TaxTMI 
TaxTMI 
2016 (7) TMI 642
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....e of registration from the Board in accordance with the regulations: 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, 195....
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....as by a press release dated 18.11.1997 decided that an appropriate regulatory framework for regulating 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....
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.... due course, first in draft form for the public discussion and later in the final form. Till these regulations are notified, it is hereby brought to the notice of the public 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 schem....
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....ng a certificate of registration from 'the Board' under the Collective Investment Regulations, could arise only after the Collective Investment Regulations were brought into existence. In this behalf it 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 ....
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....It was submitted on behalf of the appellant, that the proviso under Section 12(1B), made the position absolutely clear and unambiguous. It was pointed out, that the proviso authorized all persons who had sponsored 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 v....
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....area, but to say that exercise of such power is solely dependent upon framing of the rules prescribing the manner in which an area may be declared as air pollution control area, does not seem to be correct. Section 19 of the Act would read as follows by omitting the words "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 En....
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...., there would be no power of appointment of a Chief or Seim nor for his removal either. This Court negated the view taken by the High Court observing that: (AIR p. 281, para 10) "[I]t seems to us that the High Court has read far more into para 3(1)(g) than is justified by its language. Para 3(1) is in fact something 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 t....
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....ute does not depend on the existence of rules unless the statute expressly provides for the same. In other words framing of the rules is not condition precedent to the exercise of the power expressly and unconditionally conferred by the statute. The expression 'subject to the rules' only means, in accordance with the rules, if any. If rules are framed, the powers so 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....
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....governing the fixing of Grid Tariffs, it was not open to the Electricity Board to issue the impugned notifications. This contention is based on sub-section (1) of Section 46 of the Act which provides that a tariff to be known as the Grid Tariff shall in accordance with any regulations made in this behalf, be fixed from time to time by the Electricity Board. It is urged that in the absence of any regulations laying down 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 regulation....
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.... to avoid the accused being so prejudiced." The key words used in Rule 34 from which the intendment is to be found are "shall not be less than ninety-six hours". As the respondent was not in active service at the relevant time, we are not concerned with the later part of that rule which provides for interval of twenty-four hours for the accused in active service. 9. In his classic work, Principles of Statutory Interpretation (7th Edn.), Justice G.P. Singh 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 ....
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....t be entered into so as to be valid at law. A distinction is sometimes made between contracts entered into with the object of committing an illegal act and contracts expressly or impliedly prohibited by statute. The distinction is that in the former class one has only to look and see what acts the statute prohibits; it does not matter whether or not it prohibits a contract: if a contract is made to do a prohibited act, that contract will be unenforceable. In the latter class, one has to consider not what act the 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 ....
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....to give a cool thought to the charge or charges for which he is to be tried, decide about his defence and ask the authorities, if necessary, to take reasonable steps in procuring the attendance of his witnesses. He may even decide not to defend the charge(s) but before he decides his line of action, he must be given clear ninety-six hours." It was submitted, on the basis of the legal position declared by this Court in the above judgments, that the bar created through Section 12(1B), forbidding new entrepreneurs from commencing activities concerning collective 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 respon....
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....Regulations were admittedly brought into force with effect from 15.10.1999, according to learned counsel for the respondents, carrying on such activity after 15.10.1999 would be unauthorized, if the persons concerned did not obtain a certificate of registration from 'the Board', in accordance with the notified regulations. It was submitted, that both the respondents had exited from the affairs of M/s. Gaurav Agrigenetics Ltd. (surely with effect from 30.7.1998 and 23.12.1998 respectively), well before the Collective Investment Regulations came into existence (-on 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....
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..... This means that the legislature having laid down the broad principles of its policy in the legislation can then leave the details to be supplied by the administrative authority. In other words by delegated legislation the delegate completes the legislation by supplying details within the limits prescribed by the statute and in the case of conditional legislation the power of legislation is exercised by the legislature conditionally leaving to the discretion of an external authority the time and manner of carrying its legislation into effect as also the determination of the area to which it is 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....
