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2015 (9) TMI 917 - HC - Indian LawsPrayer for discharge from the complaint case filed by SEBI - collective investment schemes (CSI) - company failed to make any application with SEBI for registration of the collective investment schemes operated by it as per the Regulations - The petitioner while praying for discharge submitted that she was the director of the company from 1.1.1998 to 25.7.1998 which period was much before the alleged violations. - Held that - From the perusal of Form 32 (P2 to the petition) it would appear that the same was filed with the Registrar of Companies much later than the filing of the complaint. It is a matter of common knowledge that such form could be filed by ROC even after sufficient lapse of time after paying nominal fee or fine. In such circumstances the petitioner was on the board of the company as a director and whether she participated in the day to day functioning of the company remains a disputed question of fact which could only be thrashed out or settled in a full fledged trial. The petitioner would get the opportunity at the trial for proving that she was not at all concerned with the affairs of the company much less day to day affairs of the company and whatever violation of the Act is alleged was not in her knowledge. - Petition dismissed.
Issues Involved:
1. Validity of the petitioner's discharge application. 2. Petitioner's directorship and liability for SEBI Act violations. 3. Applicability and interpretation of SEBI regulations and provisions. 4. Evaluation of evidence at the stage of framing charges. Issue-wise Detailed Analysis: 1. Validity of the petitioner's discharge application: The petitioner sought discharge from the complaint filed by SEBI, arguing that she had ceased to be a director of the company long before the alleged violations. The court examined whether the charge against the petitioner was groundless under Section 239 of the Code of Criminal Procedure, which mandates discharge if no prima facie case is established. 2. Petitioner's directorship and liability for SEBI Act violations: The petitioner was a director from 1.1.1998 to 25.7.1998, resigning before the alleged violations. SEBI's complaint was based on the company's failure to register its Collective Investment Schemes (CIS) as required by the SEBI Act and regulations. The court noted that Form 32, indicating the petitioner's resignation, was filed with the Registrar of Companies on 22.9.2004, after the complaint was lodged. This raised a disputed question of fact about the petitioner's involvement in the company's affairs during the alleged violations, necessitating a full trial to resolve. 3. Applicability and interpretation of SEBI regulations and provisions: The court discussed various SEBI regulations, including Section 12(1B) of the SEBI Act, which prohibits sponsoring or carrying on CIS without registration. The company failed to comply with these regulations, leading to the complaint. The court highlighted that the violations were continuous offenses until the company complied with SEBI's directives by refunding the money to investors, as established in Vishnu Prakash Bajpai vs. SEBI. 4. Evaluation of evidence at the stage of framing charges: The court emphasized that at the stage of framing charges, detailed discussions or in-depth inquiries are not required. The court must determine if a prima facie case is made out based on the complaint and materials presented by the prosecution. The court referenced the Supreme Court's ruling in State of Orissa vs. Debendra Nath Padhi, which held that the accused cannot produce material at the stage of framing charges. The petitioner's defense, including Form 32, could not be considered at this stage, as it would lead to a mini-trial, defeating the purpose of the Code of Criminal Procedure. Conclusion: The court concluded that no interference was required with the order dated 19.11.2012, which refused to discharge the petitioner. The petition was dismissed, and the petitioner was directed to prove her non-involvement in the company's affairs during the trial.
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