TaxTMI 
TaxTMI 
2022 (1) TMI 1451
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....nishable under Sections 420, 467, 468, 471 read with 120-B of Indian Penal Code (IPC), under Sections 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988 and under Section 68(A) of the Companies Act, 1956 on the complaints made by the Chief General Manager, SEBI. FACTUAL BACKGROUND 2 It appears that two offences were registered on the complaint of Chief General Manager, SEBI with prosecution agency, CBI which led to registration of aforesaid FIRs. The allegations were in respect of certain brokers and individuals getting allotted Initial Public Offer (IPO) applications in fictitious names in respect of the issue of shares of Yes Bank Limited (YBL) to corner more shares meant for retail investors and sold them on profit on listing, thus making unjust profit. Upon registration of the aforesaid FIRs, Adjudicating Authority, SEBI issued a notice to the petitioner herein on 7th June, 2006. In the notice the Adjudicating Authority alleged that the petitioner had opened Demat Accounts in fictitious and benami names and made large number of applications in the IPOs in the category of retail investors in fictitious and benami names. This was done to corner the quota of retail....
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....sed by the party. x. Economic benefits accruing to a party from delayed or avoided compliance. xi. Conditions where necessary, to deter future noncompliance by the same or another party. xii. Satisfaction of claim of investors regarding payment of money due to them or delivery of securities to them. xiii. Compliance of the civil enforcement action by the accused. xiv. Party has undergone any other regulatory enforcement action for the same violation. xv. Any other factors necessary in the facts and circumstances of the case. 13. It will be the endeavor of the Committee to settle a case before it, subject to the party taking remedial action and on such further consent terms including consent bars or consent penalties as the Committee may find appropriate in the facts of the case. Consent orders may be passed depending on the nature of the violation by either a) admission of the guilt or b) without admitting or denying guilt. Where an order is passed without admitting or denying guilt, such person shall never represent subsequently that he/she is not guilty. In the event such a representation is made, the enforcement proc....
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....rst time the petitioner was named as an accused (No.5). The case was registered as Special CBI Case No. 47 of 2007 and Special CBI Case No. 48 of 2007. 5 Pursuant to the Circular in respect of guidelines for Consent Orders and for considering the request for composition of offences, the petitioner applied for consent order on 5th November, 2008. From the said consent application, it is apparent that the petitioner had disclosed about the aforesaid offences and amongst others had specifically stated about the terms of consent proposal, more particularly at para 19 and prayed that he be exonerated from all the above stated proceedings (in the consent application) against him by SEBI or at the behest of SEBI. 6 At this stage, it is pertinent to note that upon the request of the petitioner SEBI placed the matter before the High Powered Advisory Committee constituted by SEBI self, which considered the consent terms proposed by the petitioner and after taking into account the contents of the application, the petitioner was called upon to pay an amount of Rs. 2,05,18,968/- being the unjust profit made by him and also to pay a sum of Rs. 20,51,897/- being 20% of t....
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....etches of submissions along with citations in support thereof. Perused. 11 Ms. Kuttikrishnan, learned Counsel for the respondent No. 2, vehemently submits that the petitioner had opened Demat Accounts in fictitious and benami names and made large number of applications in the IPOs in the category of retail investors in fictitious and benami names only with a view and malafide to corner the quota of retail investors in the IPOs by the companies. Learned Counsel also invited my attention to the earlier Writ Petition filed by the petitioner and its result thereof. Apparently, since huge fraud has been committed upon the investors, there is no merit in the Petitions and the same are liable to be dismissed with costs, argued learned Counsel. Besides, according to her, the complainant is not made a party and therefore, on this count also the Petitions are liable to be dismissed. 12 Learned Counsel for respondent No. 2 also placed reliance in Parbatbhai Aahir Alias Parbatbhai Bhimsinghbhai Karmur and Others Vs State of Gujarat and Another [(2017) 9 Supreme Court Cases 641] ANALYSIS AND FINDINGS 13 From the charge-sheet the accusation levelled against the petitioner i....
