Ankur Cultivators Private Limited v. Securities Exchange Board of India

1. ANKUR CULTIVATORS PRIVATE LIMITED THROUGH ITS DIRECTOR / AUTHORISED REPRESENTATIVE AT S-9, 3RD FLOOR, SRINIWASPURI, NEW DELHI-110065.....PETITIONER NO.1

2. ADVANCE HOVERCRAFTS AND COMPOSITES PRIVATE LIMITED THROUGH ITS DIRECTOR / AUTHORISED REPRESENTATIVE AT S-9, FLOOR, SRINIWASPURI, NEW DELHI-.....PETITIONER NO.2 (By Shri Mukul Gupta, Sr. Advocate along with Shri Vibhor Garg and Shri Sumit Kumar Mishra, Advocates.)

AND SECURITIES EXCHANGE BOARD OF INDIA AT 5TH FLOOR, BANK OF BARODA BUILDING, 16 SANS AD MARG NEW DELHI-110001.....RESPONDENT (By Shri Neeraj Malhotra, Sr. Advocate along with Shri Ashish Aggarwal, Advocate.) % Pronounced on: 22.08.2022 2022:DHC:3182 - 2 -

JUDGMENT

1. Heard, learned senior counsel appearing on behalf of the parties.

2. The petitioners in the main petition have challenged the order on charge dated 03.10.2019, passed by learned ASJ Tis Hazari, Court, New Delhi, in Criminal Case No.33/16; and during the pendency of the main petition, have prayed for stay of the proceedings in the aforesaid criminal complaint by way of filing instant application.

3. Shri Mukul Gupta, learned senior counsel assisted by Shri Vibhor Garg and Shri Sumit Kumar Mishra, Advocates, appearing on behalf of the petitioners submitted that the petitioners have a strong case on merits and therefore, if further proceedings of the complaint case are not stayed, the petitioners would suffer irreparably. According to him, the trial court has failed to appreciate that the petitioners were not at all linked with co-accused No.17, namely, Mr.Vivek Nagpal and the said co-accused has neither been the Director nor the shareholder of any of the petitioner companies. There is no evidence to demonstrate that Mr.Vivek Nagpal has ever been the Director or a shareholder of the petitioner companies. According to him, there exist documents to the contrary, relied upon by the respondent agency itself. The learned senior counsel has referred to various paragraphs of the complaint, specifically paragraph 5 to 12 to demonstrate that the sole basis of filing of the complaint against the petitioner companies is that the accused No.17, Mr.Vivek Nagpal, has been shown to be one of the Directors of the petitioner companies and has been described to be the person in charge and responsible of the petitioner companies. - 3 -

4. The learned senior counsel has taken this court through page Nos.178 to 180, to highlight that even as per the documents relied upon by the respondent agency, as on 31.03.2001, the accused No.17, Mr.Vivek Nagpal, was not holding any share in the petitioner companies. It is also highlighted that the list of Directors of both the companies does not reflect the name of the accused No.17, Mr.Vivek Nagpal and therefore, there is no reason to allow the trial court to proceed further with the instant complaint. He has placed reliance on a decision of the Coordinate Bench of this Court, in the matter of Virender Kumar Singh & Anr. vs. Securities Exchange Board of India[1]. While reading paragraph 9 thereof, it is submitted that the question as to whether, a person concerned was in charge and was responsible to the company for the conduct of its business, has to be considered first, before the cognizance is taken. According to him, such a question cannot be left to be examined only by the trial court, when it can be easily verified by a mere inspection of the record of the Registrar of Companies. He therefore, submitted that in the aforesaid case, this court interfered with the order of summoning and quashed the complaint in question.

5. Shri Neeraj Malhotra, learned senior counsel assisted by Shri Ashish Aggarwal, Advocate, appearing on behalf of the respondent, on the other hand, submits that the trial court from paragraph No. 36 onwards had considered the submissions made by the petitioners and it had been found that the accused No.17, Mr.Vivek Nagpal, was the Director of petitioner companies and was the person in-charge and responsible for the conduct of their affairs at the relevant time. The relationship of Mr.Vivek Nagpal with various companies has been mentioned in paragraph Nos.42 and 43 of the impugned order.

- 4 - According to him, the documents referred to by learned senior counsel for the petitioners would only indicate that firstly, as on 31.03.2001, there was no shareholding by the accused No.17, Mr.Vivek Nagpal, in petitioner companies, whereas, the subjectmatter of the investigation is from 09.08.2000 to 30.06.2001; and secondly, the document at page No.180 does not contain any date and it only reflects the names of the Directors of petitioner companies. He, therefore, submits that in any case, bare reading of the complaint would clearly indicate that specific role has been attributed to accused No.17 and to the present petitioners. Therefore, at this stage, it would be highly improper if the proceedings of the trial court are stayed. While placing reliance on a decision of the Hon’ble Supreme Court in the case of Aneeta Hada vs M/S Godfather Travels & Tours[2], he submits that petitioner companies can be independently prosecuted and punished without there being any connection with the accused No.17, Mr.Vivek Nagpal. He, however, submits that in any case the same would be considered at the time of the final hearing. He also submits that no prejudice would be caused to other side if the trial continues during the pendency of the instant petition.

6. I have considered the submissions made by the learned counsel appearing for the parties and perused the record.

7. A perusal of the proceedings of this court show that on 27.11.2019, this court directed for issuance of notice which was accepted by learned counsel appearing on behalf of the respondent and the matter was directed to be re-notified on 03.02.2020. However, in the meantime, it was directed that the trial court shall fix a date after the date is fixed in the present petition. On 29.11.2019, it was further noted that the respondent moved an application before the trial

- 5 court seeking clarification of the impugned order and therefore, the trial court was directed to list the said application after the date was fixed in the present petition. On 03.02.2020, the said interim arrangement was extended and the matter was directed to be listed on 01.10.2020. On 08.12.2020, in absence of any appearance on behalf of the petitioner, the matter was directed to be listed on 25.03.2021. Further proceedings would show that the interim order so passed, was extended from time to time. However, there has not been any consideration on the instant application on its merit and therefore, on 03.08.2022, this court directed the parties to make their submissions on merits of the aforesaid application.

8. The complaint in question has been filed in the year 2016 against various companies on the premise that there were irregularities in the trading and shares of the accused No.1 company. It has been alleged in the complaint that there were synchronisation of logging-in of traders, creation of artificial volumes, false market in the shares, circular trading, churning of the same stock and market manipulation. Large number of shares were made available to the Ketan Parekh Group, ostensibly under guise of fiduciary transactions and those shares were sold by Ketan Parekh entities in the market.

9. Taking into consideration the fact that the subject-matter of the investigation was from 09.08.2000 to 30.06.2001 and the trial court has prima facie found sufficient material to proceed against the petitioners, therefore, without expressing anything on the merits of the case, as the same would prejudice their rights to be determined at a later stage, this court does not find any reason to stay the further proceedings of the trial court. However, it is made clear that the further proceedings of the trial court would remain subject to the outcome of the instant petition. - 6 -