2022 (9) TMI 175 - HC - SEBI

Chit funding schemes/scam - Investigation Done by the CBI - Petitioner challenged Investigation of the petitioners by the Central Bureau of Investigation (CBI) on the ground of lack of jurisdiction - HELD THAT - The scale and magnitude of the scam commonly termed as the Chit Fund Scam deserves investigation by an agency operating at a national level such as the CBI, since the tentacles of such financial scam, which has adversely affected numerous common citizens, have apparently spread over several states of India. Only the investigation and the trial of the CBI case, on its completion, shall reveal whether the source of money involved in the chit fund scam and rerouting of the huge sums involved can be traced to the petitioner no.1- Company, even if the petitioner, it is assumed is not a chit fund company in the strict sense of the term. Mere investigation by the CBI, that too, when the criminal proceedings are at the stage of trial and after such a long time subsequent to the unsuccessful challenge to the charges framed, cannot be a violation of any legal or fundamental right of the petitioners. Hence, it cannot be observed that the CBI investigation of the petitioners and the framing of charges are vitiated in any manner, sufficient for the writ court to quash the same. Even if it is assumed for the sake of argument that the list furnished by the SEBI in connection with this writ, containing the name of the petitioner no. 1 company, has not been proved to have been furnished before the Supreme Court in Subrata Chattaraj 2014 (10) TMI 328 - SUPREME COURT , due to the reasons as discussed above, even without relying on such list, and irrespective of the fact that the petitioners were not parties to the said litigation, the petitioners clearly come within the broad sweep of the Supreme Court s directions for investigation relating to the chit fund scam, since charges have been framed against the petitioners long back and after due investigation, the trial of the case is going on at present. Inasmuch as the formation of the One-Man Committee consisting of a retired Hon ble Judge of this Court is concerned, there cannot be any rhyme or reason for this Court, sitting in writ jurisdiction, to direct the said committee, out of the blue, to return all documents in its custody to the petitioners, particularly, since such efforts of the petitioners have failed before every competent forum. The petitioner no.2 is in custody for a considerable span of time and since the trial of the CBI case, upon investigation is going on in full swing, there is no substance in the present writ petition.

Summary

Issues:
Challenge to CBI investigation jurisdiction, cancellation of CBI case, quashing of charge-sheet, SEBI regulations applicability, compliance with Cr.P.C. Section 207, return of documents, violation of SEBI provisions, recall of charges order, bail rejection, forum shopping, company status as chit fund, involvement in financial scam, advantage of SEBI registration, national-level investigation, tracing money source, legality of CBI investigation, One-Man Committee formation, document custody, trial progress.

Analysis:
1. The petitioners challenged the CBI investigation jurisdiction, seeking cancellation of CBI Case RC/53/S/2014 and quashing of charge-sheets. They argued that as a SEBI-regulated company, they were not a chit fund entity, citing SEBI Act provisions and a Professional/Provisional Registration Certificate issued in their favor.

2. The petitioners contended that the Supreme Court judgment on a chit fund scam was inapplicable to them, emphasizing their SEBI compliance. They asserted that the charges framed against them lacked legal basis and violated Cr.P.C. Section 207 requirements, citing relevant legal precedents.

3. The petitioners sought the return of documents held by a One-Man Committee, highlighting their defenselessness without access to crucial materials. They argued that failure to comply with document return would impede their ability to defend against the criminal case, violating their fundamental rights.

4. The SEBI argued that the petitioners violated SEBI provisions despite a Provisional Registration Certificate, justifying the ongoing CBI investigation as independent of SEBI measures. The court noted restrictions on the company's operations under the provisional registration, indicating non-compliance.

5. The court observed that the petitioners' challenges, including a recall of charges order and bail rejection, had been unsuccessful in criminal forums. It cautioned against forum shopping and deemed the writ petition as an attempt to circumvent prior legal outcomes, discouraging such actions.

6. Considering the national-level impact of the chit fund scam, the court upheld the necessity of a CBI investigation, irrespective of the petitioners' specific classification as a chit fund company. It emphasized the importance of trial completion to determine the source of funds involved in the scam.

7. The court dismissed the writ petition, emphasizing the ongoing trial progress, rejection of prior challenges, and lack of legal basis for quashing the CBI investigation and charges. It concluded that the petitioners' actions did not warrant intervention in the criminal proceedings, denying their request for document return and upholding trial continuity.