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....' under Section 12(1B), and a certificate of registration was obtained, no fresh entry could be made in the field of collective investment, by a person/entity not already carrying on such activity. 18. A perusal of the conclusions drawn by us in the foregoing two paragraphs, wherein we have interpreted Section 12(1B) of the SEBI Act would reveal, that persons governed by the substantive provision (the non-proviso category) were permitted to "commence" activities concerning collective investment, only after obtaining a certificate of registration; and persons covered under the proviso category (-who were already 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 ....
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....e been enumerated in Regulations 68 to 72 of the Collective Investment Regulations (these regulations are not being extracted herein, for reason of brevity). 20. Insofar as persons falling in the non-proviso category (namely, those desirous of commencing activities concerning collective investment, after 25.1.1995) are concerned, such persons could commence an activity in the nature of collective investment, after seeking a certificate of registration under the Collective Investment Regulations. For which purpose, they were required to apply under Regulation 4 of the Collective Investment Regulations. Regulation 4 aforementioned is reproduced 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 S....
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.... unconditional, till the new entrepreneur (described above) obtained a certificate of registration, in accordance with the regulations. The said bar would, therefore, undoubtedly extend till the framing of the regulations. The above bar, would further extend, even beyond the framing of the above regulations, till the concerned new entrepreneur was successful in obtaining a certificate of registration. Therefore, the period during which the concerned activities were barred (for the non-proviso category) under Section 12(1B) - commenced from the date of insertion of Section 12(1B) into the SEBI Act (-25.1.1995), and subsisted upto, the actual date when the new 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 hereinabov....
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....ty, and nothing more. No such question, arises in the present case. Herein, a bar has been created, preventing a new entrepreneur from commencing a defined activity. No question of jurisdiction (of the competent authority), arise in the present controversy. 25. In spite of the position expressed hereinabove, it was the contention of learned counsel for the respondent nos. 1 and 2, that the aforementioned determination would not adversely affect the private respondents, because the complaint filed by 'the Board' under Section 200 of the Cr.P.C. read with Sections 24(1) and 27 of the SEBI Act, did not accuse the respondents, of having committed a breach of the 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....
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....tment schemes being operated by it as per the said regulations. 14. It is submitted that in terms of Regulations 73(1) of the said regulations, an existing collective investment schemes which failed to make an application for registration with SEBI, shall wind up the existing collective investment schemes and repay the amounts collected from the investors. Further, in terms of Regulation 74 of the said regulations, an existing collective investment scheme which is not desirous of obtaining provisional registration from SEBI shall formulate a scheme of repayment and make such repayment to the existing investors in the manner specified in Regulation 73. 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) 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 ....
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....e is absolutely no room for any doubt, that the private respondents were being treated as operating, an "existing" collective investment scheme. They were accused inter alia, for having not complied with Regulation 5 of the Collective Investment Regulations. Regulation 5, allows an "existing" enterprise operating a collective investment scheme, to apply for registration. We have already interpreted Regulation 5, more particularly, the term "existing", used in conjunction with collective investment schemes, in paragraph 19 above. The accusations levelled against the respondents, will have to be understood in the context of Regulation 5, on account of the express stance adopted by 'the Board' in paragraph 10 of the complaint, wherein, having treated the respondents as persons who had 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....
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....n of the activity of sponsoring or carrying on a collective investment scheme by the respondents, after 25.1.1995 (when Section 12(1B) was inserted into the SEBI Act), and in continuing therewith, without obtaining a certificate of registration, cannot be the basis for proceeding against the respondents. For the simple reason, that the respondents had not been so accused, in the complaint filed by 'the Board'. In this behalf, reference may be made to P.B. Desai vs. State of Maharashtra, (2013) 15 SCC 481, wherein this Court held as under:- "51. We would also like to make another aspect very explicit. The appellant was levelled a specific charge which was framed against him. The prosecution was required to prove that particular charge and not to go beyond that and attribute "rash and 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 respondent....
