9911796707
TMI Blog2014 (4) TMI 1315X X X X Extracts X X X X X X X X Extracts X X X X ..... less he obtains a certificate of registration from the Securities and Exchange Board of India (for short 'SEBI) in accordance with the regulations. The proviso to the aforesaid sub-section, permits any person, sponsoring or causing to be sponsored, carrying or causing to be carried on any such fund or scheme operating in the security market immediately before 25.1.1995, for which no certificate of registration was required prior to the said date, to continue to operate till such time Regulations are made under clause (d) of sub-section (2) of Section 30. 3. The Securities and Exchange Board of India Regulations, 1999 (hereinafter referred to as 'the Regulations') came to be notified on 15.10.1999 4. SEBI vide its letter dated 10.12.1999 and 29.12.1999 and also by way of a public notice dated 10.12.1999 intimated Rim Zhim Agro Forest Limited (hereinafter referred to as the Company) of its obligation to send an Information Memo to all the investors detailing the state of affairs of its Collective Investment Scheme (for short 'the CIS'), the amount repayable to each investor and the manner in which the said amount was determined. The information was required to be sent latest by Feb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r payment made by the investors, by whatever name called, are pooled and utilized for the purposes of the such or arrangement; (ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable, from such scheme or arrangement; (iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; (iv) the investors do not have day-to-day control over the management and operation of the scheme or arrangement shall be a collective investment scheme. Though the aforesaid Section came to be inserted with effect from only 22.02.2000, the expression 'Collective Investment Scheme (CIS) even before the aforesaid incorporation was understood to mean any scheme, whereby funds were raised from the members of the general public for the purpose of making investment in any property. 8. Ex.CW1/2 is a letter purporting to be written by Mr. P.S. Chaudhary , Managing Director of the Company to SEBI, in response to a letter of SEBI dated 28.07.1998, seeking time till 30th September, 1998 to submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refunded the dues of all the investors. In reply to question No.13 he stated that the Company had made payment in respect of 90-95 per cent of the investors. 9. The appellant Mr. S.S. Thakur also admitted that Mr. P.S. Chaudhary was the Managing Director of the Company and the letters Exhibits CW1/2, CW1/4 & CW1/5 were sent by the Company. He also admitted that along with Ex.CW1/5, the Managing Director of the Company Shri P.S. Chaudhary had filed a copy of the offer document, copy of agreements with investors, funds raised in different schemes and the names, details and background of the Directors of the Company. He also admitted that the funds raised by the Company amounted to Rs. 29,16,200/- and besides him Mr. K.C. Kaundal and Mr. S.C. Mahajan were the Directors of the Company. He also claimed that the Company had made payment to 90-95 per cent of the investors. 10. The learned counsel for the appellants submits that admission made by an accused in his statement under Section 313 of Cr.P.C. does not constitute evidence and, therefore, the documents Exhibits CW1/2, CW1/4 and CW1/5 as well as the accompanying documents cannot be said to be proved and cannot form basis of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of the Act. 13. Regulation 74 of the SEBI CIS Regulations, which came into force on 15.10.1999, provides that an existing CIS which is not desirous of obtaining provisional registration from the Board shall formulate a scheme of repayment to the existing investors in the manner specified in Regulation 73. Moreover, Regulation 69 provides that if prior to the date of coming into force the Regulations, any person was running an existing collective investment scheme he should apply for grant of certificate within two months from such date. Regulation 69 contains a prohibition against launching any new CIS or raising money from the investors, under the existing Scheme, without registration with SEBI. Since the scheme of the Company had not been liquidated by the time the aforesaid Regulations came into force, the Company was under an obligation to formulate a scheme of repayment and make such repayment to its investors in terms of Regulation 73, which inter alia required the scheme to be wound up and the investors to be intimated within two (2) months from the date of receipt of intimation from SEBI, detailing the state of affairs of the scheme, the amount repayable to each investor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but, there is no documentary proof of such payment. No investor has been produced in the witness box and no receipt or any other document evidencing such a payment was produced during trial. In any case, even as per the admission of the aforesaid two Directors there are some investors who are yet to be repaid the amount which the Company had collected from them under its CIS. By not making full payment in terms of the Regulations and the directions issued by the Chairman of SEBI, the Company contravened the provisions of the Regulations and also failed to comply with the direction issued by the Chairman of SEBI. 17. In M/s P.G.F Ltd. and others vs. Union of India and another AIR 2013 SC 3702, direction was given by SEBI to a company which had collected money by way of Collective Investment Scheme, to collect any money from the investors or to launch any scheme with a further direction to refund the money collected by it within one month from the date of the order of SEBI. The aforesaid order was challenged by the appellant before the Apex Court, inter alia, on the ground that it was ultra vires of Section 11AA of SEBI Act. Rejecting the contention, the Apex Court, inter alia, hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny neglect on their part, they shall be guilty in terms of sub-section (2) of Section 27 even if they were not persons in-charge of and responsible to the Company for conduct of its business. 21. As far as the appellant Mr. P.S. Chaudhary, he being the Managing Director of the Company, was the person primarily concerned with managing the business of the Company. Being the Managing Director, he would be involved in day-to-day business of the Company and raising funds from the investors under the Collective Investment Scheme floated by the Company. Therefore, he would certainly be a person in-charge of and responsible to the Company for conduct of its business. Mr. Chaudhary does not even claim that the contravention of sub section (1B) of Section 12 of SEBI Act and the CIS Regulation of SEBI was committed by the company without his knowledge or that he had exercised all due diligence to prevent the commission of the said offence by the company. In these circumstances, it can hardly be disputed that being the Managing Director and person in-charge and responsible to the Company for conduct of its business, he is vicariously liable for the contravention of the provisions of SEBI Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
