Court Not Prohibited From Looking Into Material Considered By SEBI While Adjudicating Plea For Compounding Of Offence: Delhi High Court

Regulation 29(2) of the Settlement Regulation provides that material placed before the HPAC or the Board cannot be used as evidence before any court or Tribunal.

Justice Subramonium Prasad observed, “In the opinion of this Court, these Regulations cannot prohibit any Court to look into the material which was placed before the HPAC or the SEBI Board before it comes to the conclusion, to agree for compounding or not to agree for compounding of the offence.”

The Petitioner was aggrieved by the Sessions Court rejecting his application seeking directions to SEBI to place on record all the material considered by HPAC while declining his request for compounding the offence under Section 11C(6) read with Section 27 of the SEBI Act, over alleged fraudulent transactions to manipulate the market.

HPAC had recommended that the offence should not be compounded.

Petitioner contended he is entitled to know the reasons given by the HPAC for such a conclusion, to place an effective challenge.

Reliance was placed on T. Takano v. SEBI, (2022) where the Supreme Court held that it is the duty of SEBI to disclose investigative material and all the information which is relevant to the proceedings initiated against a person as a matter of right.

SEBI contended that there is confidentiality attached to the record of proceedings. It cited Regulations 29(2) of the Settlement Regulations which states that the material placed before the HPAC or the Board cannot be used as evidence before any Court or Tribunal.

In any case, the Board argued that the entire decision of the HPAC was placed before the petitioner in the form of reply to compounding application along with the reasons, therefore, there is no necessity for providing the documents.

The High Court said that while considering an application for compounding, it is necessary for the Court to understand the factors taken into account by SEBI.

“The application of the Petitioner for a direction to produce the documents cannot be said to be only an exercise to delay the trial or proceedings as these documents would be important to decide the application for compounding,” it observed.

So far as the issue with respect to the documents being supplied to the Petitioner is concerned, the Court said whether such material is sensitive and cannot be shared with the Petitioner is a fact that the competent Court has to consider while dealing with the application by the accused challenging the opinion of the HPAC.

It accordingly directed SEBI to produce all the documents before the Sessions Court in a sealed cover. Whether the same can be supplied to the Petitioner would be decided by the Sessions Court itself.

Appearance: Mr. Jagdeep Singh Bakshi, Sr. Advocate with Ms. Anshika Maheshwari, Ms. Varada Bhutani, Mr. Mudit Jain, Mr. Amitesh Singh Bakshi, Mr. Navroop Singh Bakshi, Ms. Mahima Malhotra and Mr. Neetej, Advocates for Petitioner; Ms. Pinky Anand, Sr. Advocate with Mr. Ashish Aggarwal and Ms. Asees Jasmine Kaur, Advocates for SEBI

Case title: Sanjay Kumar v. SEBI

Citation: 2025 LiveLaw (Del) 68

Case no.: CRL.M.C. 507/2022

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