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2015 (3) TMI 461 - HC - Companies Law


Issues Involved:
1. Bar of limitation for taking cognizance of the offence.
2. Vicarious liability of the directors.
3. Competency of the Board to file the complaint.

Detailed Analysis:

1. Bar of Limitation for Taking Cognizance of the Offence:

The petitioners argued that the cognizance order suffers from a legal bar due to the limitation period. They contended that the offence, punishable with imprisonment up to 1 year, had a limitation period of one year under Section 468(2)(b) of the Cr.P.C. The SEBI was aware of the offence on 04.01.2000, making the limitation period expire on 04.01.2001. However, the cognizance was taken on 08.04.2004, which is time-barred. The petitioners cited several judgments, including *State of Maharashtra Vs. Sharadchandra Vinayak Dongre* and *Prashant Goel Vs. State and Anr.*, to support their claim.

In response, the respondent argued that the Board approved the investigation report on 09.10.2003, making the complaint within the limitation period. The respondent also filed an application under Section 473 of the Cr.P.C. for condonation of delay, if necessary. The court agreed with the respondent, stating that the period of limitation should be counted from 09.10.2003, the date when the Board approved the investigation report. Hence, the complaint was within the limitation period, and the question of limitation was answered in favor of the respondent.

2. Vicarious Liability of the Directors:

The petitioners contended that the complaint did not disclose the specific role of petitioner nos. 3 and 4, making their summoning unjustified. They argued that a mere statement that the petitioners were in charge of the company's day-to-day affairs was insufficient. They relied on judgments like *N.K.Wahi Vs. Shekhar Singh and Anr.*, *Central Bank of India Vs. Asian Global Limited and Ors.*, and *Sham Sunder and Ors. Vs. State of Haryana* to support their argument.

The court rejected this argument, stating that petitioner nos. 3 and 4 were directors of the company and responsible for its conduct. The complaint specifically mentioned that they were in charge and responsible for the company's day-to-day business. The court found the judgments cited by the petitioners inapplicable, as they dealt with different factual scenarios. The court emphasized that vicarious liability could be fastened on the directors if they were actively involved in the company's business.

3. Competency of the Board to File the Complaint:

The court examined the provisions of the SEBI Act and the relevant regulations. It noted that under Section 26 of the SEBI Act, only the Board could file a complaint. Regulation 7 allowed the Board to order an investigation, and Regulation 10 required the Investigating Officer to submit a report to the Board. The court found that the Board approved the investigation report on 09.10.2003, making it competent to file the complaint thereafter.

The court concluded that the Board's competency to file the complaint arose only after the investigation report was approved on 09.10.2003. Therefore, the impugned order taking cognizance on 08.04.2004 was not time-barred.

Conclusion:

The court dismissed the revision petition, holding that the complaint was within the limitation period, the directors were vicariously liable, and the Board was competent to file the complaint. The court emphasized that the arguments regarding the delay in the Board's actions and the specific roles of the directors were matters to be examined during the trial.

 

 

 

 

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