Mega Corporation Ltd. And Ors vs Union Of India And Anr
2021 Latest Caselaw 15035 Bom

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      IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                CRIMINAL APPELLATE JURISDICTION

             Criminal Revision Application No. 563 / 2019

Mega Corporation Ltd. and Ors.                             .. Applicants

              Versus.

Union of India and Ors.                                    .. Respondents


                         ****

Advocate Samsher Garud, Santosh Avhad i/by Jayakar and

Partners for the Applicants.

Ms. Purnima Kantharia, Advocate for Union of India.

Advocate Sabiha Ansari for Respondent No.2.

Smt. Sharmila Kaushik, APP for State.

                                 ****

                  CORAM         : SANDEEP K. SHINDE J.
                  RESERVED ON  : 06th OCTOBER, 2021.
                  PRONOUNCED ON : 14th OCTOBER, 2021.

ORDER. : -

1. This Revision Application challenges the correctness,

legality and propriety of order dated 7th October, 2019 below

Exhibit-13 in SEBI Special Case No.177/2015 passed by the

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Additional Sessions Court, Greater Mumbai, whereby the

learned Judge declined to pass order of discharge.

2. Background facts : Securities and Exchange Board of

India (SEBI Board for short), commenced investigation into

the unusual price movements of the scrip of Mega

Corporation Ltd, the Applicant - Company, during the period Company, during the period

25th January, 2005 to 16th September, 2005. Based on the

finding in the investigation, the board charged the company

with manipulating the market in its shares by several means.

Board issued show cause notice dated 10th October, 2007

alleging that the Applicant-company sought to generate

investor interest in the scrip by publishing false and

misleading announcement in the press about the company 'ss

prospects and business plans which projected unduly high

revenues and profits for the company. Whereafter interim

exparte restrain order was passed by the Board on 24 th

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October, 2005. It was confirmed on 24th July, 2006 and was

in force till the final order was passed on 28 th February, 2008.

Aggrieved by the order dated 28th February, 2008, Company

filed the appeal under Section 15T of the Securities and

Exchange Board of India Act, 1992 passed by the whole time

member, SEBI by which the Applicant-Company was

restrained from accessing the capital market in any manner

whatsoever for a period of one year for violation of

regulations 3(a)(b)(c) and (d) and 4(1), 4(2)(k) and 4(2)(r) of

the Securities and Exchange Board of India (Prohibition of

Fraudulent and Unfair Trade Practices relating to Securities

Market) Regulations 2003 (FUTP Regulations for short). The

appeal was heard by the Securities Appellate Tribunal,

Mumbai and the charge of making false and misleading

announcement as also that of manipulation in the annual

accounts for the year 2004-2005 in order to lure investors,

was quashed and set aside.

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3. Pending proceedings under FUTP regulations, in June,

2008, SEBI filed complaint under Section 200 of the Code of

Criminal Procedure, 1973 read with Section 24(1) of SEBI Act,

1992 alleging violation of Section 12 of the SEBI Act, on the

following ground;

(i) The Accused No.1-Company, its promoters and

directors, who are Accused Nos. 2 to 4 and associates entities/

persons/brokers viz. Accused Nos. 5 to 7 acted fraudulently in

concert with each other in order to have unlawful gain and

indulged in prior manipulation, artificial, market creation.

Thus, all the accused violated Regulation 3(a) (b) (c) and (d)

and 4(1)(2)(k)(r) of SEBI (Prohibition of Fraudulent and Unfair

Trade Practices) Regulations, 1995 and 3(i)(ii) of SEBI

(Prohibition of Insider Trader) Regulations, 1992.

(ii) The Accused No.1-Company failed to follow the normal

accounting practices and provided misleading information in

the balance-sheet.

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(iii) That whole time directors i.e. Accused Nos. 2, 3 and 4 of

the Company were responsible for making misleading

announcement, declaring inflated and manipulated financial

results and providing misleading information to SEBI.

