TaxTMI 
TaxTMI 
TaxTMI 
2008 (2) TMI 614
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....90, a large number of plantation companies came to be incorporated. Each of them promised attractive returns to persons prepared to invest their monies in what were known as "collective investment schemes". When it transpired that many of these schemes were in fact non-starters, and the investors were not getting back their monies, the SEBI stepped into formulate certain regulations. The corrective action received impetus from orders passed by this court in writ petitions that were filed by the investors seeking redress. Among the directions issued by a Division Bench of this court were those contained in an order passed on 22-1-2002, in C.W. No. 3352 of 1998 S.D. Bhattacharya v. SEBI the relevant portion of which reads as follows :- "Having regard to the affidavit of the SEBI affirming that the aforesaid companies have not complied with the orders, and for securing the interests of the investors we are of the view that their bank accounts ought to be frozen. We are also of the opinion that not only the bank accounts of the aforesaid companies should be frozen but the bank accounts of their directors and promoters should also be frozen with immediate effect. We order accordingly. ....
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....nder the regulations and as such had violated the provisions of sections 11B and 12(1B) of the Securities and Exchange Board of India Act, 1992 and regulation 5(1) read with regulations 68(1), (2), 73 and 74 of the said regulations. 14. Subsequently, on 31-3-2000, the SEBI issued a public notice in the newspapers inviting the attention of accused No. 1 to the aforesaid position. Further, a notice dated 12-5-2000, was issued to accused No. 1 calling upon it to show-cause as to why the action as stated therein be not initiated against it for its violations of the aforesaid provisions of law. However, accused No. 1 neither responded to the said public notice nor the subsequent show-cause notice. Subsequently, accused No. 1 was reminded by show-cause notice dated 12-5-2000, to wind up the schemes and repay the amounts to the investors. 15. On 7-12-2000, the SEBI by exercising its powers conferred upon it under section 11B of the Securities and Exchange Board of India Act, 1992, directed accused No. 1 to refund the money collected under the aforesaid collective investment schemes of accused No. 1 to the persons who invested therein within a period of one month from the date of the sai....
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.... the offence. It is, however, not disputed that the offences are of a continuing nature. (iv)In many of these cases, individuals who have been arraigned as co-accused were either not associated with the company in question or they had ceased to be the directors long before the complaint was filed or the offence came to the knowledge of the SEBI. In any event, no precise role has been assigned to any of these individuals who have been arraigned as co-accused in the alleged commission of the offence by the company. 9. Reliance, inter alia, is placed on the judgments of the Supreme Court as well as of this court in Pepsi Foods Ltd. v. Special Judicial Magistrate, AIR 1998 SC 128, S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla [2005] 127 Comp. Cas. 5631; G.S. Rajgarhia v. Air Force Naval Housing Board [2004] (3) JCC (NI) 236, Everest Advertising (P.) Ltd. v. State [2005] 128 Comp. Cas. 787 and Mahender Prasad Singh Ratra v. N.K. Metals [1998] 75 DLT 155. 10. Counsel for the respondent, the SEBI, on the other hand points out that the latest position of law has been explained by the Supreme Court in N. Rangachari v. Bharat Sanchar Nigam Ltd. [2007] 137 Comp. Cas. 1982, where it has been ....
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....ion 27(1) of the SEBI Act, it will have to be averred in the complaint that the person who is arraigned in his capacity as a director of such company was in charge of the affairs of the company and responsible to it for the conduct of its business "at the time of commission of the offence". 13. In N. Rangachari's case (supra) which was a case arising under the Negotiable Instruments Act, the averment in the complaint read as under:- "That accused No. 1 is a company incorporated under the Companies Act. Accused Nos. 2 and 3 are its directors. They are in charge of and responsible to accused No. 1 for conduct of business of accused No. 1 company. They are jointly and severally liable for the acts of accused No. 1." (p. 202) 14. After referring to the earlier judgments in S.M S. Pharmaceuticals Ltd. v. Neeta Bhalla [2005] 127 Comp. Cas. 563 , Saroj Kumar Poddar v. State (NCT of Delhi) [2007] 137 Comp. Cas. 837 1 Monaben Ketanbhai Shah v. State of Gujarat [2005] 126 Comp. Cas. 342 2, Rajesh Bajaj v. State NCT of Delhi, AIR 1999 SC 1216, Bilakchand Gyanchand Co. v. A. Chinnaswami [1999] 98 Comp. Cas. 573 and Rajneesh Aggarwal v. Amit J. Bhalla [2001] 104 Comp. Cas. 3321 the Supreme C....
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....ors of accused No. 1 company. The accused Nos. 2 to 9 are the persons in charge and responsible for the day-to-day affairs of the company and all of them were actively connived with each other for the commission of the offences." (p. 309) 16. In view of the decision in Sushila Devi's case (supra), which is on identical facts concerning a complaint by the SEBI against a plantation company, and which follows the judgment of the Supreme Court in N. Rangachari's case (supra), the inevitable conclusion is that the complaints in question do make out a prima facie case against the petitioners for the offences complained of under the SEBI Act. 17. It is possible that in individual cases, a person might be able to, in his or her defence, show that such person had ceased to be the director at the time of the commission of the offence or that he or she was not associated with the company at all. But, that would essentially be a matter for evidence. 18. It may be noticed at this stage that there have been instances where the petitioners have, along with their petitions under section 482 of the Code of Criminal Procedure, filed in this court certified copies of Form No. 32 filed by them in t....