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IN THE HIGH COURT OF JUDICATURE AT BOMBAY AT NAGPUR BENCH
S.B. Shukre, J.
Khanhaiya Ramchand Thawrani - Appellants
Vs.
State of Maharashtra - Respondent
Criminal Application [ABA] Nos. 445, 446 and 447 of 2016
Decided On : 24-10-2016
Security Contracts (Regulation) Act, 1956 - Sections 23 and 26-Criminal Procedure Code, 1973, Section 190.-In instant case, it was held that if any offence is committed under Section 23 of Security Act, cognizance of such offence may be taken merely at the time when a complaint thereabout is instituted in compliance of provisions of Section 26 of the Act and not otherwise.
Offences punishable under the provisions of the Securities Act are deemed to be cognizable under Section 25 of that Act. Ordinarily, under Section 154 of the Criminal Procedure Code, information relating to the commission of a cognizable offence can be given by any person, who has the information about commission of such an offence. The law thus can be set in motion on the basis of information given by any person either orally or in writing to an officer- in-charge of a police station and upon receipt of such information, a police officer in exercise of his power under Section 156(1) of the Criminal Procedure Code can, without the order of a Magistrate, make investigation into such an offence. The law can also be set in motion under the scheme of the provisions of the Criminal Procedure Code by making a complaint in terms of Section 2(d) before a concerned Magistrate. Under Section 190 of the Criminal Procedure Code, cognizance of an offence can be taken by a Magistrate upon either a police report or a complaint filed in terms of Section 2(d) of the Criminal Procedure Code or information received from any person other than a police officer or own knowledge of the Magistrate that an offence has been committed. This scheme of the Criminal Procedure Code, however, has been substantially altered under the provisions of the Securities Act.
It prescribes that cognizance of any offence punishable under this Act can be taken only upon a complaint made by any authority or person contemplated under the Act and in no other way. Had the Legislature intended that cognizance of offence be taken upon police report, it would have expressly provided so. Such an express provision, in fact, has been seen to be made in other special enactments.
Security Contracts (Regulation) Act, 1956 - Sections 23 and 26-Criminal Procedure Code, 1973, Chapters XI and XVI-Scope and applicability of.-The procedure by adopting which offences punishable under Section 23 of Securities Act is tried, would be administered by the provisions of 26, 26-B and 26-D of that Act together with relevant provisions contained in Chapters XV and XVI of Criminal Procedure Code, 1973.
Security Contracts (Regulation) Act, 1956 - Sections 23(1) and 26-Criminal Procedure Code, 1973, Section 438-Anticipatory bail-Grant of.-Where it was proved that documents prima facie falsified by the applicant and disputes as to deficiencies of prosecution over said issues also raised, applicant was held not entitled to anticipatory bail.
Once it is found that there can be no investigation initiated by a Police Officer without there being a complaint filed in terms of Section 26 of the Securities Act and also without there being any express authorisation by the competent Court given to him for making an investigation into the offences alleged to be committed under various clauses of Section 23(1) of the Securities Act, no arrest can be sought to be made by a Police Officer. In this case, there is no complaint filed so far in terms of Section 26 of the Securities Act. Therefore, insofar as this offence is concerned, the applicant would be entitled to be released on confirmed anticipatory bail.
As regards the offences registered under various Sections of the Indian Penal Code, there is no material available on record from which prima facie involvement of the applicant in all or any of the offences could be seen. There is not even an allegation that anybody has been induced with dishonest intention to part with money or property. There is also nothing available on record showing that some documents have been prima facie falsified by the applicant. In fact, there is also not much dispute raised about deficiency .of the prosecution case on these counts. Therefore, even for these offences, the applicant would be entitled to be granted a relief of confined anticipatory bail.
Security Contracts (Regulation) Act, 1956 - Section 26-Complaint against illegal share trading-Maintainability of.-Whenever a complaint against illegal share trading is filed by a competent authority or any person named under Section 26 of the Security Act, such complaint excludes the police report.
Section 25 of the Securities Act cannot be understood as conferring power upon the police to also make investigation in the offence punishable under Section 23 de hors a complaint filed under Section 26 just because these offences are deemed to be cognizable for which a police officer can make arrest without warrant. There is a, marked distinction between authority to make arrest without warrant in a cognizable offence and power to make investigation without order of a Magistrate in a cognizable case. What Section 25 does is that it lends cognizability to any offence punishable under Section 23 of the Securities Act and nothing more.
