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2022 (1) TMI 1451 - HC - SEBIOffence under SEBI Act - Charge for IPO applications in fictitious names - exercise of power under Section 482 of Code of Criminal Procedure and Article 226 and 227 of Constitution of India - as noted petitioner had opened Demat Accounts in fictitious and benami names and made large number of applications in the IPOs in the category of retail investors in fictitious and benami names only with a view and malafide to corner the quota of retail investors in the IPOs by the companies Validity and impact of SEBI's Consent Order - HELD THAT - One doesn t require much prescience to understand that the allegations made by SEBI while initiating proceedings under SEBI Act and as also prosecution initiated by CBI are similar in nature. In such circumstances, the Consent Order assumes significance and one is required to look into whether Consent Order passed in the matter tantamounts to compounding the offences alleged against the petitioner, in accordance with the guidelines of the said consent scheme. Thus, the consent application so moved by the petitioner is in accordance with guidelines of SEBI. Prosecution pending against him was also pointed out by him and even he urged that he be exonerated from the cases so started either by SEBI or at the behest of SEBI. After considering all relevant parameters as provided in said Consent Circular including gravity of offence, SEBI has passed the Consent Order. We no doubt of whatsoever nature in my mind that the gravity of offence and as well as the large public interest were duly considered before compounding the proposed prosecution by SEBI. It is also not in dispute that the petitioner had disgorged Rs. 2.35 crore and in a sense the public interest was duly secured and protected. SEBI, the complainant, in the present matter having agreed to compound the said irregularities upon payment of certain amounts allegedly earned by the petitioner and the petitioner having been paid the same, it can no more be termed as fraudulent act on the part of petitioner warranting continuation of prosecution based on such allegations. The dispute between the parties were predominantly commercial in nature having little criminal overtone and this being so, in my humble view, the observations made of the principles so laid down by the Hon ble Apex Court in the case of Parbatbhai Aahir Alias Parbatbhai Bhimsinghbhai Karmur and Others 2017 (10) TMI 1194 - SUPREME COURT clearly applies to the case in hand. The disputes which are predominantly commercial in nature with little criminal overtone can be quashed by the Hon ble Court while exercising the power under Section 482 of the Cr.P.C As far as the impleadment of complainant as a party respondent is concerned, in our opinion, having regard to the facts and circumstances there was no necessity for the petitioner to implead the complainant as a party respondent. Therefore, do not find merit in the submissions of learned Counsel for respondent No. 2 that the Petitions are bad for non-joinder of complainant as a party respondent. The present are the fit cases in which the Court can exercise its inherent power under Section 482 of the Cr.P.C. and as also under Article 227 of the Constitution of India. Therefore, conclude that the continuation of the proceedings in Special CBI Case and Special CBI Case pending on the files of the Special Judge (CBI), Greater Mumbai, qua the Petitioner herein shall be an abuse of process of Court, therefore, the same is hereby ordered to be quashed and set aside in order to meet the ends of justice.
Issues Involved:
1. Invocation of extraordinary powers under Article 227 of the Constitution of India and Section 482 of the Criminal Procedure Code, 1973. 2. Legality of the orders dated 10th March 2008 and 19th March 2008 taking cognizance and issuing process in Special CBI Case Nos. 47 and 48 of 2007. 3. Allegations against the petitioner regarding IPO applications in fictitious names. 4. Validity and impact of SEBI's Consent Order dated 7th December 2009. 5. Applicability of SEBI's guidelines for Consent Orders and composition of offences. 6. The effect of the Consent Order on the pending criminal proceedings. 7. Analysis of the inherent powers of the Court under Section 482 of the Cr.P.C. and Article 227 of the Constitution. 8. The necessity of impleading the complainant as a party respondent. 9. Examination of precedents and principles laid down by the Supreme Court regarding quashing of criminal proceedings. Detailed Analysis: 1. Invocation of extraordinary powers under Article 227 of the Constitution of India and Section 482 of the Criminal Procedure Code, 1973: The petitioner sought to invoke the extraordinary powers of the High Court under Article 227 of the Constitution and Section 482 of the Cr.P.C. to challenge the orders dated 10th March 2008 and 19th March 2008, which took cognizance and issued process against him. 2. Legality of the orders dated 10th March 2008 and 19th March 2008: The petitioner challenged the legality of the orders taking cognizance and issuing process in Special CBI Case Nos. 47 and 48 of 2007. These cases arose from FIRs registered for offences under Sections 420, 467, 468, 471 read with 120-B of IPC, Sections 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988, and Section 68(A) of the Companies Act, 1956. 3. Allegations against the petitioner regarding IPO applications in fictitious names: The allegations involved the petitioner opening Demat Accounts in fictitious and benami names to corner shares meant for retail investors in the IPOs of Yes Bank Limited. The petitioner allegedly transferred these shares to his accounts and subsequently to financiers, making unjust profits. 4. Validity and impact of SEBI's Consent Order dated 7th December 2009: The SEBI Consent Order dated 7th December 2009 disposed of the pending proceedings under Sections 11(4) and 11B of the SEBI Act, 1992, the adjudication proceedings, and the proposed prosecution against the petitioner. The petitioner paid an amount of Rs. 2,25,70,864/- as part of the settlement. 5. Applicability of SEBI's guidelines for Consent Orders and composition of offences: SEBI issued guidelines on 20th April 2007 for Consent Orders and composition of offences. The guidelines provided a detailed mechanism for compounding offences, including the involvement of a High Powered Committee and the Panel of WTMs. The petitioner applied for a consent order on 5th November 2008, which was considered and accepted by SEBI. 6. The effect of the Consent Order on the pending criminal proceedings: The Consent Order's issuance and the petitioner's compliance with the settlement terms led to the conclusion that the continuation of the prosecution would be an abuse of process. The Court noted that the public interest was secured and protected by the settlement, and the petitioner's actions could no longer be termed fraudulent. 7. Analysis of the inherent powers of the Court under Section 482 of the Cr.P.C. and Article 227 of the Constitution: The Court referenced several Supreme Court judgments, including Sunder Babu and Others Vs. State of Tamil Nadu, Nikhil Merchant Vs. CBI, and Anita Maria Dias and Another Vs. State of Maharashtra, to highlight the circumstances under which inherent powers can be exercised to quash proceedings. The Court emphasized that proceedings with predominantly commercial disputes and little criminal overtone could be quashed if continuing them would be unjust. 8. The necessity of impleading the complainant as a party respondent: The Court found no merit in the argument that the petitions were bad for non-joinder of the complainant as a party respondent. Given the facts and circumstances, there was no necessity for the petitioner to implead the complainant. 9. Examination of precedents and principles laid down by the Supreme Court regarding quashing of criminal proceedings: The Court analyzed precedents, including Parbatbhai Aahir Alias Parbatbhai Bhimsinghbhai Karmur and Others Vs State of Gujarat and Another, and concluded that the case at hand was predominantly commercial with little criminal overtone. Therefore, the principles for quashing such proceedings applied. Conclusion: The Court concluded that the continuation of the proceedings in Special CBI Case Nos. 47 and 48 of 2007 would be an abuse of process. The petitions were disposed of, and the proceedings were quashed to meet the ends of justice.
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