Although the following sections recognise SEBI’s rights to flag off process under the criminal justice architecture, it is important to note that SEBI remains reliant on the overall criminal procedure framework under the CrPC and does not have a parallel regime for criminal action. To understand the breadth of its reach, the following provisions of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) as well as the Securities Contract (Regulation) Act, 1956 (“SCR Act”) and the Depositories Act, 1996 (“Depositories Act”), are relevant.
Section 24 envisages two key powers of criminal sanction, which can be initiated only upon the filing of a complaint by SEBI in terms of Section 26(1) :
(i) Where a person can be punished with imprisonment for a term which may extend to ten years, or with fine, which may extend to twenty-five crore rupees or with both, for any violation of the SEBI act, its rules and regulations. This is without prejudice to any other action initiated by SEBI under the adjudicatory or 11B mechanism.
(ii) A similar action is contemplated under Section 24(2) for failing to pay the penalty imposed by SEBI in exercise of its quasi-judicial powers, or to comply with its directions/orders.
Section 23 of the SCR Act primarily contemplates criminal action in two scenarios – first, under Sections 23 (1) and (2) which criminalises violations such as entering into prohibited contracts, entering into securities contracts outside of a recognised stock exchange, etc., and secondly, under Section 23M which covers those violations for which no other punishment has been specified and for failing to comply with penal or directory orders of SEBI. In both these instances, punishment can extend to imprisonment up to ten years, and/or a maximum fine of ₹25 crores.
Similar to the criminal powers contemplated under the SEBI Act and the SCR Act, Section 20 of the Depositories Act lays down two similar powers for contravention/abetting such contravention of any of the provisions of the Act/regulations/bye-laws as also for failing to remit a penalty, or comply with any directions/orders of SEBI.
These provisions have been amended over the years and been statutorily assembled through a slew of amendments over the years, to keep them current and relevant.
Source: Barandbench
