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TMI Blog2023 (4) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... s shares being provided as 'collateral security' - The accused criminally conspired with an illegal intention to cheat and without his knowledge, illegally and fraudulently fabricated the documents and forged his signature on various Delivery Instruction Slip and criminally breached the trust and transferred 23,00,000 shares from his DP Account to their DP account and sold their shares in the open market for a sum of 144crores and criminally misappropriated the same. Section 12A deals with Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. Section 12A (c) prohibits engagement in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder - it is too early for the petitioner to contend that there is no offence made out against him for prosecuting him under Section 12A r/w Section 24 of SEBI Act. Prima facie as per the orders of the SEBI, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnai, against M/s. Quantum Global Securities, M/s. Desert River Capital Private Limited and KSBL Securities Limited in relation to an act of illegal sale of equity shares of M/s. Securekloud Technologies Limited by Narendra Malik, Bhavesh Ram Prakash Singh, Rohit Arora, Ashish Singh, Kalpana Singh and the Directors of M/s. Quantum Global Securities, M/s. Desert River Capital Private Limited and KSBL Securities Limited. The two FIRs were registered on 02/02/2019 and 26/09/2019, in Crime Nos. 39/2019 and 282/2019 respectively. 3.Based on the abovesaid FIRs, the Enforcement Directorate opened an ECIR bearing reference No. ECIR/CEZO-1/17/2020. Petitioner was the defacto complainant in the aforesaid Crime Numbers and he was issued summons, dated 02/09/2022, 28/10/2022 and 07/12/2022 by the Directorate of Enforcement Department. The officers of the Enforcement Directorate instead of investigating the predicate offence, traversed beyond their jurisdiction, indulged in roving and fishing expedition and expanded their investigation over the pending SEBI cases of petitioner's company M/s. Securekloud Technologies Limited. SEBI cases do not come under the purview of Prevention of Money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Office and seven others. The relevant portion of the order is extracted hereunder: 28. The investigation, even after the elapse of three years, is stated to reveal only prima facie materials and no concrete evidences are stated to have been found been found to implicate the petitioner or frame charges. Admittedly, however there are no proceedings against the petitioner so as to implicate him before the Criminal Court or in any other fora to justify the restrictions under which he has been placed. 29. Admittedly, there have been no instances when the petitioner has evaded summons/notices calling for his attendance/appearance. The Central Bureau of Investigation (CBI) has confirmed that there are no investigations that are ongoing in the case of the petitioner, though reserving their right to initiate appropriate action at an appropriate juncture in future. 30. No material is placed before the Court in support of the bald assertion that the petitioner is a flight risk and as a consequence there is no tangible material available, admittedly, to deny the petitioner of his Fundamental Right. 31. This Court, in the decision in the case of Karthi P Chidambaram (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject of an LOC will not be arrested/detained. 64. The mandate of the Office Memorandum dated 27.10.2010, that a request for Issuance of an LOC would necessarily have to contain reasons for such request makes it clear that the condition precedent for issuance of an LOC is the existence of reasons, which should be disclosed in the request for issuance of an LOC. (C) W.P.(CRL) 714/2022 Dated 04.04.2022 Rana Ayyub Vs. Union of India and Anr. is relied for the proposition that if applicant has appeared before the Investigating Agency when summoned, there is no cogent reason for presuming that the petitioner would not appear before the Investigation Agency and hence, no case is made out for issuing the impugned LOC. (D) W.P.(C) 5374/2021 CRL.M.(BAIL) 605/2021 dated 12.01.2022 Vikas Chaudhary Vs. Union of India is relied for the proposition that LOC is an extremely severe step and meant to be used only in exceptional circumstance, the authorities must tread with caution. (E) CWP-5492-2022 (O M) dated 05.04.2022 Noor Paul Vs.Union of India Ors . is relied for the proposition that Non-supply of a copy of the LOC to the subject of the LOC at the time th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of offences vide the abovesaid FIR. 7.Investigation conducted so far revealed the complicity of the petitioner. They are: (i) Petitioner obtained loan from M/s. QGSL as a resident Indian and Indian Citizen and suppressed his KYC documents showing him as a foreign citizen and an NRI. (ii) This was done only to avoid and bypass regulatory requirements of NRE/ NRO accounts. (iii) His regular DMAT account with HDFC was opened as an NRI. (iv) He obtained loan from M/s. QGSL knowing fully well that the share brokers are not allowed to give loan and the said loan can be obtained only from an NBFC. (v) Petitioner and the then CFO of M/s.8k Miles found to be involved in manipulation of books of account and inflating the revenue of the company, thereby showing the rosy picture