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2023 (1) TMI 458 - HC - SEBIInquiring into complaints by SEBI - Power conferred on the investigating authority - reasonable ground to believed that transactions in securities - purpose of empowering the SEBI to investigate - investigative process undertaken by respondent No.3 - investigations conducted prior to ordering investigation u/s 11C - HELD THAT:- In the instant case respondent No.3 was designated as an investigating authority in order to enable the Board to investigate into the dealings in the scrip of Omaxe Ltd. on the basis that there was a reasonable ground to believed that transactions in securities were dealt with in a manner detrimental to the investors or securities market. It is in exercise of this inquisitorial power conferred under Sec.11C that respondent No.3 issued summons to the petitioners to investigate as to whether the petitioners had anything to do with the buy recommendations made in the scrip of Omaxe Ltd during 01.06.2020 to 01.07.2020. The basis for the investigation is the document provided by the telemarketer M/s Mobonair Wireless Pvt. Ltd. which had informed the Board that SMS recommendations were sent by the petitioner No.1, and it had also provided document alongwith its email dt.10.08.2022. When the Board has been conferred an investigative power by Parliament, and when a complaint is received against an Investment Advisor such as petitioner no.1, the Board has a statutory duty to investigate it; and in the course of such investigation, it can ask for information from the persons against whom such allegations are leveled, to assist it in the investigation. The penalty of imprisonment of a term which would extends to one year or fine which would extend to 1 Crore become leviable under sub section (6) of Section 11 C only if without reasonable cause a person were to refuse to produce before the investigating authority the books, registers and other documents or furnish information which is his duty to furnish or refuses to appear before the investigating authority personally or to answer any question which is put to him by the investigating authority or to sign the notes of any examination referred to in sub section (7). The punishment of imprisonment or fine will be imposed under Sec.11C(6) only after a complaint is lodged before a competent criminal court by SEBI against the person refusing to cooperate in the investigative process and the said court will consider whether in the facts and circumstances of the case, such refusal is bonafide and whether punishment ought to be imposed and if so, to what extent. There are, thus, adequate safeguards provided in the enactment itself against any misuse of the power. The petitioner has not been able to show that powers conferred on the SBI by Sec.11 C (3), (5), (6) and (7) interfere or violate in any way and fundamental rights conferred upon the petitioners by Article 19(1) (a), 20(3) and 21 of the Constitution of India. Such powers are necessary to be exercised in public interest and to protect investors. If the case of the petitioners is that the documents on the basis of which summons were issued to the petitioners are forged documents and they are not guilty of the allegations of giving buy recommendations in the scrip of Omaxe Ltd. at all, they have a duty to assist in the investigative process undertaken by respondent No.3 and place whatever material they have in their possession to enable the investigating authority to complete the investigation and place the report thereon before the Board. Therefore, no case has been made out by petitioners for quashing the impugned summons issued for physical appearance of petitioner No.2 and other Directors. So the prayer made in that regard is rejected. As regards the prayer of the petitioners for directing respondent No.4 to register FIR and take other necessary action against Ms. Vishal Shah and M/s. Mobonair Wireless Pvt. Ltd. and others is concerned, in the event the Police is not registering the FIR on the complaint lodged by the petitioners, they have an effective alternate remedy vested under Section 154(3) Cr.PC by giving complaint in writing to the Superintendent of Police concerned; and in spite of that if their grievance persists, then they could approach the Magistrate under Section 156 (3) Cr.P.C.
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