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....n the non-proviso category? Were the accused, proceeded against on the ground, that they had commenced activities concerning collective investment schemes after 25.1.1995, without seeking a certificate of registration? Answers to the aforesaid queries, by the erstwhile directors of M/s. Gaurav Agrigenetics Ltd., are in the negative. The above response of the accused, is seriously contested by Mr. Arvind Datar, learned senior counsel representing 'the Board'. We shall endeavour, in the first instance, to determine the veracity of the submissions advanced at the hands of 'the Board', namely, whether the accused were proceeded against, as belonging to the non-proviso category. 31. The contentions advanced at the hands of 'the Board' comprise of four independent submissions. First of all it was urged, 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 aggr....
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.... investors, as provided for under the Collective Investment Regulations. In our considered view, reliance placed on the two paragraphs of the complaint is clearly insufficient, for the purpose canvassed by the learned senior counsel representing 'the Board'. We are of the view, that the above assertions in the complaint, assumed that the respondents were "existing" operators (-prior to 25.1.1995). Because in our view, only "existing" operators, had to wind up, if they choose not to conform with the Collective Investment Regulations (after their notification). 34. There can be no doubt whatsoever, that the particulars of the offence, of which an accused is charged, have to be clearly stated to him. In case the accused in the present case were to be charged for having violated Section 12(1B) as new operators under the non-proviso 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 ....
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....ly impermissible. We are also of the view, that Section 251 of the Cr.P.C. will not remedy the above defect and deficiency in the complaint. In the above view of the matter, for the reasons recorded hereinabove, and additionally, for the reasons recorded while rejecting the first contention advanced at the hands of the learned senior counsel for 'the Board', we find no merit in the submission founded on Section 251 of the Cr.P.C. 36. The third submission advanced on behalf of 'the Board', was based on the determination rendered by the trial Court, that the accused had violated Section 12(1B) of the SEBI Act. Learned senior counsel pointed out, that the date of incorporation of M/s. Gaurav Agrigenetics Ltd. (-3.7.1995), of which the respondents/accused were directors, was clearly brought out by way of concrete evidence, before the trial Court. 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 S....
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....rsed or altered by a Court of appeal, confirmation or revision 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, or any error, or irregularity in any sanction for the prosecution, unless in the opinion of that Court, a failure of justice has in fact been occasioned thereby. (2) In determining whether any error, omission or irregularity in any proceeding under this Code, or any error, or irregularity in any sanction for the prosecution has occasioned a failure of justice, the Court shall have regard to the fact whether the objection could and should have been raised at an earlier stage in the proceedings." Relying on Section 465 of the Cr.P.C. it was contended, that after the conclusion 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 proce....
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....mited to the extreme exigency to avert "a failure of justice". Any omission or even the illegality in the procedure which does not affect the core of the case is not a ground for ordering a de novo trial. This is because the appellate court has plenary powers for revaluating and reappraising the evidence and even to take additional evidence by the appellate court itself or to direct such additional evidence to be collected by the trial court. But to replay the whole laborious exercise after erasing the bulky records relating to the earlier proceedings, by bringing down all the persons to the court once again for repeating the whole depositions would be a sheer waste of time, energy and costs unless there is miscarriage of justice otherwise. Hence the said course can be resorted to when it becomes unpreventable for the purpose of averting "a failure of justice". The superior 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 version....
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....competent jurisdiction shall be reversed or altered by a court of appeal, confirmation or revision 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 enquiry or other proceedings under this Code, or any error, or irregularity in any sanction for the prosecution, unless in the opinion of that court, a failure of justice has in fact been occasioned thereby." 15. A reading of the section makes it clear that the error, omission or irregularity in the proceedings held before or during the trial or in any enquiry were reckoned by the legislature as possible occurrences in criminal courts. Yet the legislature disfavoured axing down the proceedings or to direct repetition of the whole proceedings afresh. Hence, the legislature imposed a prohibition that unless such error, omission or irregularity 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 ....
