Prakash Gupta Vs SEBI
Supreme Court of India
Date-23rd July 2021

Sub-Whether consent of SEBI has to be read in Section 24A of SEBI Act 1992 dealing with compounding of offences, even though the section doesn’t provide for such consent. Supreme Court deals with the entire jurisprudence on the compounding of an offence.

In this case, the apex court was dealing with misuse and rigging of price by the Promoter of the Company Ideal Hotels & Industries limited which owned a hotel at Varanasi in connivance with six entities related to the promoter. Having admitted the guilt, the promoter applied for compounding which was rejected by the Trial Court and High Court in view of consent of SEBI having not been obtained. The Supreme Court in appeal after dealing with entire jurisprudence on Compounding held that even though Section 24A of the SEBI Act did not provide for taking consent of SEBI before the SAT or the Court proceeded with the application for compounding ,the same has to be read in the section in view of the principle of casus omissus.While the statute has entrusted the powers of compounding offences to SAT or to the Court, as the case may be, before which the proceedings are pending, the view of SEBI as an expert regulator must necessarily be borne in mind by the SAT and the Court, and would be entitled to a degree of deference. While SEBI does not have a veto, having regard to the language of Section 24A, its views must be elicited. Finally the court upheld that SEBI rightly denied the compounding in the larger investor interest on account of serious allegations against the promoters.

This judgement will give more teeth to SEBI and is a landmark judgement in the interest of investor community at large.

Ramesh Patodia
24-07-2021