Mega Corporation Ltd. And Ors vs Union Of India And Anr
2021 Latest Caselaw 15190 Bom

Rane                           1/11                 REVN-563-2019



IN THE HIGH COURT OF JUDICATURE AT BOMBAY

             CRIMINAL APPELLATE JURISDICTION

CRIMINAL REVISION APPLICATION NO. 563 OF 2019



Mega Corporation Limited and Ors.            .....Applicants
     V/s.
Union of India and Ors.                      .....Respondents

                       ****

Mr. Santosh Avhad i/by. Jayakar & Partners, Advocate for
     the applicants.

Ms. Veera Shinde, APP for State.

Ms. Sahiba Ansari, Advocate for respondent no.2.

                  Coram : Sandeep K. Shinde, J.

Friday, 22nd October, 2021.

P.C. :

1. Matter has been moved for speaking to minutes of the order dated 14th October, 2021.

2. Learned Counsel for the applicants, points out, that in para-10, last line, the number of proceedings, stayed by this Court is incorrect and needs to be deleted. The said correction is carried out, to read as :

"Thus, for the reasons stated above, the proceedings in SEBI Special Case No.177 of 2015 Rane 2/11 REVN-563-2019

before the SEBI Special Judge, Sessions Court, Mumbai, against the Applicants, shall remain stayed till the decision of the Hon'ble Apex Court in the Civil Appeal instituted by the SEBI against the decision of the Securities Appellate Tribunal in Appeal No.60/2008."

3. The corrections be carried out and the order be read accordingly.

(Sandeep K. Shinde, J.) Rane 3/11 REVN-563-2019

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
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correctness, legality and propriety of order dated 7th

October, 2019 below Exhibit-13 in SEBI Special Case

No.177/2015 passed by the 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 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 10 th

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's prospects and business plans

which projected unduly high revenues and profits for the Rane 5/11 REVN-563-2019

company. Whereafter interim exparte restrain order was

passed by the Board on 24 th October, 2005. It was

confirmed on 24th July, 2006 and was in force till the final

order was passed on 28th 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 Rane 6/11 REVN-563-2019

aside.

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 15 th

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 Complainant, Rane 8/11 REVN-563-2019

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 15th 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 although the SEBI has preferred an appeal

against the decision of Securities Appellate Tribunal, the Rane 9/11 REVN-563-2019

Hon'ble Apex Court vide order dated 27 th 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'ble 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'ble 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'ble Apex

Court has held that;

"Adjudication proceedings and criminal Prosecution can be launched simultaneously and the finding in the adjudication proceedings in Rane 10/11 REVN-563-2019

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'ble 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 SEBI Special

Case No.177 of 2015 before the SEBI Special Judge,

Sessions Court, Mumbai, against the Applicants, shall

remain stayed till the decision of the Hon'ble Apex Court

in the Civil Appeal instituted by the SEBI against the Rane 11/11 REVN-563-2019

decision of the Securities Appellate Tribunal in Appeal

No. 60/2008.

11. Revision Application is admitted. Hence, Rule.

(SANDEEP K. SHINDE, J.)

Najeeb..

Note : Correction is carried out in para-10 in the last line only, pursuant to speaking to minutes order dated 22nd October, 2021.

         Digitally
         signed by
         NEETA
NEETA    SHAILESH
SHAILESH SAWANT
SAWANT   Date:
         2021.10.22
         14:08:18
         +0530