2008 (1) TMI 816 - HC - Companies Law

Criminal Complaint pending before the learned Additional Sessions Judge, Delhi ( ASJ ) seeked to be quashed - Held that - An attempt was made by learned counsel for the SEBI to contend that the offence was a continuing one and took place from the very date that the company was incorporated and in any event from the date the SEBI Act was notified, i.e., April 4, 1992. The court is unable to accept this submission. There is not a whisper of an averment to this effect anywhere in the complaint. The time of commission of an offence is a matter of fact and not conjecture. In that view of the matter, Criminal Complaint No. 17 of 2004 and the order dated January 14, 2004, passed by the learned ACMM summoning the petitioners is hereby quashed and set aside.

Summary

Issues:
Petition under section 482 of CrPC seeking quashing of Criminal Complaint No. 17 of 2004 before ASJ. Allegations by SEBI against company and directors for failure to comply with regulations. Directors' liability after resignation. Interpretation of section 27 of SEBI Act regarding liability of persons in charge of company.

Analysis:
1. The petition sought to quash a criminal complaint filed by SEBI against a company and its directors for failing to comply with regulations related to a collective investment scheme. The complaint alleged intentional evasion of repayment by the company, leading to liability of the directors under section 27 of the SEBI Act.

2. The directors contended that they had resigned before the company's non-compliance and thus should not be held liable. They presented evidence of their resignation through Form No. 32 filed with the Registrar of Companies, emphasizing that their directorship had ceased prior to the alleged offence.

3. SEBI argued that the resignation of directors does not absolve them of liability as per section 27 of the SEBI Act. The court referred to precedents and highlighted the importance of the time of the offence for determining liability, emphasizing the need for the complainant to establish the directors' involvement at that specific time.

4. The court analyzed section 27 of the SEBI Act, drawing parallels with the Negotiable Instruments Act, and emphasized the requirement to prove the directors' involvement at the time of the offence. It noted that the complaint itself indicated a later filing date compared to the alleged non-compliance period, suggesting condonation of non-compliance before the directors' resignation.

5. The court rejected SEBI's argument that the offence was continuous from the company's incorporation, emphasizing the lack of such averment in the complaint. It concluded that the directors' liability hinged on their status at the time of the alleged offence, which, in this case, was after their resignation.

6. Ultimately, the court quashed the criminal complaint and set aside the order summoning the petitioners, ruling in favor of the directors due to the lack of evidence establishing their liability post-resignation. The petition was allowed without costs, providing clarity on the directors' liability under section 27 of the SEBI Act based on the specific timing of the alleged offence.