It does not make the case relating to any of these offences as cognizable. Power of a police officer to make investigation under Section 156 of the Criminal Procedure Code without order of a Magistrate is in respect of a cognizable case and it emanates from receiving an information relating to commission of a cognizable offence under Section 154 of the Criminal Procedure Code. This power sees its culmination when either a report under Section 169 or a police report under Section 173(2) is filed before a Magistrate.
Security Contracts (Regulation) Act, 1956 - Section 26-Illegal share trading.-Whether any police officer may be regarded as falling within scope of "any person" mentioned in Section 26 of the Act? Held no.
A police officer would get the authority to make arrest without warrant only when there is a complaint filed before the Special Court under Section 26 of the Securities Act and other conditions implicit in the provisions of Chapter XV and XVI of the Criminal Procedure Code are fulfilled. The procedure indicated by various provisions of Chapter XV and XVI of the Criminal Procedure Code would also have to be followed by the Court before whom the complaint is filed. Under Section 200 of the Criminal Procedure Code, a Magistrate can take cognizance of the offence, and in his discretion, exercised in accordance with law, may decide to either dismiss the complaint under Section 203 of the Criminal Procedure Code or issue the process in terms of Section 204 of the Criminal Procedure Code. Under Section 202(1), a Magistrate or the Special Judge in case of the offences punishable under Section 23 of the Securities Act, can also postpone the issue of process against the accused and either inquiry into the case himself or direct an investigation to be made by a police officer or some other fit person, for the purpose of deciding whether or not there is sufficient ground for proceeding.
It is here under Section 202(1) of the Criminal Procedure Code when a decision is taken to postpone the issue of process that a Special Court in its discretion may direct an investigation to be made in the case by a police officer. It is only when such a direction is issued that a police officer can make investigation and not otherwise. If the direction of the Special Judge does not contain any further order regarding making of the arrest, a police officer making investigation need not once again approach him to seek clarification regarding arrest and can, without there being any warrant or specific order issued by the Special Judge, effect arrest of the accused during the course of the investigation. Section 25 of the Securities Act is thus dependent upon filing of the complaint under Section 26 of the Securities Act as well as issuance of direction by a Special Judge or Court for investigation to be made by the police officer.
Once a complaint is filed under Section 26 and a direction for police investigation under Section 202(1) of the Criminal Procedure Code is issued, a police officer would get all the power to make the arrest by virtue of the deeming provision of the cognizability of the offence. In a way, Section 25 also acts as a clarification for the police officer that on receipt of the direction for investigation by him, he need not ask for further orders or directions for effecting the arrest of the accused. Thus, Section 25 does not operate independently of Section 26 of the Securities Act rather it supports and supplements Section 26 so that there is effective investigation and proper collection of evidence against the offender. Such an inference arises by interpreting harmoniously all the relevant provisions. It also promotes the object of the Securities Act, and prevents any anomalous situation arising from independent reading of Sections 25 and 26 of the Act.
Security Contracts (Regulation) Act, 1956 - Section 26-Criminal Procedure Code, 1973, Sections 154 and 156.-Whenever any complaint is lodged under Section 26 of the Act, 1956, such offence would be investigated by police officer and in this nature of case, it would not be an applicable principle that police officer can investigate merely cognizable cases whereof FIR is lodged.
There is no doubt that a police officer can make investigation into a cognizable offence. But, he can do so either in exercise of his power under Section 156(1) of the Criminal Procedure Code (i.e. without order of Magistrate) or upon direction received from a Magistrate under Section 156(3) or Section 202 of the Criminal Procedure Code. Here, Court is concerned with power of police officer to investigate without order of Magistrate under Section 156(1) of the Criminal Procedure Code. But this power of police officer under Section 156(1) of the Criminal Procedure Code comes alive only when an information or FIR relating to commission of cognizable offence is received by him under Section 154 of the Criminal Procedure Code and not otherwise. In the absence of FIR. received and registered under Section 154, there would be no case called "cognizable case" to be investigated into by a police officer. Under Section 156(1) of the Criminal Procedure Code, it is worthy to note, what can be investigated is "cognizable case" and this provision avoids use of expression "cognizable offence". Court has, however, seen earlier that the complaint contemplated under Section 26 of the Securities Act is different from the FIR filed under Section 154 of the Criminal Procedure Code and it does not include within its fold such an FIR.
Therefore, question of a police officer exercising his power to investigate a cognizable case under Section 156(1) of the Criminal Procedure Code in case of any offence under the Securities Act would not arise. It would then follow that filing of a complaint by a competent authority or a person in terms of Section 26 of the Securities Act first is a sine qua non for setting the law in motion and making inquiry or investigation into the offences alleged to be committed under the provisions of this Act.
