Prima facie vicarious liability under the SEBI Act can sustain prosecution where complaint and adjudication material show business responsibility.

At the stage of discharge and framing of charge, the Court held that the complaint read with the adjudication order could disclose a prima facie case against directors for prosecution under the SEBI Act on the basis of vicarious liability. It noted that the complaint alleged the applicants were responsible for the company's business and had deliberately failed to pay the penalty, while the adjudication order showed their involvement in the underlying proceedings and the finality of the penalty order. The absence of the exact words "in charge of" was not decisive where the averments and supporting material, taken together, indicated responsibility and non-compliance. The refusal to discharge was therefore upheld and the prosecution remained maintainable.

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Issues: Whether, at the stage of discharge and framing of charge, the complaint read with the adjudication order disclosed a prima facie case against the directors for prosecution under Section 24(2) of the SEBI Act by invoking vicarious liability under Section 27 of the SEBI Act.

Analysis: The complaint alleged that the applicants were directors or officers of the company, were directly responsible for its business, and had intentionally avoided payment of the penalty imposed by the adjudicating officer. The adjudication order, which formed the basis of the prosecution under Section 24(2), showed the applicants' involvement in the underlying SEBI proceedings and the finality of the penalty order after dismissal of the appeal. At the stage of Sections 227 and 228 of the Code of Criminal Procedure, 1973, the Court was entitled to consider the complaint together with the supporting documents and assess whether sufficient ground existed to proceed. The omission of the exact words "in charge of" in the complaint did not, by itself, defeat the prosecution when the averments as a whole and the adjudication material indicated responsibility for the conduct of business and deliberate non-compliance.

Conclusion: The refusal to discharge the applicants was upheld and the prosecution was held maintainable against them.

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