Gujarat High Court
Raejshkumar Durgadas Daryani vs State Of Gujarat on 5 August, 2025
NEUTRAL CITATION
R/SCR.A/5490/2015 ORDER DATED: 05/08/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 5490 of 2015
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RAEJSHKUMAR DURGADAS DARYANI & ORS.
Versus
STATE OF GUJARAT & ANR.
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Appearance:
ABATED for the Applicant(s) No. 3
MR RJ GOSWAMI(1102) for the Applicant(s) No. 1,2,4
MR CHINTAN DAVE, APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
Date : 05/08/2025
ORAL ORDER
Learned advocate for the petitioners does not press
present petition qua the offences of the IPC is concerned and his
prayer is limited to the offence of the Securities Contract
Regulation Act. Accordingly, present petition stands dismissed
as not pressed qua offences of the IPC is concerned.
1. Rule returnable forthwith. Learned APP for the respondent
- State wavies service of notice of Rule for and on behalf of the
respondent State.
2. By way of this application under Article 226 of the
Constitution of India read with Section 482 of the Code of
Criminal Procedure, 1973, petitioner prayed to quash and set
aside FIR being C.R.No.I-217 of 2014 registered with Sector 21
Police Station, Gandhiangar for the offences punishable under
Sections 13 and 23(1) of the Securities Contract Regulation Act
qua the petitioner herein.
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3. Brief facts of the case are as under:-
3.1. F.I.R has been filed by respondent No. 2 on 17/11/2014. It
is alleged that on 17/11/2014 at about 12:45 PM the
complainant has received secret information that in shop No.
G.4 Amar Mobile, Shrinath Complex, Sector-22. petitioner No. 1
Le Rajeshkumar Durgadas Dariyani and his partners are illegally
contacting the clients from their mobile phone and by using their
computers and other electronic gadgets they are doing illegal
activity of "Dabba Tradding" of Shares and with that information
about at 05:30 PM the complainant and other police staff with 2
panchs went to Shop No. 4, Shrinath Complex, Sector-22,
Gandhinagar wherein petitioner No. 1 Le Rajeshkumar Durgadas
Daryani Rajeshkumar Durgadas Gurnani have taken shop on
rent from witness No. 8 in which accused no. I use the account
no. V449K01 of one Anupbhai shah and online computer rates of
shares were filling up in which petitioner No.2 i.e Sanjaybhai
Baldevbhai Patel was writing deals of shares on raw book and
petitioner No. 4 i.e Pranav Kantilal Trivedi was writing deals on
sheet according to the information getting from laptop through
internet and accused No. 4 was giving advice to buy the shares
and petitioner No. 3 ie Pravin Rambahi Patel was helping
everyone to write and petitioner No. 1 was making deal of shares
from through net on computer and doing such activity without
registration of rules of SEBI and was not paying taxes to
government by illegal buying and selling of shares to the clients
and have done breach of trust and cheating with government
and doing illegal "Dabba Trading" by making raw receipts and by
using electronic gadgets. Hence, FIR is filed.
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R/SCR.A/5490/2015 ORDER DATED: 05/08/2025
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4. The principal contention advanced by learned advocate
appearing on behalf of petitioner is that cognizance of the
offences under the Act cannot be taken on the basis of a police
report, in view of the statutory bar contained in Section 26 of the
Act. Accordingly, he submits that the filing of the FIR against the
petitioner is a clear abuse of the process of law.
4.1 In support of his submission, reliance has been placed on
the judgment of a Co-ordinate Bench in the case of Milanbhai
Manubhai Shah v. State of Gujarat (Special Criminal
Application No. 1841 of 2018), as well as the decision in
Bhagirathsinh Rajendrasinh Solanki & 13 others v. State of
Gujarat (Special Criminal Application No. 10070 of 2016).
4.2 He, therefore, concluded his submissions by praying that
the present petition be allowed and that the FIR, along with all
consequential proceedings arising therefrom, be quashed.
5. On the other hand, learned APP prays to pass necessary
orders.
6. I have heard learned advocates for the petitioner and
learned APP for the respondent-State.
