'P', director of XYZ Limited (the Company), was accused of having engaged in price rigging and insider trading during the Initial Public Offer (IPO) of the company, in violation of Regulations 4(a) and (e) of the SEBI (P

In the case of Prakash Gupta v. Securities and Exchange Board of India, dated July 23, 2021, Hon'ble Supreme Court has traced the jurisprudential basis of Compounding of Offences. Few Important Points are as follows: In tracing the history of compounding, the Apex Court began with the origins of Compounding in English common law. Curiously, the original discussions surrounding compounding (or composition) of offences in the English common law do not occur in its context as a procedural tool 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. The apex court referred to Blacks' Law Dictionary which contains a definition of the expression "compounding crime". The apex court referred to P Ramanatha Aiyar's Advanced Law Lexicon 3rd Edition, Reprint 2007, at page 932 which defines the expression "Compounding a crime". The court also referred to Sections 213 and 214 of the Indian Penal Code, 1860 ("IPC") which also introduce a category of crime in India. While the "exception" to the provisions of Sections 213 and 214 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. 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. 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 Criminal Procedure Code. In explaining the basis for the provision of compounding an offence in Section 345 of the 1898 Act, the Law Commission of India in its 41st Report stated as follows: "24.66...The broad principle that forms the basis of the present scheme is that where the offence is essentially of a private nature and relatively not serious, it is compoundable." In its 237th Report on Compounding of (IPC) Offences, the Law Commission of India explained the rationale for compounding. Section 320 provides for the compounding of offences only under the Indian Penal Code, 1860 (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, in other words, be expressly conferred by the statute which creates the offence. The provision for compounding of offences was contained in Section 621-A of the Companies Act, 1956. The provisions contained in Section 147 of the Negotiable Instruments Act, 1881 for compounding of offences came up for consideration before a two judge Bench of this Court in the case of JIK Industries decided in 2012. Subsequent to the decision in JIK Industries (supra), there is a decision of another two-judge Bench of this Court in VLS Finance Limited v. Union of India, (2013) 6 SCC 278. The Company Judge of the Delhi High Court had dismissed an appeal assailing an order of the Company Law Board allowing an offence under Section 211(7) of Companies Act, 1956 to be compounded. 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 Criminal Procedure Code, 1973. 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. The plain language of Section 24A of SEBI Act, 1992 does not provide for the consent of SEBI.