OTS not Available for SEBI Settlement Scheme if Proceedings not Pending in Courts/Tribunals

Case Details: Nimisha Saraf v. Securities & Exchange Board India - [2023] 146 taxmann.com 568 (Delhi)

Judiciary and Counsel Details

• • Purushaindra Kumar Kaurav, J.
  • Gaurav Kejriwal, Adv. for the Petitioner.
  • Pratap Venugopal, Abhishek Baid, Praneet Das, Anup Jain & Ashok Kumar Jain, Advs. for the Respondent.

Facts of the Case

In the present case, a question was raised that, can One-time Settlement under SEBI Settlement Scheme 2022 be utilized if there are no active proceedings before the AO, SAT, Courts, or Recovery Officer?

As per the SEBI (Settlement Proceedings) Regulations 2018 and the eligibility clause of the SEBI settlement Scheme, 2022, the one-time settlement opportunity is open to entities who conducted non-genuine trades or trade reversals on the stock option segment of BSE between April 1, 2014 to September 30, 2015 and are facing enforcement proceedings and Such enforcement proceedings have been approved or initiated and are pending before any authority/forum.

It clearly indicates that the benefit of Scheme can only be extended where the enforcement proceedings have been approved or initiated and are pending before any authority/forum.

The petitioner’s argument that enforcement proceedings are still pending cannot be accepted. The enforcement proceedings, after being approved, must be formally initiated before the adjudicating authority. In this case, the approval and initiation stage is already over as the adjudicating officer has already passed the order.

Extract of Regulation 5 of SEBI (Settlement Proceedings) Regulations 2018 is reproduced as under: –

5. (1) No application for settlement of any specified proceedings shall be considered, if:

(a) an earlier application with regard to the same alleged default had been rejected;

(b) the audit or investigation or inspection or inquiry, if any, in respect of any cause of action, is not complete, except in case of applications involving confidentiality; or

(c) monies due under an order issued under securities laws are liable for recovery under securities laws.

It is thus seen that as on the date the money towards penalty is due under an order issued under Securities Laws, which is liable to be recovered under Securities Laws. Regulation 5 of SEBI Regulation, 2018 puts a specific bar on settlement of such cases.

Further, the eligibility clause of the Scheme under which the petitioner seeks benefit is also reproduced as under: –

“6. Eligibility: Under the Scheme, 2022, all the entities who had executed non-genuine trades/trade reversals on the stock option segment of BSE during the period April 01, 2014 to September 30, 2015 and against whom enforcement proceedings have been approved or initiated and are pending before any authority/forum, viz. Adjudicating Officer/Hon’ble SAT/Hon’ble Courts/Recovery Officer etc. shall be eligible to avail the one-time settlement opportunity”.

High Court Held

Hon’ble High Court observed that the pendency of recovery proceedings cases are distinct than the original proceedings. Hence, it was held that the case of the petitioner does not fall within Clause 6 of the said scheme for eligibility, accordingly, no mandamus can be issued.

Thus, One-time settlement opportunity under SEBI Settlement Scheme 2022 cannot be availed where proceedings are not pending before AO/SAT/Courts/Recovery Officer etc.