

Analysis: The power to compound under Section 24A of the SEBI Act vests in the Court or SAT, though SEBI's view as an expert regulator is entitled to due deference. The material placed before the HPAC and the Whole Time Members was held to be relevant for deciding whether the compounding request satisfied the guidelines recognised by the Supreme Court, including the nature and gravity of the violation, the conduct of the applicant, and the public character of the offence. Regulation 29 was held not to prevent the Court from looking into the material considered by SEBI for the limited purpose of deciding the compounding application, even if the documents were not to be released to the applicant as a matter of course.

Conclusion: The applicant was entitled to production of the material before the Court, and the order refusing the Section 91 request was set aside. The Court directed SEBI to produce the documents, permitting them to be placed in sealed cover, while leaving it to the trial Court to decide whether they should be supplied to the applicant.

Ratio Decidendi: In compounding proceedings under the SEBI Act, the Court may summon and peruse the material considered by SEBI in deciding the request, and the confidentiality rules governing settlement proceedings do not bar the Court from examining such material for adjudication of the compounding application.

---