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of <h1>Court sets aside SEBI Act notice against Petitioners in Collective Investment Scheme case</h1> <h3>Suresh Batra Versus Securities & Exchange Board of India</h3> The court set aside the order framing notice against the Petitioners under the SEBI Act for offenses related to Collective Investment Schemes. The ... Petitioners seek setting aside of the order dated 12-11-2009 passed by the learned Addl. Sessions Judge framing notice under section 251 Cr. P.C. against them for offences punishable under section 24(1), read with section 27 of the Securities and Exchange Board of India Act, 1992 ('SEBI Act'). Held that:- A perusal of the Memorandum of Association of the accused Company shows that the Petitioners herein are only the shareholders in the Company and were neither the promoters nor Directors nor in-charge and responsible for the Company's day to day working. There is no specific role attributed to the Petitioners in the complaint dated 15-12-2003 filed against the Petitioners and the accused Company. In view of the facts and circumstances of the case, the order of learned Additional Sessions Judge dated 12-11-2009 framing notice against the Petitioners is set aside. Issues:Setting aside of order framing notice under SEBI Act.Analysis:The judgment involves the setting aside of an order dated 12-11-2009 passed by the learned Addl. Sessions Judge, which framed notice under section 251 Cr. P.C. against the Petitioners for offenses punishable under section 24(1), read with section 27 of the Securities and Exchange Board of India Act, 1992 ('SEBI Act'). The complaint alleged that the accused Company operated Collective Investment Schemes without complying with SEBI regulations. Despite repeated directions from SEBI to refund the money collected under the scheme, the accused Company failed to comply, leading to the framing of notice against the Petitioners.Detailed Analysis:1. The Petitioners contended that they were only shareholders of the accused Company and not Directors or in-charge of its operations. They argued that there were no specific allegations against them in the complaint. Reference was made to a previous case where a shareholder was excluded from proceedings due to lack of specific allegations. The Petitioners sought similar relief based on this precedent.2. The judgment provided a background of the case, stating that the accused Company raised funds through Collective Investment Schemes without following SEBI regulations. Despite directives to refund investors, the Company failed to comply. The Addl. Sessions Judge framed notice against the Petitioners based on their association with the Company.3. The Memorandum of Association showed that the Petitioners were shareholders and not involved in the management of the Company. Citing a Supreme Court case, it was highlighted that mere association with a company does not imply liability for its actions. The judgment clarified that the Petitioners, being only shareholders, could not be held responsible for the Company's offenses.4. The judgment concluded by setting aside the order of the Addl. Sessions Judge, thereby granting relief to the Petitioners. It disposed of the petition in favor of the Petitioners based on their limited role as shareholders and lack of involvement in the Company's operations.In summary, the judgment revolved around the Petitioners seeking to overturn an order framing notice against them under the SEBI Act for offenses related to Collective Investment Schemes. The court ruled in favor of the Petitioners, emphasizing their status as shareholders without managerial responsibilities, thus absolving them of liability for the Company's actions.
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