Prakash Gupta vs Securities and Exchange Board of India

s. 24A – Requirement of the consent of SEBI – Held: s. 24A does not stipulate that the consent of SEBI is necessary for the SAT or the Court before which such proceedings are pending to compound an offence – Where Parliament intended that a recommendation by SEBI is necessary, it has made specific provisions in that regard in the same statute, as in s. 24B – Section 24A is conspicuously silent in regard to the consent of SEBI before the SAT or, as the case may be, the Court before which the proceeding is pending can exercise the power – Hence, it is clear that SEBI’s consent cannot be mandatory before SAT or the Court before which the proceeding is pending, for exercising the power of compounding u/s. 24A.

Securities and Exchange Board of India – Power and functions of – Held: SEBI has been ascribed role as a regulatory, adjudicatory and prosecuting agency – Thus, the SEBI Act and the rules, regulations and circulars made or issued under the legislation, are constantly evolving with a concerted aim to enforce order in the securities market and promote its healthy growth while protecting investor wealth – Powers of the SAT and the Court would necessarily have to align with SEBI’s larger existential purpose – Thus, in line with the object of the SEBI Act, s. 24A to be interpreted in a manner that furthers the statutory role of SEBI, rather than one which thwarts its considered course of action – Therefore, before taking a decision on whether to compound an offence punishable u/s. 24(1), the SAT or the Court must obtain the views of SEBI for furnishing guidance to its ultimate decision – These views, unless manifestly arbitrary or mala fide, must be accorded a high degree of deference – Court must be wary of substituting its own wisdom on the gravity of the offence or the impact on the markets, while discarding the expert opinion of the SEBI.

s. 24A – Compounding of offence under – Guidelines laid down for Securities Appellate Tribunal-SAT or such courts in the matter of adjudicating an application for compounding of the offence u/s. 24A – To consider the factors in SEBI’s circular dated 20.04.2007; to give deference to the opinion of High powered advisory committee-HPAC, and SAT or court to differ only when the reasons provided are malafide or manifestly arbitrary; to ensure that application u/s. 24A are not for quashing u/s. 482 CrPC; and to consider whether the offence is private or public in nature and the non-prosecution.

Code of Criminal Procedure, 1973: s. 320 – Compounding of offences – Principle underlying s. 320 – Stated – s. 320 provides for the compounding of offences only under the IPC – Hence, in respect of offences which lie outside the IPC, compounding may be permitted only if the statute which creates the offence contains an express provision for compounding before such an offence can be made compoundable – Power of compounding must, be expressly conferred by the statute which creates the offence. Criminal law: Compounding of offences – Jurisprudential basis for – Discussed.

Words and phrases: Expression “compounding crime” – Definition of.

Disposing of the appeal, the Court

HELD: 1.1 Section 24A of the Securities and Exchange Board of India Act, 1992, which provides for the compounding of certain offences, contains certain characteristic features: firstly, Section 24A begins with a non-obstante clause, “notwithstanding anything contained in the Code of Criminal Procedure 1973”; secondly, any offence punishable under the SEBI Act can be compounded, provided it is not an offence which is punishable only with imprisonment or with imprisonment and fine. Therefore, only where a fine is an alternative to imprisonment does the provision apply; thirdly, the offence may be compounded either before or after the institution of any proceeding; and fourthly, the offence may be compounded by SAT or by a Court, before which such proceedings are pending. [Para 36][894-D-F]

1.2 Offences punishable under sub-Section (1) of Section

24 are compoundable for the reason that the punishment which has been stipulated is for a certain term of imprisonment or with fine or with both (the term of imprisonment and the quantum of fine has been enhanced). Whether an offence under Sub-section

(2) of Section 24 is compoundable under Section 24A depends on the construction which is to be placed on the words “or with fine”. One option would be to construe these words as an alternative to the whole of the preceding words which appear immediately before namely “he shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to ten years”. The second option is that the words “or with fine” are an alternative to any sentence imposed above the minimum of one month. Prima facie, it appears that for offences under subSection (2) of Section 24, prescribing imprisonment for a term which shall not be less than one month is mandatory. While the imprisonment may extend up to ten years, for any period in excess of one month a fine of up to Rs 25 crores is an alternative or in the cumulative. [Para 37][894-F-H; 895-A-B]

