Full Text
HIGH COURT OF DELHI
Date of Decision: 13th July, 2023
MOHD IQBAL ..... Petitioner
Through: Mr. Ananta Prasad Mishra, Advocate
Through: Mr. Sanjay Mann, Mr. Shashank Bajpai, Advocates.
JUDGMENT
1. The present petition under Section 482 of the Code of Criminal Procedure 1973 („CrPC‟) seeks quashing of Criminal Complaint NO. 343/2002 (renumbered as CC No. 66/5) pending before the Court of Additional Chief Metropolitan Magistrate (Special Acts), Tis Hazari Courts, Delhi and all proceedings emanating therefrom, including the order dated 23.04.2002 whereby the present petitioner was summoned for the offences under Sections 24(1) and 27 of the Securities Exchange Board of India Act, 1992 („SEBI Act‟) and the order dated 07.10.2005 whereby non-bailable warrants were issued qua the petitioner and other accused persons.
2. A complaint bearing number 343/2002 (renumbered as CC No. 66/5) under Section 200 of CrPC read with Section 24(1) and Section 27 of SEBI Act, was filed against the company, Aim Plantation Ltd along with its directors, including the petitioner herein. As per the said complaint, it had been alleged by SEBI (the complainant therein) that the aforesaid company was running a Collective Investment Scheme (C.I.S.) and had raised an aggregate amount of Rs. 0.532 crores from the general public, but had not applied to the former for registration of the collective investment schemes allegedly being operated by it. It is further alleged that the aforesaid company never initiated any steps for winding up of the schemes and for repayment to the investors despite notices. In view of the above allegations, SEBI, by way of the aforesaid mentioned complaint alleged that the company along with its directors violated Sections 11B, 12(1B) of the Securities and Exchange Board of India Act, 1992 read with Regulations 5(1), 68(1), 68 (2), 73 and 74 of C.I.S. Regulations 1999.
3. Learned counsel for the petitioner restricted his submissions only to the extent that the alleged complaint made no specific averments qua the present petitioner. In support of the aforesaid submission, the learned counsel for the petitioner drew the attention of the court to the decision in Rashima Verma v. SEBI, (2009) 157 DLT 417, and stated that in the said case, a similar complaint, in almost identical circumstances had been quashed by a Learned Single Judge of this High Court. Learned counsel for the petitioner referred to para 24, 26 & 27 of the aforesaid judgment which stated as below:-
26. In the present case, only Mr. G.S. Verma was the Chairman-cum- Managing Director of the Company at the time of commission of the alleged offence and therefore, was the person responsible for the business of the company. However the summons have been issued against all the accused persons who are impleaded as Directors despite prime accused being the company in the absence of a specific averments against the petitioner. Even without taking care of requirements of law whether prima facie case was made out against the petitioner, the Magistrate acted mechanically in passing the impugned order against the petitioner.
27. In view of my detailed discussion as above, the complaint as against the petitioner (accused No. 6 in the complaint) is not maintainable. Hence, the complaint and the impugned summoning order qua the petitioner is accordingly quashed. Attested copy of the order be sent to the trial court.” He further urged that by virtue of merely being a director of a company, the petitioner cannot be held vicariously liable under Section 27 of the SEBI Act, 1992.
4. It was the submission of the learned counsel for the petitioner that the Learned Magistrate erred while taking cognizance of the alleged offences and thereby issuing summons to the present petitioner in the absence of any cogent material placed on record.
5. The learned counsel for the respondent submitted that the offence committed by the present petitioner is an act of omission and commission whereby the accused had failed to comply with statutory provisions. In support of the aforesaid submission, he urged that the petitioner along with the other co-accused persons sponsored and caused to be sponsored C.I.S., without getting the mandatory registration from SEBI, thereby violated the provision of Section 12(1B) of the SEBI Act. It was also the contention of the learned counsel for the respondent that the petitioner being the director and promoter of the accused company and person in charge of the affairs of the accused company, was required to wind up the existing C.I.S., and duly file audited reports after make necessary payments to the investors, with the regional office of SEBI, as per procedure under the statutory regulations, which he failed to do.
6. Learned counsel for the respondent further submitted that it is an admitted case that the present petitioner is a director and promoter of the accused company, which has been reflected from the perusal of the documents, which include records of the accused company from the Ministry of Corporate Affairs („MCA‟) portal appended by the present petitioner in the present petition itself.
