High Court upholds issuance of process for criminal breach of trust and cheating, quashes certain orders, directs expedited proceedings.

The High Court upheld the Metropolitan Magistrate's issuance of process under Sections 406, 420 r/w Section 34 of IPC, reinstating the charges against the accused for criminal breach of trust and cheating. The Court quashed the Revisional Court's orders, except for dropping Section 15-HA of SEBI Act, which the complainant chose not to pursue. The Court directed expedited proceedings and dismissed the accused's petitions, emphasizing the company's vicarious liability and rejecting the delay argument due to the nature of the offences.

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Issues Involved:
1. Legality of the issuance of process under Sections 406, 420 r/w Section 34 of IPC and Section 15-HA of SEBI Act by the Metropolitan Magistrate.
2. Validity of the Revisional Court's order exonerating some accused and upholding charges against others.
3. Applicability of Section 15-HA of SEBI Act.
4. Allegations of criminal breach of trust, cheating, and the role of arbitration proceedings.
5. Vicarious liability of the company and its directors.
6. Delay in filing the complaint.

Detailed Analysis:

1. Legality of Issuance of Process:

The complainant filed a complaint alleging that the accused committed criminal breach of trust and cheating by misappropriating pledged shares. The Metropolitan Magistrate issued process under Sections 406, 420 r/w Section 34 of IPC and Section 15-HA of SEBI Act. The accused challenged this, leading to the Revisional Court's partial exoneration. The High Court upheld the issuance of process by the Metropolitan Magistrate, noting that the complainant made a prima facie case of criminal breach of trust and cheating.

2. Revisional Court's Order:

The Revisional Court had set aside the process against Morgan Securities Pvt. Ltd. (Accused No.1) entirely and against the directors (Accused Nos.2 to 4) under Section 420 IPC and Section 15-HA of SEBI Act. However, it upheld the process under Section 406 r/w Section 34 of IPC against the directors. The High Court quashed the Revisional Court's order, reinstating the charges as initially issued by the Metropolitan Magistrate, except for Section 15-HA of SEBI Act, which the complainant chose not to pursue.

3. Applicability of Section 15-HA of SEBI Act:

The complainant decided not to press for the application of Section 15-HA of SEBI Act. The High Court accepted this and dropped the section from the charges, modifying the Metropolitan Magistrate's order accordingly.

4. Allegations of Criminal Breach of Trust and Cheating:

The complainant alleged that the accused sold the pledged shares at a minimal price to their sister concern, Doogar and Associates Ltd., which later sold them at a higher price, causing a loss to the complainant. The High Court noted that the allegations and evidence presented prima facie indicated criminal breach of trust and cheating, justifying the issuance of process.

5. Vicarious Liability of the Company and Directors:

The accused argued that the company could not be held vicariously liable for the directors' actions and vice versa. The High Court rejected this, citing the Supreme Court's decision in Iridium India Telecom Ltd. v. Motorola Inc., which held that a company could be prosecuted for criminal offences and that directors could be held liable for the company's actions. The High Court emphasized that the company, being a juristic person, could be prosecuted and fined, even if it could not be imprisoned.

6. Delay in Filing the Complaint:

The accused argued that the complaint, filed in 2011 for offences allegedly committed in 2001, was delayed. The High Court found that the complainant had explained the delay satisfactorily and noted that the limitation period did not apply to offences under Section 420 IPC, thus rejecting the delay argument.

Conclusion:

The High Court quashed the Revisional Court's orders, reinstating the Metropolitan Magistrate's issuance of process under Sections 406, 420 r/w Section 34 of IPC, while dropping Section 15-HA of SEBI Act. The Court directed the Metropolitan Magistrate to expedite the hearing and dispose of the complaint within a year, excluding periods affected by the pandemic. The writ petitions filed by the complainant were allowed, and those by the accused were dismissed.

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