2.1 Section 24A provides for the compounding of an offence either before or after the institution of any proceeding. Since Section 24A provides for compounding prior to the institution of proceedings, the legislature has stipulated that an application can be made to SAT. However, once a proceeding has been instituted before a Court which is seized of it, it is the imprimatur of the Court that is required in such a situation. The expression “or a court before which such proceedings are pending” would indicate that once proceedings have been instituted before it, the Court has exclusive jurisdiction to compound offences. [Para 38][895-C-E]

2.2 In a circular dated 20 April 2007, SEBI issued guidelines for consent orders under Sections 15T of the SEBI Act and Section 23A of the Depositories Act, 1996, and for compounding of offences under Section 24A of the SEBI Act, Section 22A of the Depositories Act and Section 23N of the Securities Contracts (Regulation) Act, 1956. It noted that compounding of an offence “may cover appropriate prosecution cases filed by SEBI before the criminal courts” and “can take place after filing criminal complaint by SEBI”. Finally, it notes the procedure to be followed by an accused person while seeking compounding. SEBI amended the circular dated 20 April 2007 through a circular dated 25 May 2012. While the circular primarily issues new guidelines in relations to consent orders, it also provides a list of offences which SEBI shall not settle. [Paras 39, 41][895-E-G; 897-C] <https://www.sebi.gov.in/legal/circulars/apr-2007/guidelines-for-consent-orders-and-for-consideringrequests-for-composition-of-offences_9254.html> accessed on 20 July 2021; <https://www.sebi.gov.in/sebi_data/commondocs/consentordfaq1_p.pdf>accessed on 20 July 2021; <https://www.sebi.gov.in/legal/circulars/may-2012/amendmentto-t he-co ns ent -circul ar-da ted -20 th -ap ri l2007_22808.html> accessed on 20 July 2021 – referred to.

2.3 A combined reading of the two circulars and FAQs issued by SEBI clarifies the following: firstly, a party can seek compounding under Section 24A at any stage once the criminal complaint has been filed by SEBI; secondly, the party shall have to file the application for compounding before the Court where the criminal complaint is pending; thirdly, a copy of the application for compounding must also be sent to SEBI, which will place it before the High Powered Advisory Committee (HPAC); and fourthly, the HPAC’s decision on the application, be it an acceptance or an objection, shall be placed by SEBI before the appropriate Court, which will have to pass appropriate orders. Hence, this makes it abundantly clear that while the HPAC’s decision on a party’s application for compounding under Section 24A must be placed before the appropriate Court, the final decision must remain in the domain of the Court. [Para 42][897-E-G]

3.1 In tracing the history of compounding, its origins in English common law is to be seen. The original discussions surrounding compounding (or composition) of offences in the English common law do not occur in its context as a procedural tool (as understood today) but rather as an offence itself. Under such an offence, a prosecutor or a victim would accept consideration in return for not prosecuting an offence. [Para 44][898-B-C]

Percy Henry Winfield, The Present Law of Abuse of Legal Procedure (Cambridge University Press, 2013) at page 117; Blacks’ Law Dictionary 5th Edition, at page 259; P Ramanatha Aiyar’s Advanced Law Lexicon 3rd Edition, Reprint 2007, at page 932 – referred to.

3.2 While the “exception” to the provisions of Sections

213 and 214 Penal Code, 1860 make the provisions inapplicable to offences which may be compounded, it is important to note that the “exception” was only introduced through an amendment in 1882 (Act 8 of 1882). On the other hand, it was in 1872, when the Code of Criminal Procedure was amended, that compounding was first introduced as a procedural tool in Indian criminal law. As is evident, the above provision only provided that compounding of offences was possible out of Court, or in Court with its permission. However, while it referred to offences which may be “lawfully compounded”, the decision on those was left to judicial discretion. When the Code of Criminal Procedure was amended in 1882, it enumerated a list of offences which could be compounded by the Courts in Section 345. This list was expanded when the Code of Criminal Procedure was amended again in 1898. Finally, in its current form, the compounding of offences is permissible under Section 320 of the CrPC. [Paras 47-49] [900-D-H; 901-A]

3.3 The provisions of Section 320 indicate that there are three categories of offences: those offences which can be compounded by the parties themselves; those offences which can be compounded by the parties but for which the permission of the Court is required; and offences which cannot be compounded at all. [Para 50][902-C-E]

