TaxTMI 
TaxTMI 
2016 (7) TMI 642
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....ations: Provided that any person sponsoring or cause to be sponsored, carrying or causing to be carried on any venture capital funds or collective investment scheme operating in the securities market immediately before the commencement of the Securities Laws (Amendment) Act, 1995 for which no certificate of registration was required prior to such commencement, may continue to operate till such time regulations are made under clause (d) of sub-section (2) of section 30. Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this section, a collective investment scheme or mutual fund shall not include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a component of investment besides the component of insurance issued by an insurer." The question that arises for consideration in the present criminal appeals is, whether respondent nos. 1 and 2 - Gaurav Varshney and Vinod Kumar Varshney, had violated Section 12(1B), by incorporating M/s. Gaurav Agrigenetics Ltd., under the provisions of the Companies Act, 1956, on 3.7.1995, in the capacity of its first directors and promoters. This po....
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.... entities which issued instruments such as agro bonds, plantation bonds, etc. has to be put in place. The Government has decided that schemes through which such instruments are issued would be treated as collective investment schemes coming under the provisions of the SEBI Act. In terms of the press release, SEBI has initiated action for drafting regulations for such collective investment schemes. The provisions of section 12(1B) of the SEBI Act prohibit collective investment schemes including mutual funds from sponsoring any new scheme till the regulations are notified. While the regulations for mutual fund schemes have been notified by SEBI, regulations for collective investment schemes including plantations schemes require to be notified in view of the press release issued by the Central Government. These regulations are under preparation and will be issued in due course, first in draft form for the public discussion and later in the final form. Till these regulations are notified, as a result of the provisions of section 12(1B) of the SEBI Act, no person can sponsor or cause to be sponsored any new collective investment scheme and raise further funds. The provisions of sect....
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....that as a result of the provisions of section 12(1B) of the SEBI Act, no person can sponsor or cause to be sponsored any new collective investment scheme and raise further funds. Further, the provisions of section 12(1B) provides that till regulations are notified all collective investment schemes which are in existence can continue with their operations till the regulations are notified. It is hereby brought to the notice of the public that existing collective investment schemes which are desirous of taking benefit of the proviso to section 12(1B) of the SEBI Act and continue their operations are directed to send to SEBI, by 15th January 1998 information containing details such as: Terms and conditions of the schemes launched, Funds raised through all the schemes, Promises or assurances or assured returns made in the scheme, Copies of offer document of the scheme and Names, details and background of promoters/sponsors. Note: The above information regarding existing collective investment schemes in northern, southern and eastern region maybe filed with the respective regional office of SEBI. In further exercise of the powers under section 11 read with section 11(B) all collec....
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....t was pointed out, that the Collective Investment Regulations were admittedly brought into force from 15.10.1999. To exculpate their involvement in the proceedings initiated against them, the main assertion advanced on behalf of respondent nos. 1 and 2 was, that respondent no. 1 - Gaurav Varshney had submitted Form-32 with the Registrar of Companies, communicating the factum of his resignation from the directorship of M/s. Gaurav Agrigenetics Ltd., on 10.5.1996. Since the aforesaid Form-32 had been submitted with the Registrar of Companies on 30.7.1998, it was contended on behalf of respondent no. 1, that he had no objection if it was assumed (for determination of the present controversy), that respondent no. 1 had resigned from the directorship of the concerned company on 30.7.1998. Likewise, it was pointed out, that respondent no. 2 - Vinod Kumar Varshney, had submitted Form-32 with the Registrar of Companies, communicating the factum of his resignation from the directorship of the company, on 15.9.1998. It was however acknowledged, that Form-32 with respect to his resignation, was submitted with the Registrar of Companies, on 23.12.1998. It was contended on behalf of respondent ....
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....nsored or were carrying on a collective investment scheme "... immediately before the commencement of the Securities Law (Amendment) Act, 1995, for which no certificate of registration was required prior to such commencement...", to continue to operate, till regulations were framed under clause (d) of sub-Section (2) of Section 30. Therefore, relying on the proviso under Section 12(1B), it was submitted, that actions of sponsoring or carrying on an enterprise of collective investment, were permitted to only such persons, who had commenced such activities prior to the commencement of the Securities Law (Amendment) Act, 1995 (i.e., prior to 25.1.1995). 9. In order to substantiate the afore-noted contention, and also, in order to demonstrate, that the action of 'the Board' in not framing the Collective Investment Regulations, would have no bearing, to the bar created under Section 12(1B), learned counsel placed reliance on Orissa State (Prevention & Control of Pollution) Board vs. Orient Paper Mills, (2003) 10 SCC 421, and invited our attention to the following observations recorded therein:- 5. We may at this stage peruse the relevant provisions of the law. Section 21 of the Act p....
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....s "in such manner as may be prescribed" which part we put into bracket as follows: "19. Power to declare air pollution control areas.-(1) The State Government may, after consultation with the State Board, by notification in the Official Gazette, declare (in such manner as may be prescribed), any area or areas within the State as air pollution control area or areas for the purposes of this Act. (2)-(4)***" 12. Section 19 says "... such manner as may be prescribed" and not "in the manner prescribed" or "... in the prescribed manner". The expression used leaves some lever or play in the working of the provision. We would like to lay emphasis on the use of the word "as" which is significant. The manner is dependent upon "as" may be prescribed, if it is not prescribed, there is no manner available such as to be followed. The meaning of the word "as" has been indicated in Concise Oxford English Dictionary, 10th Edn., 2002 amongst others to mean as follows: *** *** *** In one of the cases decided by this Court, to be referred later in this judgment "as may be prescribed" has been held to mean "if any". It is thus clear that such expression leaves the scope for some play fo....
