TMI Blog2023 (7) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... actual issues involved in the present case while exercising the jurisdiction u/s 482 of Code of Criminal Procedure. - CRL.M.C. 2459/2011 & CRL.M.A. 8860/2011 (Stay) - - - Dated:- 13-7-2023 - HON BLE MR. JUSTICE AMIT SHARMA For the Petitioner Through: Mr. Ananta Prasad Mishra, Advocate For the Respondents Through: Mr. Sanjay Mann, Mr. Shashank Bajpai, Advocates. JUDGMENT AMIT SHARMA, J. 1. The present petition under Section 482 of the Code of Criminal Procedure 1973 ( CrPC ) seeks quashing of Criminal Complaint No. 343/2002 (renumbered as CC No. 66/5) pending before the Court of Additional Chief Metropolitan Magistrate (Special Acts), Tis Hazari Courts, Delhi and all proceedings emanating therefrom, including the order dated 23.04.2002 whereby the present petitioner was summoned for the offences under Sections 24(1) and 27 of the Securities Exchange Board of India Act, 1992 ( SEBI Act ) and the order dated 07.10.2005 whereby non-bailable warrants were issued qua the petitioner and other accused persons. 2. A complaint bearing number 343/2002 (renumbered as CC No. 66/5) under Section 200 of CrPC read with Section 24(1) and Section 27 of SEBI Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summoning of the accused, before a Magistrate sets into motion the criminal law as a matter of course. xxx 26. 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 summons have been issued against all the accused persons who are impleaded as Directors despite prime accused being the company in the absence of a specific averments against the petitioner. Even without taking care of requirements of law whether prima facie case was made out against the petitioner, the Magistrate acted mechanically in passing the impugned order against the petitioner. 27. In view of my detailed discussion as above, the complaint as against the petitioner (accused No. 6 in the complaint) is not maintainable. Hence, the complaint and the impugned summoning order qua the petitioner is accordingly quashed. Attested copy of the order be sent to the trial court. He further urged that by virtue of merely being a director of a company, the petitioner cannot be held vicariously liable under Section 27 of the SEB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Exchange Board of India Act, 1992 read with Reg. 5 (1) read with Reg. 68(1), 68(2), 73 and 74 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 which is punishable under Sec. 24 (1) of Securities and Exchange Board of India Act, 1992. The Accused No. 2 to 8 are the directors and/or 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 in terms of Sec. 27 of Securities and Exchange Board of India Act, 1992. xxx 14. Relying on N. Rangachari, this Court in Sushila Devi 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: 7. The accused No. 1 is a company registered under the provisions of the Companies Act and the accused No. 2 to 9 are the directors of the accused No. 1 company. The accused No. 2 to 9 are the persons incharge 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. 15. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge of the responsible to the Accused No. 1 for the conduct of its business and are liable for the violations of the Accused No. 1, in terms of Sec. 27 of Securities and Exchange Board of India Act, 1992. Besides CW2 in her testimony has stated: The non-compliance of the SEBI directions and the violations of Sec. 12(1B) of the Act and the Regulations is attributable to accused Nos. 2 to 6, who are the directors of accused No. 1 company. Accused No. 1 company did not get the schemes registered with SEBI prior to mobilization of funds thereunder. Till date accused no. 1 company has not applied for registration nor any provisional registration was granted to it. The accused No. 1 company or its directors accused Nos. 2 to 6 have not filed any winding up and repayment report till now. The accused No. 1 company and its directors accused Nos. 2 to 6 were intimated regarding obligations under SEBI regulations and directions passed by Chairman SEBI through public notices dated 10.12.1999 and 07.12.2000, which was published on 14.1.2001 which are Ex. CW-2/2 and Ex. CW-2/3 respectively. No cross examination of this witness had been conducted on this aspect. Thus the testi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittedly, are the working directors of the company. It is also not the case of the petitioners that they were not the directors of the company during the period when the alleged offence was committed. 10. Learned counsel for the respondent further submitted that the reliance of the petitioner on the judgment of Rashima Verma (Supra) is misplaced in as much as the petitioner therein i.e., Ms. Rashima Verma was not a director/promoter of the company but was only subscriber to the memorandum. Reliance was placed on para 5 and 6 of the aforesaid judgment which records as under: 5. Learned Senior Counsel for the petitioner, Mr. Sidharth Luthra, submitted that the summoning order dated 15.12.2003 deserves to be quashed as the same was passed without perusing the material available on the record and also that there are no substantive allegations in the complaint 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 Associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rector, manager, secretary or other officer shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Explanation : For the purposes of this section, (a) company means anybody corporate and includes a firm or other association of individuals; and (b) director , in relation to a firm, means a partner in the firm. [emphasis supplied] The aforesaid provisions of Section 27 of the companies Act are more or less similar to Section 141 of the Negotiable Instruments Act 1981 which stipulates that where the offence under Section 138 has been committed by a company, every person who, at the time the offence was committed , was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. 13. A perusal of the complaint dated 23.04.2002 filed by SEBI against the accused company reflects the following averments with respect to the directors:- 18. In view of the above, it is charged that the Accused No. 1 has committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of the process of the court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm-twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed; d) No restriction can be placed on the High Court's powers under Section 482 of the Code. The High Court always uses and must use this pow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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