Bakshi, Mr. Navroop Singh Bakshi, Ms. Mahima Malhotra and Mr. Neetej, Advocates v. SECURITIES AND EXCHANGE BOARD OF INDIA

Judgment

1. The Petitioner has approached this Court for quashing/setting aside of the Order dated 26.11.2021 passed by the Ld. Additional Sessions Judge, Tiz Hazari, dismissing an application filed by the Petitioner under Section 91 Cr.P.C. The Petitioner had filed the said application seeking directions to the Respondent-Security and Exchange Board of India (hereinafter "SEBI") to place on record all the statements/findings/documents considered by the High Powered Advisory Committee (hereinafter "HPAC") and the panel of Whole Time Members (WTC) while rejecting the request of the Petitioner herein for compounding the offence alleged in the complaint against the Signature Not Verified Digitally Signed By:RAHUL SINGH Signing Date:16.01.2025 18:35:58 CRL.M.C. 507/2022 Petitioner herein. 2. Shorn of unnecessary details, the facts leading to the filing of the present petition are as under"- a. On 28.05.2004, a criminal complaint, being Criminal Complaint No.12/2016, was filed by the Responder under Section 200 of the CrPC read with Section 26 of the SEBI Act, 1992 before the learned trial Court against the Petitioner and

another accused Mr. Vivek Nagpal under Section 11C(6) read with Section 27 of the SEBI Act, 1992. b. It is stated that the allegations against the Petitioner and Mr. Vivek Nagpal are that they were found actively involved in fraudulent and unfair transactions/activities manipulating the market in the script of "Padmini Technologies". It is stated that the allegations in the complaint is that the Petitioner and Mr. Vivek Nagpal failed to respond to the summons received by them. The role of the Petitioner is that the Petitioner played an active role in facilitating an irregular preferential allotment in order to manipulate the market and create artificial price rise of the shares of "Padmini Technologies". It is stated that the Petitioner is an accused of creating forged and fabricated documents to achieve the aforesaid objective and also that the Petitioner has forged a sale bill of one M/s Shivesh Computers, allegedly to whom one of the allottees namely Alok Khetan had sold his allotment at the instance of the Petitioner. It is stated that M/s Shivesh Computers has denied buying shares of the Company and did not know Mr. Alok Khetan. The signatures of Signature Not Verified Digitally Signed By:RAHUL SINGH Signing Date:16.01.2025 18:35:58 CRL.M.C. 507/2022 Mr. R. K. Surinder Kumar Verma, one of the Directors of M/s Shivesh Computers Pvt. Ltd. was also found to have been forged on the sale bill. It is stated that a separate complaint has also been filed by the Complainant against M/s Padmini Technologies and various other entities including accused persons herein, for violation of Regulations 3, 4 and 6 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1995 and Section 23(1)(b) of Securities Contracts (Regulations) Act, 1956. c. It is stated that during the pendency of the complaint, the Petitioner filed an application under Section 24-A of the SEBI Act seeking compounding of offences in the criminal complaint pending before the Ld. Trial Court for alleged violation of Section 11C(6) of SEBI Act, 1992. SEBI (Settlement Proceedings) Regulations, 2018 has been framed for the purpose of compounding. It is stated that a High Powered Advisory Committee (HPAC) has been constituted under Section 11C(6) of the SEBI Act. The HPAC gave its opinion on the compounding of the offences. It transpires that the HPAC after considering the compounding application, recommended that the offence should not be compounded. The report of the Committee has been submitted before the Panel of Whole Time Members of SEBI and the Panel of Whole Time Members of SEBI has concurred with the recommendation of the HPAC not to compound the offence. d. A reply was filed by the Respondent in the Court opposing the Signature Not Verified Digitally Signed By:RAHUL SINGH Signing Date:16.01.2025 18:35:58 CRL.M.C. 507/2022 compounding. Pursuant to the aforesaid reply filed by the Respondent, the Petitioner moved an application under Section 91 of the Cr.P.C. seeking directions from the Court to the Respondent record statements/documents/findings considered by the HPAC in its meeting dated 27.12.2019 and the Whole Time Members of SEBI, while advising/recommending upon the compounding application of the Petitioner so that it can place its arguments for adjudication of the application under Section 24A of the SEBI Act. e. The said application has been rejected vide Order dated

26.11.2021. The Ld. Trial Court while placing reliance upon Regulations 29(2) of the Settlement Regulations, 2018 has stated that regulations clearly talk about any proposals, information submitted, or representation made by the Petitioner. The Ld. Trial Court is of the onion that the reply filed by the SEBI not only contains the decision of rejection but also about the circumstances that led to the rejection of request for compounding the application. The Ld. Trial Court held that prayer to compound the offence under the SEBI Act shall be considered by the Court, uninfluenced by the rejection of similar request by the authorities of SEBI. It is this Judgment which is under challenge in the Petition.

3. Notice in the present Petition was issued on 03.02.2022. Reply has been filed by the Respondent/SEBI 4. Learned Senior Counsel for the Petitioner submits that penal actions Signature Not Verified Digitally Signed By:RAHUL SINGH Signing Date:16.01.2025 18:35:58 CRL.M.C. 507/2022 are attracted for the violation of Section 11C(6) read with Section 27 of the SEBI and the Petitioner is entitled to know the reasons which have been given by the HPAC to come to the conclusion that the SEBI must not agree for compounding the offence. He submits that it is open for the Petitioner to contend that the decision taken by the HPAC is arbitrary and has been arrived at without considering the necessary documents. He contends that the decision of the Committee is not binding on the Trial Court and therefore, it is always open for the Petitioner to challenge these findings in the application under Section 24A of the SEBI Act. He states that for placing an effective challenge, the Petitioner has to peruse recommendations of the HPAC. Learned Senior Counsel for the Petitioner places reliance on the judgment passed by the Apex Court in Prakash Gupta