In a landmark judgment that could send shockwaves through India’s securities market regulatory architecture, the Bombay High Court has unequivocally declared that a Securities and Exchange Board of India (SEBI) consent order cannot magically erase independent criminal prosecutions. The ruling in the explosive Manoj Gokulchand Seksaria case dismantles the illusion that monetary settlements with SEBI absolve serious offenders from facing criminal justice.
The case, rooted in the notorious Yes Bank–IDFC IPO scam, exposes large-scale cornering of shares meant for genuine retail investors through a web of forged accounts and fraudulent applications—a brazen manipulation orchestrated with the aid of public sector bank officials. The accused remitted a substantial sum—over ₹2.25 crore—to SEBI under a consent settlement arrangement back in 2009, thinking the shadow of justice had lifted.
But the High Court’s sharp rebuke shatters that misconception: “Permitting quashing of proceedings, in matters, in which the offence is against society, would be a mockery of the process of law and the criminal justice system.” In blunt terms, the court warns that allowing financial settlements to bypass criminal accountability would erode public faith and create the dangerous precedent that corporate criminals can simply “buy their way out” of prosecution.
SEBI’s own regulatory framework admits it cannot settle “grievous, serious, fraudulent and unfair trade practices” that impact retail investors and disturb market integrity—yet here lies a glaring contradiction. The regulator accepted a consent settlement in a high-profile scam that caused substantial losses to the ordinary investor, but attempted to brush aside concurrent criminal investigations.
The court’s judgment tears into this regulatory farce, emphasizing that SEBI’s consent mechanism is strictly administrative and civil, and cannot encroach on the domain of criminal law which operates independently. The money paid to SEBI, the court asserts, “cannot exonerate” offenders from charges of forgery, criminal conspiracy, and corruption involving public servants—serious public wrongs that defile the market and economy.
This verdict exposes an explosive truth: SEBI’s consent orders, while packaged as expedient and investor-friendly, risk becoming a dangerous escape hatch for economic offenders unless sharply circumscribed. It warns regulators, corporates, and courts alike that the integrity of India’s financial markets depends on swift, uncompromising criminal accountability—not cozy settlements that stifle justice.
Will SEBI finally tighten its consent order provisions and uphold its mandate to protect investors? Or will it continue to offer the semblance of punishment while allowing fraudsters to dodge true criminal liability? With the Bombay High Court laying bare these contradictions, the time for regulatory theater could be over. |
