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2023 (7) TMI 586 - HC - SEBIOffences under SEBI - collective investment schemes without applying for registration - petitioner (directors) was summoned for the offences under Sections 24(1) and 27 of the SEBI Act - company never initiated any steps for winding up of the schemes and for repayment to the investors despite notices - HELD THAT - The complaint filed by respondent, SEBI makes a specific averment that the present petitioner was the director and was in-charge of and responsible to the company for the conduct of its business for the relevant period of time in terms of Section 27 SEBI Act, 1992. No documents have been produced on record to rebut the aforesaid averment made by the respondent to demonstrate that making the petitioner stand trial would be an abuse of process of the Court. It is pertinent to state that the question as to whether the present petitioner shall be liable as the director of the accused company with regard to the violations committed by the said entity in question is a matter of trial and shall be adjudicated before the Trial Court of competent jurisdiction. This Court need not examine disputed factual issues involved in the present case while exercising the jurisdiction u/s 482 of Code of Criminal Procedure.
Issues Involved:
1. Quashing of Criminal Complaint No. 343/2002. 2. Summoning order dated 23.04.2002. 3. Issuance of non-bailable warrants dated 07.10.2005. 4. Vicarious liability of the petitioner as a director under Section 27 of the SEBI Act, 1992. Summary: Issue 1: Quashing of Criminal Complaint No. 343/2002 The petitioner sought the quashing of Criminal Complaint No. 343/2002 (renumbered as CC No. 66/5) under Section 482 of the CrPC, which alleged that the company Aim Plantation Ltd and its directors, including the petitioner, violated Sections 11B, 12(1B) of the SEBI Act and various CIS Regulations by running a Collective Investment Scheme (C.I.S.) without registration and failing to wind up the schemes or repay investors. Issue 2: Summoning Order Dated 23.04.2002 The petitioner argued that the complaint lacked specific averments against him, citing the case of Rashima Verma v. SEBI, where a similar complaint was quashed due to the absence of specific allegations. The petitioner emphasized that being a director alone does not make one vicariously liable under Section 27 of the SEBI Act. Issue 3: Issuance of Non-Bailable Warrants Dated 07.10.2005 The petitioner contended that the Magistrate erred in issuing summons and non-bailable warrants without sufficient material evidence. The respondent argued that the petitioner, as a director and promoter, failed to comply with statutory provisions, including winding up the C.I.S. and filing necessary reports with SEBI. Issue 4: Vicarious Liability of the Petitioner as a Director The respondent cited various judgments to support the claim that directors in charge of and responsible for the conduct of the company's business are liable for violations under the SEBI Act. The court noted that the complaint specifically averred that the petitioner was a director responsible for the company's conduct. The court held that determining the petitioner's liability is a matter for trial and dismissed the petition, stating that no documents were presented to rebut the respondent's claims. Conclusion The court dismissed the petition, emphasizing that the question of the petitioner's liability as a director is a matter for trial and not for determination under Section 482 of the CrPC. Pending applications were also disposed of, and the court clarified that its observations were not an opinion on the case's merits.
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