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....thing like a legislative list and enumerates the subjects on which the District Council is competent to make laws. ... But it does not follow from this that the appointment or removal of a Chief is a legislative act or that no appointment or removal can be made without there being first a law to that effect." This Court found that para 2(4) relating to administration of an autonomous district, vested in the District Council such powers and further observed as under: (AIR p. 281, para 10) "The Constitution could not have intended that all administration in the autonomous districts should come to a stop till the Governor made regulations under para 19(1)(b) or till District Council passed laws under para 3(1)(g). ... Doubtless when regulations are made ... the administrative authorities would be bound to follow the regulations so made or the laws so passed." 15. It is thus clear from the decision referred to in the preceding paragraph that the power which vests in an authority would not cease to exist simply for the reason that the rules have not been framed or the manner of exercise of the power has not been prescribed. So far as Section 54 of the Act is concerned, it on....
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....conferred on authority could be exercised in accordance with these rules. But if no rules are framed there is no void and the authority is not precluded from exercising the power conferred by the statute." A reference was also made to the decisions of this Court in the cases reported in B.N. Nagarajan v. State of Mysore, AIR 1966 SC 1942, and Mysore SRTC v. Gopinath Gundachar Char, AIR 1968 SC 464. Reliance was also placed on U.P.SEB v. City Board, Mussoorie, (1985) 2 SCC 16. 21. In view of the discussion held above, in our view it would not be correct to say that simply because the rules have not been framed prescribing the manner it would render the Act inoperative. The area was notified as air pollution control area by the State Government as authorized and provided by virtue of the powers conferred under Section 19 of the Act. The declaration is provided to be made by means of a notification published in the Official Gazette. No other manner is prescribed nor exists. The relevant notifications issued by the Government cannot be said to be contrary to any rules in existence as framed by the Government. The respondent had knowledge of the notification and had also applied for....
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.... the principles for fixing the tariff, the impugned notifications were void as they had been issued without any guidelines and were, therefore, arbitrary. It is admitted that no such regulations had been made by the Electricity Board by the time the impugned notifications were issued. The Division Bench has negatived the above plea and according to us, rightly. It is true that Section 79(h) of the Act authorises the Electricity Board to make regulations laying down the principles governing the fixing of Grid Tariffs. But Section 46(1) of the Act does not say that no Grid Tariff can be fixed until such regulations are made. It only provides that the Grid Tariff shall be in accordance with any regulations made in this behalf. That means that if there were any regulations, the Grid Tariff should be fixed in accordance with such regulations and nothing more. We are of the view that the framing of regulations under Section 79 (h) of the Act cannot be a condition precedent for fixing the Grid Tariff...." 10. It was also the contention of learned counsel for 'the Board', that the bar created by Section 12(1B), forbidding everyone not already engaged in the activity of collective investme....
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....ingh has quoted a passage of Lord Campbell in Liverpool Borough Bank v. Turner, [(1860) 30 LJ Ch 379], that reads: "No universal rule can be laid down as to whether mandatory enactments shall be considered directory only or obligatory whether implied nullification for disobedience. It is the duty of courts of justice to try to get at the real intention of the legislature by carefully attending to the whole scope of the statute to be considered." *** *** *** 14. In Mannalal Khetan v. Kedar Nath Khetan, (1977) 2 SCC 424, while dealing with Section 108 of the Companies Act, 1956 a three-Judge Bench of this Court held: (SCC pp. 429-31, paras 17-23) "17. In Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur, AIR 1965 SC 895, this Court referred to various tests for finding out when a provision is mandatory or directory. The purpose for which the provision has been made, its nature, the intention of the legislature in making the provision, the general inconvenience or injustice which may result to the person from reading the provision one way or the other, the relation of the particular provision to other provisions dealing with the same subject and the language of....
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....he statute prohibits, but what contracts it prohibits. One is not concerned at all with the intent of the parties, if the parties enter into a prohibited contract, that contract is unenforceable. (See St. John Shipping Corpn. v. Joseph Rank Ltd. (1957) 1 QB 267) (See also Halsbury's Laws of England, 3rd Edn., Vol. 8, p. 141.) 20. It is well established that a contract which involves in its fulfilment the doing of an act prohibited by statute is void. The legal maxim a pactis privatorum publico juri non derogatur means that private agreements cannot alter the general law. Where a contract, express or implied, is expressly or by implication forbidden by statute, no court can lend its assistance to give it effect. (See Melliss v. Shirley Local Board, (1885) 16 QBD 446). What is done in contravention of the provisions of an Act of the legislature cannot be made the subject of an action. 21. If anything is against law though it is not prohibited in the statute but only a penalty is annexed the agreement is void. In every case where a statute inflicts a penalty for doing an act, though the act be not prohibited, yet the thing is unlawful, because it is not intended that a statute....
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....ve investment, without obtaining a certificate of registration, was strict and mandatory. 11. Based on the assertions noticed above, as also, the legal position declared by this Court, it was sought to be canvassed, that by incorporating M/s. Gaurav Agrigenetics Ltd. on 3.7.1995, and immediately on its incorporation, by sponsoring or carrying on a collective investment enterprise, without obtaining a certificate of registration from 'the Board', in accordance with the Collective Investment Regulations, the respondents had clearly breached the bar created by Section 12(1B) of the SEBI Act. On account of the fact, that respondent nos. 1 and 2 had even on their own showing, continued to be the promoter-directors of M/s. Gaurav Agrigenetics Ltd. upto 30.7.1998 (with reference to the respondent no. 1 - Gaurav Varshney), and 23.12.1998 (with reference to the respondent no. 2 - Vinod Kumar Varshney) respectively, they were obviously in breach of the bar, contemplated under Section 12(1B) of the SEBI Act. 12. Mr. Jatin Zaveri, learned counsel representing respondent nos. 1 and 2, seriously disputed the above interpretation placed by learned counsel for the appellant, on Section 12(1B) of....
