TMI Blog2009 (1) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... Singh for the Respondent. JUDGMENT 1. Petitioner has been summoned, vide order dated 15-12-2003 in complaint case No. 1231 of 2003 titled SEBI v. Divyabhoomi Agro (P.) Ltd. as director of the company, in view of the violation under section 27 of the Securities and Exchange Board of India Act, 1992 ( SEBI Act ) by the learned Additional Sessions Judge. Divyabhoomi Agro (I) Ltd. ( the company ) was operating Collective Investment Schemes ( CIS ) at the time of coming into force of SEBI (Collective Investment Schemes) Regulations, 1999 ( CIS Regulations ) and raised an aggregate amount of Rs. 8,26,800 from the general public. The company filed details with Securities and Exchange Board of India ( SEBI ) regarding its CIS, pursuant to SEBI Press Release dated 26-11-1997 and Public Notice dated 18-12-1997. As per the regulations, any person, who had been operating CIS at the time of commencement of the said regulations was deemed to be an existing CIS and after coming into force of these regulations, the said person was required to move an application before SEBI for grant of registration within a period of two months from the date of notification of the said regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that petitioner was in-charge of or responsible for the conduct of business or the day-to-day affairs of the company. It is further argued that petitioner was never a director of the company and was neither in-charge of nor responsible for the conduct of the business of the company because as per memorandum of association of the company, petitioner was merely one of the initial subscribers of the shares of the company and was not the director. 6. Learned senior counsel for the petitioner has further argued that allegations against the petitioner are contained in paragraph 20 of the complaint only and correspondence as regards SEBI Regulations were addressed to and replied by the company and no such correspondence was made by the petitioner on behalf of the company. It is emphasised that Form 32, put on record perusal of which would show that the petitioner was not the director of the company and, hence, the summoning order dated 15-12-2003 as against the petitioner is contrary to the material available on the record, bad and is liable to be quashed and set aside. 7. Petitioner has relied upon the following judgments : u SMS Pharmaceuticals Ltd. v. Neeta Bhalla [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, I shall proceed to decide the petition only on merits of the case. 11. For considering the petition on merits and to appreciate the submissions of the counsel for the rival parties, I feel the necessity of reproducing relevant paragraphs in the complaint whereby the directors of the company have been roped in by the complainant: "7. The accused No. 1 is a company registered under the provisions of the Act and accused Nos. 2 to 8 are the directors of the accused No. 1-company. The accused Nos. 2 to 8 are the persons in-charge and responsible for the day-to-day affairs of the company and all were actively connived with each other for the commission of offences.... 20. The accused Nos. 2 to 8 are the directors of the accused No. 1 and as such persons in-charge of and responsible to the accused No. 1 for the conduct of its business and are liable for the violations of the accused No. 1, as provided under section 27 of Securities and Exchange Board of India Act, 1992." 12. Perusal of the complaint shows accusations as to the violation of SEBI Regulations and commission of offence under SEBI Act are essentially against the company, Divyabhoomi Agro (I) Ltd. The complai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplaint and simple narration of the contents of the provisions under the statute or the requirements of law would not be enough to summon such person as accused. 15. In the present case, the complainant has only averred that petitioner was director and was in-charge of the affairs of the company and was responsible for the conduct of its day-to-day business. But there is no further elaboration as to how petitioner was in-charge of the affairs of the company and was responsible for the conduct of its business. There is not even a whisper nor a shred of evidence or anything else to show, apart from the presumption drawn by the complainant in the complaint that there is an act committed by the director from which a reasonable inference could be drawn that petitioner could be vicariously liable. It was necessary for the complainant to make averments elaborating the role of such a director in respect of her working in the company from which the court could come to a prima facie conclusion that she was responsible for the conduct of the business of the company. 16. In SMS Pharmaceuticals Ltd. s case ( supra ) a reference was made to three-Judges Bench, wherein one of the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion he enclosed list of directors and memorandum and articles of association of the company. In the list of directors dated 1-6-1998, petitioner is shown as one of the directors and her occupation is shown as service. The chairman- cum -managing director, accused G.S. Verma, again submitted similar information vide another letter dated 25-11-1998 to the Chairman, SEBI, Mumbai. 19. In the memorandum of association, name of the petitioner appears at serial No. 5 in the list of persons as subscribers . In Form 32 dated 29-9-1997, name of the petitioner does not appear in the list of managing director and directors appointed as per the articles of association indicating that petitioner was not the director of the company at the relevant time. Since petitioner is shown to be in service at that point of time, she could not have been actively participating in the day-to-day affairs of the company and, therefore, could not be said to be responsible for the conduct of its day-to-day business. 20. Learned counsel for the respondent has submitted that respondent could not have known the nature of work which was assigned to the petitioner as a director of the company and it is for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al for the purpose of attributing role to the petitioner while arraying her as an accused. The tendency of making all the directors as accused for facing liability for an offence committed by the company is on the increase and it needs rationalisation. In J.N. Bhatia ( supra ), the court held as follows : "No doubt, the complainant is an outsider and may not know the internal arrangement of the company and his knowledge, vis-a-vis, the company has to be limited to his personal knowledge which he derives from his dealings with the company. However, at the same time from his personal knowledge which he derives from his dealings with the company he can make necessary averments regarding the persons who dealt with him. Apart from chairman and managing director, who become liable in any case, in view of the ratio laid down in SMS Pharmaceuticals Ltd. s case ( supra ), the complainant can specifically state as to which other director dealt with him in the course of the business and in what manner. There may be a director and/or other person who dealt with him on behalf of the company in negotiating the particular deal with the complainant and/or in issuing the cheque(s) in questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds for proceeding against the accused. In a criminal complaint, it is the duty of the complainant to allege and make out all the ingredients of the offence before calling upon the court to proceed against the accused. Only legally permissible presumptions can be raised against the accused whereas the factual aspect of the allegations in the complaint are to be established by the complainant before seeking summoning of the accused, before a Magistrate sets into motion, the criminal law as a matter of course. 24. N. Rangachari ( supra ) and Sushila Devi s case ( supra ) have no relevance to the facts and circumstances of this case. In the said two cases, the petitioners were the chairman and managing directors of the accused company respectively and the chairman and managing director of the company, in all circumstances are in-charge of the affairs of the company and are responsible to the company for the conduct of its business. 25. 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 sum ..... 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