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....an be no doubt, therefore, that omissions and/or irregularities in matters of procedure can be overlooked, subject to the condition, that such an omission or irregularity does not occasion "failure of justice". This is our understanding of Section 465 of the Cr.P.C. 42. Having so interpreted Section 465 of the Cr.P.C., we may also indicate, that material facts constituting the offence, for which an accused is being charged, must mandatorily be put to the accused. Lack of material facts, which are vital to establish the ingredients of an offence, cannot be viewed as a procedural omission. The above requirement is not procedural, but substantive. Accordingly, it is not possible for us to accept that the lapse which the appellant desires this Court to overlook and exempt, can be overlooked under Section 465. We are also of the considered view, that irregularity and omission in the present case, in not disclosing to the accused, the particulars 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 proceedi....
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.... the Collective Investment Regulations (see paragraph 29 above). The said regulations came into existence with effect from 15.10.1999. By the time the Collective Investment Regulations were notified, respondent nos. 1 and 2 - Gaurav Varshney and Vinod Kumar Varshney, had already severed their relationship with M/s. Gaurav Agrigenetics Ltd. In view of the uncontroverted factual position expressed by learned counsel for the respondents, we find no difficulty in concluding, that proceedings which were initiated against respondent nos. 1 and 2, and were quashed by the High Court, call for no interference. Ordered accordingly. 45. In the result, the appeals stand dismissed. Criminal Appeal nos. 833-836 of 2012 46. It is not a matter of dispute, that the respondent herein - Mrs. Parvesh Varshney was one of the directors of M/s. Gaurav Agrigenetics Ltd., i.e. the same company involved in criminal appeal nos. 827-830 of 2012. We have, in our conclusions 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 procee....
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....the respondent herein. Therefore, for exactly the same consideration and reasons as have weighed with us, for not accepting the pleas raised by 'the Board' in Criminal Appeal nos. 827-830 of 2012 against the other co-accused in the same complaint dated 15.12.2003, we decline to interfere with the impugned order passed by the High Court, dated 12.8.2010, with reference to the respondent - Mrs. Parvesh Varshney - accused no. 6, as well. 49. In the result, the instant appeals are dismissed. Criminal Appeal no. 252 of 2015 50. Only a word of caution. In the connected earlier criminal appeals (nos. 827-830 of 2012, and 833-836 of 2012), 'the Board' was the appellant, and the accused were the respondents. Herein, the accused - Major P.C. Thakur is the appellant, and 'the Board' is the respondent. 51. The instant appeal relates to M/s. Accord Plantation Ltd., a company incorporated under the provisions of the Companies Act, 1956, on 16.10.1996. Even though the 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 1....
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....er "...in charge of, and was responsible to..." the company for the conduct of its business. It was, therefore submitted, that it was not open to 'the Board' to proceed against the appellant. In order to substantiate the instant contention, learned counsel placed reliance on S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla, (2005) 8 SCC 89, wherefrom our attention was invited to the following observations:- "4. In the present case, we are concerned with criminal liability on account of dishonour of a cheque. It primarily falls on the drawer company and is extended to officers of the company. The normal rule in the cases involving criminal liability is against vicarious liability, that is, no one is to be held criminally liable for an act of another. This normal rule is, however, subject to exception on account of specific provision being made in the statutes extending liability to others. Section 141 of the Act is an instance of specific provision which in case an offence under Section 138 is committed by a company, 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 ca....
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....ll be liable for criminal action. It follows from this 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 under the provision. The liability arises from being in charge of and responsible for the conduct of 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. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of "every person" the section would have said "every director, manager or secretary in a company is liable"..., etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned....