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....15.10.1999). And therefore, neither of the respondents could be accused of violating Section 12(1B) of the SEBI Act, or of not complying with the provisions of the Collective Investment Regulations. 13. In order to controvert the submissions advanced at the hands of learned counsel for the appellant, based on the judgments rendered by this Court, emphatic reliance was placed on the decision in Vasu Dev Singh vs. Union of India, (2006) 12 SCC 753, wherefrom, the following observations, were sought to be highlighted:- "Conditional legislation and delegated legislation 16. We, at the outset, would like to express our disagreement with the contentions raised before us by the learned counsel appearing on behalf of the respondents that the impugned notification is in effect and substance a conditional legislation and not a delegated legislation. The distinction between conditional legislation and delegated legislation is clear and unambiguous. In a conditional legislation the delegatee has to apply the law to an area or to determine the time and manner of carrying it into effect or at such time, as it decides or to understand the rule of legislation, it would be a conditional legisl....
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....s to extend;" (See also M.P. High Court Bar Assn. v. Union of India, (2004) 11 SCC 766; State of T.N. v. K. Sabanayagam, (1998) 1 SCC 318, and Orient Paper and Industries Ltd. v. State of Orissa, 1991 Supp (1) SCC 81.)" 14. We have heard learned counsel for the rival parties. We are of the considered view, that it would be appropriate in the first instance, to interpret sub-Section (1B) of Section 12 of the SEBI Act. And only thereafter, proceed to deal with the other issues canvassed by learned counsel. 15. In our considered view, an effective interpretation of Section 12(1B) can be rendered, only upon understanding the intent behind Section 12(1B), and the exception created through the proviso thereunder. On being so considered it is apparent, that on the insertion of Section 12(1B) in the SEBI Act on 25.1.1995, two classes of persons were created. The first class comprised of such person(s) who had commenced the activity of sponsoring or carrying on a collective investment scheme prior to 25.1.1995 (this category will be referred to hereinafter as, the proviso category). This category would be governed by the proviso under Section 12(1B). The second category created by....
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....eady carrying on such activities), were permitted to "continue" their activities (concerning collective investment), and after the concerned regulations were framed, they could continue the said activities only after obtaining a certificate of registration. 19. The Collective Investment Regulations came into force on 15.10.1999. A person falling in the proviso category, namely, an individual who had commenced the activity of sponsoring or carrying on a collective investment initiative prior to 25.1.1995, was liable to move an application for registration under Regulation 5 of the Collective Investment Regulations. Regulation 5, is extracted hereunder:- "Application by existing Collective Investment Schemes 5. (1) Any person who immediately prior to the commencement of these regulations was operating a scheme, shall subject to the provisions of Chapter IX of these regulations make an application to the Board for the grant of a certificate within a period of two months from such date. (2) An application under sub-regulation (1) shall contain such particulars as are specified in Form A and shall be treated as an application made in pursuance of regulation 4 and dealt with....
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....eproduced below:- "Application for grant of certificate 4. Any person proposing to carry any activity as a Collective Investment Management Company on or after the commencement of these regulations shall make an application to the Board for the grant of registration in Form A." A perusal of Regulation 4 extracted above, leaves no room for any doubt, that the same is applicable to a person "... proposing to carry any activity..." in the nature of a collective investment. On the analogy of the interpretation placed by us on Section 12(1B), all persons who had not commenced to sponsor or carry on a collective investment scheme before 25.1.1995, would fall in this category. In the above view of the matter, we are satisfied, that persons who were desirous to sponsor or carry on the activity in the nature of collective investment after 25.1.1995, were clearly and unambiguously barred from doing so, unless they were possessed of a certificate of registration, issued by 'the Board' under the Collective Investment Regulations. 21. In view of the above, we have no hesitation in holding, that an "existing" collective investment scheme within the meaning of Section 12(1B), as also,....
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....ew entrepreneur obtained a certificate of registration. We hold so accordingly. 23. In view of the above, we have no hesitation in accepting the contention advanced by learned counsel for 'the Board', that the bar created under Section 12(1B), forbidding persons who had not engaged themselves, in an activity of collective investment before 25.1.1995, continued till the concerned persons/entities successfully obtained the required certificate of registration, under the Collective Investment Regulations. Our conclusion hereinabove emerges from, inter alia, the following salient features. Firstly because, the Statement of Objects and Reasons of the Securities Laws (Amendment) Act, 1995, which resulted in the insertion of sub-Section (1B) in Section 12 of the SEBI Act, reveals that the same was brought in, on account of past experience of 'the Board', and the dire need to protect the interests of investors. Secondly because, the language of sub-Section (1B) of Section 12 of the SEBI Act is clear and unambiguous - it allowed existing collective investment scheme(s) entrepreneurs, to continue with the same by creating an exception in their favour, through the proviso under Section 12(1B....
