2024 (8) TMI 1283 - SC - SEBI

Validity of criminal proceedings once settlement before the SEBI on the adjudication side concluded - allegation of fraudulent activities committed in the Initial Public Offering (IPO) of the shares - Jurisdiction of Single Judge OR Division Bench - whether the respondent had made out a case for quashing the proceedings will be independently decided by the Division Bench which will now hear the matter on remand? - HELD THAT - The first round of proceedings arising out of Writ Petition 2018 (2) TMI 2119 - BOMBAY HIGH COURT was heard and disposed of by the Division Bench, with the Division Bench rejecting the contention of the respondent and dismissing the Writ Petitions. When the matter travelled to this Court, the respondent withdrew the Special Leave Petition with liberty to file a fresh petition. We feel that on the facts of this case considering the earlier order of the Division Bench and the order of this Court granting liberty to file a fresh petition, the present case in the second-round ought to have been heard by the Division Bench. We are refraining from pronouncing on the aspect whether there was any clever manipulation of the prayers to clutch at jurisdiction since anything said would prejudice the case of the parties. We say nothing more on this at this stage. Ld. Single Judge, who heard Writ Petition took the view that in view of the consent terms passed by SEBI, it would not be in the interest of justice to continue with the criminal proceedings as it would tantamount to an abuse of the process of the law. We have now adopted, we are refraining from commenting on the contentions of the parties with regard to the merits of the matter. As to whether the respondent had made out a case for quashing the proceedings will be independently decided by the Division Bench which will now hear the matter on remand. The Division Bench will not be influenced by the observations of the previous Division Bench, the order of the Single Judge and also by the present order which we have now passed. The Division Bench will independently decide the matter on its own merits and in accordance with law. Considering that the FIR was registered in 2006, we request the Division Bench to take up the matter and dispose of the two Writ Petitions expeditiously and, in any event, not later than three months from today. Since we are remitting the matter, we are inclined to grant an interim stay of further proceeding pending before the Special Judge (CBI), Greater Mumbai for a period of four weeks from today. Parties are at liberty to approach the Division Bench hearing the matter for appropriate extension/modification of this interim order and the Division Bench shall after hearing the parties make such order as it deems fit. We have held above, the impugned order 2022 (1) TMI 1451 - BOMBAY HIGH COURT is set aside and the matter is remitted to the High Court of Judicature at Bombay.

Summary

Issues Involved:
1. Jurisdiction of Single Judge vs. Division Bench in the High Court.
2. Effect of SEBI consent order on criminal proceedings.
3. Validity of cognizance orders and subsequent criminal proceedings.

Detailed Analysis:

1. Jurisdiction of Single Judge vs. Division Bench in the High Court:

The appeals arose from the judgment and order dated 05.01.2022 by a Single Judge of the Bombay High Court. The primary issue was whether the Single Judge had the jurisdiction to hear the matter, given that the initial Writ Petition No. 406 of 2018 was disposed of by a Division Bench. According to Rule 2(II)(h) of the High Court Rules, applications for quashing an FIR and chargesheet fall outside the jurisdiction of a Single Judge and should be heard by a Division Bench. The respondent's fresh petitions (Writ Petition No. 245 of 2020 and Writ Petition No. 730 of 2020) challenged the cognizance orders instead of the FIR and chargesheet, which allowed the matter to be heard by a Single Judge under Rule 18(4). The Supreme Court noted that the matter should have been heard by a Division Bench, considering the earlier proceedings and the order permitting the withdrawal of the Special Leave Petition with liberty to file a fresh petition.

2. Effect of SEBI Consent Order on Criminal Proceedings:

The respondent had approached SEBI for a consent order, which was granted on 07.12.2009, directing the respondent to pay a sum including unjust profits and settlement charges. The respondent argued that this consent order should absolve them from criminal proceedings. The Single Judge quashed the criminal proceedings, reasoning that continuing them would be an abuse of the process of law, given the SEBI consent order. However, the Supreme Court refrained from commenting on the merits of this argument, leaving it to the Division Bench to decide independently.

3. Validity of Cognizance Orders and Subsequent Criminal Proceedings:

The respondent's fresh petitions specifically challenged the cognizance orders dated 10.03.2008 and 19.03.2008, which were not expressly challenged in the first round of litigation. The Single Judge quashed the criminal proceedings based on these cognizance orders. The Supreme Court noted that the respondent had not challenged these orders in the initial Writ Petition No. 406 of 2018, which only challenged the FIR and chargesheet. The Supreme Court decided to remit the matter to a Division Bench for an independent decision on whether the respondent had made out a case for quashing the proceedings.

Conclusion:

The Supreme Court set aside the impugned order dated 05.01.2022 and remitted the matter to the High Court of Judicature at Bombay to be heard by a Division Bench. The Division Bench is to decide the matter independently, without being influenced by previous observations or orders, including the present order. The Division Bench is requested to dispose of the writ petitions expeditiously, within three months. An interim stay of further proceedings in Special Case No. 47 of 2007 and Special Case No. 48 of 2007 was granted for four weeks, with parties at liberty to seek further orders from the Division Bench.