TaxTMI 
TaxTMI 
2025 (11) TMI 1107
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....008 in respect of FIR No. RC 4(E)/2006/BS&FC/Mumbai dated 20th February 2006 in Sessions Court Special Case No.48 of 2007 alongwith chargesheet dated 2nd March 2009, both registered under Section 120-B r/w. read with section 420, 467, 468, 471 of Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 and under Section 68-A of the Companies Act, 1956. Facts: 2) The Securities and Exchange Board of India (SEBI), addressed a complaint letter to the Central Bureau of Investigation (CBI/Respondent No. 2), giving information in respect of certain illegal acts/offences which had been committed in respect of the Initial Public Offerings (IPO's) of Yes Bank Limited (YBL) and Infrastructure Development Finance Corporation (IDFC). Pursuant to the complaints, CBI registered two criminal complaints Criminal Case No. RC 3(E) / 2006 / BS&FC / Mumbai and Criminal Case No. RC 4(E) /2006 /BS & FC / Mumbai. The Petitioner is an accused in both complaints. The case of the prosecution is that, the accused including the Petitioner pursuant to a criminal conspiracy, opened Bank and Demat accounts in the name of fictitious persons and applied for sha....
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....ecial Case No 22 of 2014 and further 9 accused persons were added with the original 16 accused, totaling to 25 accused. 6) Criminal Case No RC 4(E)/2006/BS&FC/Mumbai is registered against 26 accused persons including the Petitioner. On 29th July 2007, a chargesheet was filed, in Criminal Case No RC 4(E)/2006/BS&FC/Mumbai, after completion of investigation, vide Special Case No 47 of 2007 against 22 accused. A supplementary chargesheet was filed in Criminal Case No RC 4(E)/2006/BS&FC/Mumbai which was numbered as Special Case No74 of 2014 and further 21 accused persons were added with the original 22 accused, totaling to 43 accused. 7) SEBI introduced a consent procedure, whereby, the entity/person, against whom SEBI had initiated proceedings under the securities laws including 11B and 11(4) proceedings, adjudicatory proceedings etc, could approach SEBI, for amicable settling the proceedings, by filing a consent application. SEBI made the consent procedure applicable to enforcement actions i.e. Administrative and or Civil/under civil laws. The consent procedure, provided that, compounding of Offence may cover appropriate prosecution cases filed by SEBI before the criminal court....
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....y,2006 and 27th April, 2006, passed by SEBI under sections 11 and 11B of the SEBI Act,1992, adjudication proceedings under Chapter VI A of the Act and proposed initiation of prosecution under section 24 of the Act against the Petitioner. The Petitioner without admitting or denying the charges, remitted a sum of Rs. 2,25,70,864/-(Rupees two crore twenty five lakh seventy thousand eight hundred and sixty four only). The Consent Order dated 7th December, 2009, specifically records that the consent Order disposes of the pending proceedings under section 11(4) and 11B of the SEBI Act, 1992, the adjudication proceedings and the proposed prosecution against the Petitioner in the matter of irregularities relating to Initial Public Offerings. 12) Petitioner armed with the Consent Order dated 7th December, 2009, approached this Hon'ble Court, by filing Writ Petition No.406 of 2018 under Article 226 of the Constitution of India read with Section 482 of Code of Criminal Procedure, for quashing the criminal proceedings and charge-sheet filed pursuant to FIR bearing No. RC 3 (E)/2006/BS & FC/Mumbai and RC 4 (E)/2006/BS & FC/Mumbai dated 21.02.2016. This Hon'ble Court, by its Order dated 27th ....
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....dated 07.10.2020, the Order of the Single Judge in Writ Petition No. 245 of 2020 and Writ Petition No. 730 of 2020 and also by the present Order which we have now passed. The Division Bench will independently decide the matter on its own merits and in accordance with law." 16) Pursuant to the said Order dated 22nd August, 2024, these Petitions were listed for hearing before this Court on 18th October, 2024. The learned Advocate for the Petitioner, sought leave to amend the Petition, to incorporate additional pleadings and prayer clauses. As the said request was made at belated stage, particularly when the Hon'ble Supreme Court had not granted any such liberty, this Hon'ble Court had expressed its doubt about granting such a request. The Petitioner requested for time, to seek a clarification from the Hon'ble Supreme Court. By an Order dated 08.11.2024, the Hon'ble Supreme Court permitted the Petitioner to approach this Court for considering the request for amendment of the Petition. Directions were passed to dispose off present petitions within 3 months. 17) On 17th May, 2025, the Hon'ble Supreme Court was pleased to extend time to dispose of the present procee....
