2020 (12) TMI 1408 - HC - SEBI

Petition to Dismiss Fraud and Conspiracy FIR Rejected; Criminal Investigation Continues Despite SEBI Probe.

Dharmendera Kumar Arora Versus The State, Govt. Of Nct of Delhi & Anr.

The court dismissed the petition to quash the FIR filed under Sections 420, 406, and 120-B of the IPC, emphasizing that the FIR disclosed cognizable ... FIR u/s 420/406/120-B of the IPC - FIR disclosing cognizable offences - SEBI's investigation affecting the quashing of the FIR - directors of Modex International have hatched a conspiracy by illegally forging and misappropriating his securities by making adjustments in their books that these securities have illegally been sold without his authorization with the object and intent to defraud him - HELD THAT:-Clearly, a plain reading of the FIR indicates that it does disclose cognizable offences. Thus, the contention that the FIR is liable to be quashed as not disclosing any cognizable offence, is clearly unmerited. The contention that the FIR is required to be quashed as SEBI is also investigating a similar compliant, is also unmerited. SEBI’s jurisdiction extends to investigate complaints and take appropriate action for violation of Securities and Exchange Board of India Act, 1992 (SEBI Act) and the Rules and Regulations made thereunder. It does not extend to prosecuting offences under the IPC. The fact that SEBI is investigating or prosecuting the petitioner for offences under the SEBI Act, or the relevant regulations made thereunder does not in any manner warrant quashing of the present FIR. It also does not preclude the investigating agency from investigating the allegations regarding offences punishable under the Indian Penal Code, 1860. Issues:1. Whether the FIR under Section 420/406/120-B of the IPC should be quashed.2. Whether SEBI's investigation affects the quashing of the FIR.3. Whether the disputes arising are civil in nature.Analysis:1. The petitioner sought to quash the FIR on three grounds. Firstly, it was argued that the FIR did not disclose any cognizable offense as there was no allegation of cheating from the inception of the transactions. The petitioner contended that since there was no intention to cheat, the FIR should be quashed. However, the court found that the FIR did disclose cognizable offenses based on the complainant's allegations of forgery and misappropriation of securities.2. Secondly, the petitioner argued that since the complainant had also lodged a complaint with SEBI, which was being investigated, the FIR should be quashed. The court clarified that SEBI's jurisdiction is limited to violations of the SEBI Act and regulations, not offenses under the IPC. Therefore, SEBI's investigation did not warrant quashing the FIR, as the investigating agency could still probe IPC offenses independently.3. Thirdly, the petitioner contended that the disputes were commercial and civil in nature, hence the FIR should be quashed. However, the court noted the serious allegations of conspiracy, forgery, and fraud made by the complainant regarding the misappropriation and unauthorized sale of securities. The court held that these allegations were not merely civil disputes but involved criminal offenses under the IPC.4. The complainant's allegations detailed how the petitioner's company offered various financial benefits and assurances regarding securities held in a DEMAT account. The complainant later felt insecure due to news reports about a related scam and requested the transfer of his securities, which the petitioner allegedly failed to do. The complainant accused the company of forging and misappropriating securities with the intent to defraud him.5. The court concluded that the FIR disclosed cognizable offenses and the presence of SEBI's investigation did not affect the validity of the FIR under the IPC. Therefore, the petition to quash the FIR was dismissed, emphasizing the seriousness of the criminal allegations made by the complainant.