3.4 Sub-section (1) of Section 320 of the CrPC stipulates that offences punishable under the sections of the IPC in the first two columns of the appended table may be compounded by the persons mentioned in the third column of that table, without the permission of the Court. Broadly speaking, the offences covered by sub- Section (1) of Section 320 are relatively of a minor nature directed against an individual without affecting the society at large. The maximum sentence for these offences may vary from five to seven years’ imprisonment. Almost all the offences are bailable and several are non-cognizable. Sub-Section

(2) of Section 320 provides for offences where compounding requires the permission of the Court before which a prosecution for the offence is pending. A provision for the permission of the Court has been introduced in respect of offences governed by sub-Section (2) of Section 320 since the legislature has viewed those offences to be of a more serious nature as compared to the offences governed by sub-Section (1) of Section 320. Sub-Section

(3) of Section 320 provides that where an offence is compoundable under the provision, the abetment of such an offence or attempt to commit such an offence or where the accused is liable under Section 34 or Section 149 of the IPC may also be compounded in a like manner. Sub-Sections (4a) provides that where the person who would otherwise be competent to compound the offence under the provision is under the age of 18 or “is an idiot or a lunatic” a person competent to contract on their behalf may, with the permission of the Court, compound the offence. Similarly, under sub-Section 4(b), where the person who would otherwise be competent to compound the offence under the provision is dead, their legal representative as defined under the Code of Civil Procedure, 1908 may, with the consent of the Court, compound the offence. Sub-Section (5) provides that where the accused has been committed for trial or when the accused has been convicted and an appeal has been pending, no compounding shall be allowed without the leave of the Court to which the accused is committed or of the Court before which the appeal is to be heard. Under sub-Section (6), the High Court or Court of Sessions is empowered to allow a person to compound an offence in the exercise of its revisional powers which such a person is competent to compound under the provision otherwise. SubSection (7) provides that compounding will not be permitted when the accused is liable either to enhanced punishment or to a punishment of a different kind for such offence for a previous conviction. Sub- Section (8) provides that the effect of compounding under this provision would have the same effect as the acquittal of the accused. Finally, sub-Section (9) provides that no offence shall be compounded except as provided by the provision. [Paras 51-53][902-E-H; 903-A-G]

3.5 It is evident that that legislative sanction for compounding of offences is based upon two contrasting principles: first, that private parties should be allowed to settle a dispute between them at any stage (with or without the permission of the Court, depending on the offence), even of a criminal nature, if proper restitution has been made to the aggrieved party; and second, that, however, this should not extend to situations where the offence committed is of a public nature, even when it may have directly affected the aggrieved party. The first of these principles is crucial so as to allow for amicable resolution of disputes between parties without the adversarial role of Courts, and also to ease the burden of cases coming before the Courts. However, the second principle is equally important because even an offence committed against a private party may affect the fabric of society at large. Non-prosecution of such an offence may affect the limits of conduct which is acceptable in the society. The Courts play an important role in setting these limits through their adjudication and by prescribing punishment in proportion to how far away from these limits was the offence which was committed. As such, in deciding on whether to compound an offence, a Court does not just have to understand its effect on the parties before it but also consider the effect it will have on the public. Hence, societal interest in the prosecution of crime which has a wider social dimension must be borne in mind. [Para 59][906-A-E]

Biswabahan Das vs Gopen Chandra Hazarika AIR 1967 SC 895:1967 SCR 447; Sheonandan Paswan vs State of Bihar (1987) 1 SCC 288 : [1987] 1 SCR 702 – referred to.

Keir vs F. Leeman and Pearson (1844) 6 Queen’s Bench Reports 308; Public Prosecutor vs Norzian bin Bintat [1995] SGHC 207 – referred to.

Ryan David Lim and Selene Yap ‘Composition: Legal and Theoretical Foundations’ (2015) 27 SAcLJ 462 – referred to.

<https://lawcommissionofindia.nic.in/reports/report237.pdf> accessed on 20 July 2021 – referred to.