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....ause a person is a director of a company, it does not necessarily mean that he fulfils both the above requirements so as to make him liable. Conversely, without being a director a person can be in charge of and responsible to the company for the conduct of its business. For the same purpose, reliance was placed on National Small Industries Corporation Ltd. vs. Harmeet Singh Paintal, (2010) 3 SCC 330, and this Court's attention was drawn to the following observations recorded therein:- "12. It is very clear from the above provision that what is required is that the persons who are sought to be made vicariously liable for a criminal offence under Section 141 should be, 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. Every person connected with the company shall not fall within the ambit of the provision. Only those persons who were in charge of and responsible for the conduct of the business of the company at the time of commission of an offence will be liable for criminal action. It follows from the fact that if a Director of a company who was not in charge of and was not re....
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...., N. Rangachari v. BSNL, (2007) 5 SCC 108, Paresh P. Rajda v. State of Maharashtra, (2008) 7 SCC 442, K.K. Ahuja v. V.K. Vora, (2009) 10 SCC 48, and other relevant judgments, this Court laid down the following principles: (National Small Industries Corpn. Ltd. case (supra), SCC pp. 345-46, para 39) "(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by....
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.... 138 read with Section 141 of the NI Act the basic averment is made that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director. 34.2. If a petition is filed under Section 482 of the Code for quashing of such a complaint by the Director, the High Court may, in the facts of a particular case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director. 34.3. In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about the role of the Director in the complaint. It may do so having come across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of court.....
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....depicting the role and involvement of the appellant in the activities of M/s. Accord Plantation Ltd. The conclusions drawn by the High Court in the impugned order, are extracted hereunder:- "18. ... As would be evident from the balance sheet of the company, remuneration was being paid by it to Mr. P.C. Thakur. It has also come in the deposition of DW2, an official from Punjab and Sind Bank that an authority letter from the company was received stating therein that Major P.C. Thakur was its director as on 24.2.1998 and he was authorized to operate the accounts of the company with the aforesaid bank. A copy of the account opening form is Ex. DW2/B, whereas a copy of the extract from the minutes of the meeting of Board of Directors of the company is Ex. DW2/C. A copy of the authority letter is Ex. DW2/D. The fact that Mr. P.C. Thakur was getting remuneration from the company and was also authorized to operate its bank accounts clearly shows that he was also a person incharge and responsible to the company for conduct of its business, during the period he was its director." In view of the fact, that the above factual position has not been disputed by learned counsel for the....
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....ound up 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 SEBI. Vide our letter dated December 15/29, 1999 and also by way of a public notice dated December 10, 1999 all the existing Collective Investment Schemes, including you, which were not desirous of obtaining provisional registration from SEBI or had failed to make an application for registration from SEBI were given individual intimation in terms of regulation 73(2) that casts an obligation on you to send an information memorandum to the investors detailing the sate of affairs of the scheme, the amount repayable to each investors and the manner in which such amount is determined. Accordingly you were required to send the information memorandum to the investors by February 28, 2000. It is noted that you have not applied for registration by March 31, 2000 and also appear to have failed to take steps for winding up of the scheme(s) in terms of Regulations. You have, therefore, prima facie violated the provisions of Section 12(1B) of SEBI Act, 1992 and regulation 5(1) read with regulations 68(1), 68(2), 73 and ....
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....also by way of a public notice dated December 10, 1999 gave intimation in terms of regulation 73(2) to the accused no. 1 which casts an obligation on the accused no. 1 to send an information memorandum to all the investors detailing the state of affairs of the schemes, the amount repayable to each investor and the manner in which such amount is determined. As per the aforesaid letters of SEBI, the information memorandum to the investors was required to be sent latest by February 28, 2000. SEBI vide another public notice published in newspapers on February 22, 2000 informed to the company that all the companies carrying out collective investment schemes who had not made any application for grant of registration or were not desirous of obtaining provisional registration were required to compulsorily windup their existing schemes as per the provisions of regulation 73(1) of the said regulations. 13. 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 11B, 12(1B) of Securities and....
