2008 (2) TMI 614 - HC - Companies Law

Offences by companies - petitions under section 482 of the Code of Criminal Procedure, 1973 seeking the quashing of criminal complaints filed against several plantation companies by the Securities and Exchange Board of India - Held that - This court does not find any ground having been made out in any of these petitions for interference in exercise of its powers under section 482 of the Code of Criminal Procedure. Accordingly, the petitions and the applications are dismissed but there will be no orders as to costs. Any observation made in this order will not influence the verdict that would be reached by the trial court in each of the cases upon an independent assessment of the evidence on record.

Issues Involved:
1. Quashing of criminal complaints against plantation companies by SEBI.
2. Requirement of prior investigation by SEBI before filing criminal complaints.
3. Allegations against directors without specifying their roles.
4. Liability of directors under Section 27 of the SEBI Act.
5. Rebuttal of presumption of guilt by directors.
6. Use of Form No. 32 to prove cessation of directorship.
7. Mistaken identity claims.

Detailed Analysis:

1. Quashing of Criminal Complaints Against Plantation Companies by SEBI:
The petitions sought to quash criminal complaints filed by SEBI against several plantation companies for offences under sections 11B, 12(1B) read with section 24 of the SEBI Act, 1992, and regulations 5(1), 68(1), (2), 73, and 74 of the CIS Regulations, 1999. SEBI initiated these complaints due to non-compliance by the companies with the regulations concerning collective investment schemes. The court noted that SEBI had taken action following orders from a Division Bench, which included freezing bank accounts of the companies and their directors to protect investors' interests.

2. Requirement of Prior Investigation by SEBI Before Filing Criminal Complaints:
The petitioners argued that SEBI should have conducted an enquiry into the affairs of the companies before filing criminal complaints, as mandated by sections 11AA, 11B, and 11C of the SEBI Act. The court, however, did not find this argument persuasive, indicating that the complaints contained sufficient averments to proceed without a prior detailed investigation.

3. Allegations Against Directors Without Specifying Their Roles:
The petitioners contended that the complaints were vague and did not specify the roles of individual directors in the alleged offences. The court referred to the Supreme Court's ruling in N. Rangachari v. Bharat Sanchar Nigam Ltd., which stated that as long as the complaint averred that the directors were in charge of and responsible for the company's affairs, it was sufficient at the complaint stage.

4. Liability of Directors Under Section 27 of the SEBI Act:
Section 27 of the SEBI Act holds every person in charge of and responsible for the conduct of the company's business at the time the offence was committed, liable. The court emphasized that the presumption of guilt under this section could be rebutted by proving lack of knowledge or due diligence to prevent the offence.

5. Rebuttal of Presumption of Guilt by Directors:
The court highlighted that the burden of proving non-liability rested on the directors, who could present evidence during the trial to show they were not responsible for the company's affairs at the relevant time. This stage arises only after the complainant has discharged the initial burden of proof.

6. Use of Form No. 32 to Prove Cessation of Directorship:
The court acknowledged instances where petitioners used Form No. 32 to prove they had ceased to be directors at the time of the offence. It noted that certified copies of Form No. 32 could be used as evidence to rebut the presumption of guilt if filed before the commission of the offence. The court referred to previous judgments where such documents were accepted as proof.

7. Mistaken Identity Claims:
In one case, the petitioner claimed mistaken identity, asserting he was not associated with the accused company. The court noted that the trial had progressed to final arguments and the petitioner had already presented this defense. Hence, the court declined to interfere with the ongoing trial proceedings.

Conclusion:
The court dismissed the petitions, finding no grounds for interference under section 482 of the Code of Criminal Procedure. It held that the complaints made out a prima facie case against the petitioners and that any defense regarding their non-liability should be presented during the trial. The court emphasized that its observations would not influence the trial court's independent assessment of the evidence.

← Previous Next →