3.6 Section 320 provides for the compounding of offences only under the IPC. Hence, in respect of offences which lie outside the IPC, compounding may be permitted only if the statute which creates the offence contains an express provision for compounding before such an offence can be made compoundable. The power of compounding must, be expressly conferred by the statute which creates the offence. [Para 62][907-C-D]

4.1 Section 24A of the SEBI Act commences with a nonobstante provision which operates notwithstanding anything contained in the CrPC. Sub-Sections (1) and (2) of Section 320 of the CrPC dealt with the compounding of offences under the IPC, while sub-Section (9) stipulates that no offence shall be compounded except as provided in the Section. However, the stipulation contained in sub-Section (9) of Section 320 ceases to have effect in relation to the compounding of offences under the SEBI Act by virtue of a specific non-obstante provision contained in Section 24A providing for the compounding by offences punishable under that legislation. Section 24A, by incorporating a non-obstante provision indicates a legislative intent to the effect that the power to compound offences punishable under the SEBI Act is not trammeled by the provisions of Section 320 of the CrPC. [Para 80][918-A-D]

4.2 The ingredients of Section 24A of the SEBI Act must be delineated. Section 24 A contains five ingredients when it specifies: the offences which can be compounded (“any offence punishable in this Act”); the exceptions which the statutory provision carves out (“not being an offence punishable with imprisonment only or with imprisonment and also with fine”); the stage at which compounding may take place (“either before or after the institution of any proceedings”); the forum before which the compounding act takes place (“a Securities Appellate Tribunal or the Court before which such proceedings are pending”); and the entrustment of the power to compound to the SAT or the Court. [Para 81][918-D-G]

4.3 The entrustment of the exclusive power to compound offences under Section 24A of the SEBI Act to the SAT or the Court before which such a proceeding is pending is evinced by the expression “be compounded by a Securities Appellate Tribunal or a court before which such proceedings are pending”. Section 24A thus contains a departure from the modalities which are prescribed in sub-Sections (1) and (2) of Section 320 of the CrPC. Section 320 of the CrPC, permits the compounding only of certain specified offences under the IPC. Section 320 contains a two-fold distinction between offences punishable under the IPC which can be compounded: (i) without the leave of the Court; and (ii) with the leave of the Court. In contrast, the power to compound under Section 24A is confined to offences punishable under the SEBI Act. The power is entrusted solely to the SAT or to the Court, before which the proceedings are pending. Hence, the non-obstante provision contained in Section 24A must be given its natural meaning and effect. [Para 82][918-G-H; 919-A-C]

4.4 The plain language of section 24 A does not provide for the consent of SEBI. The issue is whether this Court should read the requirement of the consent of SEBI into the provision, on the ground that this is a casus omissus. This would, however, amount to re-writing the statutory provision by introducing language which has not been employed by the legislature. [Para 83][919-C-D]

Union of India vs Rajiv Kumar (2003) 6 SCC 516 : [2003] (1) Suppl. SCR 597 – referred to.

4.5 It is evident that Section 24A does not stipulate that the consent of SEBI is necessary for the SAT or the Court before which such proceedings are pending to compound an offence. Where Parliament intended that a recommendation by SEBI is necessary, it has made specific provisions in that regard in the same statute. Section 24B provides a useful contrast. Section 24B(1) empowers the Union Government on the recommendation of SEBI, if it is satisfied that a person who has violated the Act or the Rules or Regulations has made a full and true disclosure in respect of the alleged violation, to grant an immunity from prosecution for an offence subject to such conditions as it may impose. The second proviso clarifies that the recommendation of SEBI would not be binding upon the Union Government. In other words, Section 24B has provided for the exercise of powers by the Central Government to grant immunity from prosecution on the recommendation of SEBI. In contrast, Section 24A is conspicuously silent in regard to the consent of SEBI before the SAT or, as the case may be, the Court before which the proceeding is pending can exercise the power. Hence, it is clear that SEBI’s consent cannot be mandatory before SAT or the Court before which the proceeding is pending, for exercising the power of compounding u/s. 24A. However, it is also important to remember that proceedings for the trial of offences under the SEBI Act are initiated on a complaint made by SEBI by virtue of Section 26 of the SEBI Act. SEBI is a regulatory and prosecuting agency under the legislation. Hence, while the statutory provisions do not entrust SEBI with an authority in the nature of a veto under the provisions of Section 24A, it is equally necessary to understand the importance of its role and position. [Paras 84, 85][920-B-G] JIK Industries Limited vs. Amarlal v. Jumani (2012) 3 SCC 255 : [2012] 3 SCR 114; VLS Finance Limited vs. Union of India (2013) 6 SCC 278 : [2013] 8 SCR 849; Damodar S Prabhu vs Sayed Babalal 2010 5 SCC 663 : [2010] 5 SCR 678; Meters and Instruments Pvt. Ltd. vs Kanchan Mehta (2018) 1 SCC 560 : [2017] 10 SCR 66; N H Securities Limited vs Securities and Exchange Board ofIndia 2018 SCC OnLine Bom 4040; Re:

Expeditious Trial of cases under Section 136 of Negotiable Instruments Act 1881 Suo Motu Writ Petition (Crl) No. 2 of 2020 – referred to.

