2016 Supreme(SC) 549

SUPREME COURT OF INDIA CRIMINAL
Jagdish Singh Khehar, C. Nagappan, JJ.
Securities and Exchange Board of India – Appellant
Versus
Gaurav Varshney & Anr. – Respondents
CRIMINAL APPEAL NOS. 827-830 OF 2012
WITH
Securities and Exchange Board of India – Appellant
Versus
Parvesh Varshney – Respondent
CRIMINAL APPEAL NOS. 833-836 OF 2012
Major P.C. Thakur – Appellant
Versus
Securities and Exchange Board of India – Respondent
CRIMINAL APPEAL NO. 252 OF 2015
WITH
Sunita Bhagat – Appellant
Versus
Securities and Exchange Board of India – Respondent
CRIMINAL APPEAL NO. 251 OF 2015
WITH
Securities and Exchange Board of India – Appellant
Versus
Raj Chawla – Respondent
WITH CRIMINAL APPEAL NO. 832 OF 2012
Decided On : 15-07-2016

IMPORTANT POINT
Any action of omission or commission of company after date on which concerned Director has resigned, would not affect him insofar as his culpability under Section 27 of SEBI Act is concerned.

Headnote:(A) Securities and Exchange Board of India Act, 1992—Section 12(1B)—Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999—Regulation 5—Bar against sponsoring or carrying on a collective investment scheme without obtaining a certificate of registration from Board under Collective Investment Regulations—Applicability—Section 12(1B) introduced a clear bar, prohibiting any action of sponsoring or initiating a collective investment scheme after 25.1.1995, without obtaining a certificate of registration from Board under Collective Investment Regulations—Persons governed by substantive provision (non-proviso category) were permitted to commence” activities concerning collective investment, only after obtaining a certificate of registration and persons covered under proviso category (-who were already carrying on such activities), were permitted to continue their activities (concerning collective investment) and after concerned regulations were framed, they could continue the said activities only after obtaining a certificate of registration—Application under Regulation 5 could not have been made by an individual falling under non-proviso category since an activity of sponsoring or carrying on a collective investment scheme by said individual could not be termed as an “existing” collective investment scheme—An existing collective investment scheme within meaning of Section 12(1B) read with Collective Investment Regulations, could only be one which had commenced prior to 25.1.1995, i.e. prior to e insertion of Section 12(1B) in SEBI Act—A collective investment scheme which commenced after 25.1.1995, could not be described as an existing collective investment scheme because same was statutorily barred and wholly impermissible in law—What a statute bars cannot be authorized through regulations. (Paras 17, 18 and 19)

       (B) Securities and Exchange Board of India Act, 1992—Section 12(1B)—Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999—Regulations 4 and 5—Bar against sponsoring or carrying on a collective investment scheme without obtaining a certificate of registration from Board under Collective Investment Regulations— Applicability—An existing collective investment scheme within meaning of Section 12(1B) as also within meaning of Collective Investment Regulations, comprised only of such collective investment scheme(s) which had come into existence prior to 25.1.1995—It was impermissible for a person who had not commenced a collective investment scheme prior to 25.1.1995, to do so thereafter till Collective Investment Regulations were framed—Thereafter, such new entrepreneur had to obtain a certificate of registration from Board’ under Regulation 4 of Collective Investment Regulations, before he could legally commence activities concerning collective investment operations—Sponsoring or carrying on any collective investment activity for first time on or after 25.1.1995, was a complete bar in absence of a certificate of registration from Board—If a person/entity had commenced to sponsor or carry on a collective investment scheme after 25.1.1995, without obtaining a certificate of registration from Board, it would tantamount to breaching express mandate contained in Section 12(1B) of SEBI Act—Date when Collective Investment Regulations came into force (15.10.1999), has no relevance, insofar as breach of Section 12(1B) of SEBI Act with reference to such new entrepreneurs is concerned—Bar to sponsor or cause to be sponsored or carry on or cause to be carried on any collective investment activity by a new entrepreneur (who had not commenced the concerned activities, before 25.1.1995) under Section 12(1B) of SEBI Act was not dependent on framing of regulations—Period during which concerned activities were barred (for non-proviso category) under Section 12(1B) commenced from date of insertion of Section 12(1B) into SEBI Act (-25.1.1995) and subsisted upto actual date when new entrepreneur obtained a certificate of registration—Bar created under Section 12(1B), forbidding persons who had not engaged themselves in an activity of collective investment before 25.1.1995, continued till concerned persons/entities successfully obtained required certificate of registration under Collective Investment Regulations. (Paras 21, 22 and 23)

