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2022 Supreme(Cal) 383
IN THE HIGH COURT OF CALCUTTA
Sabyasachi Bhattacharyya, J.
Mps Greenery Developers Ltd. And Another - Appellant
Versus
State Of West Bengal And Others - Respondent
WPA No. 3832 of 2020 With CAN 1 of 2021
Decided On : 01-09-2022
Mr. Ashok Banerjee, Mr. Ashok Gupta, Mr. Dipankar More, Mr. Ajoy Lal Acharya, for the Appellant; Mr. Surajit Nath Mitra, Mr. Prasanta Kumar Dutt, Mr. Susanta Kumar Dutt, Mr. Syamantak Banerjee, Mr. Amajit De, Mr. Amitesh Banerjee, Mr. Tarak Karan, Mr. Bikash Ranjan Bhattacharyya, Mr. Subhasis Chakraborty, Ms. Sushmita Kumar Singh, Mr. Amit Chowdhury, Mr. Amal Baran Chatterjee, Mrs. Arundhati Banerjee, Mr. Kaustav Banerjee, for the Respondent
The main legal point established in the judgment is that the SEBI's provisional registration does not conclusively establish the status of a company, and the perception of involvement in a financial scam can justify continued investigation by the CBI.
Headnote:
Companies Act - SEBI Regulations - Chit Fund Act - 1956 Act, SEBI Act, 1992, SEBI (CIS) Regulations, 1999, Chit Fund Act, 1932 - Section 11AA(3)(vii) of the SEBI Act, 1992 - WP No.19716(W) of 2009 - Subrata Chattoraj Vs. Union of India and others, (2014) 8 SCC 768 - V.K. Sasikala Vs State, AIR 2013 SC 613 - Vinubhai Haribhai Malaviya and others Vs. State of Gujarat and another, AIR 2019 SC 5233 - [SUMMARY OF ACTS AND SECTIONS REFERENCED] The court discussed the Companies Act, 1956, SEBI Act, 1992, SEBI (CIS) Regulations, 1999, and Chit Fund Act, 1932. It highlighted Section 11AA(3)(vii) of the SEBI Act, 1992, and the judgments in WP No.19716(W) of 2009, Subrata Chattoraj case, V.K. Sasikala case, and Vinubhai Haribhai Malaviya case, emphasizing the interpretation of SEBI regulations and the applicability of chit fund business definitions.
Fact of the Case:
The petitioners challenged the investigation by the CBI, sought cancellation of CBI Case RC/53/S/2014, and quashing of charge-sheets. They argued that the petitioner no.1 is governed by the SEBI Act, not the Chit Fund Act, and that the charges framed against them were vitiated.
Finding of the Court:
The court found that the SEBI had imposed restrictions on the petitioner no.1's operations, and the charges against the petitioners were not rescinded despite their challenges. The court also noted that the petitioners' involvement in a financial scam, regardless of their technical status as a chit fund, justified the CBI investigation to continue.
Issues: The issues included the jurisdiction of the CBI, the validity of the charges framed against the petitioners, and the return of documents to the petitioners for their defense.
Ratio Decidendi: The court held that the SEBI's provisional registration did not conclusively establish the petitioners' status, and the CBI investigation was justified based on the perception of the petitioners' involvement in a financial scam. The court also noted that the petitioners' challenges after failing in criminal forums amounted to forum shopping.
Final Decision: The writ petition was dismissed, and the court directed the issuance of urgent certified copies if applied for.
JUDGMENT
Sabyasachi Bhattacharyya, J.- The petitioner no.2 is the Chairman and Managing Director of petitioner no.1, a company incorporated under the Companies Act, 1956 (hereinafter referred to as 'the 1956 Act') on or about May 18, 1995. The present writ petition has been filed by the petitioners, challenging the investigation of the petitioners by the Central Bureau of Investigation (CBI) on the ground of lack of jurisdiction. The petitioners have also sought cancellation of CBI Case RC/53/S/2014 dated September 27, 2014, which gave rise to GR 479 of 2014 pending before the Chief Judicial Magistrate at Barasat, District - North 24-Parganas. The petitioners have also sought for quashing of the charge-sheet dated June 12, 2015 and supplementary charge-sheet dated January 25, 2016 filed in connection with the said case.
2. The learned Senior Advocate appearing for the petitioners submits that the petitioner is not a Chit Fund company engaged in chit business but is a company governed by the SEBI Act, 1992 and SEBI (CIS) Regulations, 1999. The petitioners rely on a Professional/Provisional Registration Certificate issued by the SEBI in favour of the petitioner no.1. It is submitted that the controlling and regulatory authority of the petitioner is the SEBI whereas, in the case of a chit fund company, such authority is the Registrar of Chit Funds, to be appointed by the State Government. Section 11AA(3)(vii) of the SEBI Act, 1992 provides that any scheme or arrangement falling within the meaning of 'chit business' as defined in Section 2(d) of the Chit Fund Act, 1932 shall not be a Collective Investment Scheme (CIS).
3. It is contended that vide judgment and order dated June 25, 2009, Sanjib Banerjee, J., in WP No.19716(W) of 2009, directed the SEBI to reconsider the matter of grant of registration to the petitioner no.1 under the SEBI (CIS) Regulations, 1999 by giving an opportunity of hearing to the petitioner no.1 and to pass a reasoned order. Such direction, it is argued, shows clearly that MPS Greenery (petitioner no.1) is a SEBI Company and not a chit fund.
4. The learned Senior Advocate appearing for the petitioners next contends that the judgment of the Supreme Court in the case of Subrata Chattoraj Vs. Union of India and others, reported at (2014) 8 SCC 768, where the present petitioners were not parties, deals with the financial scam commonly known as the 'chit fund scam'. Since MPS is not a chit fund company or carrying on chit business, the said judgment is not applicable to the petitioner no.1, it is argued.
5. Hence, it is submitted, the investigation by the CBI and all action taken on the basis thereof, including the framing of charges on September 27, 2018 and initiation of the criminal case bearing CRL 879 of 2014 are bad in law and liable to be quashed. Since the CBI is relying on the said judgment to validate its investigation in respect of the petitioner, it is submitted that the said contention of the CBI is not tenable in law, since the petitioners were not parties to the said matter and the same deals with a chit fund scam, in respect of which the petitioner is not concerned at all.
6. It is submitted by the petitioners that the charges were framed de hors the law against the directors of the petitioner no.1, including the petitioner no.2. It is submitted that the circumstances attending such framing of charges vitiate the same.
7. The mandatory provisions of Section 207 of the Code of Criminal Procedure, 1973 (Cr.P.C.) have not been complied with in passing the order framing charges, it is argued. The learned Senior Advocate places reliance on the case of V.K. Sasikala Vs State, reported at AIR 2013 SC 613, relied on in Vinubhai Haribhai Malaviya and others Vs. State of Gujarat and another, reported at AIR 2019 SC 5233, to show that the Supreme Court held that at the time of framing of charges, the court is required to satisfy itself that all papers, documents and statements under Section 207 of the Cr.P.C. have