of the company, which led to exorbitant hike in the share price of the Company. Petitioner and the CFO of the company Shri.RS.Ramani involved in manipulation of share price of M/s.8k Miles in order to garner maxim profit for themselves. Petitioner got shares of Shri.RS.Ramani and sold in the open market for Rs.110 crores. He was part of the said conspiracy when the petitioner tried to obtain the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ani. Petitioner's premises were searched along with the premises of the lenders of his loan and important evidences of his outright involvement in manipulation of share prices of M/s.8k Miles were found in the form of digital evidences and the same are being analysed. To confront the findings of digital evidences, he was summoned for his appearance on 15.03.2023. However, he preferred not to appear. 10.It is his further submission that when they searched in the business and residential premises, he was asked about his laptop and he replied that his laptop is in USA. Through the Find my app in his mobile phone, it could be gathered that his laptop and mobile phone were concealed at some premises in Chennai itself and they were seized. The data recovered from the said devices are huge and are being analysed. Due to the share price manipulation activities and fudging of books of account, the innocent investors, who believed in the genuineness of the books of account of his company, lost more than Rs.1000crores. At the same time, petitioner and Shri.RS.Ramani generated huge profit by way of selling the shares and borrowing the money against his shares from illegal market throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a), 15HA, 15HB of the SEBI Act, 1992 and is not penalised under Sections 12A r/w Section 24, though there is a finding that the company and petitioner have violated Section 12A (c) of the SEBI Act, 1992 and Regulation 3(d) 4(1) of the PFUTP regulations, 2003. When there is no punishment imposed under Section 12A r/w Section 24, Enforcement Directorate has no jurisdiction to investigate the case against the petitioner for the alleged violations of the securities under the SEBI Act, 1992 and for the penalties imposed aforesaid. 13.Considered the rival submissions and perused the records. 14.It is true that the petitioner is the defacto complainant in the FIR in Crime No.39/2019 for the offences under Sections 420, 465, 468, 471 and 120B IPC and Crime No.282/2019 for the offences under Sections 409, 420, 465, 468, 471 and 120B IPC registered against the accused. The FIR allegations in Crime No.39/2019 shows that petitioner owns 92,00,000 shares in M/s. 8K Miles Software Services Ltd. He is the promoter of this Company. It is a listed company in BSE and NSE. To meet his business financial requirements, Shri.R.S.Ramani, the Whole time Director introduced one Mr. Rohit Arora (L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounter affidavit filed by the first respondent, narrated in detail above, that petitioner himself is a party to the conspiracy in share manipulation, i.e., Exorbitant hike in the price by showing a rosy picture, possible inflation of revenue, questionable related party transactions, siphoning of funds by the promoters and fraudulent write-off of INR 520.65 Crores, sale of shares in the open market for Rs.110 crores in conspiracy with R.S.Ramani, parking of illgotten money in the entities belonging to the petitioner in USA and UAE, causing loss to the investors for more than Rs.1000crores, intentional, willful mis-declaration, impersonation claiming as Indian resident and Indian citizen when actually he is a foreign citizen and NRI and manipulation of the accounts in favour of the revenue of the company etc., Though petitioner appeared for enquiry, it is seen from the statement of the learned Additional Solicitor General of India that petitioner had not effectively co-operated with the enquiry/investigation. When he was confronted with the documents relating to his off shore companies and movements of money received from the lenders and when he was asked to provide documents related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g/committing the offences under the SEBI Act, 1992. 18.FIR in Crime No.39/2019 was registered for the offences under Sections 420, 465, 468, 471 and 120B IPC and FIR in Crime No.282/2019 was registered for the offences under Sections 409, 420, 465, 468, 471 and 120B IPC. Offences under Section 120-B r/w Sections 420 and 471 IPC are Scheduled offences under the Prevention of Money-Laundering Act, 2002. We have come across cases were the defacto complainant had himself/herself during the course of investigation found to be an accused. In the nature and circumstances of the case, the allegations made against the petitioner, the volume of the amount involved in this case, volume of loss suffered by the investors, volume of money ill gotten by petitioner and said to have parked in USA and UAE and the fact that investigation in this case is not completed for the reason that analysis of electronic data consumes lot of time, this Court is of the view that the presence of petitioner in India is absolutely necessary for completion of investigation. There is also force in the submissions of the learned Additional Solicitor General of India that if petitioner is permitted to leave India, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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