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....(E)/2006/BS&FC/Mumbai is that the Petitioner, a sub broker of the KSBL, while doing business in his individual capacity, put in 2000 IPO applications in fictitious names in the IPO of IDFC, thereby cornered 5,30,304 shares and earned profit of Rs. 1,64,00,000/- 20.2) Mr. Ponda referred to Circular dated 20th April, 2007 bearing No. EFD/ED/Cir-1/2007 issued by SEBI, relating to guidelines of consent Order, in respect of composition of offences under the SEBI Act, SCRA Act and Depositories Act. Mr. Ponda, submits that, SEBI has issued guidelines for the consent/settlement procedure under which the person/entity desirous of the settling the matter can apply for settlement. That, the Securities laws permit composition of offences. That, under section 24A of the SEBI Act, composition of offences is permitted. That, Clause 7 of the Circular, allows compounding of an offence after filing criminal complaint by SEBI. 20.3) Mr. Ponda submits that, in clause 11 of the Circular, various factors which are considered by SEBI in deciding the consent application are mentioned. Mr. Ponda, submits that, under clause 14 of the Circular, if the Committee believes that the proposal of consent is ....
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....ses 591. 20.7) Mr Ponda submits that, continuation of the proceedings would be an abuse of the process of law as SEBI being the complainant has imposed a penalty and penal consequences on the Petitioner. That, the issues/disputes between the Petitioner and SEBI have been set to rest on the basis of the Consent terms. That, SEBI does not have any claim against the Petitioner and no individual complaint has been filed. That, proceeding with the trial/complaint would be an exercise in futility. 20.8) The sum and substance of the arguments, advanced on behalf of the Petitioner is that:- (i) under the Consent Order, an amount of Rs 2,25,70,794/- has been paid in the form of disgorgement and settlement fees to SEBI, (ii) that all other civil matters have been settled. (iii) pursuing the present matters/prosecutions, will serve no useful purpose; (iv) the SEBI has settled the matter; (v) it is only in the interest of justice, that present criminal proceedings be quashed and set aside. Respondent No. 2/CBI's Submissions: 21) Per Contra, Mr. Kuldeep Patil, Advocate for appearing for Respondent No. 2-CBI submits that, the complaint and....
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....e criminal complaint, of which quashing is sought, is an offence against the society or against an individual alone. The seriousness, gravity and nature of the crime have to be considered. That, in heinous, serious offences and offences against the society, quashing ought not to be permitted. 21.2) Mr. Kuldeep Patil submits that, in the case in hand, there is a conspiracy involving cornering of shares meant for retail/small investors, manipulation of security market, earning unjust profit/wrongful gain and thereby causing wrongful loss to the retail investors in the market. That, fabricated the documents have been utilized. That, there is active participation of the Petitioner. That, all the accused have conspired against the Initial Public Offering process. The investigation is completed and chargesheets have been filed. That, the offences in the present case are under Section 120-B r/w. read with section 420, 467, 468, 471 of Indian Penal Code and Section 13(2) r/w. 13(1)(d) of the Prevention of Corruption Act, 1988 and under Section 68-A of the Companies Act, 1956. That bank employees being public servants are involved in the conspiracy. That, in the present case the offences....
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....plication and SEBI after considering various facts, the consent application, has been directed by SEBI to disgorge the amount of Rs. 2,05,18,897/- and pay Rs. 20,51,897/- towards settlement charges to SEBI. 22.1) Mr. Ponda submits that, in the present case the prosecution was initiated i.e. Section 120-B, 420, 467, 468, 471 of Indian Penal Code which is similar to that of the case of K Bharathi Devi (Supra). That in K Bharathi Devi (Supra) even though offence of cheating is prima facie constituted, the Hon'ble Supreme Court quashed the complaint. That the Hon'ble Supreme Court has taken into consideration various facts, i.e the time lapse i.e complaint was filed in the year 1987, the bank has chosen not to continue with the prosecution, the claim of the bank was satisfied etc. In view thereof the Hon'ble Supreme Court had permitted the quashing of the Complaint in the case of K Bharathi Devi (Supra). Mr. Ponda further submits that, the statement that this offence is against the society or economy of the country or against the public money, is not correct, as the petitioner has used his own money and no public money is involved. 22.2) Mr. Ponda relied upon the case....