7. At the outset, I may refer Section 26 of the Act, which is as
under:-
"26. Cognizance of offences by courts.
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(1) No court shall take cognizance of any offence
punishable under this Act or any rules or regulations or
bye-laws made thereunder, save on a complaint made
by the Central Government or State Government or the
Securities and Exchange Board of India or a recognised
stock exchange or by any person.
(2) No court inferior to that of a Court of Session
shall try any offence punishable under this Act."
8. A bare perusal of Section 26 of the Act makes it evident
that the Court is barred from taking cognizance of any offence
punishable under the Act, except upon a complaint made by the
Central Government, State Government, the Securities and
Exchange Board of India (SEBI), a recognized stock exchange, or
by any person as specified therein.
8.1. It is thus well-settled that while the police may register an
FIR and investigate the offence, the Court cannot take
cognizance thereof unless a complaint, as defined under Section
2(d) of the Code of Criminal Procedure, 1973, is filed before the
competent Court by a person authorized under Section 26 of the
Act.
8.2. The issue raised by the petitioner stands squarely covered
by the judgment rendered in Milanbhai Manubhai Shah (supra),
wherein the Co-ordinate Bench had referred to its earlier
decision dated 27.04.2015 passed in Special Criminal
Application No.4780 of 2014. Paragraph 7 of the said
judgment, being relevant, is reproduced hereinbelow:
"7. The issue raised in this writapplication is
squarely covered by an order passed by this Court dated
27/04/2015 in the Special Criminal Application No.4780
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of 2014. The order dated 27/04/2015 is extracted
hereunder:-
Rule returnable forthwith. Mr.Shah, the learned APP
waives service of notice of Rule for and on behalf of the
respondents.
By this writ application under Article 226 of the
Constitution of India, the applicantsoriginal accused have
prayed for the following reliefs:
(A) Your Lordships may be pleased to quash and set
aside FIR being C.R. NO.II68 of 2011 for the offence
under Sections 23(1) of the Securities Contract
(Regulation) Act, 1956 and under Section 15H(A)
of the Securities and Exchange Board of India Act, 1992
and the chargesheet filed thereupon (Annexure A)
and the impugned order dated 19.09.2014 passed
by the learned 3rd Additional Sessions Judge at
Mahesana in application below Exhibit 4. (Annexure B).
(B) Pending admission, hearing and final disposal of this
petition Your Lordships may be pleased to stay the
further proceedings pursuant to the FIR being C.R. NO.II-
68 of 2011, registered at Mahesana B Division Police
Station on 25.05.2011 for the offence under Sections
23(1) of the Securities Contract (Regulation) Act, 1956
and under Section 15H(A) of the Securities and Exchange
Board of India Act, 1992 and the chargesheet filed
thereupon (Annexure A).
(C) To pass such other further order as deemed fit in the
facts and circumstances of the case.
On 18th November 2014 the following order was passed:
"Issue notice for final disposal to the respondents,
returnable on 18th December 2014. Mr.Pujari waives
service of notice for and on behalf of the respondents. It
appears that the respondent no.2, a Police Constable of
Mehsana BDivision Police Station, Mehsana, received an
information, and based upon such information, lodged an
FIR against the applicants herein for the offence
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punishable under Section 23(1) of the Securities
Contracts (Regulation) Act, 1956 and Section
15H(A) of the Securities and Exchange Board of
India Act, 1992. It also appears that on conclusion of the
investigation, chargesheet has been filed and the case as
on today is pending in the Court of the 3 rd Additional
Sessions Judge, Mehsana, being sessions triable case.
It appears that the applicants herein filed an application
for discharge under Section 227 of the Code of Criminal
Procedure. However, the same came to be rejected by the
learned 3rd Additional Sessions Judge, Mehsana, vide
order dated 19th September 2014. It is this order before
me which is the subject matter of challenge.
Prima facie, I am of the view that while
rejecting the discharge application, the learned
Judge appears to have missed the effect of
Section 26 of the Act, 1956 and Section 26 of the SEBI
Act, 1992.