4. On 27th September, 2016, Applicants (Accused) moved

an application for discharge from SEBI Special Case

No.177/2015, on the ground that the Securities Appellate

Tribunal, Mumbai in its decision dated 15th October, 2018

having held that charge of manipulative trading by the

Company in its own shares by the Applicant had failed in

absence of any link being established by the Respondent-

Board between any of the traders and the Company,

Prosecution cannot sustained and the continuation of the

proceeding would an abuse of process of Court. Thus, urged

that, since Applicants have been exonerated on merits in the

adjudication proceedings and findings are binding on the

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Complainant, the allegations that Accused-Applicant

violated the Regulations FUTP and 3(i)(ii) of SEBI

(Prohibition of Insider Trading) Regulations, 1992 and offence

under Section 24(1) of SEBI Act cannot be sustained.

5. The learned Additional Sessions Judge rejected the

application and refused to pass the discharge order. Feeling

aggrieved by this order, Applicants have preferred this

revision.

6. Heard. Learned Counsel for the parties.

7. Perused the complaint, order dated 15 th October, 2018

passed by the Securities Appellate Tribunal, Mumbai and the

complaint in question.

8. Learned Counsel for the Applicants would submit that

findings in adjudication proceedings being binding and

conclusive, Prosecution cannot be sustained. It is argued that

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although the SEBI has preferred an appeal against the

decision of Securities Appellate Tribunal, the Hon 'sble Apex

Court vide order dated 27th March, 2019 admitted the appeal;

but application for stay was dismissed. Learned Counsel in

support of his submission would rely on the judgment of the

Hon'sble Apex Court in the case of Radheshyam Kejriwal Vs.

State of W.B. (2011) 3 SCC 581.

9. In the case in hand, Applicants have been exonerated in

the adjudication proceedings on the allegations for which,

they have been prosecuted by the SEBI. In the case of K.C.

Builders (2004) 2 SCC 731; the Hon'sble Apex Court had taken

a view that when there is categorical finding in the

adjudication proceedings exonerating the person, it is binding

and conclusive and thus, the Prosecution cannot be allowed

to stand. In the case of Radheyshyam Kejriwal (Supra), the

Hon'sble Apex Court has held that;

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"Adjudication proceedings and criminal Prosecution can be launched simultaneously and the finding in the adjudication proceedings in favour of the person facing trial for identical violation will depend upon the nature of finding. If the exoneration in adjudication proceedings is on technical ground and not on merit, Prosecution may continue and in case of exoneration, is on merits where the allegation is found to be not sustainable at all and the person held innocent, criminal Prosecution on the same set of facts and circumstances cannot be allowed to continue."

10. In case in hand, the Applicants have been exonerated in

the adjudication proceedings on merits and not on technical

ground, and therefore the Prosecution for identical violation

shall continue, if the order passed by Securities Appellate

Tribunal is quashed and set aside by the Hon 'sble Supreme

Court in Civil Appeal, preferred by the SEBI against the

decision of Securities Appellate Tribunal, Mumbai in Appeal

No.60/2008. Thus, for the reasons stated above, the

proceedings in the complaint bearing C.C. No.931/M/2008,

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pending on the file of Additional Chief Metropolitan

Magistrate, 9th Court, Bandra, Mumbai, against the

Applicants, shall remain stayed till the decision of the

Hon'sble Apex Court in the Civil Appeal instituted by the SEBI

against the decision of the Securities Appellate Tribunal in

Appeal No. 60/2008.

11. Revision Application is admitted. Hence, Rule.

                                           (SANDEEP K. SHINDE, J.)



                                             Digitally signed
                              MOHAMMAD       by MOHAMMAD
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                              NAJEEB         MOHAMMAD
                              MOHAMMAD       QAYYUM
                              QAYYUM         Date: 2021.10.14
                                             14:01:27 +0530

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