It was observed that SEBI cannot be compelled to settle the dispute via compounding and that the Court also cannot proceeding with compounding in the absence of the consent from SEBI.
The petitioners had filed an application before the SEBI Special Court for compounding the offence, expressing their willingness to comply with the terms that may be mandated by SEBI as part of compounding process.
The offence alleged against the Petitioners is under Section 24(2) of the SEBI Act which provides for imprisonment and fine and hence it is compoundable in accordance with Section 24(A) of the said Act.
Section 24 A of the SEBI Act which is quoted herein above indeed stipulates that notwithstanding anything contained in the Code of Criminal Procedure any offence punishable under the SEBI act not being an offence punishable imprisonment only or with imprisonment or also with fine may either before or after the institution of any proceedings be compounded by Securities Appellate Tribunal or Court before which such proceedings are pending. The interpretation of the said provision would not mean that whenever an application is preferred by the accused such offences has to be compounded or that the prosecution agency cannot oppose such an application. It would also not mean that the prosecuting agency viz SEBI can be compelled to concede for allowing compounding application. The Division Bench of this Court in the case of Shilpa Stock Broker (supra) has taken into consideration the scope of the Act and the responsibility of SEBI in protecting the interest of the investors and in the light of the said circumstances, it was observed that SEBI cannot be compelled to settle the dispute. Considering the aforesaid circumstances and more particularly in view of the observations of the Division Bench of this Court in the case of Shilpa Stock Broker and also in the light of scope powers of Respondent No.1 being the regulatory authority or the statutory authority it cannot be said that the proceedings can be compounded in the absence of the consent of SEBI.