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....l, would arise only on 31.3.2000, the proceedings initiated against the appellant were not sustainable, and would be liable to be quashed. 57. Learned counsel for 'the Board' however seriously contested, that the appellant - Major P.C. Thakur had resigned from M/s. Accord Plantation Ltd. on 20.2.2000. In this behalf, he placed reliance on the statement of DW6 - Vikram, Senior Dealing Assistant of the office of the Registrar of Companies, Jalandhar. Even though in his examination-in-chief, DW6 - Vikram had clearly affirmed, that in terms of Form-32 (exhibited as DW6/1), Major P.C. Thakur was shown to have resigned from the directorship of M/s. Accord Plantation Ltd. with effect from 20.2.2000, yet in his cross-examination, he acknowledged "..... as per my record, the persons named as members of the Board of directors in the annual return of 20th September, 2002 - Exhibit DW6/4 and 5 are Sh. Ajay Vohra, Tejinder Singh, P.C. Thakur, Rajan Rana and Rajkumar Sharma. These returns have been submitted by the company.....". It was the contention of learned counsel, that annual returns are filed by a company under Section 159 of the Companies Act, 1956. Sub-Section (1) of Section 159 is ....
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....f the Companies Act, 1956, which was also relied upon, is extracted hereunder:- "303. Register of directors etc.- (1) *** *** *** (2) The company shall, within the periods respectively mentioned in this sub-section, send to the Registrar a return in the prescribed form containing the particulars specified in the said register and a notification in the prescribed form of any change among its directors managing directors, managers or secretaries, specifying the date of the change. The period within which the said return is to be sent shall be a period of thirty days from the appointment of the first directors of the company and the period within which the said notification of a change is to be sent shall be thirty days from the happening thereof;" 59. It was contended, that while it cannot be disputed that the name of Major P.C. Thakur existed on Form-32 sent to the Registrar of Companies, and DW6 - Vikram in his statement duly brought out, that as per the record of the Registrar of Companies, Major P.C. Thakur had resigned from the directorship of the company with effect from 20.2.2000, yet an equally significant fact is, that in the annual return....
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....ur severed his relationship with M/s. Accord Plantation Ltd., by tendering his resignation and submitting the same with the Registrar of Companies in Form-32. Based on the judgment rendered by this Court in the Harshendra Kumar D's case (supra), there can be no doubt, that the submissions advanced on behalf of the appellant have to be accepted, unless the same can be effectively repudiated. The mere mention of the name of Major P.C. Thakur in the annual return filed on 30.9.2002, in our considered view, cannot per se lead to the inference, that Major P.C. Thakur, was still on the Board of directors of M/s. Accord Plantation Ltd.. We say so because, Section 159(1)(g) of the Companies Act, 1956, requires that alongwith the annual return, the particulars of the directors, managing directors, managers and secretaries, "... past and present...", have to be indicated. That being the mandate of Section 159, the assertion made at the hands of learned counsel for 'the Board' could only be justified if the name of Major P.C. Thakur (in the annual return submitted on 30.9.2002) projected him as a "present" director. It is, therefore, that we examined photocopies of DW6/4 and DW6/5, (referred ....
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.... charge of, and responsible for, the conduct of the company's business, guilty of the offence allegedly committed by the company. There can be no dispute about the fact, that a director of a company, may well be in charge of, and responsible for the conduct of the business of the company (though the above position would not emerge ipso facto, by holding the position of a director). Yet, after the concerned individual has resigned from the position of director, in our view, he cannot be considered to be responsible to the company, for the conduct of its business. Any action of omission or commission of the company, after the date on which the concerned director has resigned, would not affect him, insofar as, his culpability under Section 27 of the SEBI Act is concerned. Thus viewed, there can be no doubt, that Major P.C. Thakur ceased to be in a position, as would make him in charge of or responsible for the conduct of the business of the company, after 20.2.2000. 64. Based on the factual position noticed in the preceding paragraph, we are of the view, that for exactly the same reasons as have been recorded by us in Criminal Appeal nos. 827-830 of 2012, the appellant herein was n....