       (C) Securities and Exchange Board of India Act, 1992—Section 12(1B)—Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999—Regulations 4 and 5—Bar against sponsoring or carrying on a collective investment scheme without obtaining a certificate of registration from Board under Collective Investment Regulations—Fact that respondents commenced activity of collective investment after insertion of sub-Section (1B) of Section 12 of SEBI Act (-25.1.1995), cannot be gone into to determine whether or not said activity was in breach of bar contemplated under Section 12(1B) of SEBI Act—Having so concluded it emerges that continuation of activity of sponsoring or carrying on a collective investment scheme by respondents, after 25.1.1995 (when Section 12(1B) was inserted into SEBI Act) and in continuing therewith, without obtaining a certificate of registration, cannot be basis for proceeding against respondents for simple reason that respondents had not been so accused, in complaint filed by Board—Fact that respondents had actually commenced a collective investment undertaking after 25.1.1995, without obtaining a certificate of registration, is of no relevance whatsoever with reference to complaint filed by Board against respondents. (Para 28)

       (D) Criminal Procedure Code, 1973—Section 251—Statement of accusation to accused—Particulars of offence of which an accused is charged, have to be clearly stated to him—In case accused in present case were to be charged for having violated Section 12(1B) as new operators under non-proviso category, it was imperative to inform them of all relevant particulars that they had unauthorisedly commenced a collective investment scheme during period when there was a complete bar against commencing to sponsor or carry on a collective investment scheme—In absence of such particulars of offence they could not have been tried or punished for the same—No amount of evidence can be looked into for an accusation not levelled or made out in a complaint—Section 251 of Cr.P.C. will not remedy such defect and deficiency in complaint—This is one of basic tenets of criminal jurisprudence. (Paras 34 and 35)

       (E) Criminal Procedure Code, 1973—Section 465—Irregular proceeding—Omissions and/or irregularities in matters of procedure can be overlooked subject to condition that such an omission or irregularity does not occasion failure of justice—Material facts constituting offence, for which an accused is being charged, must mandatorily be put to accused—Lack of material facts which are vital to establish ingredients of an offence, cannot be viewed as a procedural omission—Irregularity and omission in present case in not disclosing to accused particulars of offence for which they were being proceeded against, would occasion failure of justice. (Paras 41 and 42)

       (F) Securities and Exchange Board of India Act, 1992—Section 27—Companies Act, 1956—Section 159—Offence by company—Culpability of Director—After concerned individual has resigned from position of Director, he cannot be considered to be responsible to company for conduct of its business—Any action of omission or commission of company after date on which concerned Director has resigned, would not affect him insofar as his culpability under Section 27 of SEBI Act is concerned. (Para 63)

       Facts of Case:

       Question that arises for consideration in present criminal appeals is, whether respondent nos. 1 and 2 had violated Section 12(1B), by incorporating M/s. Gaurav Agrigenetics Ltd., under provisions of Companies Act, 1956, on 3.7.1995, in the capacity of its first directors and promoters. M/s. Gaurav Agrigenetics Ltd. commenced a collective investment scheme, immediately on its incorporation. Respondent nos. 1 and 2 – Gaurav Varshney and Vinod Kumar Varshney, were aggrieved by criminal proceedings initiated against them, on the basis of a complaint filed by Board under Section 200 of Cr.P.C. read with Sections 24(1) and 27 of SEBI Act, alleging, that they had breached bar created by Section 12(1B), which had forbidden the sponsoring or carrying on of a collective investment initiative without obtaining a certificate of registration from ‘the Board’. Respondent nos. 1 and 2 approached High Court of Delhi by filing Criminal Miscellaneous Case nos. 7468-7471 of 2006 and Criminal Miscellaneous no. 951 of 2007, for quashing Complaint Case no. 1241 of 2003, pending in Court of the Chief Metropolitan Magistrate, Tis Hazari Courts, Delhi as well as order dated 15.12.2003 by which Chief Metropolitan Magistrate had summoned them.

       Findings of Court:

       We are satisfied, that controversy raised in instant appeal is exactly similar to one decided in Criminal Appeal nos. 827-830 of 2012 (Securities and Exchange Board of India vs. Gaurav Varshney and another), for reason that respondent herein had resigned from position of director of M/s. Fair Deal Forests Ltd., on 30.3.1997. We are also satisfied, that controversy raised in instant appeal is also similar to the one decided in Criminal Appeal no. 251 of 2015 (Sunita Bhagat vs. Securities and Exchange Board of India) for reason that complaint in present case was filed against respondent on 15.12.2003 i.e., well after period of one year, calculated from date of respondent’s resignation.

       Result—Appeals dismissed.