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2020 (9) TMI 1209 - HC - SEBISeeking quashment of FIR at the investigation process - activities promising return of profits upon soliciting deposits in the form adviser fee / royalty - cognizable offence under the provisions of PID Act - HELD THAT - The police in the present case has registered FIR not on the basis of complaint of a victim and now seeks to find whether there are any victims or not, which is absolutely against the ethos of investigative processes. The provisions of IPC and PID Act are not attracted prima facie in this case, that there is an statutory bar against taking cognizance by Court for any such offence, which is in the domain of SEBI Act, 1992, which requires complaint to be filed by SEBI Board. This case is squarely relates to breach of provisions of SEBI Act, 1992 and SEBI Regulations, 2013 and only Special Court is empowered to take cognizance on the basis of complaint filed by SEBI Board. The police was not authorized to register an FIR in such case because there is a specific statutory bar in such matters. What the police could have done was that bring to the notice of SEBI Board the alleged violation being committed by the applicant Company. After providing vital information and inputs to the SEBI Court, the matter would have been looked into by SEBI Board only and appropriate complaint could have been filed by SEBI Board before the competent Special Court - instead of doing so, the police has embarked upon registration of FIR in such a case and by doing so, has travelled beyond the scope of its competence and jurisdiction. Application allowed.
Issues Involved:
1. Quashment of FIR and subsequent proceedings. 2. Legitimacy of the police raid and FIR registration. 3. Applicability of SEBI Act, 1992 and SEBI Regulations. 4. Validity of charges under IPC and PID Act. 5. Jurisdiction and authority of the police versus SEBI Board. Detailed Analysis: Quashment of FIR and Subsequent Proceedings: The petitioner filed a petition under Section 482 of Cr.P.C seeking to quash the FIR and subsequent proceedings. The primary argument was that the FIR was based on a complaint by a broker not connected to the company, and the company was compliant with SEBI regulations. The petitioner argued that no client had accused the company of cheating, thus Sections 406 and 420 of IPC were not applicable. Additionally, the company did not take deposits, nullifying the applicability of the PID Act. The petitioner also highlighted procedural violations, including the lack of permission from a Superintendent of Police before initiating the investigation. Legitimacy of the Police Raid and FIR Registration: The respondent/State argued that the police raid was justified based on credible information about financial misconduct by the petitioner’s company. The police found no SEBI registration documents during the raid, and statements from employees indicated potential mismanagement and unqualified advice. The State maintained that the police were within their rights to register an FIR based on the information received, regardless of its initial credibility. Applicability of SEBI Act, 1992 and SEBI Regulations: The petitioner presented certificates of SEBI registration and compliance with SEBI guidelines. It was argued that under Section 26 of the SEBI Act, no court could take cognizance of a complaint against the company unless filed by the SEBI Board. The court noted that even if the investigation concluded that an offence was committed, the court could not take cognizance without a complaint from SEBI, as per Section 26 of the SEBI Act. Validity of Charges under IPC and PID Act: The court found that the complaint was lodged by a broker, not a victim, and thus the charges of cheating and breach of trust were not substantiated. The court also noted that the company charged fees for advice, which could not be classified as deposits under the PID Act without a victim's allegation. The court emphasized that the police must register an FIR upon receiving information about a cognizable offence but cannot proceed without a SEBI Board complaint in cases involving SEBI regulations. Jurisdiction and Authority of the Police versus SEBI Board: The court underscored that only the SEBI Board could file a complaint for violations of SEBI regulations, and the Special Court was the competent authority to try such offences. The police were not authorized to register an FIR for breaches under the SEBI Act, 1992. The court cited precedents where similar FIRs were quashed due to the statutory bar on taking cognizance without a SEBI Board complaint. Conclusion: The court concluded that the FIR and subsequent proceedings were not justified as they pertained to violations under the SEBI Act, which required a complaint from the SEBI Board. The police overstepped their jurisdiction by registering the FIR. Consequently, the FIR and all subsequent proceedings were quashed. The application was allowed, emphasizing the statutory limitations on police authority in matters governed by SEBI regulations.
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