Security Contracts (Regulation) Act, 1956 - Sections 26 and 25-Investigation as to illegal share trading.- Whenever any complaint is made as to illegal share trading, investigation of such offence cannot made by any police officer unless requisite conditions is complied with.
Complaint alleging commission of any offence punishable under Section 23 of the Securities Act can be filed only by the Central Government or the State Government, or the SEBI or recognized stock exchange or by any person, who falls in the same category as the category of the authorities mentioned in Section 26 or who is a person affected by contravention of the provisions of the Securities Act.
Filing of a complaint by an authority or a person contemplated by Section 26 of the Securities Act, is sine qua non for setting the law in motion.
No authority has been given under the Securities Act to a Police Officer of any rank to file a complaint under Section 26 of the Securities Act.
A Police Officer can neither make investigation into the offences punishable under the Securities Act nor effect arrest for them till the time the requisite conditions discussed at length in the order are fulfilled.
The procedure for dealing with the offences punishable under Section 23 of the Securities Act would be governed by Sections 26, 26-B and Section 26-D of that Act together with applicable and relevant provisions of the Criminal Procedure Code, in particular, those contained in Chapters XV and XVI of the Criminal Procedure Code.
S.B. Shukre, J.
1. These three bail applications are being disposed of by this common order, as the offences registered against the applicant in three crimes at two police stations are similar, arise out of same allegations and that the common grounds are raised in these applications.
2. The allegations against the applicant are that the applicant is not a registered member of a recognised stock exchange nor has any licence issued by the Central Government to deal in securities and yet, he dealt in securities and thus carried out illegal business of trading in shares. It is also alleged that the applicant kept a place, which was not a recognised stock exchange and used it for the purpose of entering into or performing various contracts in securities in contravention of the provisions of the Securities Contracts (Regulation) Act, 1956 (hereinafter called 'the Securities Act' for short). It is further alleged that by indulging in illegal share trading, the applicant caused huge loss of revenue to the Government by cheating the Government, various authorities and persons having stakes or interest in securities dealings. These activities were carried on, according to the police, by the applicant at three different places falling within the jurisdiction of Police Station Tahsil and Police Station Lakadganj and accordingly three distinct crimes were registered against the applicant. The crime pertaining to Police Station Tahsil is Crime No. 102/2016 registered for the offence punishable under Sections 406, 465, 468, 471, 420 and 120-B of the Indian Penal Code (for short 'the I.P.C.) and also the offence punishable under Section 23(1) of the Securities Act and the crimes pertaining to Police Station Lakadganj are Crime Nos. 153/2016 and 155/2016 registered for the offences punishable under Sections 419, 420, 406, 467, 471, 477-A and 120-B read with Section 34 of the I.P.C. and also the offence punishable under Section 23(1) of the Securities Act. Bail applications Nos. 445, 446 and 447 of 2016 relate to these three distinct crimes respectively.
3. I have heard Shri Avinash Gupta, learned Senior Counsel for the applicant and Mrs. Bharti Dangre, learned Public Prosecutor, who argued on law points involved and Shri S.S. Doifode, learned A.P.P. assisting the learned Public Prosecutor on factual aspects of the case. I have gone through the case-diary including the F.I.R. and the material placed on record.
4. Shri Gupta, learned Senior Counsel has taken an objection which hits at the very basis of the crimes registered against the applicant. The core of this argument is that there being no complaint filed by a competent authority or person, no investigation could be made by the police and even if the investigation is made, it cannot culminate into a police report or a final report as contemplated under Section 173(2) of the Code of Criminal Procedure (for short 'the Cr.P.C.'). His other part of the argument is that there is no prima facie case made out for the I.P.C. offences. I feel it necessary to give a summary of his argument by reproducing them in the forgoing paragraphs.
5. As regards the I.P.C. offences, the learned Senior Counsel submits that the offences alleged against the applicant, which are punishable under various sections of the I.P.C. are not at all made out, as there is absolutely nothing on record which would show that anybody was deceived by inducing him to deliver any property or to give any consent for retention of property nor is there any allegation that any false documents were created and used as genuine. He further submits that there is also no allegation that particular accounts have been falsified by the applicant.
6. About the offence of illegal trading in shares punishable under various clauses of Section 23(1) of the Securities Act, the learned Senior Counsel submits that investigation by a police officer under the provisions of the Securities Act is not permissible unless and until there is a complaint f
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