5.1 The provisions of the SEBI Act would indicate the importance of the role which has been ascribed to it as a regulatory, adjudicatory and prosecuting agency. SEBI has vital functions to discharge in the context of maintaining an orderly and stable securities’ market so as to protect the interests of investors. SEBI was established in 1988 by a government resolution, to urgently respond to the rapid growth of capital markets. Therefore, the SEBI Act and the rules, regulations and circulars made or issued under the legislation, are constantly evolving with a concerted aim to enforce order in the securities market and promote its healthy growth while protecting investor wealth. [Paras 86-87][920-G-H; 921-A; 924-E-F] Sahara India Real Estate Corporation Ltd. vs SEBI (2013) 1 SCC 1 : [2012] (12) SCR 1; B S E Brokers’ Forum vs Securities and Exchange Board of India (2001) 3 SCC 482 – referred to.

5.2 This Court has been mindful of the public interest that guides the functioning of SEBI and has refrained from substituting its own wisdom over the actions of SEBI. Its wide regulatory and adjudicatory powers, coupled with its expertise and information gathering mechanisms, imprints its decisions with a degree of credibility. The powers of the SAT and the Court would necessarily have to align with SEBI’s larger existential purpose. Therefore, in line with the object of the SEBI Act and the precedents, it would be the task to interpret s. 24A in a manner that furthers the statutory role of SEBI, rather than one which thwarts its course of action. [Para 88][926-A-B; 927-D]

5.3 Section 24(1) is an omnibus provision for all offences punishable for contravention (or attempts or abetments) of the provisions of the Act or of any rule or regulation made under it. Prior to Amending Act 59 of 2002 which came into effect from 29 October 2002, the punishment for offences extended to a period of one year of imprisonment, or with fine, or with both under Section 24(1). The term of imprisonment has been extended to up to ten years and a fine of Rs twenty-five crores by the amending legislation of 2002. The rationale for this amendment, as evinced from its Statement of objects and reasons, was to provide an effective deterrent for potential wrongdoers. Offences punishable under sub- Section (1) of Section 24 would cover a range of violations from the venial to the serious. The entrustment of the power to compound offences either before or after the institution of any proceeding is to SAT or a Court before which such proceedings are pending. The provisions of Section 24A must be read in a manner consistent with the object and purpose underlying the position of SEBI as an expert regulator. SEBI, as the regulator, is entrusted with diverse roles and functions including the power to regulate the securities’ market, make regulations and to enforce the provisions of the Act. Its functions have been recognized in a panoply of statutory provisions. Independent of initiating a prosecution, SEBI has been entrusted with wide ranging powers and functions including the power to investigate, to issue directions and levy penalties and make cease and desist orders. [Para 89][927-E-H; 928-A-B] SEBI vs Kishore R Ajmera (2016) 6 SCC 368 : [2016] 1 SCR 1118; Securities and Exchange Board of India vs Ajay Agarwal (2010) 3 SCC 765 : [2010] 3 SCR 70; G L Sultania vs Securities & Exchange Board of India (2007) 5 SCC 133 : [2007] 6 SCR 1152; PGF Ltd vs Union of India (2015) 13 SCC 50 : [2013] 6 SCR 32; SEBI vs Akshya Infrastructure (P) Ltd. (2014) 11 SCC

112 : [2014] 13 SCR 402; SEBI vs Saikala Associates Ltd. (2009) 7 SCC 432 : [2009] 6 SCR 798 – referred to.

