2010 (10) TMI 88 - HC - Companies Law

Whether violation of regulations 73 and 74 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 punishable under section 24 of the Securities and Exchange Board of India Act, 1992 is a continuing offence or not? Held that - In this case, under section 12(1B) no person could have carried out a collective investment scheme unless he obtained a certificate of registration from the Board in accordance with the Regulations framed under the Act. Regulations were framed in the year 1999 and notified to all concerned including the petitioner. As per regulation 68 any person operating a collective investment scheme at the commencement of the Regulations was under legal obligation to get the existing collective investment scheme registered with the Board and obtain a certificate of registration. If it failed to do so, it was a legal mandate to such person to wind up the existing collective investment scheme by following the procedure as prescribed under regulation 73. Regulation 74 further provided that existing collective scheme which was not desirous of obtaining provisional registration from the Board was legally bound to formulate a scheme of repayment and make such repayment to the existing investors in the manner specified in regulation 73. Nothing has been placed on record to suggest that petitioners had taken any step to get registered with the Board or wound up the collective investment scheme and made the payment to the investors. The amount still continues to be retained by the petitioners, thus, infringement of regulations 73 and 74 is continuing in nature and limitation envisaged under section 468 of Cr. P.C. would not be attracted. Appeal dismissed.

Summary

Issues Involved:
1. Whether the violation of regulations 73 and 74 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 is a continuing offence.
2. Whether the complaint filed by the Securities and Exchange Board of India (SEBI) was barred by time under section 468 of the Code of Criminal Procedure, 1973 (Cr.P.C.).

Issue-wise Detailed Analysis:

1. Continuing Offence under Regulations 73 and 74:
The core issue in this case was whether the violation of regulations 73 and 74 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999, punishable under section 24 of the Securities and Exchange Board of India Act, 1992, constitutes a continuing offence. The petitioner had failed to register a collective investment scheme with SEBI or wind up the scheme and repay the investors as mandated by regulations 73 and 74. Regulation 68 required any person operating a collective investment scheme at the commencement of the regulations to apply for registration with SEBI. If the application was not made or rejected, the scheme had to be wound up, and the investors repaid as per regulations 73 and 74. The court concluded that the infringement of these regulations was a continuing offence since the petitioners had not taken steps to comply with the regulations, and the amount collected from investors was still retained by them.

2. Barred by Time under Section 468 of Cr.P.C.:
The petitioners contended that the complaint was time-barred under section 468 of Cr.P.C., as the alleged offence occurred in 2000, and the complaint was filed after more than three years. However, the court referred to section 472 of Cr.P.C., which states that in the case of a continuing offence, a fresh period of limitation begins to run at every moment the offence continues. The court cited several precedents, including the Supreme Court's judgments in State of Bihar v. Deokaran Nenshi and Bhagirath Kanoria v. State of Madhya Pradesh, which defined a continuing offence as one that arises from a failure to comply with a legal obligation that persists over time. The court held that the failure to wind up the collective investment scheme and repay the investors was a continuing offence, and thus, the limitation period under section 468 of Cr.P.C. did not apply.

Conclusion:
The court dismissed the petition, affirming that the violation of regulations 73 and 74 was a continuing offence and the complaint was not barred by limitation. The petitioners were under a legal obligation to comply with the regulations, and their failure to do so constituted an ongoing infringement, making the offence continuing in nature. The judgment emphasized the importance of adhering to the legal requirements for collective investment schemes and upheld SEBI's regulatory authority in enforcing compliance.