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....bar expressed with reference to new entrepreneurs, under Section 12(1B) of the SEBI Act. It was submitted, that the only accusation levelled at the respondents was, for a breach of the Collective Investment Regulations, framed under Section 12(1B). In order to substantiate his aforesaid contention, learned counsel for the respondents invited our attention to the complaint dated 15.12.2003. In order to appreciate the contention of learned counsel, an extract of the aforesaid complaint, including all the paragraphs relied upon by him, is reproduced below:- "7. The accused no. 1 is a company registered under the provisions of the Companies Act and the accused nos. 2 to 11 are the directors of the accused no. 1 company. The accused nos. 2 to 11 are the persons incharge 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 offences. 8. The accused no. 1 is operating collective investment schemes and raised an aggregate amount of Rs. 14,63,279/- (Rupees fourteen lakhs sixty three thousand two hundred seventy nine only) from the general public. 9. The accused no. 1 company filed information/details with....
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....stration under the said regulations nor took any steps for winding up of the schemes and repayment to the investors as provided under the regulations and as such had violated the provisions of Section 12(1B) of Securities and Exchange Board of India Act, 1992 and Regulation 5(1) read with Regulation 68(1), 68(2), 73 and 74 of the said regulations. 16. On December 7, 2000 SEBI by exercising its powers conferred upon it under Section 11B of Securities and Exchange Board of India Act, 1992 directed the accused no. 1 to refund the money collected under the aforesaid collective investment schemes of the accused no. 1 to the persons who invested therein within a period of one month from the date of the said directions. 17. However, despite repeated directions by SEBI, the accused no. 1 did not comply with the said regulations and from this, it is clear that the accused no. 1 is intentionally and with dishonest intentions evading the repayment of the amounts collected by it from the investors. 18. The accused no. 1 raised a total amount of Rs. 14,63,279/- (Rupees fourteen lakhs sixty three thousand two hundred seventy nine only) by its own admission and its failure to refund the amo....
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....d commenced the activity of a collective investment, they were accused of not having made an application to 'the Board' for the grant of registration in terms of Chapter IX (of the Collective Investment Regulations). 27. It would be relevant to mention that Chapter IX bears the heading "Existing Collective Investment Schemes", whereunder Regulations 68 to 72 delineate procedural details, for obtaining a certification of registration. The connotation of the term "existing" with reference to collective investment schemes, in Chapter IX, would be the same, as has been interpreted by us, in paragraph 19 above. It was, therefore, submitted on behalf of the respondents, that they were not accused of having unauthorisedly commenced a collective investment scheme. It was contended, that the violation of Section 12(1B) of the SEBI Act, alleged against the respondents, had to be understood in the manner expressed in the complaint. The complaint described the respondents, as operating an "existing" collective investment venture. It was pointed out, that the respondents were proceeded against, only for their failure to obtain a certificate of registration under Regulation 5 of the Collective ....
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.... negligent" acts which are not the part of the charge. Culpability is specifically related to the "act" committed on 22.12.1987 at about 9 a.m. in the hospital viz. the act of performing surgical procedure. It is, thus, this act alone, and nothing more, for which the appellant and Dr. Mukherjee were charged and the appellant is supposed to meet this charge alone." The fact that the respondents had actually commenced a collective investment undertaking after 25.1.1995, without obtaining a certificate of registration, in our considered view, is of no relevance whatsoever, with reference to the complaint filed by 'the Board' against the respondents (dated 15.12.2003). 29. A significant question which arises for consideration is, whether the respondents against whom the above complaint dated 15.12.2003 was filed, could be punished for violating Section 12(1B) of the SEBI Act. We may clarify, that proceedings are permissible, against both categories. Against the non-proviso category, for having commenced the barred activity after 25.1.1995, without registration. And also against the proviso category, for having continued the concerned activity without obtaining registration, after the....
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...., that a collective perusal of paragraphs 8 and 15 of the complaint dated 15.12.2003, would leave no room for any doubt, that the directors of the company concerned were pointedly accused of having violated Section 12(1B) of the SEBI Act. The said paragraphs 8 and 15 are reproduced herein below:- "8. The accused no. 1 is operating collective investment schemes and raised an aggregate amount of Rs. 14,63,279 (Rupees fourteen lakhs sixty three thousand two hundred seventy nine only) from the general public. *** *** *** 15. However, the accused no. 1 neither applied for registration under the said regulations nor took any steps for winding up of the schemes and repayment to the investors as provided under the regulations and as such had violated the provisions of Section 12(1B) of Securities and Exchange Board of India Act, 1992 and Regulation 5(1) r/w Regulations 68(1), 68(2), 73 and 74 of the said regulations." 32. Having given our thoughtful consideration to the factual assertions contained in the complaint, it is not possible for us to agree with the learned senior counsel representing 'the Board', for the simple reason, that a perusal of the above factual assertions, revea....
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....roviso category, it was imperative to inform them of all the relevant particulars, namely, that they had unauthorisedly commenced a collective investment scheme, during the period when there was a complete bar, against commencing to sponsor or carry on a collective investment scheme. In the absence of the above particulars of the offence, they could not have been tried or punished for the same. No amount of evidence can be looked into, for an accusation not levelled or made out, in a complaint. This is one of the basic tenets of the criminal jurisprudence. 35. We will now proceed to deal with the second submission, advanced at the hands of the learned senior counsel, for 'the Board'. In support of his second submission, the learned senior counsel relied on Section 251 of the Cr.P.C. The said provision is reproduced hereunder:- "251. Substance of accusation to be stated.- When in a summons-case the accused appears or is brought before the Magistrate, the particulars of the offence of which he is accused shall be stated to him, and he shall be asked whether he pleads guilty or has any defence to make, but it shall not be necessary to frame a formal charge." A perusal of Section 2....