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.... "Section 24A: Composition of certain offences - Notwithstanding anything in the Code of Criminal Procedure, 1973, any offence punishable under this Act, not being offence punishable with imprisonment only, or with imprisonment and also with fine, may either before or after the institution of any proceedings, be compounded by a Securities Appellate Tribunal or a court before which such proceedings are pending." 20 Similarly, Section 26 of the said Act provides that the Court can take cognizance of any offence under the said Act or any rules or regulations made thereunder only on a complaint made by the Board. 21 From the above, it is very clear that SEBI is an institution to protect the interest of investors at large and for healthy development of securities market. It is given exclusive jurisdiction to deal with the matter pertaining to the irregularities pertaining to the securities. 22 In the light of powers so conferred by the said Act and in exercise thereof, SEBI issued circular dated 20th April, 2007 providing for the guidelines for the composition of the offences viz. 'Consent order' and as pointed out above, amongst other thing, it provides for cons....
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....g Officer) Rules 1995. It interalia provides that SEBI initiated adjudication proceedings under Section 151 r/w 15HA of SEBI Act dealing with fraudulent and unfair trade practices. In said notice at para 3, it is alleged that the petitioner had opened various Demat Accounts in fictitious and benami names and made large number of applications in IPOs in the category of retail investors in fictitious and benami names. Further, it alleged that after allotment of shares in the category of retail investors in the IPOs, the petitioner had transferred the said shares to his account and also received IPO shares from many dematerialized account holders. It further alleged that the petitioner had violated Section 12A of the SEBI Act which provides for prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control and thus were violative of Regulation 3,4 and 6 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices related to Securities Market) Regulations, 1995 read with Regulation 3 and 4 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices related to Securities Market) Regulations 2003. 26 One doesn't require much ....
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....of offence and as well as the large public interest were duly considered before compounding the proposed prosecution by SEBI. It is also not in dispute that the petitioner had disgorged Rs. 2.35 crore and in a sense the public interest was duly secured and protected. 30 SEBI, the complainant, in the present matter having agreed to compound the said irregularities upon payment of certain amounts allegedly earned by the petitioner and the petitioner having been paid the same, it can no more be termed as fraudulent act on the part of petitioner warranting continuation of prosecution based on such allegations. 31 The parameters of exercise of power under Section 482 of Code of Criminal Procedure and Article 226 and 227 of Constitution of India are laid down by the Hon'ble Supreme Court in several cases. In Sunder Babu and Others Vs. State of Tamil Nadu [(2009) 14 SCC 244] the Hon'ble Apex Court envisaged three circumstances under which the inherent jurisdiction may be exercised, namely, (i) to give effect to an order under the Code, (ii) to prevent abuse of the process of Court, and (iii) to otherwise secure the ends of justice. The Hon'ble Apex Court further held that inher....
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....as and Another Vs. State of Maharashtra [(2018) 3 Supreme Court Cases 290] the Hon'ble Apex Court after considering various earlier judgments held that in the offences arising from commercial and financial transactions on account of settlement and compromise between the parties, the High Court shall be well within its jurisdiction to quash the criminal proceeding, observing that whether the parties have reached the settlement and on that basis petition for quashing the criminal proceedings is filed, those criminal cases having overwhelmingly and predominantly civil character, particularly those arising out of commercial transactions or arising out of matrimonial relationship or family disputes should be quashed when the parties have resolved their entire disputes among themselves. 35 The Division Bench of this Court in Macrotech Developers Limited Vs. Principal Commissioner of Income Tax and Others [2021 SCC OnLine Bom 459] had an occasion to consider the effect of the settlement of the dispute by the taxation authorities and its effect on the pending prosecution and in that context it has held that the preamble of the 'Vivad se Vishwas Act' (which was subject matter of the pros....