My attention has been drawn to Section 26 of the
Securities Contracts (Regulation) Act, 1956, which is with
regard to cognizance of offences by courts. Section 26
reads thus :
26. Cognizance of offences by courts.(1) No court shall
take cognizance of any offence punishable under this Act
or any rules or regulations or byelaws made thereunder,
save on a complaint made by the Central Government or
State Government or the Securities and Exchange Board
of India or a recognized stock exchange or by any person.
(2) No court inferior to that of a Court of Session shall try
any
offence punishable under this Act.
The plain reading of Section 26 of the Act, 1956 would
suggest that no court will be able to take cognizance of
any offence punishable under the Act except on a
complaint made by the Central Government or State
Government or Securities & Exchange Board of India or a
recognized Stock Exchange or any person.
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Let me assume for the moment that the respondent no.2
herein would fall within the ambit of 'any person'.
The issue which falls for my consideration is,
whether the court before whom the chargesheet is filed
can take cognizance of the offence. The word 'complaint'
figuring under Section 26 of the Act means, a complaint
in writing before the court as defined under Section 2(d)
of the Code of Criminal Procedure. I am conscious of the
fact that Section 25 makes the offence under Section 23
of the Act a cognizable offence. Since Section 23 is a
cognizable offence, the police would definitely have the
power to investigate. To this extent, there is no problem.
The police has investigated, chargesheet is filed. Now the
stage has come for the court to take cognizance. In my
view, the Sessions Court will not be able to take
cognizance on the police report in view of the specific bar
contained in Section 26 of the Act. The same is the
position with Section 26 of the Securities and Exchange
Board of India Act, 1992. Section 26 reads thus :
26. Cognizance of offences by courts.(1) No court shall
take cognizance of any offence punishable under this Act
or any rules or regulations made thereunder, save on a
complaint made by the Board.
(2) No court inferior to that of a court of session shall try
any
offence punishable under this Act.
The law in this regard is wellsettled. Although the police
has the power to investigate the offence alleged against
the applicant and chargesheet has been filed, the Court
will not be able to take cognizance in view of the specific
bar. The investigation carried out by the police can be
used for the purpose of filing a complaint in writing
before the appropriate court. To be precise,
whatever materials have been collected by the
Investigating Officer could be used by the authority for
the purpose of filing a complaint before the competent
court.
Having heard Mr.Gadhavi, the learned advocate
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appearing on behalf of the applicants and having gone
through the materials on record, I am of the view that the
applicants have been able to make out a strong prima
facie case to have an interim order of stay of further
proceedings of Sessions Case No.20 of 2014 pending in
the Court of the 3rd Additional Sessions Judge,
Mehsana. I, accordingly, grant such relief. Direct service
is permitted."
Mr. NJ Shah, the learned APP appearing for the
State very fairly submitted that the position of law
being well settled, the prosecution must fail.
In the aforesaid view of the matter, this application is
allowed. The proceedings of Sessions Case No.20 of
2014 pending in the Court of 3rd Additional Sessions
Judge, Mehsana are hereby quashed. All
consequential proceedings pursuant thereto stand
terminated. Rule is made absolute. Direct service is
permitted."
9. I have no hesitation in accepting indeed, I unreservedly
accept the submission advanced by learned advocate for the
petitioner, having due regard to the settled position of law as
succinctly elucidated in the aforesaid judgments.
10. The net result of the foregoing discussion is that the writ
petition succeeds and is accordingly ALLOWED.
11. The FIR being C.R.No.I-217 of 2014 registered with Sector
21 Police Station, Gandhiangar for the offences punishable
under Sections 13 and 23(1) of the Securities Contract
Regulation Act qua the petitioners herein are hereby quashed
and set aside. Rule is made absolute. Direct service is permitted.
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12. However, it is clarified that this order shall not preclude the
competent authority from initiating prosecution by filing a
criminal complaint, based on the material collected during the
course of investigation in connection with the aforesaid FIR, in
accordance with law.
13. FIR in question and subsequent proceedings arising there-
from in respect of the offence punishable under the IPC stands
continued; without being influenced by any observations made
in this order.
(J. C. DOSHI,J)
SATISH
