TMI Blog2023 (1) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts Petitioner No.1 is M/s Multibagger Securities Research Advisory Pvt. Ltd. and Petitioner No.2 is its Director. Petitioner No.1 is registered with the Securities Exchange Board of India (for short Board ) as an Investment Advisor on 29.05.2017. An investigation is being conducted by respondent No.1- Board into the trading activities of certain entities in the scrip of Omaxe Ltd. which were made during the period 01.06.2020 to 01.07.2020. A Tele-marketier by name M/s Mobonair Wireless Pvt. Ltd. had provided information to the respondents that SMS re-commendations were sent by petitioner No.1. A reply was sought by the respondents from the petitioners through an e-mail dt.10.08.2022 (Annexure P-11) enclosing copy of the document provided by the Tele-marketier with a request to provide complete information. A week later, on 18.08.2022, summons dt.17.08.2022 were issued by respondent No.3, who was appointed as an investigating authority, to the petitioners as well as another Director by name Shailesh Goyal, directing their personal appearance before respondent No.3 on 25.08.2022 at 1.30 P.M. at the Office of the Board at New Delhi under Section 11C(5) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns associated with the securities market and to report thereon to the Board. (2) Without prejudice to the provisions of sections 235 to 241 of the Companies Act, 1956 (1 of 1956), it shall be the duty of every manager, managing director, officer and other employee of the company and every intermediary referred to in section 12 or every person associated with the securities market to preserve and to produce to the Investigating Authority or any person authorised by it in this behalf, all the books, registers, other documents and record of, or relating to, the company or, as the case may be, of or relating to, the intermediary or such person, which are in their custody or power. (3) The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to, or produce such books, or registers, or other documents, or record before him or any person authorised by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books, or registers, or other documents, or record is relevant or necessary for the purposes of its investigation. (4) The Inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or by, and signed by, the person examined, and may thereafter be used in evidence against him. (8) Where in the course of investigation, the Investigating Authority has reasonable ground to believe that the books, registers, other documents and record of, or relating to, any intermediary or any person associated with securities market in any manner, may be destroyed, mutilated, altered, falsified or secreted, the Investigating Authority may make an application to [the Magistrate or Judge of such designated court in Mumbai, as may be notified by the Central Government] for an order for the seizure of such books, registers, other documents and record. (8A) The authorised officer may requisition the services of any police officer or any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub section (8) and it shall be the duty of every such officer to comply with such requisition. (9) After considering the application and hearing the Investigating Authority, if necessary, the Magistrate or Judge of the Designated Court] may, by order, authorise the Investigating Authority (a) to enter, with such assistance, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Sub Section (5) would be taken down in writing and would be read over to or by and signed by the person examined, and may thereafter be used in evidence against him, violates Article 20 (3) of the Constitution of India. In addition, it is contended that the summons for physical appearance of all the Directors of petitioner No.1 are unconstitutional, unreasonable and amounts to harassment. According to the petitioners, one Director by name Shailesh Goyal, who is well aware of the workings of the company, was requested to be permitted to appear on behalf of petitioner No.1 company vide Annexure P-15, but respondent No.2 called the petitioners and also sent an e-mail to the effect that presence of all the Directors is required physically. We have noted the contentions of the petitioners. CONSIDERATION BY THE COURT The Board was established to protect interests of the investors in Securities and to promote the development of and to regulate the securities market by such measures as it thinks fit. The various measures it is empowered to take are set out under Sub-Section (2) and (2A) of Section 11. It has also been conferred in subsection (3) of Section 11 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to function in a dual capacity. It functions in an inquisitorial capacity while examining the issue, whether reasonable grounds exist to believe that the transactions in securities are being dealt with in a manner detrimental to the investors or the securities market or, whether any intermediary or any person associated with the securities market has violated any of the provisions of the SEBI Act or the rules regulations made thereunder, or directions issued by the Board. If it finds that reasonable grounds exist to believe the existence of the aforesaid state of affairs, it can direct an investigation by an investigating authority under Section 11C of the Act. Once the investigation has been ordered under Section 11C and an investigation report made, the SEBI while examining the said report and acting upon it, functions in its quasi judicial capacity. This is evident from Section 11(4) of the SEBI Act, which, inter alia, reads: (4) Without prejudice to the provisions contained in subsections (1), (2), (2A) and (3) and section 11B, the Board may, by an order, for reasons to be recorded in writing, in the interests of investors or securities market, take any of the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. If it is not made obligatory for the persons proceeded against by SEBI to cooperate with the investigation by furnishing information in per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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