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.... matter independently and to decide as to whether the Petitioner has made out case of quashing the proceedings. The effect of the consent Order dated 9th December 2009 is also required to be considered. Reasons: SEBI ACT 24) The object and purpose of the SEBI Act is to provide for the establishment of a Board to protect the interest of the investors in securities and to promote the development of, and to regulate, the securities market by such measures as it thinks fit. The main object of SEBI, is to promote orderly and healthy growth of the securities market and for protecting the interest of the investors. The SEBI Act is a social welfare legislation, seeking to regulate the securities market and protect the interest of the common man/general public who are small investors. SEBI has enacted various rules and regulations to ensure that the participants in the securities market abide by the same and act in an orderly manner. SEBI, issues various orders and direction to ensure that the securities law are complied with and abided by the all participants and intermediaries. SEBI takes administrative, regulatory action and or adjudicatory action in cases of violation of the se....
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....is is an important aspect of the matter. SEBI in its parent statute i.e. Securities and Exchange Board of India Act, 1992 has consciously provided for compounding of only certain offence i.e offences only where fine is an alternative to imprisonment, thereby implying that Section 24A does not apply to the offence, which is punishable with imprisonment or imprisonment with fine. The distinction would imply that an offence which is grave and serious in nature is not compounded. 24.3) We find that such an object or intention of the SEBI, is further fortified in its Circular dated 25th May, 2012, by which the Circular dated 20th April, 2007, was amended, and certain new guidelines were issued in relation to the Consent Orders. In the said Circular, SEBI has provided that compounding should not be permitted in serious, fraudulent and unfair trade practices which in the opinion of the Board caused substantial losses to investors and small shareholders or have or may have market wide impact, except those defaults where the entity makes good the losses due to the investors. A conjoint reading, of the Consent Circulars, Consent Order and Section 24A of SEBI Act, make it very clear that S....
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....ill permit a compromise of all offences, though made the subject of a criminal prosecution, for which offences the injured party might sue and recover damages in an action. It is often the only manner in which he can obtain redress. But, if the offence is of a public nature, no agreement can be valid that is founded on the consideration of stifling a prosecution for it." Emphasis supplied" 25.1) The Hon'ble Supreme Court in Prakash Gupta V/s. Securities and Exchange Board of India, (supra) laid down the guidelines for compounding the offence 24A of the SEBI Act. the Hon'ble Supreme Court, has observed as as under; "104.1....... They should consider the factors enumerated in SEBI's Circular dated 20 April 2007 and the accompanying FAQs, while deciding whether to allow an application for a consent Order or an application for compounding. These factors, which are non-exhaustive, are: "Following factors, which are only indicative, may be taken into consideration for the purpose of passing Consent Orders and also in the context of compounding of offences under the respective statute: 1. Whether violation is intentional. 2. Party's ....
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.... have a veto in regard to compounding of offence and whether SAT or a court must obtain the views of SEBI for furnishing guidance to its ultimate decision? and (iii) Thirdly whether gravity of offences needs to be kept in mind while exercising powers of compounding under section 24-A of the SEBI Act? In the said matter, while answering the issues, the Hon'ble Supreme Court held that: (i) the consent of SEBI was not mandatory before SAT or any court; (ii) the views of SEBI may be sought in a matter of compounding under section 24A of the SEBI Act and (iii) the court must be conscious of the gravity of the offences that the accused is prosecuted for and that serious acts which impinged upon the protection of investors and the stability of the securities market must not be compounded. We have also noted the fact that, the Hon'ble Supreme Court, after considering the nature of the allegations in the said matter observed that: "... Finally, SAT or the court should consider whether the offence committed by the party submitting the application under Section 24-A is private in nature, or it is of a public character, non-prosecution of wh....
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....ter filing criminal complaint by SEBI. Clause 9 provides for the procedure for consent, in other cases, where any person/party who is notified or who has reasonable grounds to believe that a civil/administrative proceeding may or will be instituted against him/her, or any party to a proceeding already instituted, may, at any time, propose in writing for an offer of consent. Further if any person/party is notified or who has reasonable ground to believe that a criminal proceeding may or will be instituted against it, may, before filing a criminal complaint by SEBI before any criminal court, propose in writing for an offer of consent. The Committee considers the proposal of consent, requisite waivers by the party, facts and circumstances of the case, material available on record and takes into account the factors and guidance as set out in clause 11 thereof. The Committee may in cases if it finds that the terms for passing a consent Order are inadequate, ask the party to revise the consent terms. If the Committee agrees with the proposal, suitable consent terms shall be recommended to a panel of two Whole Time Members, who may pass a suitable Order in view of the recommendation of th....