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....ourt. M/s. Gaurav Agrigenetics was undisputedly incorporated after 25.1.1995. It was further urged, that neither of the accused directors disputed the fact that the company of which they were promoter-directors, was actually carrying on a collective investment scheme. Such being the undisputed factual position, it was asserted, that a breach of Section 12(1B), as applicable to the non-proviso category, was clearly established. And further, that such breach was affirmed by the trial Court. It was, therefore, the contention of the learned senior counsel representing 'the Board', that it was no longer open to the accused to canvass, that the particulars of the offence under Section 12 (1B) were not clearly disclosed, in the complaint filed by 'the Board'. 37. We have given our thoughtful consideration to the contentions advanced at the hands of the learned senior counsel, in support of his third submission. We are, however, inclined to accept the submissions advanced at the hands of the accused. Neither the complaint nor the charge-sheet filed against the accused before the trial Court demonstrates, that the company in question commenced its collective investment activities on its ow....
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....lusion of a criminal case, resulting in recording an order of conviction, and also, the imposition of sentence, neither the findings nor the sentence were open to be revised or altered, merely "... on account of any error, omission or irregularity in the complaint, summons, warrant, proclamation, order, judgment or other proceedings before or during trial or in any inquiry or other proceedings under this Code...". It was accordingly urged, that the mention of Section 12(1B) of the SEBI Act in the complaint, should be taken as sufficient to understand the particulars, on the basis whereof, the accused were being proceeded against. It was accordingly submitted, that there was no justification whatsoever, in view of the clear mandate contained in Section 465 of the Cr.P.C., to interfere in the findings recorded by the trial Court, and/or to interfere with the sentence imposed. In addition to the aforesaid contention it was pointedly urged, that sub-Section (2) of Section 465 of the Cr.P.C. provided the benchmark, for interfering with such findings and sentence. It was submitted, that interference would only be permissible, in situations where the omission or irregularity would result ....
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....ior court which orders a de novo trial cannot afford to overlook the realities and the serious impact on the pending cases in trial courts which are crammed with dockets, and how much that order would inflict hardship on many innocent persons who once took all the trouble to reach the court and deposed their versions in the very same case. To them and the public the re-enactment of the whole labour might give the impression that law is more pedantic than pragmatic. Law is not an instrument to be used for inflicting sufferings on the people but for the process of justice dispensation. *** *** *** 12. Section 465 of the Code falls within Chapter XXXV under the caption "Irregular Proceedings". The Chapter consists of seven sections starting with Section 460 containing a catalogue of irregularities which the legislature thought were not enough to axe down concluded proceedings in trials or enquiries. Section 461 of the Code contains another catalogue of irregularities which in the legislative perception would render the entire proceedings null and void. It is pertinent to point out that the former catalogue contains the instance of a Magistrate, who is not empowered to take cogniza....
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....ty has occasioned "a failure of justice" the superior court shall not quash the proceedings merely on the ground of such error, omission or irregularity. 16. What is meant by "a failure of justice" occasioned on account of such error, omission or irregularity? This Court has observed in Shamnsaheb M. Multtani v. State of Karnataka, (2001) 2 SCC 577, thus: (SCC p. 585, para 23): "23. We often hear about 'failure of justice' and quite often the submission in a criminal court is accentuated with the said expression. Perhaps it is too pliable or facile an expression which could be fitted in any situation of a case. The expression 'failure of justice' would appear, sometimes, as an etymological chameleon (the simile is borrowed from Lord Diplock in Town Investments Ltd. v. Deptt. of the Environment), (1977) 1 All ER 813. The criminal court, particularly the superior court should make a close examination to ascertain whether there was really a failure of justice or whether it is only a camouflage." *** *** *** 23. We conclude that the trial held by the Sessions Court reaching the judgment impugned before the High Court in appeal was conducted by a court of competent jurisdiction ....
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....s of the offence for which they were being proceeded against, would occasion "failure of justice". Thus viewed, it is not possible for us to accept the contention advanced at the hands of the learned senior counsel, that the pending proceedings before the trial Court, should not be interfered with. 43. The sole allegation levelled against the respondents was, that they were guilty of having breached the provisions of the Collective Investment Regulations, by failing to make any application to 'the Board' for registration of the collective investment scheme(s) being operated by them, and by failing to wind up their existing collective investment scheme(s), and/or in repaying the amounts collected from the investors. That alone constituted the factual foundation of the complaint made against the respondents. Insofar as the instant charge against the respondents is concerned, it was the contention of learned counsel for the respondents, that the Collective Investment Regulations were notified on 15.10.1999. The said regulations, therefore, could not have been breached by the respondents, prior to 15.10.1999. It was submitted, that the respondent no. 1 - Gaurav Varshney, can indisputa....
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....with reference to criminal appeal nos. 827-830 of 2012, upheld the order dated 13.5.2010 passed by the High Court in Criminal Miscellaneous Case nos. 7468-7471 of 2006 and Criminal Miscellaneous no. 951 of 2007, quashing the proceedings initiated against two of the directors of the above company, namely, Gaurav Varshney and Vinod Kumar Varshney. The High Court in the above judgment (pertaining to Gaurav Varshney and Vinod Kumar Varshney) had quashed the proceedings initiated against the co-directors of the respondent herein, arising out of a complaint dated 15.12.2003 filed by 'the Board' before the Chief Metropolitan Magistrate, Tis Hazari Courts, Delhi, in exercise of its jurisdiction under Section 482 of the Cr.P.C.. The said proceedings against the co-directors were initiated on the basis of a complaint made by 'the Board' in the Court of the Chief Metropolitan Magistrate, Tis Hazari Courts, Delhi against M/s. Gaurav Agrigenetics Ltd., and ten of its directors. In the above complaint, Gaurav Varshney was arrayed as accused no. 5 and Vinod Kumar Varshney was impleaded as accused no. 8. 47. Insofar as the instant criminal appeal is concerned, the same has been filed against the ....
