Bombay High Court: While hearing writ petitions under Article 226 of the Constitution, wherein the petitioners were seeking quashing of criminal prosecutions initiated by the Central Bureau of Investigation, (‘CBI’) in relation to alleged irregularities in the in the Initial Public Offerings (‘IPO’) of Yes Bank Ltd. (‘Yes Bank’) and Infrastructure Development Finance Corporation (‘IDFC’), the Division Bench of A. S. Gadkari and Ranjitsinha Raja Bhonsale*, JJ., held that the Consent Order passed by Securities and Exchange Board of India (‘SEBI’) in December 2009 was only in respect of administrative and civil proceeding and did not refer to or deal with the pending criminal proceedings. The Court observed that to quash proceedings merely because payments were made to SEBI would be unwarranted and misplaced sympathy and highlighted that such quashing would amount to an absolute abuse of process of law.
Background:
The case arose from complaints made by SEBI to the CBI in 2006 regarding irregularities in the IPOs of Yes Bank and IDFC. It was alleged that the accused, including the petitioner, opened fictitious bank and demat accounts, applied for shares in the retail investor category, cornered shares meant for genuine investors, and later sold them at higher prices for unjust profit. These acts, carried out with the help of public servants and bank employees, deprived retail investors of their legitimate allotments and undermined the IPO process.
Based on SEBI’s complaint, CBI registered two criminal cases and filed charge sheets in 2007 against several accused including the petitioner. Supplementary charge sheets later expanded the number of accused. Parallelly, SEBI issued show cause notices, passed interim ex parte orders, and initiated adjudication proceedings. In 2007, SEBI introduced a consent procedure allowing settlement of enforcement actions, and the petitioner filed consent applications in 2008, specifically referring to the pending criminal prosecutions.
On 7 December 2009, SEBI’s Whole Time Member accepted the High-Powered Committee’s recommendation and passed a Consent Order. The petitioner was directed to disgorge Rs 2,05,18,968 and pay 20 per cent of that amount as settlement charges, totalling Rs 2,25,70,864. The order recorded that it disposed of proceedings under Sections 11(4), 11B, adjudication proceedings, and proposed prosecution under Section 24 of the SEBI Act. Armed with this Consent Order, the petitioner sought quashing of criminal proceedings before the High Court in 2018, but the petition was dismissed.
The petitioner then approached the Supreme Court, which in January 2020 allowed withdrawal of the petition with liberty to raise the effect of the Consent Order before the High Court. Subsequently, petitions were filed in 2020 challenging cognizance orders of 2008. In January 2022, a Single Judge of the Court quashed proceedings against the petitioner, holding continuation would be abuse of process. However, CBI challenged this before the Supreme Court, which in August 2024 remanded the matter back to the High Court, directing independent consideration of the effect of the Consent Order. Interim stay was granted in May 2025 on further proceedings in the criminal cases, and the Division Bench was tasked to decide whether the Consent Order of 2009 could nullify the pending CBI prosecutions.
Analysis and Decision:
The Court emphasised that only because money was paid, an accused could not be exonerated from the criminal liability. It was observed that to quash the criminal proceedings on the ground that monies were paid to SEBI under a Consent Order would be misplaced and set a wrong precedent. The Court found that the Consent Order was only in respect of administrative and civil proceeding and did not refer to or deal with the pending criminal proceedings.
The Court further noted that 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. The Court observed that it would erode the faith of the common man in the criminal justice system and give rise to the perception that an accused can get away with a serious prima facie charge by settling the matter or making payments to the regulator. Moreover, the Court emphasised that this is not the objective of SEBI and also not the objective of the criminal justice system.
The Court analysed that the Consent Order dated 07-12-2009 and the payments made thereunder towards disgorgement and settlement charges did not in any manner affect or impact the criminal prosecution. The Court observed that payment to an institution, in an offence against society or societal interest, ought not to be considered as a ground for quashing a criminal prosecution.
The Court highlighted that the general proposition that the possibility of conviction is remote or bleak, or that no useful purpose will be served by continuing the criminal proceedings, or that continuation would cause oppression or prejudice to the accused despite settlement, cannot take precedence over the harm and adverse impact on society. The Court emphasised that in serious and grave offences, economic offences, offences against the financial markets or serious economic frauds, such arguments cannot hold good.
The Court noted that the facts of the present case amounted to and were akin to a financial and economic fraud, falling within the ambit of social wrong and had an adverse societal impact. The Court observed that the case could not be quashed merely because money has been paid under a Consent Order. The Court emphasised that the facts made out a prima facie case for the offences alleged, and the role attributed could not be put in the category of an individual or personal wrong. It was further highlighted that prima facie it was a conspiracy to get personal gain at the cost of society, the victim being the small retail investor deprived of the opportunity to invest in an IPO.
The Court further noted that the implications of this crime are serious, far-reaching, and bring into doubt the robustness, security, and integrity of the system. The Court emphasised that heinous and serious offences, offences against society, and economic offences against the financial system cannot be quashed even if there is a settlement or compensation.
Finally, the Court held that the Consent Order dated 7th December 2009 and the payments made thereunder do not affect or impact the present criminal prosecutions. The Court observed that to quash proceedings merely because payments are made to SEBI would be unwarranted and misplaced sympathy and highlighted that such quashing would amount to an absolute abuse of process of law. The Court further observed that the charges were serious, prima facie made out, affecting the rights of retail investors, the securities market, and the economy, and emphasised that the conspiracy involved bank officials aiding and abetting the accused under the Prevention of Corruption Act.
Consequently, the Court held that both petitions deserved dismissal and accordingly discharged the rule.
[Manoj Gokulchand Seksaria v. State of Maharashtra, 2025 SCC OnLine Bom 4444, decided on 14-11-2025]
Advocates who appeared in this case:
For the Petitioner: Aabad Ponda, Senior Advocate a/w Jugal Kanani a/w Rahul Pandey i/by Alok Singh, Advocate
For the Respondent: M. M. Deshmukh, Public Prosecutor a/w Vinod Chate, APP, Kuldeep Patil, Advocate
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