5.4 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. The view of SEBI, an envisaged in the FAQs accompanying SEBI’s circular dated 20 April 2007, must undoubtedly be sought by the SAT or the Court, to decide on whether an offence should be compounded. For SEBI can provide an expert view on the nature and gravity of the offence and its implication upon the protection of investors and the stability of the securities’ market. These considerations and others which SEBI may place before the SAT or the Court, would be of relevance in determining as to whether an application for compounding should be allowed. Therefore, before taking a decision on whether to compound an offence punishable under Section 24 (1), the SAT or the Court must obtain the views of SEBI for furnishing guidance to its ultimate decision. These views, unless manifestly arbitrary or mala fide, must be accorded a high degree of deference. The Court must be wary of substituting its own wisdom on the gravity of the offence or the impact on the markets, while discarding the expert opinion of the SEBI. [Para 90][928-B-E]

5.5 It is also important to note that the legislative scheme of the SEBI Act delineates several actions that are liable for penalty under Section 15, but includes a common sentencing provision under Section 24. Therefore, Section 24 would be the sentencing provision for the most banal of offences, to the most egregious of market disruptions and frauds. The maximum punishment prescribed under Section 24 has also seen an amendment and increase by the Amending Act 59 of 2002, in order to ensure effective deterrence. In exercising the power of compounding under Section 24A, the SAT or the Court must be conscious of the gravity of the offences that the accused are being prosecuted for, considering that the legislative scheme does not individually prescribe separate sentencing provisions which would otherwise have provided an insight into the gravity and gradation of the offences. Hence, SEBI’s view on the compounding would become all the more important, in this light. [Para 91][928-F-H; 929-A]

6. Section 24A only provides the SAT or the Court before which proceedings are pending with the power to compound the offences, without providing any guideline as to when should this take place. Hence, it is necessary to elucidate upon some guidelines which SAT or such Courts must take into account while adjudicating an application under Section 24A:

(i) They should consider the factors enumerated in SEBI’s circular dated 20 April 2007 and the accompanying FAQs, while deciding whether to allow an application for a consent order or an application for compounding. These factors are non-exhaustive.

(ii) According to the circular dated 20 April 2007 and the accompanying FAQs, an accused while filing their application for compounding has to also submit a copy to SEBI, so it can be placed before the HPAC. The recommendation of the HPAC is then filed before the SAT or the Court, as the case may be. As such, the SAT or the Court must give due deference to such opinion. The opinion of HPAC and SEBI indicates their position on the effect of non-prosecution on maintainability of market structures. Hence, the SAT or the Court must have cogent reasons to differ from the opinion provided and should only do so when it believes the reasons provided by SEBI/HPAC are mala fide or manifestly arbitrary.

(iii) The SAT or Court should ensure that the proceedings under Section 24A do not mirror a proceeding for quashing the criminal complaint under Section 482 of the CrPC, thereby providing the accused an opportunity. The principle behind compounding, is that the aggrieved party has been restituted by the accused and it consents to end the dispute. Since the aggrieved party is not present before the SAT or the Court and most of the offences are of a public character, it should be circumspect in its role. In the generality of instances, it should rely on the SEBI’s opinion as to whether such restitution has taken place.

(iv) Finally, the SAT or the Court should consider whether the offence committed by the party submitting the application under Section 24A is private in nature, or it is of a public character, the non-prosecution of which will affect others at large. As such, the latter should not be compounded, even if restitution has taken place. [Para 92][929-B-D; 930-E-H; 931-A-D]

7. In the instant case, the nature of the allegations against the appellant are such so as to preclude a decision to compound the offences. They have been adverted, in a considerable amount of detail, to the circumstances which have been narrated in the counter affidavit filed by SEBI. There is merit in the submissions that the allegations in the present case involved serious acts which impinged upon the protection of investors and the stability of the securities’ market. The observation in the order of adjudication of the Chairperson of the SEBI dated 22 September 2000, that no loss has been caused to the investors as a result of the proposal which was submitted by the promoters to purchase the shares at the rate of Rs 12 per share, would not efface the element of alleged wrong doing. Such alleged acts of price rigging and manipulation of the prices of the shares have a vital bearing on investors’ wealth and the orderly functioning of the securities market. SEBI was, therefore, justified in opposing the request for the compounding of the offences. The matter was referred to the HPAC constituted by SEBI and presided over by a former judge of the Bombay High Court, which denied the request for compounding. This decision which has been taken by SEBI is not mala fide nor does it suffer from manifest arbitrariness. On the contrary, having due regard to the nature of the allegations, an order for compounding was not warranted. The judgment of the High Court is upheld. [Paras 93-94][931-D-H; 932-A-B]