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....list of dates describes the appellant - Major P.C. Thakur, as a promoter-director of the said company, learned counsel for the appellant was at pains to point out, that the appellant was inducted as director only in 1998. It was submitted, that the appellant's involvement in the functioning of M/s. Accord Plantation Ltd., was limited to tendering advice with reference to its agricultural activities, and that, the appellant - Major P.C. Thakur, was neither in charge of nor responsible to the company, for the conduct of its business activities. 52. In addition to the submissions noticed with reference to the earlier appeals (Criminal Appeal nos. 827-830 of 2012), it was the vehement contention of learned counsel for the appellant, that it was not open for 'the Board' to proceed against the appellant under Section 27 of the SEBI Act, which is extracted hereunder:- "27. Offences by Companies. - (1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence....
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.... extends criminal liability for dishonour of a cheque to officers of the company. Section 141 contains conditions which have to be satisfied before the liability can be extended to officers of a company. Since the provision creates criminal liability, the conditions have to be strictly complied with. The conditions are intended to ensure that a person who is sought to be made vicariously liable for an offence of which the principal accused is the company, had a role to play in relation to the incriminating act and further that such a person should know what is attributed to him to make him liable. In other words, persons who had nothing to do with the matter need not be roped in. A company being a juristic person, all its deeds and functions are the result of acts of others. Therefore, officers of a company who are responsible for acts done in the name of the company are sought to be made personally liable for acts which result in criminal action being taken against the company. It makes every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of business of the company, as well as the company, liable for the offe....
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....ware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action. *** *** *** 12. The conclusion is inevitable that the liability arises on account of conduct, act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable. *** *** *** 15. Cases have arisen under other Acts where similar provisions are contained creating vicarious liability for officers of a company in cases where primary liability is that of a company. State of Karnataka v. Pratap Chand, (1981) 2 SCC 335, was a case under the Drugs and Cosmetics Act, 1940. Section 34 contains a similar provision making every person in charge of and responsible to the company for the conduct of its business liable for offence committed by a company. It was held that a person liable for criminal action under that provision shoul....
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....s from the fact that if a Director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable for a criminal offence under the provisions. The liability arises from being in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. 13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. *** *** *** 22. Therefore, this Co....
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....for offence committed by the company along with averments in the petition containing that accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint. (vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases." *** *** *** 28. We are concerned in this case with Directors who are not signatories to the cheques. So far as Directors who are not signatories to the cheques or who are not Managing Directors or Joint ....
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....erment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm-twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed. 34.4. No restriction can be placed on the High Court's powers under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent inter alia the abuse of the process of the court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon....
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....ding, that the appellant - Major P.C. Thakur was in charge, and was responsible to the company, for the conduct of its business. It is not possible for us to accept, that the appellant - Major P.C. Thakur's activities concerning M/s. Accord Plantation Ltd., were confined to tendering advice with reference to its agricultural activities alone. In the above view of the matter, we find no difficulty whatsoever in affirming, that the appellant was liable to shoulder the responsibilities of the company relatable to its business activities, and therefore, was justifiably proceeded against, under Section 27 of the SEBI Act. 54. Insofar as the present appeal is concerned, a show cause notice dated 12.5.2000 was issued by the SEBI to M/s. Accord Plantation Ltd. A few of the relevant paragraphs of the show cause notice dated 12.5.2000 are extracted hereunder:- "As you are aware, SEBI (Collective Investment Scheme) Regulations, 1999 (hereinafter referred to as Regulations) came into force on October 15, 1999. As per regulation 5(1), any person who immediately prior to the commencement of these Regulations was operating a Collective Investment Scheme, shall subject to the provisions of Ch....
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....mplaint filed by 'the Board' under Section 200 of the Cr.P.C. read with Sections 24(1) and 27 of the SEBI Act, the accusations levelled against M/s. Accord Plantation Ltd., as also, the appellant herein, were similar. Relevant paragraphs of the complaint dated 21.1.2003 are being extracted hereunder:- "7. The accused no. 1 company filed information/details with SEBI regarding the collective investment schemes pursuant to SEBI press release dated November 26, 1997 and/or public notice dated December 18, 1997. 8. In terms of Chapter IX of the said regulations, any person who had been operating a collective investment scheme at the time of commencement of the said regulations shall be deemed to be an existing collective investment scheme and shall comply with the provisions of the said Chapter IX. Further, in terms of the said Chapter IX any person who immediately prior to the commencement of the said regulations was operating a collective investment scheme shall make an application to SEBI for grant of registration within a period of two months from the date of notification of the said regulations. 9. SEBI having regard to the interest of investors and request received from var....
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....n the above show-cause notice and complaint (dated 12.5.2000 and 21.1.2003, respectively), it was the contention of learned counsel for the appellant, that 'the Board' treated M/s. Accord Plantation Ltd. as an "existing" collective investment enterprise, namely, a collective investment scheme falling within the meaning of the proviso under Section 12(1B) of the SEBI Act. Referring to the show-cause notice it was pointed out, that 'the Board' had accused the appellant for not having made an application under Regulation 5 of the Collective Investment Regulations, upto 31.3.2000. It was pointed out that Regulation 5, pertains to "existing" collective investment schemes. It was contended, that even though under the Collective Investment Regulations originally drawn, such an application had to be preferred by 15.12.1999 (i.e. within the period of two months from the date of commencement of the Collective Investment Regulations), the said date was subsequently extended to 31.3.2000. It was submitted, that the imputations contained in the show-cause notice were clearly misconceived, as the appellant had ceased to have any concern with the company, with effect from 20.2.2000. The instant f....
