The court upheld the validity of SEBI's Settlement Regulations, emphasizing that conditions imposed for settlement proposals serve public interest and do not constitute excessive delegation.

Jitendra Jain, JJ.

RESERVED ON: 15 October 2024 PRONOUNCED ON: 11 November 2024 JUDGMENT: ( Per M. S. Sonak, J.)

1. Heard learned counsel for the parties.

2. This petition challenges the following: - (a) The validity of regulations 6(1)(f) and 13(2)(ba) of the Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018 (Settlement Regulations);

(b) Communication dated 31 July 2024 (impugned rejection letter) by which the petitioners’ settlement proposal came to be rejected.

3. The petition also refers to a challenge to the regulation 11-A of the Settlement Regulations. However, no such provision exists in the copy of the Settlement Regulations handed over to us. In any event, no submissions were made in the context of this regulation 11-A.

4. The first petitioner is a publicly listed company incorporated under the Companies Act of 1956. It trades shares, currencies, and derivatives on all the leading exchanges in India. The second petitioner is a promoter of the first petition company, with a shareholding of 74.56%.

5. The respondent, the Securities and Exchange Board of India (SEBI), issued a show-cause notice (SCN) dated 29 August 2023 to the petitioners and seven others regarding the trading in the first petitioner's scrip. The executive summary on pages 3 to 11 of the SCN contains the gist of the allegations.

6. The SCN alleges serious violations by the petitioners and the other noticees. There are allegations about the petitioners and the other noticees acting in concert with each other through common directors, employees, signatories, bank accounts, etc. There are allegations about the noticees acting in concert while acquiring shares of Abans Enterprises Ltd. (AEL) without making the required disclosures under the SAST Regulations. There are allegations about the noticees creating false and misleading appearance of trade and contributing to price rise by manipulative trading practices leading to inflated contribution of net market Long Term Plan (LTP) during the prescribed patches. There are allegations about manipulation of volumes of shares by deliberately placing high buy orders and subsequently deleting the same thereby creating misleading appearance of trading.

7. The petitioners sought for documents, insisted upon cross- examination and raised several preliminary objections. The petitioners filed applications insisting upon the adjudication of the preliminary objections before the proceedings in the SCN could advance any further. Offers of repeated personal hearings were mostly turned down by raising all kinds of objections. Even Writ Petition No.3147/2024 was filed in this Court for direction to place the petitioners’ applications raising preliminary issues before the Whole Time Members (WTM).

8. Simultaneously, without prejudice, the petitioners filed settlement applications on 23 September 2023, duly registered on 20 October 2023 as application nos.7404 and 7405 of 2023 seeking settlement.

9. After preliminary scrutiny via email dated 14 December 2023, SEBI sought information on disclosures made by the second petitioner under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations). However, the petitioners declined to make the necessary disclosures, stating that such disclosures would prejudice their defence in the SCN. In the personal hearing before the Internal Committee (IC) on 17 January 2024, the petitioners claim to have been informed by the IC about specific “ condition precedent(s) ” that they would have to comply with for consideration of their settlement applications.

10. The petitioners protested and refused to comply, claiming that such condition precedent(s) were nothing but an admission of the allegations in the SCN. The petitioners, however, submitted revised settlement terms and insisted they be placed before the High-Powered Advisory Committee (HPAC). On the one hand, expeditious hearings were claimed. On the ot