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.... quantifiable loss. The adverse effect on rights of the small investors and market impact is also taken into consideration to exclude offences from the scope of compounding. Even in the present case, the rights of the retail investors have been adversely affected, in as much as the opportunity of retail investors to participate in the IPO under the category of RII's was impaired and possibility of getting an allotment of shares in the IPO was impaired or in some cases may be wiped out. The acts of the Petitioner and other accused have adversely affected the market mechanism, the IPO process, the rights of retail investors and had a wide market impact also. At least that was the case of the SEBI in its complaint. This, surely is not good for the orderly development and protection of the securities market. 27) A perusal of the circulars and the guidelines, makes it clear, and there can be no doubt of the fact that the Consent Order may settle all issues or reserve an issue or claim. What is important, that the consent Order or initial approval must precisely state what issues or claims are settled and/or covered under the Consent Order and which are left out. Non-mentioning of a p....
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....onsent Order was passed and not to a prosecution prior to that date. We find that the Consent Order is only in respect of administrative and civil proceeding. The Consent Order does not refer to or deal with the present pending criminal proceedings. The present investigation is an independent investigation and the consent Order can have no effect or impact on the investigation. The Consent Order therefore does not affect the present criminal prosecutions. Law laid down by the Hon'ble Supreme Court: 28) As regards the question of quashing the present criminal prosecutions, one needs to first consider the law as laid down by the Hon'ble Supreme Court for the parameters of exercise of power under section 482 of the Code of Criminal Procedure,1973 in normal cases so also cases in which settlements/compromises have been arrived. 28.1) the Hon'ble Supreme Court in case of State of Haryana v. Bhajan Lal reported in 1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426, at paragraph 102, laid down illustrative categories where quashing of proceedings is justified. These are: "(1) Where the allegations made in the first information report or the complaint, even if they are ta....
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.... Ors. vs. State of U.P. and Ors., (2023 SCC Online SC 949), the Hon'ble Apex Court declined to interfere in the Order of the High Court rejecting the petition filed for quashing of the FIR, taking note of the fact that, the investigation had been completed and chargesheet is required to be filed. The view taken by the Apex Court is that the Trial Court should be allowed to look into materials which the investigation officer might have collected forming part of the chargesheet, despite the observation of the Apex Court that the allegation leveled in the FIR did not inspire any confidence. 28.4) The Hon'ble Supreme Court in the cases of (i) State of Haryana & Ors. vs. Ch. Bhajan Lal & Ors., AIR 1992 SC 604, (ii) Rajeev Kourav vs. Baisahab & others, (2020) 3 SCC 317 and (iii) Kaptan Singh vs. State of Uttar Pradesh and others, (2021) 9 SCC 35, has held that, exercise of powers under Section 482 Cr.P.C. to quash the proceedings is an exception and not a rule. Appreciation of evidence is not permissible at the stage of quashing of proceedings in exercise of powers under Section 482 of Cr.P.C. 28.5) Similarly in the case of State of Odisha vs. Pratima Mohanty and others, (2022)....
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.... in regard to the date and time of the commission of the alleged offence. At the same time, we also take notice of the fact that the investigation has been completed and charge sheet is ready to be filed. Although the allegations levelled in the FIR do not inspire any confidence more particularly in the absence of any specific date, time, etc. of the alleged offences, yet we are of the view that the appellants should prefer discharge application before the Trial Court under Section 227 of the Code of Criminal Procedure (CrPC). We say so because even according to the State, the investigation is over and charge sheet is ready to be filed before the competent court. In such circumstances, the Trial Court should be allowed to look into the materials which the investigation officer might have collected forming part of the charge sheet. If any such discharge application is filed, the Trial Court shall look into the materials and take a call whether any case for discharge is made out or not." 28.8) The general principle of law which emerges from the aforesaid case law is that a court while exercising its jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 should be c....
