2010 (1) TMI 572 - HC - Companies Law

Criminal complaint filed by the respondent against the petitioner under sections 24(1) and 27 of Securities and Exchange Board of India Act, 1992 Held that - There can be no valid legal objection to considering the certified copy of Form 32 issued by Registrar of Companies correctness of which is unimpeachable and which can be otherwise be read in evidence without any formal proof. A criminal trial is a serious matter, having grave implications for an accused, who not only has to engage a lawyer and incur substantial expenditure on defending him, but, has also to undergo the ordeal of appearing in the Court on every date of hearing, sacrificing all his engagements fixed for that day. If he is in business or profession, he has to do it at the cost of affecting his business or profession, as the case may be. If he is in service, he has to take leave on every date of hearing. Besides inconvenience and expenditure involved, a person facing criminal trial undergoes constant anxiety and mental agony, as the sword of possible conviction keeps hanging on his head throughout the trial. Therefore, when there is a reasonable certainty that the trial is not going to result in conviction, it would be neither fair nor reasonable to allow it to proceed against a person such as the petitioner in this case. Thus the criminal complaint in question, to the extent, it pertains to the petitioner, is hereby quashed.

Summary

Issues Involved:
1. Quashing of criminal complaint under sections 24(1) and 27 of the Securities and Exchange Board of India (SEBI) Act, 1992.
2. Resignation of the petitioner as a Director of M/s. Fair Deal Forests Limited.
3. Applicability of Section 27 of SEBI Act and Section 141 of Negotiable Instruments Act.
4. Consideration of Form 32 as evidence.
5. Vicarious liability of the petitioner for the company's actions.

Detailed Analysis:

1. Quashing of Criminal Complaint:
The petitioner sought to quash the criminal complaint filed by the respondent under sections 24(1) and 27 of the SEBI Act, 1992. The complaint alleged that the petitioner, as a Director of M/s. Fair Deal Forests Limited, was responsible for the company's failure to comply with SEBI regulations regarding Collective Investment Schemes.

2. Resignation of the Petitioner:
The petitioner argued that she had resigned as a Director on 30-3-1997 and submitted Form-32 to the Registrar of Companies, which was accepted. The court accepted the certified copy of Form-32 as evidence, establishing that the petitioner had indeed resigned before the SEBI regulations were framed.

3. Applicability of Section 27 of SEBI Act and Section 141 of Negotiable Instruments Act:
The court noted that the provisions of section 27 of the SEBI Act are identical to section 141 of the Negotiable Instruments Act. The interpretation given to section 141 would thus apply to section 27 of the SEBI Act. The court relied on previous judgments, including K.K. Ahuja v. V.K. Vora, which clarified the liability of directors and officers under these sections.

4. Consideration of Form 32 as Evidence:
The court emphasized the authenticity and conclusive nature of the certified copy of Form 32. It held that when such a document is available, it would be futile to re-examine the petitioner's directorship status. The court referenced previous judgments, including Dr. (Mrs.) Sarla Kumar v. Srei International Finance Ltd., which supported the acceptance of Form 32 as conclusive evidence of resignation.

5. Vicarious Liability of the Petitioner:
The court concluded that since the petitioner was not a Director at the time the SEBI regulations were framed, she could not be held vicariously liable for the company's violations. There were no allegations that the petitioner was involved in the company's decisions or that the violations occurred with her consent or connivance. The court distinguished this case from Bharat Poonam Chand Shah v. Dominos Printech India (P.) Ltd., noting that the authenticity of Form 32 was not disputed in the present case.

Conclusion:
The court quashed the criminal complaint against the petitioner, recognizing the certified copy of Form 32 as conclusive evidence of her resignation. The trial was allowed to proceed against other accused persons. The decision highlighted the importance of authentic public documents in determining the liability of individuals in corporate offenses.