7. In support of his submissions, the learned counsel for the respondent placed his reliance on judgment dated 06.02.2008 of a Learned Single Judge of this Court in G.S. Gosal v. SEBI in CR M.C. No. 3282/2005, wherein in paragraphs 7, 14 & 15 it was held a sunder:
14. Relying on N. Rangachari, this Court in Sushila Devi declined to quash the complaint holding that the complaint contained sufficient averments to attract the offence under the SEBI Act. The precise averments in the complaint read as under:
15. In view of the decision in Sushila Devi which is on identical facts concerning a complaint by SEBI against a plantation company, and which follows the judgment of the Supreme Court in N.Rangachari, the inevitable conclusion is that the complaint in question do not make out a prima facie case against the petitioners for the offences complained of under the SEBI Act”
8. Learned counsel for the respondent further drew the attention of this Court to paragraphs 14 & 15 of Ankur Forest and Project Development India Ltd. and others v. SEBI, 2011 SCC OnLine Del 690 wherein it was held as under:
9. Learned counsel for the respondent further referred to the observations made in SRG Infotech Ltd and Ors v. SEBI, 2014 SCC OnLine Del 1684, wherein it was held as follows:
10. Learned counsel for the respondent further submitted that the reliance of the petitioner on the judgment of Rashima Verma (Supra) is misplaced in as much as the petitioner therein i.e., Ms. Rashima Verma was not a director/promoter of the company but was only subscriber to the memorandum. Reliance was placed on para 5 and 6 of the aforesaid judgment which records as under:
11. Heard the parties and perused the record.
12. Section 24 and Section 27 of the SEBI Act provide as under:
13. A perusal of the complaint dated 23.04.2002 filed by SEBI against the accused company reflects the following averments with respect to the directors:- “18. In view of the above, it is charged that the Accused No.l has committed the violation of Sec.11B, 12 (IB) of Securities and Exchange Board of India Act, 1992 read with Reg.[5] (1) read with Reg. 68(1), 68(2), 73 and 74 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 which is punishable under Sec.24 (1) of Securities and Exchange Board of India Act, 1992. The Accused No.2 to 8 are the directors and / or persons in charge of and responsible to the Accused No.l for the conduct of its business and are liable for the violations of the Accused No.l, in terms of Sec.27 of Securities and Exchange Board of India Act, 1992.” [emphasis supplied] In the present case, it is an admitted fact that the present petitioner (Accused no. 3 in the complaint) along with other co-accused persons were the directors of the accused company at the relevant time when the offences have been alleged to have been committed.
14. Recently, the Hon‟ble Supreme Court, in S.P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan, 2022 SCC OnLine SC 1238, with regard to the issue of specific averments in a complaint, held as under: “Specific Averments in the complaint:
41. In Gunmala Sales Private Limited (supra), this Court after an exhaustive review of its earlier decisions on Section 141 of the NI Act, summarized its conclusion as under:— “a) Once in a complaint filed under Section 138 read with Section 141 of the NI Act the basic averment is made that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director; b) If a petition is filed under Section 482 of the Code for quashing of such a complaint by the Director, the High Court may, in the facts of a particular case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director; c) In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about role of the Director in the complaint. It may do so having come across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of the process of the court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm-twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed; d) No restriction can be placed on the High Court's powers under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent inter alia the abuse of the process of the Court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director.”
42. The principles of law and the dictum as laid in Gunmala Sales Private Limited (supra), in our opinion, still holds the field and reflects the correct position of law.”
15. In the facts of the present case, the only submission made by the learned counsel appearing on behalf of the petitioner was to the effect that no specific averments have been made qua the present petitioner, as noted hereinabove. The complaint filed by respondent, SEBI makes a specific averment that the present petitioner was the director and was in-charge of and responsible to the company for the conduct of its business for the relevant period of time in terms of Section 27 SEBI Act, 1992. It is further noted that no documents have been produced on record to rebut the aforesaid averment made by the respondent to demonstrate that making the petitioner stand trial would be an abuse of process of the Court.
16. In view of the aforesaid position, it is pertinent to state that the question as to whether the present petitioner shall be liable as the director of the accused company with regard to the violations committed by the said entity in question is a matter of trial and shall be adjudicated before the Learned Trial Court of competent jurisdiction. This Court need not examine disputed factual issues involved in the present case while exercising the jurisdiction under Section 482 of Code of Criminal Procedure.
17. Thus, the present petition is dismissed and disposed of accordingly.
18. Pending applications, if any also stands disposed of.
19. Needless to state, nothing stated herein above is an opinion of the merits of the case.
AMIT SHARMA JUDGE JULY 13, 2023