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....who were being prosecuted under Section 13(2) read with 13(1)(d) of Prevention of Corruption Act. The Court refused to quash the charge against the accused by holding that the Court would not quash a case involving a crime against the society when a prima facie case has been made out against the accused for framing the charge. Ashok Sadarangani was again a case where the accused persons were charged of having committed offences under Sections 120-B, 465, 467, 468 and 471, IPC and the allegations were that the accused secured the credit facilities by submitting forged property documents as collaterals and utilized such facilities in a dishonest and fraudulent manner by opening letters of credit in respect of foreign supplies of goods, without actually bringing any goods but inducing the bank to negotiate the letters of credit in favour of foreign suppliers and also by misusing the cash-credit facility. The Court was alive to the reference made in one of the present matters and also the decisions in B. S. Joshi, Nikhi Merchant and Manoj Sharma and it was held that B.S. Joshi and Nikhil Merchant dealt with different factual situation as the dispute involved had overtures of a civil di....
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....ossibility of conviction is remote and bleak and continuation of criminal case would put accused to great oppression and prejudice and extreme injustice would be caused to him by not quashing the criminal case despite full and complete settlement and compromise with the victim. In other words, the High Court must consider whether it would be unfair or contrary to the interest of justice to continue with the criminal proceeding or continuation of the criminal proceeding would tantamount to abuse of process of law despite settlement and compromise between the victim and wrongdoer and whether to secure the ends of justice, it is appropriate that criminal case is put to an end and if the answer to the above question(s) is in affirmative, the High Court shall be well within its jurisdiction to quash the criminal proceeding." 29.2) In the matter of Sushil Suri V/s. Central Bureau of Investigation & Ors. reported in (2011) 5 Supreme Court Cases 708, the Hon'ble Supreme Court has held that, "..when more than sufficient circumstances exist suggesting hatching of a criminal conspiracy, forgery of documents, having regard to the modus operandi adopted by the accused as depicte....
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.... been collected and produced before the Court and the issues involved, whether factual or legal, are of such magnitude that they cannot be seen in their true perspective without sufficient material." 25. The essential ingredient of the offence of "criminal conspiracy", defined in Section 120A IPC, is the agreement to commit an offence. In a case where the agreement is for accomplishment of an act which by itself constitutes an offence, then in that event, unless the Statute so requires, no overt act is necessary to be proved by the prosecution because in such a fact-situation criminal conspiracy is established by proving such an agreement. In other words, where the conspiracy alleged is with regard to commission of a serious crime of the nature as contemplated in Section 120B read with the proviso to sub-section (2) of Section 120A IPC, then in that event mere proof of an agreement between the accused for commission of such crime alone is enough to bring about a conviction under Section 120B and the proof of any overt act by the accused or by any one of them would not be necessary. (See: Suresh Chandra Bahri Vs. State of Bihar). 32. It needs little emphasis that e....
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.... ends of justice. 26. We are in respectful agreement with the aforesaid view. Be it stated, that availing of money from a nationalized bank in the manner, as alleged by the investigating agency, vividly exposits fiscal impurity and, in a way, financial fraud. The modus operandi as narrated in the chargesheet cannot be put in the compartment of an individual or personal wrong. It is a social wrong and it has immense societal impact. It is an accepted principle of handling of finance that whenever there is manipulation and cleverly conceived contrivance to avail of these kind of benefits it cannot be regarded as a case having overwhelmingly and predominantingly of civil character. The ultimate victim is the collective. It creates a hazard in the financial interest of the society. The gravity of the offence creates a dent in the economic spine of the nation. The cleverness which has been skillfully contrived, if the allegations are true, has a serious consequence. A crime of this nature, in our view, would definitely fall in the category of offences which travel far ahead of personal or private wrong. It has the potentiality to usher in economic crisis. Its implications have ....
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....lement, the view of the offender and the victim will not prevail since it is the interest of society that the offender should be punished to deter others from committing similar crimes. 29.5) the Hon'ble Supreme Court in the matter of Central Bureau of Investigation Vs. Maninder Sing (AIR 2015 Supreme Court 3657), in Paragraph 11 and 12 it is observed that; "17. .... In economic offences Court must not only keep in view that money has been paid to the bank which has been defrauded but also the society at large. It is not a case of simple assault or a theft of a trivial amount; but the offence with which we are concerned is a well planned and was committed with a deliberate design with an eye of personal profit regardless of consequence to the society at large. To quash the proceeding merely on the ground that the accused has settled the amount with the bank would be a misplaced sympathy. If the prosecution against the economic offenders are not allowed to continue, the entire community is aggrieved. 18. In recent decision in Vikram Anantrai Doshi (supra), this Court distinguished Nikhil Merchant's case and Narendra Lal Jain's case where the compromise was a....
