TaxTMI 
TaxTMI 
2009 (1) TMI 489
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....blic Notice dated 18-12-1997. As per the regulations, any person, who had been operating CIS at the time of commencement of the said regulations was deemed to be an existing CIS and after coming into force of these regulations, the said person was required to move an application before SEBI for grant of registration within a period of two months from the date of notification of the said regulations. 2. On 15-12-1999 and 29-12-1999, vide letters and public notice dated 10-12-1999, the company was given intimation to send its information, memorandum of all the investors detailing the state of affairs of the investment schemes and the amount repayable to each investor and also the manner in which the repayment of the amount was to be determined. The company, however, failed to make an application with SEBI and, therefore, as per regulation 73(1), the company was to wound up, and was required to repay the amount collected from the investors and as per regulation 74, company was required to formulate a scheme of repayment to the existing investors. The company neither applied for registration under the regulations nor took steps for winding up of the schemes and repayment to the inve....
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...., put on record perusal of which would show that the petitioner was not the director of the company and, hence, the summoning order dated 15-12-2003 as against the petitioner is contrary to the material available on the record, bad and is liable to be quashed and set aside. 7. Petitioner has relied upon the following judgments : u SMS Pharmaceuticals Ltd. v. Neeta Bhalla [2007] 74 SCL 187 (SC) u K. Srikanth Singh v. North East Securities Ltd. [2007] 77 SCL 214 (SC) u J.N. Bhatia v. State [2007] 79 SCL 191 (Delhi) u Anoop Jhalani v. State [2007] 144 DLT 858 u P.S. Srinivasan v. VLS Finance Ltd. Crl. MC Nos. 735-37, 7423-25, 7430-32 and 7458-60 of 2006, (Unreported dated 28-3-2008). 8. Learned counsel for the respondent, Mr. Ashish Aggarwal, on the other hand, has submitted that petition is not maintainable, as petitioner has raised contentions on facts and not on law and the facts can only be considered by the trial court during the course of trial on production of evidence and not at this stage. It is also argued that accused had failed to comply with the statutory provisions and the petitioner being the person in-charge of and responsible for the affairs of th....
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.... of its business and are liable for the violations of the accused No. 1, as provided under section 27 of Securities and Exchange Board of India Act, 1992." 12. Perusal of the complaint shows accusations as to the violation of SEBI Regulations and commission of offence under SEBI Act are essentially against the company, Divyabhoomi Agro (I) Ltd. The complaint contains the details as to the manner in which the accused company had potentially violated the SEBI regulations and committed offences under SEBI Act. However, assertion of offences committed, putting the liability on the directors as contained in paragraphs 7 and 20 and reproduced above, only state that, as the company had committed offences, all directors would be liable and are liable for the functioning and for conducting the day-to-day business of the company. Mere allegations contained in a line or two against the directors in paragraphs 7 and 20 without specifying the violative act committed by any of the directors would not suffice to make the directors offenders so as to summon them for the offences under SEBI Act. 13. Complainant is required to be specific and explicit as to the nature of allegations should be ....
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....to make averments elaborating the role of such a director in respect of her working in the company from which the court could come to a prima facie conclusion that she was responsible for the conduct of the business of the company. 16. In SMS Pharmaceuticals Ltd.'s case (supra) a reference was made to three-Judges Bench, wherein one of the questions to be considered was whether a director of the company would be deemed to be in-charge of and responsible for the day-to-day affairs of the company and for the conduct of its business and, therefore, deemed to be guilty of the offence committed by the company unless he proves to the contrary. It was observed that the said question was made in view of the fact that at the stage of issuance of process, the Magistrate has before him, only the complaint and the accompanying documents and since Magistrate has power to reject the complaint at the threshold, it necessarily suggests that a complainant should make out a case for issue of process, i.e., prima facie the ingredients of the offence allegedly committed by the director are to be satisfied. It was further observed that simply because a person is director in the company, he would not....
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....ting in the day-to-day affairs of the company and, therefore, could not be said to be responsible for the conduct of its day-to-day business. 20. Learned counsel for the respondent has submitted that respondent could not have known the nature of work which was assigned to the petitioner as a director of the company and it is for the petitioner to prove in evidence during the trial of the case that she was neither director nor was responsible for day-to-day affairs of the company and for the conduct of its business. I do not find force in these submissions. The complainant could have collected information or derived knowledge, during its dealings with the company to know the role of the directors of the company in its day-to-day business and from the said personal knowledge which it could derive during its dealings with the company, complainant could have made necessary averments against the directors of the company who dealt with it. The complainant could, therefore, have specifically implicated each of the directors who dealt with it in due course of the business of the company, besides the chairman-cum-managing director who otherwise also becomes liable for the violations comm....
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....a), the complainant can specifically state as to which other director dealt with him in the course of the business and in what manner. There may be a director and/or other person who dealt with him on behalf of the company in negotiating the particular deal with the complainant and/or in issuing the cheque(s) in question or in signing the documents while dealing with the complainant, depending upon the nature of business dealings between the company and the complainant. He may also be a person who had promised the complainant that the cheque(s) would be honoured on presentation. That apart, the complainant cannot be totally in dark about the affairs of the company even though he is not in hold of the internal documents of the company. Every company incorporated under the Companies Act is supposed to file its annual returns with the Registrar of Companies. Balance sheet of the company and such annual returns are public documents. The complainant can always inspect those documents available with the Registrar of Companies, which may throw light by spelling out the role the directors of a particular company are playing. Thus, the complainant is not in a helpless situation and can gath....