TMI Blog2008 (2) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... These petitions under section 482 of the Code of Criminal Procedure, 1973 ("the Cr. PC") seeking the quashing of criminal complaints filed against several plantation companies by the Securities and Exchange Board of India (SEBI) for offences under sections 11B, 12(1B) read with section 24 of the Securities and Exchange Board of India Act, 1992 ("the SEBI Act") read with regulations 5(1), 68(1), (2), 73 and 74 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 ( the CIS Regulations ). These petitions raise common question of law and are, therefore, being disposed of by this common judgment. 2. In the early 1990, a large number of plantation companies came to be incorporated. Each of them promised attractive returns to persons prepared to invest their monies in what were known as "collective investment schemes". When it transpired that many of these schemes were in fact non-starters, and the investors were not getting back their monies, the SEBI stepped into formulate certain regulations. The corrective action received impetus from orders passed by this court in writ petitions that were filed by the investors seeking redress. Among the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narrate how the companies floating collective investment schemes, were required to make an application with the SEBI for registration of the scheme under regulation 73(1) and also furnish information to all the investors detailing with the state of affairs of the scheme, the amount repayable to each investor, and the manner in which such amount determined. Time for furnishing the information kept getting extended by the SEBI from time to time. 6. Thereafter, the complaint states as under : "13. However, accused No. 1 neither applied for registration under the said regulations nor took any steps for winding up of the schemes and repayment to the investors as provided under the regulations and as such had violated the provisions of sections 11B and 12(1B) of the Securities and Exchange Board of India Act, 1992 and regulation 5(1) read with regulations 68(1), (2), 73 and 74 of the said regulations. 14. Subsequently, on 31-3-2000, the SEBI issued a public notice in the newspapers inviting the attention of accused No. 1 to the aforesaid position. Further, a notice dated 12-5-2000, was issued to accused No. 1 calling upon it to show-cause as to why the action as stated therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffairs of the company is mandatory before a criminal complaint is filed. ( ii )The complaints have been prepared and filed in a mechanical manner with bald allegations against all the directors of the company without any particular reference to the role played by each director in being responsible for the failure by the company to comply with the requirements of the SEBI Act and the CIS Regulations. ( iii )The requirement of section 27 of the SEBI Act is that the liability will fasten to a person who "at the time the offence was committed" was in charge of the affairs and responsible to the company for the conduct of its business. The complaints are vague about the time of the commission of the offence. It is, however, not disputed that the offences are of a continuing nature. ( iv )In many of these cases, individuals who have been arraigned as co-accused were either not associated with the company in question or they had ceased to be the directors long before the complaint was filed or the offence came to the knowledge of the SEBI. In any event, no precise role has been assigned to any of these individuals who have been arraigned as co-accused in the alleged commission of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to be proceeded against and punished accordingly." 12. The above provision is more or less similar to section 141 of the Negotiable Instrument Act, 1881 ("the NI Act") which stipulates that where the offence has been committed by a company, every person in charge of the affairs of the company and responsible to it for the conduct of its business "at the time the offence was committed" would be deemed to be guilty of the offence. This presumption of guilt can, however, be rebutted by such person, if he can prove that it was committed without his knowledge. However, this stage arises only after the complainant has discharged the initial burden. Where the offence has been committed by a company, in order to invoke the deeming provision of section 27(1) of the SEBI Act, it will have to be averred in the complaint that the person who is arraigned in his capacity as a director of such company was in charge of the affairs of the company and responsible to it for the conduct of its business "at the time of commission of the offence". 13. In N. Rangachari s case ( supra ) which was a case arising under the Negotiable Instruments Act, the averment in the complaint read as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within their knowledge and it is for them to establish at the trial such a restriction or to show that at the relevant time they were not in charge of the affairs of the company. Reading the complaint as a whole, we are satisfied that it is a case where the contentions sought to be raised by the appellant can only be dealt with after the conclusion of the trial." (p. 210) 15. Relying on N. Rangachari s case ( supra ) this court in Sushila Devi s case ( supra ), 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 (page 309 of 140 Comp. Cas.) : "7. Accused No. 1 is a company registered under the provisions of the Companies Act and accused Nos. 2 to 9 are the directors of accused No. 1 company. The accused Nos. 2 to 9 are the persons in charge and responsible for the day-to-day affairs of the company and all of them were actively connived with each other for the commission of the offences." (p. 309) 16. In view of the decision in Sushila Devi s case ( supra ), which is on identical facts concerning a complaint by the SEBI against a plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t time to place on record in these proceedings Form No. 32 in respect of some of the individuals who have been arraigned as co-accused along with the company. However, counsel was unable to show, any averment in the petitions to the effect that Form No. 32 had in fact been filed in respect of such person before the date of the commission of the offence. This court is not prepared to adjourn these cases only to enable the petitioners to now apply for a copy of the Form No. 32 and place it on record. If in fact there is such a Form No. 32 in respect of any individual, it can certainly be produced before the Trial Court by way of evidence in order to persuade the trial court to hold that the person concerned cannot be made liable for the offence in terms of section 27 of the SEBI Act. 20. An attempt was made by counsel for the petitioners to show that the petition Crl. M.C. No. 2756 of 2005 was a case of mistaken identity. It was submitted that the petitioner Shri S.S. Walia was not associated with the accused company in question and that the person who was really the director happened to have the same name by coincidence. However, counsel for the SEBI pointed out that since no st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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