Delhi High Court
Suresh Batra & Ors. vs Securities & Exchange Board Of ... on 30 May, 2011
Author: Mukta Gupta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Crl. Rev. Petition No. 88/2010
% Reserved on: 23rd May, 2011
Decided on: 30th May, 2011
SURESH BATRA & ORS. ..... Petitioners
Through: Mr. Anil Hooda, Advocate.
versus
SECURITIES & EXCHANGE BOARD OF INDIA ..... Respondent
Through: Mr. Sanjay Mann, Advocate.
Coram:
HON'BLE MS. JUSTICE MUKTA GUPTA
1. Whether the Reporters of local papers may Not Necessary
be allowed to see the judgment?
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be reported Yes
in the Digest?
MUKTA GUPTA, J.
1. By the present revision petition, the Petitioners seek setting aside of the
order dated 12th November, 2009 passed by the learned Addl. Sessions Judge
framing notice under Section 251 Cr.P.C. against them for offences
punishable under Section 24(1) read with Section 27 of the Security and
Exchange Board of India Act, 1992(in short "SEBI Act").
2. Brief facts leading to the filing of the present petition are that M/s
Master Green Forests Ltd. was incorporated on 3rd June, 1992 with three
Directors Dayaram Verma, Santosh Verma and Amrit Lal Verma.
Memorandum of Association was submitted to the Registrar of Companies
Act, Punjab having its office at Jalandhar City. Thereafter, on 15th
December, 2003 SEBI filed a complaint under Section 200 Cr.P.C. against the
Company, Petitioners and the three other Directors of the Company. In the
said complaint it is alleged that the said Company operated Collective
Investment Schemes and raised huge amount from general public without
complying with rules and regulations issued by SEBI in regard to the
Collective Investment Schemes. Pursuant to the press release dated 26th
November, 1997 and a public notice dated 18th December, 1997 notified by
the SEBI the accused Company filed details with SEBI in regard to its
Collective Investment Scheme. Thereafter, SEBI in the year 1999 vide its
public notice dated 10th December, 1999 & letters dated 15th December, 1999
and 29th December, 1999 had intimated the Petitioners that they are required
to send the information such as memorandum to all the investors detailing the
statement of affairs of the C.I.S., the amount repayable to each investor and
the manner in which such amount is determined latest by 28 th February, 2000
which date was then extended upto 31st March, 2000 vide a press release.
However, the accused Company neither applied for the registration under the
said regulation nor took any steps for winding up of the scheme nor
repayment to the investors as provided under the regulations and as such had
violated the provisions of Section 12(1B) of SEBI Act, 1992 and Regulation
5(1) read with Regulations 68(2), 73 and 74. On 7th December, 2000 SEBI
directed the accused Company to refund the money collected under the C.I.S.
to the persons who had invested the money within a period of one month from
the date of said directions and a notice was served in this regard. However,
despite repeated directions and reminders sent by SEBI, the accused Company
did not comply with the said Regulations and thus has committed the violation
of Sections 11(B), 12(B) r/w regulation 68(1), 68(2), 73 & 74 of SEBI(CIS)
Regulation 1999 punishable under Section 24(1)8 SEBI Act. It is alleged that
the accused Company and its promoters, Directors in-charge responsible for
the conduct of its business are liable under Section 27 of SEBI Act, 1992.
3. Learned counsel for the Petitioners contends that the Petitioners herein
are not the Directors, promoters or in-charge of the accused Company. They
are only the shareholders and have no role to play in the day to day working
of the Company. Their names appear in the Memorandum in the capacity of
shareholders and not under the head of Directors, promoters or persons in-
charge of the Company. It is also stated that there is no specific allegation
qua the Petitioners in the complaint dated 15th December, 2003. In the year
2009 an application being Crl. M.C. 1367/2007 was filed by one of the
shareholders Sanjeev Kumar wherein this Court vide its order dated 20th
October, 2009 had observed that there was no averment regarding the
Petitioner therein and no specific role had been assigned to him by SEBI in
their complaint and hence his petition was allowed. This Court held that the
complaint qua the Petitioner therein was not maintainable and the trial Court
was directed to proceed with the complaint case minus Sanjeev Kumar. It is
contended that the case of the Petitioners herein is similar to that of Sanjeev
Kumar and on parity the Petitioners be granted the relief prayed for.
4. A brief narration of facts relevant to the case is that the Government of
India in order to regulate the excessive fund raising by the private
entrepreneur and floating of multiple schemes throughout the country vide its
press release dated 18th November, 1997 conveyed that such schemes should
be treated as Collective Investment Schemes under the SEBI Act, 1992 and
SEBI was asked to frame regulations in this regard. The Respondent SEBI in
the year 1999, notified Securities and Exchange Board of India [Collective
Investment Scheme] Regulations, 1999 to regulate the floating of Collective
Investment Scheme (in short "C.I.S.") by the Companies. The accused
company is a registered company under the provisions of Companies Act. It
operated a Collective Investment Scheme and raised huge amounts from
general public. Pursuant to the press release dated 26th November, 1997 and
public notice dated 18th December, 1997, the company filed information with
the respondent SEBI regarding its C.I.S. The accused company was then
required to follow the provisions under Chapter IX of the Regulations which
required any person who had been operating a C.I.S. at the time of
commencement of the said Regulations to be an existing C.I.S. Also any
person who immediately prior to commencement of the Regulations operating
such scheme was required to make an application to the SEBI for grant of
registration within a period of 2 months, from the date of notification of the
said Regulations. As per the Regulation 73(1) if a company failed to make an
application for the registration, it ought to have wound up the existing C.I.S.
and repay the amount to the investors. Despite repeated directions and
reminders sent by the SEBI, to the accused Company i.e. M/s Master Green
Forest Limited, the said company failed to comply with the regulations and
winding up the scheme. In the year 2003 complaint case No. 11/2009 was
filed against the Company and the Petitioners. Taking cognizance of the said
complaint learned Addl. Sessions Judge on 12 th November, 2009 framed
notice against the Petitioners along with the Directors of the said Company.
This order of learned Addl. Sessions Judge is impugned in the present
petition.
5. A perusal of the Memorandum of Association of the accused Company
shows that the Petitioners herein are only the shareholders in the Company
and were neither the promoters nor Directors nor in-charge and responsible
for the Company's day to day working. There is no specific role attributed to
the Petitioners in the complaint dated 15th December, 2003 filed against the
Petitioners and the accused Company. Hon'ble Supreme Court in K.K. Ahuja
vs. V.K. Vora & Anr., 2009 (10) SCC 48 has held that a mere averment that
person is in-charge of the Company i.e. in-charge of the day to day
management of the Company cannot make him vicariously liable. Their
Lordships further clarified the position of directors who would be held
responsible for the offences committed by the Company. In the case at hand,
it is clear that the Petitioners are neither the Directors nor in anyway
related/involved in the management or day to day affairs of the Company.
They are only the shareholders and thus cannot be held liable for the offences
committed by the Company.
6. In view of the facts and circumstances of the case, the order of learned
Additional Sessions Judge dated 12th November, 2009 framing notice against
the Petitioners is set aside
7. Petition is disposed of.
(MUKTA GUPTA)
JUDGE
MAY 30, 2011
dk
