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2025 Supreme(Online)(Bom) 6082

IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION
A. S. Gadkari, Ranjitsinha Raja Bhonsale, JJ
Manoj Gokulchand Seksaria – Appellant
Versus
The State of Maharashtra Through Public Prosecutor – Respondent
CRIMINAL WRIT PETITION NO. 245 OF 2020|CRIMINAL WRIT PETITION NO. 730 OF 2020

Advocates:
For the Appellants/Petitioners: Mr. Aabad Ponda, Mr. Jugal Kanani, Mr. Rahul Pandey, Mr. Alok Singh
For the Respondents: Smt. M. M. Deshmukh, Mr. Vinod Chate, Mr. Kuldeep Patil

Consent payments in serious economic offences do not negate criminal liability, reinforcing accountability for actions detrimental to investors and society.

Headnote:(A) Indian Penal Code - Sections 120-B, 420, 467, 468, 471 - Prevention of Corruption Act, 1988 - Sections 13(2) and 13(1)(d) - Companies Act, 1956 - Sections 68-A - Quashing of Criminal Proceedings - Petitioner sought to quash proceedings related to alleged conspiracy involving fraudulent IPO applications for YBL and IDFC shares, negatively impacting retail investors. SEBI acted upon violations, leading to charges against the Petitioner and others for wrongful gains. (Paras 1, 24, 30, 33, 43)

(B) Consent Order - Effect on Criminal Prosecution - High court observed consent payments made to SEBI do not exonerate criminal liability due to serious nature of offences against society, including manipulation affecting investors' rights and market integrity. (Paras 34, 35, 41, 43)

Facts of the case:
Petitioner involved in illegal IPO applications using fictitious identities. Judicial action initiated by SEBI followed by CBI’s FIR and charges leading to prosecution for criminal conspiracy. Specific allegations include forgery and misuse of bank accounts for personal gain at the expense of retail investors. (Paras 1, 2, 30)

Findings of Court:
Court emphasized ongoing proceedings are socially relevant and continuation is justified due to severity of charges under criminal laws, dismissing petitions for quashing. (Paras 34, 41, 43)

Issues: Key questions addressed included the implications of a Consent Order on criminal proceedings and whether the allegations warranted quashing based on factors like societal impact and nature of the crimes. (Paras 1, 19)

Ratio Decidendi: The court held that serious economic offences impacting public and retail investors could not be exonerated by consent settlements, reinforcing the need for accountability in financial crimes. (Paras 34, 41)

Result: Petitions dismissed, reinforcing prosecution's legitimacy in light of societal and market impacts of the alleged crimes. (Paras 43)

JUDGMENT

[Per: RANJITSINHA RAJA BHONSALE, J] :-

1) By way of these Petitions, filed under Article 227 of Constitution of India and Section 482 of the Criminal Procedure Code, 1973, the Petitioner seeks to quash and set aside criminal proceedings i.e impugned Order dated 19^th March 2008 in respect of FIR No. RC 3(E)/2006/BS&FC/ Mumbai dated 20^th February 2006 in Special Case No. 47 of 2007 alongwith chargesheet dated 2^nd March 2009 and impugned Order dated 10^th March 2008 in respect of FIR No. RC 4(E)/2006/BS&FC/Mumbai dated 20^th February 2006 in Sessions Court Special Case No.48 of 2007 alongwith chargesheet dated 2^nd March 2009, both registered under Section 120-B r/w. read with section 420, 467, 468, 471 of Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 and under Section 68-A of the Companies Act, 1956.

Facts :

2) The Securities and Exchange Board of India (SEBI), addressed a complaint letter to the Central Bureau of Investigation (CBI/Respondent No.2), giving information in respect of certain illegal acts/offences which had been committed in respect of the Initial Public Offerings (IPO’s) of Yes Bank Limited (YBL) and Infrastructure Development Finance Corporation (IDFC). Pursuant to the complaints, CBI registered two criminal complaints Criminal Case No. RC 3(E) / 2006 / BS&FC / Mumbai and Criminal Case No. RC 4(E) /2006 /BS & FC / Mumbai. The Petitioner is an accused in both complaints. The case of the prosecution is that, the accused including the Petitioner pursuant to a criminal conspiracy, opened Bank and Demat accounts in the name of fictitious persons and applied for shares, in the said fictitious names in the retail investor category (RII) i.e shares meant for retail investors, predatory cornered the shares meant for genuine retail investors. The said illegally cornered shares were then transferred to the accounts of some the accused including the Petitioner and then sold in the market at substantial higher prices. The said illegal acts ensured unjust profit and wrongful gain for the Petitioner and other accused. This was done and achieved at the cost of the retail investors and by abusing the IPO process/system. The entire game plan was masterminded, designed and executed by the accused including the Petitioner with the help of public servants/bank employees of PSU banks. The complaint proceeds on the basis that the acts of the accused including the Petitioner are not only detrimental to the orderly development of the securities market but also criminal in nature as forged documents were used and genuine retail investors at large were deprived of the legitimate allotment of shares through the IPO process.

3) The CBI/Respondent No.2 registered, Criminal Case No. RC 3(E)/2006/BS&FC/Mumbai and RC 4(E)/2006/BS&FC/Mumbai, in respect of the illegalities committed by the accused including the Petitioner in respect of the IPO’s of YBL and IDFC respectively. Criminal prosecutions were under Section 120-B r/w. read with section 420, 467, 468, 471 of Indian Penal Code and Section 13(2) read with Section 13(1) (d) of the Prevention of Corruption Act, 1988 and Section 68-A of the Companies Act, 1956.

4) SEBI issued to the Petitioner, Show Cause Notices under Section 11B and 11(4) of SEBI Act, 1992. The WTM, SEBI passed ad-interim ex parte Orders dated 12^th January, 2006 and 27^th April, 2006 under sections 11 and 11B of the SEBI Act, 1992. Notice dated 7^th June, 2006 was issued, to the Petitioner, under the SEBI (Procedure for holding Inquiry and Imposing penalties by Adjudicating Officer) Rules, 1995, No. A & E/BS/68771/2006.

5) Criminal Case No. RC 3(E)/2006/BS&FC/Mumbai is registered against 19 accused persons. On 19^th October, 2007, a chargesheet was filed, in Criminal Case No. RC 3(E)/2006/BS&FC/Mumbai, after completion of Investigations vide Special Case No 48 of 2007, against 16 accused including the Petitioner. A supplementary chargesheet was filed in Criminal Case No

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