Delhi High Court
Nimisha Saraf vs Securities And Exchange Board Of ... on 20 January, 2023
1 Neutral Citation Number 2023/DHC/000506
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 766/2023 & CM APPLs. 2985/2023, 2986/2023
Date of Decision: 20.01.2023
IN THE MATTER OF:
NIMISHA SARAF
D/O SH. AJAY SARAF,
8/3, ALIPUR ROAD,
CIVIL LINES,
DELHI-110054 ..... Petitioner
Through: Mr. Gaurav Kejriwal, Advocate
Versus
SECURITIES AND EXCHANGE BOARD OF INDIA
SEBI BHAVAN, PLOT NO. C-4A, G BLOCK,
BANDRA KURLA COMPLEX, BANDRA (EAST)
MUMBAI-400051. ..... Respondent
Through: Mr. Pratap Venugopal, Mr. Abhishek
Baid, Mr. Praneet Das, Mr. Anup Jain & Mr.
Ashok Kumar Jain, Advocates
CORAM:
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV
JUDGMENT
PURUSHAINDRA KUMAR KAURAV, J. (ORAL)
1. This petition seeks for issuance of directions in the nature of
mandamus directing the respondents to open/enable the link for payment
of penalty in terms of the Scheme and accept the payment on behalf of
the Petitioner on or before the closure of the Settlement Scheme of 2022
either physically or online. The petitioner also prayed for production of
Signature Not Verified
Signed By:PRATIMA
Signing Date:24.01.2023
10:11:03
2 Neutral Citation Number 2023/DHC/000506
file relating to the Petitioner's Order being Adjudication Order No.
order/PB/AS/2021-22/14221.
2. The facts of the case are that on 05.08.2021, Show Cause Notice
was issued to the petitioner alleging that he carried out non-genuine
trades i.e. in liquid stock options at the Bombay Stock Exchange,
whereby, he violated Regulations 3(a)(b)(c)(d), 4(1) and 4(2)(a) of SEBI
(prohibition of Fraudulent and Unfair Trading Practices related to
Securities Markets), Regulations 2003. The petitioner filed the reply,
however, the adjudicating authority in terms of order dated 18.11.2021
imposed a penalty of Rs.5,00,000/-. The petitioner preferred statutory
appeal before appellate authority, which had also suffered the same fate
on 07.02.2022. It appears that the review petition filed by the petitioner
was also dismissed on 15.07.2022. In August, 2022, the respondent
propounded the SEBI settlement Scheme, 2022 with an object to settle
enforcement proceedings approved/initiated and pending in respect of
Illiquid stock Options. On 18.11.2022, the petitioner through his
Advocate forwarded mail to the respondent enabling him to make the
payment so as to take the benefit of the concerned Scheme. The Scheme
appears to have been extended upto January 21, 2023. Between
September, 2022 to January 13, 2023, the petitioner appears to have
made various correspondence to the respondent authority requesting
them to enable him to take the advantage of the scheme while accepting
online payment.
3. Learned counsel for the petitioner while referring to Clause 1 of
the Scheme indicates that the object of the concerned Scheme is to settle
the enforcement proceedings approved/initiated and pending in respect of
Signature Not Verified
Signed By:PRATIMA
Signing Date:24.01.2023
10:11:03
3 Neutral Citation Number 2023/DHC/000506
Illiquid stock Options matter. He, therefore, submits that the non-
acceptance of the amount from the petitioner as well as non opening of
the link is strictly against the mandate of the Scheme, which is adversely
affecting the right of the petitioner from entering into a settlement in
terms of the Scheme in question. While highlighting the purpose of the
Scheme, learned counsel makes an endeavour to suggest that the word
used in the Scheme i.e. "approved/initiated enforcement proceedings"
would mean that the proceedings in hand are still pending before the
enforcement directorate in the form of execution. According to him,
since the amount has not yet been realised from the petitioner and,
therefore, for all practical purposes, proceedings should be treated as
pending before the enforcement Department.
4. Learned counsel appearing on behalf of the respondent, on
advance notice, vehemently opposed the prayer. He submits that the case
of the petitioner has already attained finality and the Scheme in question
since has been framed in exercise of Power vested under Regulation 5,
SEBI (Settlement Proceedings) Regulations 2018, which specifically
states that no application for settlement of any specified proceedings
shall be considered. If money is due as per an order issued under
securities law are liable for recoveries under securities law. According to
him, since the money in question is liable to be recovered under the
securities law and, therefore, the Scheme cannot be expanded to include
the cases where the proceedings have already attained finality.
5. I have heard learned counsel for the parties and perused the record.
6. Extract of Regulation 5 of SEBI (Settlement Proceedings)
Regulations 2018 is reproduced as under:-
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Signed By:PRATIMA
Signing Date:24.01.2023
10:11:03
4 Neutral Citation Number 2023/DHC/000506
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.
7. 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".
8. A perusal of the concerned Regulation and the eligibility Clause
would clearly indicate that 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. 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.
Signature Not Verified
Signed By:PRATIMA
Signing Date:24.01.2023
10:11:03
5 Neutral Citation Number 2023/DHC/000506
9. In the instant case, the argument made by learned counsel for the
petitioner cannot be accepted that the enforcement proceedings are
still pending. After approval of the enforcement proceedings, the same
are required to be formally initiated before the adjudicating authority
and in the instant case, the stage of approval of initiation and of
initiation is already over when the adjudicating officer had already
passed an order. It is thus seen that as on 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 for settlement of such cases.
Pendency of recovery proceedings cases are distinct than the original
proceedings. Hence, the case of the petitioner does not fall within
Clause 6 of the said scheme for eligibility, accordingly, no mandamus
can be issued.
10. The petition stands dismissed alongwith pending applications.
(PURUSHAINDRA KUMAR KAURAV)
JUDGE
JANUARY 20, 2023
p'ma
Signature Not Verified
Signed By:PRATIMA
Signing Date:24.01.2023
10:11:03