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.... success, readily invokes the inherent jurisdiction for quashing of the criminal proceeding. The court's principal duty, at that juncture, should be to scan the entire facts to find out the thrust of allegations and the crux of the settlement. It is the experience of the Judge comes to his aid and the said experience should be used with care, caution, circumspection and courageous prudence. As we find in the case at hand the learned Single Judge has not taken pains to scrutinize the entire conspectus of facts in proper perspective and quashed the criminal proceeding. The said quashment neither helps to secure the ends of justice nor does it prevent the abuse of the process of the Court nor can it be also said that as there is a settlement no evidence will come on record and there will be remote chance of conviction. Such a finding in our view would be difficult to record. Be that as it may, the fact remains that the social interest would be on peril and the prosecuting agency, in these circumstances, cannot be treated as an alien to the whole case. Ergo, we have no other option but to hold that the Order of the High Court is wholly indefensible". 29.6) In the case of Daxaben Vs.....
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....onvicted and by not quashing the criminal proceedings, justice shall be casualty and ends of justice shall be defeated. The above list is illustrative and not exhaustive. Each case will depend on its own facts and no hard-and-fast category can be prescribed". 29.7) The Hon'ble Supreme Court in the matter of Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai Karmur & Ors. Vs. State of Gujrat & Anr. Reported in (2017) 9 SCC 641, wherein it has been observed in Para No. 13 and 15; "13. The same principle was followed in Central Bureau of Investigation v Maninder Singh by a bench of two learned Judges of this Court. In that case, the High Court had, in the exercise of its inherent power under Section 482 quashed proceedings under Sections 420, 467, 468 and 471 read with Section 120-B of the Penal Code. While allowing the appeal filed by the Central Bureau of Investigation Mr Justice Dipak Misra (as the learned Chief Justice then was) observed that the case involved allegations of forgery of documents to embezzle the funds of the bank. In such a situation, the fact that the dispute had been settled with the bank would not justify a recourse to the power under Section 482: ....
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....ctions with an essentially civil flavour may in appropriate situations fall for quashing where parties have settled the dispute; (ix) In such a case, the High Court may quash the criminal proceeding if in view of the compromise between the disputants, the possibility of a conviction is remote and the continuation of a criminal proceeding would cause oppression and prejudice; and (x) There is yet an exception to the principle set out in propositions (viii) and (ix) above. Economic offences involving the financial and economic well-being of the state have implications which lie beyond the domain of a mere dispute between private disputants. The High Court would be justified in declining to quash where the offender is involved in an activity akin to a financial or economic fraud or misdemeanour. The consequences of the act complained of upon the financial or economic system will weigh in the balance." 29.8) In the case of The State of Madhya Pradesh Vs. Laxmi Narayan & Ors (2019) 5 SCC 688 the ratio of Gian Singh, Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai Karmur, Narinder Singh & Ors. has been reiterated. the Hon'ble Supreme Court observed that; "the....
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....whole and pose a serious threat to the financial health of the country. If such offences are viewed lightly, the confidence and trust of the public will be shaken. 17. A profitable reference in this regard can be made to the judgment in State vs. R Vasanthi Stanley wherein this Court declined to quash the proceedings in a case involving alleged abuse of the financial system. It was observed as under: "15. ........ A grave criminal offence or serious economic offence or for that matter the offence that has the potentiality to create a dent in the financial health of the institutions is not to be quashed on the ground that there is delay in trial or the principle that when the matter has been settled it should be quashed to avoid the head on the system. That can never be an acceptable principle or parameter, for that would amount to destroying stem cells of law and Order in many a realm and further strengthen the marrow of unscrupulous litigations. Such a situation should never be conceived of. 18. In the instant case, it is on record that consent terms were submitted by the parties before the DRT. It is admitted that the bank had suffered losses to the tun....
