Clean up mess on plea bargains

WITHOUT CONTEMPT

Media reports suggest that the Securities and Exchange Board of India Act, 1992 (Sebi Act) is in for amendments. The amendments are expected to be tabled in Parliament later this month. If news reports are accurate, the amendments will enable plea bargaining.

When the Sebi Act was amended in 2002, Sections 24A and 24B were mindlessly introduced, purportedly to introduce an element of plea bargaining in the Indian context. Section 24A enabled the compounding of offences while Section 24B enabled immunity from legal action.

Under Section 24A, any offence punishable under the Sebi Act may be compounded so long as the offence being compounded is not punishable with imprisonment. On the face of it, one would think there is nothing exceptionable about it.

However, the catch was that draftsmen who wrote Section 24A seemed to have had no clue about the Act. Section 24 of the Act prescribes imprisonment for every single contravention of the Act.

This was the position right from the time the Act was passed. Therefore Section 24A was still-born and quite useless.

While drafting Section 24A, a simple principle of not taking away the rigour of imprisonment and thereby not diluting the punishment for serious offences seems to have motivated the amendment. This is why even offences that could potentially involve imprisonment were not eligible for compounding, even if the alternative of monetary penalty was available.

However, people who drafted the law forgot that Section 24 indiscriminately enjoined imprisonment for every single contravention of the Sebi Act.

Therefore, either the rigorous requirement of disallowing compounding of offences entailing imprisonment ought not to have been imposed, or Section 24 ought to have been amended to provide for differentiating between serious offences that would fall outside the scope of compounding, with the less serious ones being amenable to compounding.

Section 24B, which enables immunity too has turned out to be a provision that would take light years to gain currency in Indian society.

Section 24B enabled the government of India to grant immunity against legal action if it was satisfied that the person concerned had made a full and true disclosure of the violation. Sebi would have to make a non-binding recommendation and the government of India would have the discretion of granting immunity.

The catch here is that the request for immunity would have to precede the initiation of any prosecution. The idea perhaps was to tell society that persons who end up violating the law ought to feel comfortable enough to walk up to the regulator, come clean with what had happened, and request immunity from legal action.

However, history has always shown that walking up to the regulator has never helped those who have approached it. For instance, there are quite a few cases of foreign institutional investors walking up and admitting to some very technical lapses, and being imposed stiff penalties "� of late, a crore seems to be the basic denomination for penalty.

In fact, going against the grain of constitutional safeguards, some provisions of securities laws, such as those relating to insider trading, tread thin on the protection against self-incrimination.

Moreover, the vigilance culture in India and the constant fear of the CBI and the CVC has ensured that no officer who desires a quiet retired life (a very fair expectation) would ever recommend grant of immunity to a person who himself admits to having committed a violation, no matter how technical. Allegations of gratification would instantly be levelled. Therefore, the power to grant immunity too has remained still-born and unused.

In any event, the distinction between offences entailing imprisonment and those that do not entail imprisonment goes against the very grain of a plea bargain.

Indian society has a very punishing and unrelenting attitude towards crime, punishment and retribution. A finding of guilt, when punished with a penalty, never brings the offender back to innocence in the eyes of Indian society.

Hopefully, the forthcoming amendments would not be aimed at blindly conferring more powers on Sebi, but focus on cleaning up the mess that past amendments have left behind.

The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own.