2015 (4) TMI 1326 - HC - SEBI

Seeking Interim order of stay of further proceedings - FIR against the applicants herein for the offence punishable under Section 23(1) of the Securities Contracts (Regulation) Act, 1956 and Section 15H(A) of the Securities and Exchange Board of India Act, 1992 - HELD THAT - The law in this regard is well-settled. Although the police has the power to investigate the offence alleged against the applicant and chargesheet has been filed, the Court will not be able to take cognizance in view of the specific bar. The investigation carried out by the police can be used for the purpose of filing a complaint in writing before the appropriate court. To be precise, whatever materials have been collected by the Investigating Officer could be used by the authority for the purpose of filing a complaint before the competent court. Applicants have been able to make out a strong prima facie case to have an interim order of stay of further proceedings of Sessions Case pending

Summary

Issues:
Quashing of FIR and chargesheet under Securities Contract Act and SEBI Act, Stay on further proceedings, Interpretation of Section 26 of the Acts, Cognizance of offences by courts, Prima facie case for interim stay, Prosecution's failure.

Quashing of FIR and chargesheet under Securities Contract Act and SEBI Act:
The applicants sought relief to quash the FIR, chargesheet, and an order passed by the Sessions Judge. The FIR was lodged for offences under the Securities Contract Act and SEBI Act. The Court noted the rejection of the discharge application by the Sessions Judge and found that the Judge may have overlooked the effect of Section 26 of the Acts. The Court analyzed Section 26, which specifies that cognizance of offences can only be taken on a complaint made by specific entities. The Court concluded that the Sessions Court could not take cognizance based on the police report due to the bar in Section 26 of both Acts. Therefore, the application to quash the proceedings was allowed, and all consequential proceedings were terminated.

Stay on further proceedings:
The applicants also requested a stay on further proceedings pending the petition. The Court, after considering the materials on record and hearing the arguments, found that the applicants had established a strong prima facie case for an interim stay on the proceedings. Consequently, the Court granted the interim stay on the Sessions Case pending in the Court of the 3rd Additional Sessions Judge.

Interpretation of Section 26 of the Acts - Cognizance of offences by courts:
The Court delved into the interpretation of Section 26 of the Securities Contract Act and SEBI Act regarding the cognizance of offences by courts. It highlighted that cognizance could only be taken on a complaint made by specific entities mentioned in the Acts. The Court clarified that even though the police had investigated and filed a chargesheet, the Court could not take cognizance based on the police report due to the specific bar in Section 26 of the Acts. The investigation materials could be used for filing a complaint before the appropriate court.

Prima facie case for interim stay:
After reviewing the arguments and materials, the Court found that the applicants had presented a strong prima facie case for an interim stay on the proceedings. The Court granted the interim stay based on this assessment.

Prosecution's failure:
The learned APP for the State acknowledged that the position of law was well-settled, indicating that the prosecution must fail. Considering this acknowledgment and the Court's analysis, the application was allowed, and the proceedings were quashed, with all consequential proceedings terminated.