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....ithin sixty days from the day on which each of the annual general meetings referred to in section 166 is held, prepare and file with the Registrar a return containing the particulars specified in Part I of Schedule V, as they stood on that day, regarding - (a) its registered office, (b) the register of its members, (c) the register of its debenture-holders, (d) its shares and debentures, (e) its indebtedness, (f) its members and debenture-holders, past and present, and (g) its directors, managing directors, managers and secretaries, past and present: Provided that any of the five immediately preceding returns has given as at the date of the annual general meeting with reference to which it was submitted, the full particulars required as to past and present members and the shares held and transferred by them, the return in question may contain only such of the particulars as relate to persons ceasing to be or becoming members since that date and to shares transferred since that date or to changes as compared with that date in the number of shares held by a member. Explanation.- Any reference in this section or in section 160 or 161 or in any other section or ....
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....lish, that he had resigned from the concerned company, with effect from 20.2.2000. 60. In order to repudiate the above contention, learned counsel representing the appellant - Major P.C. Thakur, placed reliance on the decision of this Court in Harshendra Kumar D. vs. Rebatilata Koley, (2011) 3 SCC 351, and highlighted the issue under consideration, by emphasizing on the following observations recorded therein:- "16. Every company is required to keep at its registered office a register of its Directors, Managing Director, manager and secretary containing the particulars with respect to each of them as set out in clauses (a) to (e) of sub-section (1) of Section 303 of the Companies Act, 1956. Sub-section (2) of Section 303 mandates every company to send to the Registrar a return in duplicate containing the particulars specified in the register. Any change among its Directors, Managing Directors, managers or secretaries specifying the date of change is also required to be furnished to the Registrar of Companies in the prescribed form within 30 days of such change. There is, thus, statutory requirement of informing the Registrar of Companies about change among Directors of the compa....
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....s to be provided pertaining to the past and present directors/manager/secretary. In the information so provided by the concerned company at S.No. IV, the names of Ajay Vohra, Tejinder Singh, PC Thakur, Rajan Rana and Rajkumar Sharma were admittedly depicted. The dates of their appointment as directors were also mentioned. Exhibit DW6/5 is silent, as to whether the names reflected in the annual return were of the past directors, or of the present directors. Since information of the past directors was also to be reflected at S.No. IV, in our considered view, no clear inference can be drawn from Exhibit DW6/5, that Major P.C. Thakur, was a "present" director at the time of filing of the above return. We are therefore of the view, that in the present case, there is no material to contradict the factual position depicted in Form-32, namely, that the appellant - Major P.C. Thakur had resigned from the company on 20.2.2000. 62. In addition to above, it is also relevant to mention, that a copy of Form-32, relating to the resignation of Major P.C. Thakur from M/s. Accord Plantation Ltd. on 20.2.2000, was placed on the record of the case (as Annexure P-3). The same was produced by DW7 - Aja....
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....llant was only accused of having breached Regulation 5 of the Collective Investment Regulations, read with Chapter IX of the said regulations, and more particularly Regulations 68, 73 and 74 (see extracts of show cause notice dated 12.5.2000, and paragraph 13 of the complaint dated 21.1.2003). We are satisfied that the last date for moving an appropriate application under Regulation 5, having been extended from 15.12.1999 to 31.3.2000, the aforesaid regulations could be deemed to have been breached by M/s. Accord Plantation Ltd., as also, by the appellant herein, in case such an application had not been filed under Regulation 5 on or before 31.3.2000. The instant conclusion drawn by us is sufficient to exculpate the appellant, who had severed his relationship, with M/s. Accord Plantation Ltd. with effect from 20.2.2000, and to accept his plea that proceedings initiated against him, were not permissible in law. 65. We will be failing in effectively discharging our responsibility, if we do not examine another legal contention advanced on behalf of the appellant. It was also pointed out, that the question of initiation of proceedings against M/s. Accord Plantation Ltd. or the appella....
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....to each investor and the manner in which such amount is determined...". Regulations 73 and 74 are reproduced hereunder:- "Manner of repayment and winding up 73. (1) An existing collective investment scheme which: (a) has failed to make an application for registration to the Board; or (b) has not been granted provisional registration by the Board; or (c) having obtained provisional registration fails to comply with the provisions of regulation 71; shall wind up the existing scheme. (2) The existing Collective Investment Scheme to be wound up under sub-regulation (1) shall send an information memorandum to the investors who have subscribed to the schemes, within two months from the date of receipt of intimation from the Board, detailing the state of affairs of the scheme, the amount repayable to each investor and the manner in which such amount is determined. (3) The information memorandum referred to in sub-regulation (2) shall be dated and signed by all the directors of the scheme. (4) The Board may specify such other disclosures to be made in the information memorandum, as it deems fit. (5) The information memorandum shall be....