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....Company and its registration with SEBI as per latest guidelines on registration. We wish to inform you that we are no more interested in operating this scheme due to stringent guidelines of SEBI. However, the company intends to pay all the deposits from sale of tree on due date for year wise detail of income and payment of maturities is enclosed. We are ready to provide any other information required at your end. Thanking you. Yours faithfully, Sd/- Managing Director" Based on the aforesaid letter dated 7.2.2000, it was contended, that M/s. Accord Plantation Ltd. had decided to wind up its operations on account of the fact, that it was not possible for it to continue its erstwhile activities, because of the stringent conditions imposed in the Collective Investment Regulations. In the instant view of the matter, it was the contention of learned counsel for the appellant, that the question of making an application for registration under Regulation 5 of the Collective Investment Regulations, or for M/s. Accord Plantation Ltd. to follow the procedure stipulated under the Collective Investment Regulations, for seeking a certificate of registration,....
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....shall be made within three months of the date of the information memorandum. (9) On completion of the winding up, the existing collective investment scheme shall file with the Board such reports, as may be specified by the Board. Existing scheme not desirous of obtaining registration to repay 74. An existing collective investment scheme which is not desirous of obtaining provisional registration from the Board shall formulate a scheme of repayment and make such repayment to the existing investors in the manner specified in regulation 73." It was submitted, that intimation as was required to be furnished by 'the Board' under Regulation 73(2), was never furnished by the respondent-Board, either to M/s. Accord Plantation Ltd. or to the appellant herein, and as such, no question of repayment of the deposits made by the investors arose, by the time the appellant relinquished his position as director of the company (with effect from 20.2.2000). 67. Since the respondent-Board had not denied the fact, that M/s. Accord Plantation Ltd. did address the letter dated 7.2.2000 (extracted above), to the respondent-Board, making its intentions clear, that it was no....
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....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... *** *** *** 18. In view of the above, it is charged that the accused no. 1 has committed the violations of Section 11B, 12(1B) of Securities and Exchange Board of India Act, 1992 r/w Regulation 5(1) r/w Regulations 68(1), 68(2), 73 and 74 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 which is punishable under Section 24(1) of Securities and Exchange Board of India Act, 1992. The accused nos. 2 to 5 are the directors and/or persons in charge of and responsible to the accused no. 1 for the conduct of its business and are liable for the violations of the accused no. 1, in terms of Section 27 of Securities and Exchange Board of India Act, 1992." It is apparent from the complaint, that the appellant - Sunita Bhagat was accused, firstly, of not applying for a certificate of registration under the Collective Investment Regulations, and secondly....
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....442 of 2010 before the High Court. The appeal preferred by the appellant - Sunita Bhagat alongwith the appeal preferred by Major P.C. Thakur (Criminal Appeal no. 464 of 2010) and the other appeals filed on behalf of the directors of M/s. Accord Plantation Ltd., were dismissed by the High Court on 29.1.2014. The instant criminal appeal arises from the said common judgment and order of the High Court, dated 29.1.2014. 74. During the course of hearing it was submitted, that M/s. Accord Plantation Ltd. was incorporated under the Companies Act, 1956, on 16.10.1996. The appellant herein - Sunita Bhagat was admittedly one of the promoter-directors of the said company. It was asserted that the appellant - Sunita Bhagat had resigned from the company on 31.8.1999 with immediate effect. It is not a matter of dispute, that Form-32, depicting the resignation of the appellant, was submitted and received in the office of the Registrar of Companies on 20.9.1999. The above factual position stands affirmed in the narration recorded by the High Court in the impugned judgment and order dated 29.1.2014. Paragraph 17 of the impugned judgment, is extracted hereunder:- "17. As far as the appel....
