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2015 (9) TMI 917 - DELHI HIGH COURT

2015 (9) TMI 917 - DELHI HIGH COURT - TMI - Prayer for discharge from the complaint case filed by SEBI - collective investment schemes (CSI) - company failed to make any application with SEBI for registration of the collective investment schemes operated by it as per the Regulations - The petitioner while praying for discharge submitted that she was the director of the company from 1.1.1998 to 25.7.1998 which period was much before the alleged violations. - Held that:- From the perusal of Form 3 .....

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ashed out or settled in a full fledged trial.

The petitioner would get the opportunity at the trial for proving that she was not at all concerned with the affairs of the company, much less, day to day affairs of the company and whatever violation of the Act is alleged was not in her knowledge. - Petition dismissed. - CRL.REV.P. 692/2012 - Dated:- 21-7-2015 - MR. ASHUTOSH KUMAR, J. For The Petitioner : Mr.Sunil Chaudhary, Advocate For The Respondent : Mr.Lovkesh Sawhney, APP, Mr.Ashish .....

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before the alleged violations of the requirements under the SEBI Act were committed. 3. Brief facts which led to the filing of the complaint by the SEBI are as hereunder. 4. Assured Agro Ltd (the company) was incorporated on 4.4.1997 with its registered office in Delhi. The company engaged itself in Collective Investments Schemes ( CIS for short). The petitioner was inducted as a director of the company on 1.1.1998 and remained on the Board of Directors till 25.7.1998, when for personal reasons .....

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India (for short SEBI ) in accordance with the regulations. The proviso to the aforesaid sub Section permits that any person sponsoring or causing to be sponsored, carrying or causing to be carried on any such fund or scheme operating in the securities market immediately before 25.1.1995, for which no certificate of registration was required prior to the said date, may continue to operate till such time regulations were made under clause (d) of sub-section (2) of section 30. 6. The Government of .....

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and Exchange Board of India (Collective Investment Scheme) Regulations, 1995 (hereinafter referred to as CIS Regulations). In terms of the said Regulations, any person who, immediately prior to the commencement of CIS Regulations was operating a Collective Investment Scheme had to make an application to the SEBI for grant of registration within a period of two months. 8. The date of submission of such application was later on extended to 31.3.2000. 9. The company failed to make any application w .....

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ollective investment scheme]. (2) The existing Collective Investment Scheme to be wound up under sub-regulation (1) shall send an information memorandum to the investors who have subscribed to the [collective investment scheme]s, within two months from the date of receipt of intimation from the Board, detailing the state of affairs of the [collective investment scheme], the amount repayable to each investor and the manner in which such amount is determined. (3) The information memorandum referre .....

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itive consent within one month from the date of the information memorandum to continue with the[collective investmentscheme]. (7) The investors who give positive consent under sub-regulation (6), shall continue with the[collective investment scheme] at their risk and responsibility :Provided that if the positive consent to continue with the[collective investment scheme], is received from only twenty-five per cent or less of the total number of existing investors, the [collective investment schem .....

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ce informed the company that all companies carrying out Collective Investment Schemes which had not made any application for grant of registration or were not desirous of obtaining provisional registration were required to compulsorily wind up their existing schemes in terms of Regulation 73. 13. As the allegation stands, the company of which the petitioner was director (claims to be a director for a short period from 1.1.1998 to 25.7.1998) neither applied for registration under the Regulation r .....

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ncement of these regulations was operating a 15[collective investment scheme], shall subject to the provisions of Chapter IX of these regulations make an application to the Board for the grant of a certificate within a period of two months from such date. 68. (1) Any person who has been operating a collective investment scheme at the time of commencement of these regulations shall be deemed to be an existing collective investment scheme and shall also comply with the provisions of this Chapter. .....

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registration by the Board under sub-regulation (1) of regulation 71; (b)by grant of a certificate of registration by the Board under regulation 10; (c) by rejection of the application for registration by the Board under regulation 12. 73. (1) An existing collective investment scheme which: (a) has failed to make an application for registration to the Board; or (b) has not been granted provisional registration by the Board; or (c) having obtained provisional registration fails to comply with the .....

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unt is determined. (3) The information memorandum referred to in sub-regulation (2) shall be dated and signed by all the directors of the [collective investment scheme]. (4) The Board may specify such other disclosures to be made in the information memorandum, as it deems fit. (5) The information memorandum shall be sent to the investors within one week from the date of the information memorandum. (6) The information memorandum shall explicitly state that investors desirous of continuing with th .....

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r of existing investors, the [collective investment scheme] shall be wound up. (8) The payment to the investors, shall be made within three months of the date of the information memorandum. (9) On completion of the winding up, the existing collective investment scheme shall file with the Board such reports, as may be specified by the Board. 74. An existing collective investment scheme which is not desirous of obtaining provisional registration from the Board shall formulate a scheme of repayment .....

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company, therefore, in the year 2000 was directed to refund the money collected under the CIS Scheme within a period of one month. 18. The complaint alleges that the company had raised a total amount of ₹ 0.885 crores and had failed to repay the amount to the investors causing huge pecuniary losses to them. 19. The complaint, therefore, came to be filed on 22.5.2002 against the company and its directors including the petitioner for violation of Section 11B, 12(1B) of the SEBI Act, 1992 re .....

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ector on 25.7.1998 (P2 to the petition). 21. Be it noted that Form 32 referred to above was filed with the Registrar of Companies on 22.9.2004 i.e. after the complaint was lodged against the company. 22. It was further submitted on behalf of the petitioner that she was not a director of the company when the notification of the year 1999 came into existence. The other ground taken by the petitioner is that in a complaint case filed by the Registrar of the Companies against M/s.Assured Agro Park L .....

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the accused persons including the petitioner. The aforesaid section namely Section 12(1B) which prohibit sponsoring or carrying on of any CIS without obtaining certificate of registration from the board, was notified on 25.1.1995 i.e. even prior to the petitioner being inducted in the board of the company as a Director or her resignation. 24. It was further argued that Form 32 which was relied upon by the petitioner was filed with the ROC on 22.9.2004 i.e. after the lodging of the complaint. It .....

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s at the threshold, subject to the framing of the charges. 26. From the perusal of Form 32 (P2 to the petition), it would appear that the same was filed with the Registrar of Companies much later than the filing of the complaint. It is a matter of common knowledge that such form could be filed by ROC even after sufficient lapse of time after paying nominal fee or fine. In such circumstances, the petitioner was on the board of the company as a director and whether she participated in the day to d .....

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ed shall be discharged. 29. Section 239 of the Code of Criminal Procedure provides that if the charge against an accused is found to be groundless, he would be discharged by the Court. At the stage of framing of the charges, no detailed discussion or in-depth enquiry is to be made. What is required to be seen by the Court while framing charges is whether on the complaint or the materials before the Court, a prima facie case under the sections charged is made out or not. 30. At the time of framin .....

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e unable to accept the aforesaid contention. The reliance on Articles 14 and 21 is misplaced...Further, at the stage of framing of charge roving and fishing inquiry is impermissible. If the contention of the accused is accepted, there would be a mini trial at the stage of framing of charge. That would defeat the object of the Code. It is well-settled that at the stage of framing of charge the defence of the accused cannot be put forth. The acceptance of the contention of the learned Counsel for .....

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