2022 (8) TMI 1005 - HC - SEBI

Offence under SEBI - Market manipulation of shares - Stay of the proceedings in criminal complaint during the pendency of the main petition - sole basis of filing of the complaint against the petitioner companies is that the accused No.17 has been shown to be one of the Directors of the petitioner companies and has been described to be the person in charge and responsible of the petitioner companies - HELD THAT - This court directed for issuance of notice which was accepted by learned counsel appearing on behalf of the respondent and the matter was directed to be re-notified on 03.02.2020. However, in the meantime, it was directed that the trial court shall fix a date after the date is fixed in the present petition. On 29.11.2019, it was further noted that the respondent moved an application before the trial court seeking clarification of the impugned order and therefore, the trial court was directed to list the said application after the date was fixed in the present petition. On 03.02.2020, the said interim arrangement was extended and the matter was directed to be listed on 01.10.2020. On 08.12.2020, in absence of any appearance on behalf of the petitioner, the matter was directed to be listed on 25.03.2021. Further proceedings would show that the interim order so passed, was extended from time to time. However, there has not been any consideration on the instant application on its merit and therefore, on 03.08.2022, this court directed the parties to make their submissions on merits of the aforesaid application. The complaint in question has been filed in the year 2016 against various companies on the premise that there were irregularities in the trading and shares of the accused No.1 company. It has been alleged in the complaint that there were synchronisation of logging-in of traders, creation of artificial volumes, false market in the shares, circular trading, churning of the same stock and market manipulation. Large number of shares were made available to the Ketan Parekh Group, ostensibly under guise of fiduciary transactions and those shares were sold by Ketan Parekh entities in the market. The subject-matter of the investigation was from 09.08.2000 to 30.06.2001 and the trial court has prima facie found sufficient material to proceed against the petitioners, therefore, without expressing anything on the merits of the case, as the same would prejudice their rights to be determined at a later stage, this court does not find any reason to stay the further proceedings of the trial court. However, it is made clear that the further proceedings of the trial court would remain subject to the outcome of the instant petition.

Summary

Issues:
Challenge to order on charge dated 03.10.2019 in Criminal Case No.33/16, Stay of proceedings in criminal complaint, Allegations of irregularities in trading and shares, Prima facie evidence to proceed against petitioners.

Analysis:
The petitioners challenged the order on charge dated 03.10.2019, alleging that they were not linked with co-accused No.17 and that there was no evidence to prove the connection. The learned senior counsel argued that the trial court failed to appreciate this fact and that the complaint against the petitioners was based on incorrect information regarding the involvement of accused No.17 in the petitioner companies. The counsel referred to specific paragraphs of the complaint and documents to support their argument, emphasizing that accused No.17 was not a director or shareholder of the petitioner companies. They also cited a previous court decision to support their contention that such matters should be verified before summoning. On the other hand, the respondent's counsel argued that the trial court had considered the submissions and found accused No.17 to be the director of the petitioner companies. They pointed out discrepancies in the documents referred to by the petitioners' counsel and asserted that the complaint clearly attributed a specific role to accused No.17 and the petitioners.

The court reviewed the submissions made by both parties and the case record. It noted the procedural history of the case, including directions for notice issuance and listing dates. The complaint filed in 2016 alleged irregularities in trading and shares, implicating various companies in market manipulation activities. Considering that the investigation period was from 09.08.2000 to 30.06.2001 and the trial court found sufficient material to proceed against the petitioners, the court decided not to stay the trial proceedings at that stage. The court clarified that its decision did not prejudge the merits of the case, leaving the final determination for a later stage. The court disposed of the instant application, indicating that the trial court proceedings would continue, subject to the outcome of the petition.

In another related matter, the court listed the case with connected matters for a future date, allowing the parties to submit written synopses and relevant judgments for the final hearing of the main petition.