SEBI consent order does not bar independent criminal prosecution for serious economic offences affecting investors and the market.

A SEBI consent order confined to the proceedings covered by it does not compromise or terminate independent CBI criminal prosecutions, especially where the prosecutions had already reached cognizance and involved alleged market manipulation, forged documents and misuse of the IPO process. In considering quashing, the Court applied the settled rule that inherent jurisdiction is exercised sparingly, and that serious economic offences with wider societal impact are not ordinarily quashed merely because there has been payment or settlement with a regulator. The alleged conduct was treated as a planned conspiracy affecting investors and the market, so continuation of the prosecution was not an abuse of process.

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Issues: (i) Whether the SEBI consent order and payments made under it affected the criminal prosecutions arising out of the CBI cases; (ii) Whether the criminal proceedings were liable to be quashed in exercise of inherent and supervisory jurisdiction.

Issue (i): Whether the SEBI consent order and payments made under it affected the criminal prosecutions arising out of the CBI cases.

Analysis: The consent mechanism under the SEBI regime was confined to the proceedings specifically covered by the order and the applicable circulars. The Court held that the consent order expressly disposed of the SEBI proceedings under sections 11(4), 11B and the related adjudicatory and proposed prosecution aspects, but it did not refer to, compromise, or settle the pending CBI criminal prosecutions. The reference in the consent application to the criminal cases was unilateral and could not enlarge the scope of the consent order. The prosecutions had already progressed to cognizance before the consent order was passed, and the consent order could not retrospectively affect an independent criminal investigation and prosecution involving serious allegations of market manipulation, forged documents, and abuse of the IPO process.

Conclusion: The SEBI consent order had no effect on the pending criminal prosecutions.

Issue (ii): Whether the criminal proceedings were liable to be quashed in exercise of inherent and supervisory jurisdiction.

Analysis: The Court applied the settled principles governing quashing, especially that inherent powers must be used sparingly and that serious economic offences, offences involving moral turpitude, and offences affecting society at large ordinarily should not be quashed merely because the complainant has been compensated or the parties have settled. The allegations were found to disclose a planned conspiracy to corner shares meant for genuine retail investors, to use fictitious bank and demat accounts and forged documents, and to secure unlawful gain at the expense of the market and investors. The Court treated the matter as an economic offence with a wide societal impact, not as a private dispute with a predominating civil flavour. It also noted the involvement of public servants and the statutory policy reflected in SEBI's consent framework, which excludes serious fraudulent and market-wide harmful conduct from settlement. On this basis, continuation of the prosecution was not an abuse of process.

Conclusion: The criminal proceedings were not liable to be quashed.

Final Conclusion: The petitions failed because the settlement with SEBI did not extinguish the independent criminal prosecution, and the alleged conduct was treated as a serious economic and societal wrong warranting trial.

Ratio Decidendi: A settlement or consent order under a regulatory regime does not bar an independent criminal prosecution for serious economic offences affecting investors and the public where the alleged conduct discloses prima facie criminality and a wider societal impact.

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