AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 656
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.... mandamus directing SEBI to read the requirement of pendency to mean and include pendency of the enforcement proceedings post adjudication. A mandamus is also sought directing SEBI to enforce the willingness conveyed in a letter dated 18 August 2010. 2. The First Petitioner is a Stock Broker registered under the SEBI (Stock Broker and Sub-Broker) Regulations, 1992. Sometime in October 2003 the Petitioner was charged by SEBI of having dealt with an unregistered Stock Broker while executing trades on behalf of one of its clients and of having carried out manipulative trades. By an order dated 30 December 2005 SEBI adjudicated upon the notice in exercise of powers conferred by Section 19 and suspended the certificate of registration of the First Petitioner for a period of one month. In a statutory appeal the Securities Appellate Tribunal by its decision dated 27 June 2006 held that the charge of engaging in manipulative trades was not sustained but upheld the finding of the Adjudicating Officer that the First Petitioner had dealt through an unregistered broker. The Tribunal substituted the penalty which was imposed by SEBI with a direction that the Petitioners shall be subjected to a....
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....ivered by the Supreme Court on 21 April 2009 the only issue that was considered was whether the Securities Appellate Tribunal had the power statutorily to substitute the penalty of suspension that was imposed by SEBI for a monetary penalty. The Supreme Court, it was submitted, did not consider as to whether the penalty that was imposed by SEBI would survive once one of the two articles of charge were found not to be established. Consequently, and to that extent, the doctrine of merger would have no application. The Petitioners had moved a Review Application before SEBI in 2009 on the ground that the suspension of the registration was disproportionate. Since the Review Application was pending before SEBI, SEBI would be within its jurisdiction in entertaining the application for recording terms of consent. 4. On the other hand, it has been urged on behalf of the Respondents by the learned Additional Solicitor General that (i) The order passed by SEBI imposing a suspension of one month has merged with the decision rendered by the Supreme Court in Appeal. Consequently, once the adjudication proceeding has attained finality, SEBI cannot enter into terms as a regulator which would have ....
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....d to resort to litigation, which can be dilatory. Clause 4 of the Guidelines provides as follows : "Consent orders may provide flexibility of wider array of enforcement actions which will achieve the twin goals of an appropriate sanction and deterrence without resorting to a long drawn litigation before SEBI/Tribunal/Courts. Passing of consent orders will also reduce regulatory costs and would save time and efforts taken in pursuing enforcement actions. This effort could more effectively be used for pursuing cases which require the full process of enforcement action and for policy work." Clause 5 of the Guidelines then stipulates thus : "Therefore, it has been decided that all appropriate administrative or civil actions e.g. proceedings under sections 11, 11B, 11D, 12(3) and 15I of SEBI Act and equivalent proceedings under the SCRA and the Depositories Act, 1996 and other civil matters pending before Securities Appellate Tribunal (SAT) / courts may be settled between SEBI and a person (party) who may prima facie be found to have violated the securities laws or against whom administrative or civil action has been commenced for such violation. Compounding of offence may cover appr....
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....t and is in the following terms :- "17. Settlement before Securities Appellate Tribunal (SAT)/Courts Where a matter is pending before SAT/Court, the same consent process will be undertaken and the draft consent terms recommended by the Committee and approved by the panel of two Whole Time Members will be filed before the SAT/Court. The SAT/Court may if found fit, pass an order in terms of the consent terms and subject to such further terms as the SAT/Court may find appropriate in the facts and circumstances of the case." Clause 19 stipulates that the procedure stipulated in the guidelines has to be applied for considering proposals for composition of offences. However, a party who wishes to compound an offence has to file an appropriate application before the Court where the complaint is pending with a copy to the Prosecution Division in the Enforcement Department of SEBI. The proposal is considered by the High Powered Committee and once approved by a panel of Whole Time Members of SEBI it is to be placed before the competent court for appropriate orders. 6. The Guidelines make it abundantly clear that an application for consensual resolution can be moved even before a proceedi....
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....e proposed by the party; x. Economic benefits accruing to a party from delayed or avoided compliance; xi. Conditions where necessary, to deter future non-compliance by the same or another party; xii. Satisfaction of claim of investors regarding payment of money due to them or delivery of securities to them; xiii. Compliance of the civil enforcement action by the accused; xiv. Whether the party has undergone any other regulatory enforcement action for the same violation; and xv. Other factors necessary in the facts and circumstances of the case. 7. Whether a dispute should be resolved or whether the wider public interest in ensuring regulatory compliance requires that proceedings should be initiated and, if initiated should be followed to their logical conclusion, is a matter which falls within the discretion of SEBI. As a matter of first principle, a person against whom action has been initiated by SEBI or a person who apprehends that action will be initiated by SEBI has no vested right to insist that the dispute be resolved in terms of a consensual settlement. SEBI has been constituted as an expert regulator to ensure the stable and orderly functioning of the securities mar....
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....ise of its jurisdiction under Article 226 of the Constitution would not be justified in issuing a mandamus to SEBI to act upon a settlement or to accept a settlement as proposed. The guidelines which have been framed by SEBI are administrative in character. Since the judgment of the Supreme Court in G.J. Fernandez v. State of Karnataka AIR 1967 SC 1753 it has been a settled principle of law that if administrative guidelines issued by an authority have no statutory force, they can confer no right on an individual that could be enforced by a writ of mandamus. This principle was reiterated in a subsequent decision of the Supreme Court in J.R. Raghupathy v. State of Andhra Pradesh [1988] 4 SCC 364. But, apart from this position, it is equally fundamental, while analyzing the provisions of the guidelines to emphasise that where the guidelines have conferred a discretionary power upon SEBI to resolve a dispute which has still not reached the stage of adjudication or criminal action, or a dispute for that matter which is pending proceeding, it is for SEBI, on a considered view of all the circumstances of each case, to determine as to whether the dispute merits an amicable solution. 9. In....
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....has to be moved before the appropriate Court. Before a complaint is filed, the filing of a complaint can be obviated by moving SEBI for a resolution of the dispute in terms of the Guidelines. The submission of the Petitioners is that SEBI has still the power to launch a criminal prosecution and hence its jurisdiction to enter into a settlement has not ended. Clause 7 of the Guidelines states that where a criminal complaint has not yet been filed but is envisaged, the process for a consent order will be followed. According to the Petitioners, the expression "envisage" refers to what lies within the powers of SEBI even though SEBI (as in this case) does not propose to launch criminal proceedings. Even if such a broad meaning were to be ascribed to the provisions of Regulation 7, as is contended, even so it is impossible to accept that a proceeding which is no longer pending but which has attained finality upon a judgment of the Supreme Court can be reopened merely on the ground that a criminal complaint has not yet been filed but could hypothetically still be filed. Where a criminal complaint has not yet been filed, a person who has reasonable ground to believe that criminal proceedi....