2023 (4) TMI 1370 - HC - SEBI

Petition to Quash SEBI Act Complaint Dismissed; Trial to Proceed Due to Valid Allegations and Unresolved Issues.

Bliss Plantations and Hill Pvt Ltd., Hitesh V. Shah, S/o. V.S. Shah, Director, C.R. Sathia Lakshmi D/o. Ramamurthy and B.V. Shah W/o. (Late) Mr. V.S. Shah Versus Securities and Exchange Board of India, Chennai

The HC dismissed the Criminal Original Petition filed by the petitioners seeking to quash the complaint under Section 200 Cr.P.C. r/w Sections 24(1), 27 ... Complaint u/s 200 of Cr.P.C. r/w Sections 24(1), 27 of SEBI against the petitioners -Respondent notified regulations for regulating the activities of Collective Investment Scheme Companies titles as Securities and Exchange Board of India (Collective Investment Scheme) Regulations Act,1999 but petitioners have not complied with the respondent directives meant to protect the interests of the investors HELD THAT:- No investor or customer has lodged any complaint with the respondent that the petitioners have cheated them and apart from the above said reason, the respondent has not levelled any specific allegation in that regard in the complaint. In the absence of any complaint, there was no cause of action to lodge the complaint. These are all the grounds have to be given into the fulfledged complaint and the complaint was lodged by the respondent, after recording the evidence. The Trial Court found prima-facie made out and had taken cognizance. Therefore, the complaint cannot be thrown out. As relying on M. Jayanthi [2019 (12) TMI 1319 - SUPREME COURT] and Arvind Khanna [2019 (10) TMI 672 - SUPREME COURT] the points raised by the petitioner cannot be considered by this Court under Section 482 Cr.P.C. In view of the above discussion, this Court is not inclined to quash the proceedings in C.C.No.6435 of 2004 on the file of the XXIII Metropolitan Magistrate, Saidapet, Chennai. While pending this matter, this Court, by an order dated 25.01.2016, appointed an Auditor of one M/s. Brahmayya & Co., in order to settle the issue. However, the petitioners did not settle the same and nothing proceeded further. Therefore, the appointment of Auditor also now stand cancelled. Issues:1. Whether the complaint filed by the respondent under Section 200 of Cr.P.C. r/w Sections 24(1), 27 of the Securities and Exchange Board of India Act, 1992 against the petitioners should be quashed.2. Whether the grounds raised by the petitioners regarding lack of specific allegations, absence of complaints from investors, and the Trial Court's decision to take cognizance of the complaint are valid.3. Whether the judgments delivered by the Hon'ble Supreme Court of India in various cases are applicable to the present case and whether the petitioners' arguments can be considered under Section 482 Cr.P.C.Analysis:1. The respondent filed a complaint against the petitioners for non-compliance with regulatory directives meant to protect investors' interests. The petitioners argued that the complaint lacked specific allegations and that no investors had lodged complaints against them. However, the Trial Court had taken cognizance of the complaint, finding a prima facie case. The High Court referred to judgments by the Hon'ble Supreme Court emphasizing that issues of inconsistencies in witness statements and defense should be addressed during trial, not in Section 482 Cr.P.C. proceedings. The High Court declined to quash the proceedings, noting that the petitioners failed to settle the matter despite the appointment of an Auditor.2. The petitioners contended that the complaint lacked specific allegations and investor complaints, but the Trial Court had already taken cognizance. The High Court cited the Supreme Court judgments, highlighting that the validity of evidence should not be a concern at the Section 482 Cr.P.C. stage. The Court emphasized that as long as the complaint contains the necessary ingredients for the alleged offenses, the matter should proceed to trial. The appointment of an Auditor to settle the issue was unsuccessful due to the petitioners' inaction, leading to the cancellation of the Auditor's appointment.3. The High Court referenced various judgments by the Supreme Court, including those in cases like Devendra Prasad Singh Vs. State of Bihar, Central Bureau of Investigation Vs. Arvind Khanna, and M. Jayanthi Vs. K.R. Meenakshi & Anr. These judgments emphasized that during Section 482 Cr.P.C. proceedings, the focus should be on whether the complaint contains the essential elements of the alleged offenses, rather than delving into the validity of evidence. The Court found that the principles laid down in these judgments were applicable to the present case, and therefore, the petitioners' arguments could not be considered under Section 482 Cr.P.C. The Criminal Original Petition was dismissed, and connected miscellaneous petitions were closed.