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.... Rajan Rai We did not prepare any list of directors after accepting the resignation of Smt. Sunita Bhagat. However, the modified list of directors would have been furnished by the company alongwith the annual returns filed by the company. As per the record, the directors of the company prior to the resignation of Smt. Sunita Bhagat were Sh. Ajay Vora, Sh. Tejender Singh, Sh. P.C. Thakur, Sh. Pradeep Dewan and Mrs. Sunita Bhagat as per annual return dated 28.9.99. The copy of the same is Ex. DW3/C (OSR). XXXX by counsel for accused no. 2. It is correct that fees have to be deposited by the person applying for change in Board of Directors on the basis of resignation and the receipt No. 21181 dated 20.9.99. The copy of the receipt is Ex. DW3/D (OSR)....." Learned counsel for the appellant reiterated the legal submissions advanced before this Court in the connected appeals, and submitted, that for exactly the reasons mentioned by a co-accused - Major P.C. Thakur, the proceedings initiated against the appellant herein, were also unsustainable, because the appellant herein had also resigned as director (-on 31.8.1999) just as Major P.C. Thakur had resigned (....
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....one year, if the offence is punishable with imprisonment for a term not exceeding one year; (c) three years, if the offence is punishable with imprisonment for a term exceeding one year but not exceeding three years." 79. For invoking the plea of limitation, learned counsel also pointed out, that under Section 24 of the SEBI Act, before its amendment on 29.10.2002, a punishment of imprisonment of one year or fine or both, was postulated. Since the punishment contemplated under Section 24 of the SEBI Act was not in excess of one year, for the violation alleged against the appellant, it was submitted, that the competence to taking cognizance, would lapse after a period of one year, on account of the bar created by Section 468(2)(b) of the Cr.P.C (extracted above). 80. Referring to the factual position in the present controversy, it was asserted, that the appellant had ceased to be a director of M/s. Accord Plantation Ltd., with effect from 20.9.1999, and as such, her liability for any alleged act of omission or commission, with reference to M/s. Accord Plantation Ltd., could not legally extended beyond 20.9.1999. As such, according to learned counsel for the appellant,....
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....sition stands reversed again. 'The Board' is the appellant in this matter and Raj Chawla, accused no. 10 before the trial Court, is the respondent. 84. The instant appeal has been preferred by 'the Board' against the respondent - Raj Chawla, who had approached the High Court by filing Criminal Miscellaneous Case 3937 of 2009, under Section 482 of the Cr.P.C., seeking quashing of the complaint filed by 'the Board', dated 15.12.2003 in the Court of Chief Metropolitan Magistrate, Tis Hazari Court, Delhi, under Section 200 of the Cr.P.C. read with Sections 24(1) and 27 of the SEBI Act. On the receipt of the above complaint, the Chief Judicial Magistrate had summoned the accused on 15.12.2003 for 21.2.2004. The High Court, through the impugned order dated 12.1.2010, quashed the criminal complaint filed by 'the Board' against Raj Chawla. 'The Board' has approached this Court by filing the instant criminal appeal, to assail the order of the High Court, dated 12.1.2010. 85. In order to effectively adjudicate upon the cause which has arisen with reference to the respondent - Raj Chawla, it would be essential to notice that the respondent - Raj Chawla was a promoter-director of M/s. Fa....
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.... investment scheme which failed to make an application for registration with SEBI, shall wind up the existing collective investment scheme and repay the amounts collected from the investors. Further, in terms of Regulation 74 of the said regulations, an existing collective investment scheme which is not desirous of obtaining provisional registration from SEBI shall formulate a scheme of repayment and make such repayment to the existing investors in the manner specified in Regulation 73. 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) read with Regulations 68(2), 73 and 74 of the said regulations. *** *** *** 18. The accused no. 1 raised a total amount of nearly Rs. 5,20,000/- by its own admission and its failure to refund the amounts to the general public who invested hard-earned money in the schemes operated by the accused no. 1, caused pecuniary damage to them. ....