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....ashing the criminal prosecutions can be made out. 31) Perusal of the record in both the complaints i.e C. R. No. RC 3(E)/2006/ BS & FC / Mumbai and RC 4(E)/2006/ BS&FC/Mumbai, would indicate that SEBI's complaints pertain to illegal predatory cornering of shares, in the IPO's by the accused persons including the Petitioner, which were meant to be allotted to the genuine retail investors (RII). From the year 2009 onwards, a general trend of the primary capital market was that shares of the companies allotted to the investors in IPO at issue price on listing commended a huge premium in the secondary capital market. The accused persons including the Petitioner by observing the said general trend, in pursuance of a well-designed and well-planned conspiracy, opened bank and Demat accounts, both in fictitious names by extensively using forged documents as genuine and cornering shares, legitimately meant for genuine RII/small individual investors. Names of fictitious persons were used to open the bank and Demat accounts, forged documents were created and used. Some accused, who were public servants in the employment of the Indian Overseas Bank, a Public Sector Bank have assisted and ai....
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....he Petitioner opened fictitious bank accounts in HDFC Bank and 2000 fictitious Demat accounts with DP KCL by forging signatures. The Petitioner submitted 2000 applications in names of fictitious persons in whose names bank and Demat accounts were opened. The Petitioner availed loan from KCL, Hyderabad by forging the signatures. Each application submitted by the Petitioner was allotted 266 shares and the same got credited to the fictitious accounts opened and operated by the Petitioner. By using forged transfer slips, the Petitioner got transferred 5,30,304 illegally cornered shares into his own Demat Account and made a profit of Rs. 1,64,00,000/-. In the IPO of IDFC, the Petitioner, Accused Nos. 1 to 3 were aided and abetted by Accused No 12,13,16, officials of KCL/Accused No. 20 wherein KCL funded the fictitious IPO Applications put in by the Petitioner and Accused Nos. 1 to 3. The conspiracy with the officials of KCL/Accused No. 20, is heightened by the fact that as NBFC, one of their entities financed the fictitious applications even when KCL/Accused No 20 did not have sufficient funds in their account. A single out stationed cheque of Hyderabad for Rs 51.90/- crores, was sent t....
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....itious loan applications were made, monies availed and used. There is a total disregard to the law. There is prima facie material against the accused including the Petitioner and the acts committed i.e making fictitious applications, opening fictitious bank and Demat accounts, illegally cornering shares legitimately meant for retail investors, depriving the retail investors of their chance for participating in an IPO offering and arranging and procuring loans by illegal means are all acts which indicate the existence of criminality or the criminal intent right from the inception. The progress of and participation of RII's in the securities market was adversely hampered, illegally altered and impacted by using illegally means. This in our opinion is a crime against the society and societal well-being. 35) The facts of the present case amount to and are akin to a financial/economic fraud and fall within the ambit of social wrong and having an adverse societal impact. The present case, cannot be quashed because the Petitioner has paid the money under a Consent Order. The facts of the present case, surely make out a prima facie case for the offences as alleged against the Petitioner....
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....tion, exercise of which has to be with restraint and in accordance with the guiding principles engrafted in the power itself i.e to secure the ends of justice or to prevent abuse of the process of any Court. The exercise of the power depends on the facts of each case and no category or straight jacket formula can be prescribed. Under section 482 of the Code of Criminal Procedure, 1973 this court is required to consider the material available on the record to see if any case is made out for quashing a criminal offence/proceeding. Based on this material, one could decide if as to whether the ends of justice would justify such exercise of power or not. If securing the ends of justice is the guiding principle, the court needs to factor in the said principle for both the accused and the victim/society. In crimes or wrongful acts which have adverse effect on the general public, are wrong doings which seriously affect and threaten the interest and well-being of society or against the society at large, cannot be given a go by to only because the accused and an institution have arrived at a settlement. It is well settled that in serious and grievous offences or other offences of mental depr....
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....to SEBI. We also need to keep in mind the society at large and the impact thereon. The acts have been committed with a deliberate design with an eye of personal profit/unjust enrichment regardless of consequence of the same on the society at large. To quash the proceeding merely because payments are made to SEBI would be nothing short of unwarranted and misplaced sympathy. If the prosecution against the economic offenders are not allowed to continue, the entire community is aggrieved. Quashing the present criminal prosecutions would in fact tantamount to an absolute abuse of process of law. 40) As regards the general proposition, that the possibility of conviction is remote or bleak or no useful purpose will be served by continuing the criminal proceedings or that the continuation of criminal case would put accused to great oppression/prejudice and extreme injustice would be caused to the accused despite the settlement and compromise with an institution, we are of the firm opinion that the same cannot take precedence over the harm to and adverse impact on the society or in a offence which is against the society/public or the system as a whole. In serious and grave offences, econ....