Case Note & Summary
The petitioners, Abans Enterprises Ltd. and its promoter Abhishek Bansal, challenged the validity of regulations 6(1)(f) and 13(2)(ba) of the Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018, and the rejection of their settlement application by SEBI's Internal Committee. The petitioners were issued a show-cause notice alleging serious violations including acting in concert, non-disclosure under SAST Regulations, and manipulative trading. While the adjudication was pending, the petitioners filed settlement applications. The Internal Committee imposed conditions precedent, including requiring the petitioners to call upon other noticees to join the settlement and to disgorge notional profits. The petitioners refused to comply, leading to rejection of their settlement application. The High Court held that the impugned regulations are intra vires the SEBI Act and not manifestly arbitrary. The court reasoned that the Internal Committee's power to impose conditions precedent is a procedural safeguard to ensure settlement applications are bona fide and not used to delay proceedings. The court also found that the conditions imposed were reasonable and that the petitioners were not serious about settlement, using it as a tactic to delay adjudication. The petition was dismissed, and the petitioners were directed to participate in the adjudication proceedings.
Headnote
A) Securities Law - Settlement Regulations - Validity of Regulations 6(1)(f) and 13(2)(ba) - SEBI Act, 1992, Section 15-JB - Challenge to provisions empowering Internal Committee to impose conditions precedent and reject settlement applications without placing before HPAC or WTM panel - Held that the impugned regulations are intra vires the SEBI Act and not manifestly arbitrary; they are procedural safeguards to ensure settlement applications are bona fide and not used to delay proceedings (Paras 1-50). B) Securities Law - Settlement Regulations - Rejection of Settlement Application - SEBI (Settlement Proceedings) Regulations, 2018, Regulations 6(1)(f), 13(2)(ba) - Petitioners' settlement application rejected by Internal Committee for non-compliance with conditions precedent - Held that the conditions imposed were reasonable and the rejection was valid; the petitioners were not serious about settlement and used it to delay adjudication (Paras 51-70). C) Securities Law - Settlement Regulations - Conditions Precedent - SEBI (Settlement Proceedings) Regulations, 2018, Regulation 6(1)(f) - Internal Committee can impose conditions precedent to ensure settlement is feasible and not an abuse of process - Held that such conditions are not ultra vires and do not amount to excessive delegation (Paras 30-45).
Issue of Consideration
Whether regulations 6(1)(f) and 13(2)(ba) of the SEBI (Settlement Proceedings) Regulations, 2018 are ultra vires the SEBI Act, 1992 and manifestly arbitrary under Article 14 of the Constitution of India, and whether the rejection of the petitioners' settlement application by the Internal Committee was valid.
Final Decision
The petition is dismissed. The challenge to the validity of regulations 6(1)(f) and 13(2)(ba) of the SEBI (Settlement Proceedings) Regulations, 2018 is rejected. The rejection of the petitioners' settlement application by the Internal Committee is upheld. The petitioners are directed to participate in the adjudication proceedings before the SEBI.
Law Points
- Settlement Regulations
- Conditions Precedent
- Ultra Vires
- Manifest Arbitrariness
- Delegation of Powers
- Article 14
