IMPORTANT POINT
The court established that a prima facie breach of SEBI regulations can justify prosecution under Sec. 24 of the SEBI Act, irrespective of whether a prior investigation was conducted.

JUDGMENT/ORDER

1. These Criminal Applications under Sec. 482 of the Criminal Procedure Code, 1973 (hereafter "the Code", for short) call into question the legality, propriety and correctness of the order dtd. 26/8/2019 passed by the learned SEBI Special Judge, City Civil & Sessions Court, Greater Bombay on an application below Exhibit 46 in SEBI Special Case No.183 of 2014 whereby the prayer of the applicant to discharge him from the prosecution came to be rejected. A prayer is also made for quashing the complaint, including an order of issuance of process and framing of charges against the applicant.

2. Background facts necessary for the determination of these applications can be stated as under: The accused offered the public to acquire 20% of the capital of M/s. Damania Airways Limited in terms of Clause 40 B of the listing agreement of the Stock Exchange, Mumbai and provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 (hereafter "1994 Regulations", for short). The offer was opened on 1/2/1996 and closed on 29/2/1996. Regulation 20(1) of the 1994 Regulations imposes a general obligation on the acquirers to publicly announce to acquire shares only when acquirers have every reason to believe they can implement the offer.

3. On 9/4/1996, a letter was dispatched to the complainant by M/s.LKP Merchant Financing Limited, the Managers to the offer, stating inter alia that the despatches are being carried out by registered post from the office of Registrar at Ahmedabad. Further, vide letter dtd. 29/4/1996, the Managers of the issue informed the complainant that out of 19,358 applicants, cheques to 10,193 applicants had been despatched. They indicated that the acquirers were aware of this delay in completing the despatch, which violated Regulation 20. Hence, they sought an explanation from the acquirers in this regard. On 22/5/1996, Managers stated that acquirers had indicated there would be further delay in despatching the cheques and requested the complainant to grant 45 days to complete the despatch.

4. On 24/5/1996, the complainant issued a letter to the acquirers stating that non-despatch of consideration amounts to a violation of Regulation 20, asking them to explain why action should not be initiated against them for the said violation.

5. The acquirers had sent a letter to the complainant dtd. 10/7/1996, stating inter alia that consideration had been despatched to more than 60% of the applicants. They stated that they could not raise funds against the security due to the liquidity crunch in the market, and hence they could not complete the payments in time.

6. Consequently, the complainant issued a Shoe Cause Notice to the acquirers dtd. 2/8/1996. The acquirers replied to this show cause notice vide letter dtd. 17/8/1996, stating inter alia that the liquidity crunch in the market caused the delay and that they had already despatched more than 70% of the consideration.

7. In Vide letter dtd. 11/12/1996, the acquirers assured the complainant that a sum of Rs.2.5 crore would be paid on an installment basis per month, beginning in January 1997, along with an interest amount at the rate of 15% as compensation for the delay in despatching the consideration to the applicants. In February 1997, the acquirers personally met the officers of the complainant and accepted that they were unable to discharge their obligation. However, the complainant has received several letters from aggrieved investors indicating that the consideration has not been dispatched to them.

8. The complainant, therefore, filed a complaint against accused Nos.1 to 5 as per Sec. 24 of the Securities and Exchange Board of India Act, 1992 (hereafter "said Act", for short).

9. Pending the complaint, accused No.3 filed an application for discharge, contending inter alia that accused No.3 resigned from the company on 7/6/1997 and, therefore, accused No.3 deserves to be discharged.

10. The complainant resisted the discharge application by fi