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....tion against M/s. Accord Plantation Ltd. or its directors, till the expiry of two months from the date of receipt of intimation from 'the Board'. 68. In view of the conclusions recorded hereinabove we are satisfied, that the proceedings initiated against the appellant were wholly misconceived, as it has not been established, that the appellant either violated Regulation 5 read with Regulations 68 to 72, or Regulations 73 and 74 of the Collective Investment Regulations. 69. The instant appeal is accordingly allowed. The conviction and sentence imposed on the appellant - Major P.C. Thakur are set aside, and the complaint stands dismissed. Criminal Appeal no. 251 of 2015 70. The instant appeal has been preferred by Sunita Bhagat, an accused in a complaint filed by 'the Board'. Obviously, therefore, 'the Board' is the respondent herein. 71. A complaint of the nature referred to in the earlier matters, was filed by the respondent-Board on 21.1.2003 under Section 200 of the Cr.P.C. read with Sections 24(1) and 27 of the SEBI Act, against M/s. Accord Plantation Ltd., and five of its directors. Sunita Bhagat, wife of Vinodh Bhagat was arrayed as accused no. 4. The charges levelled aga....
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....uilty and claimed trial. The trial was conducted by the Additional Sessions Judge (Central-01), Delhi. After recording the evidence furnished by the complainant, as also the evidence produced in defence, the trial Court vide its judgment dated 25.3.2010 arrived at the conclusion, that the guilt of the accused-company - M/s. Accord Plantation Ltd., as also, of accused numbers 2 to 5 (-who were its directors), had been duly established. 72. The trial Court held, that the accused had floated a collective investment scheme, and mobilized funds from the general public, without obtaining a certificate of registration, as required under Section 12(1B) of the SEBI Act. The trial Court also concluded, that despite the notification of the Collective Investment Regulations on 15.10.1999, the accused-company had failed to apply for the registration of its collective investment scheme. Further, M/s. Accord Plantation Ltd. was found to have neither wound up its collective investment scheme, nor repaid its investors as per Regulations 73 and 74 of the Collective Investment Regulations. The accused were accordingly held guilty of violating Regulations 5(1) read with Regulations 68(1), 68(2), 73 a....
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....e investors and also enclosing returns, copies of offer documents and bio datas of Promoters was sent by her. She was also a Promoter of the Company and one of its first directors, as stated by DW6 Vikram besides being a Director in another company, Blue Peeks Floriculture Limited. A perusal of the balance sheet of the Company would show that she was also paid remuneration by the Company during the financial year 1997-1998. All these documents leave no reasonable doubt that she also was a person in-charge of and responsible to the Company for conduct of its business. No evidence has been led by her to prove that the contravention of sub-section (1B) of Section 12 of the Act was committed without her knowledge or that she had exercised all due diligence to prevent the commission of the aforesaid offence by the Company." 75. On the issue of resignation of the appellant - Sunita Bhagat from the company, our attention was invited to the statement of DW3 - Yashpal, JTA, Registrar of Companies, Jalandhar. The same is extracted hereunder:- "I have brought the summoned records relating to the company Accord Plantation Ltd. The certified copy of Form 32 placed in the judicial recor....
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....a of limitation, also. Since the contention was pressed, and also responded to, we consider it just and appropriate to deal with the same. It was the contention of learned counsel for the appellant, that the complaint preferred by 'the Board' on 21.1.2003 before the Additional Chief Metropolitan Magistrate, was incompetent in law, in view of the period of limitation stipulated under the provisions of the Cr.P.C. In order to support his claim under Section 468 of the Cr.P.C., learned counsel, in the first instance, placed reliance on Section 32 of the SEBI Act, which is reproduced below:- "32. Application of other laws not barred.-The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force." Relying on Section 32 it was contended, that the provisions under the SEBI Act were in addition to, and not in derogation of, the provisions of any other law for the time being in force, including the Cr.P.C. This position was not repudiated on behalf of 'the Board'. We are satisfied in recording, that the above contention, advanced on behalf of the appellant, is fully justified. 78. With reference to the provision....
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....e contention advanced on behalf of the appellant - Sunita Bhagat, that Section 468 of the Cr.P.C. could be relied upon, in criminal proceedings initiated under the provisions of the SEBI Act. Having so concluded we are of the view, that since the punishment contemplated under Section 24 of the SEBI Act at the relevant juncture, did not exceed one year, the period of limitation for taking cognizance under Section 468 of the Cr.P.C. would be one year. We are also inclined to accept the contention advanced at the hands of learned counsel for the appellant, that the period of limitation in the present case would commence to run with effect from the date the appellant - Sunita Bhagat tendered her resignation from the position of director of M/s. Accord Plantation Ltd., namely, with effect from 20.9.1999. Thus viewed, the bar of taking cognizance against the appellant - Sunita Bhagat, would operate with effect from 20.9.2000. Admittedly, the complaint in the present case was preferred by 'the Board' before the Additional Chief Metropolitan Magistrate, Tis Hazari Courts, Delhi, on 21.1.2003. The trial Court could not have taken cognizance of the same, in view of the clear bar contemplated....
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....stor, and the manner in which such amount was determined. 86. Dissatisfied with response received, 'the Board' filed a criminal complaint against M/s. Fair Deal Forests Ltd. and 9 of its directors, wherein the respondent - Raj Chawla was arrayed as accused no. 10. A relevant extract of the complaint is reproduced below:- "7. The accused no. 1 is a company registered under the provisions of Companies Act and the accused nos. 2 to 11 are the Directors of the accused no. 1 company. The accused nos. 2 to 11 are the persons incharge 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 offences. 8. The accused no. 1 is operating collective investment schemes and raised an aggregate amount of nearly Rs. 5,20,000/- from the general public. 9. The accused no. 1 company filed information/details with SEBI regarding its collective investment schemes pursuant to SEBI press release dated November 26, 1997, and/or public notice dated December 18, 1997. *** *** *** 12. SEBI having regard to the interest of investors and request received from various persons operating collective investment schemes, extende....