Bombay High Court
Mega Corporation Ltd. And Ors vs Union Of India And Anr on 22 October, 2021
Author: Sandeep K. Shinde
Bench: Sandeep K. Shinde
Rane 1/11 REVN-563-2019
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL REVISION APPLICATION NO. 563 OF 2019
Mega Corporation Limited and Ors. .....Applicants
V/s.
Union of India and Ors. .....Respondents
****
Mr. Santosh Avhad i/by. Jayakar & Partners, Advocate for
the applicants.
Ms. Veera Shinde, APP for State.
Ms. Sahiba Ansari, Advocate for respondent no.2.
Coram : Sandeep K. Shinde, J.
Friday, 22nd October, 2021.
P.C. :
1. Matter has been moved for speaking to minutes of the order dated 14th October, 2021.
2. Learned Counsel for the applicants, points out, that in para-10, last line, the number of proceedings, stayed by this Court is incorrect and needs to be deleted. The said correction is carried out, to read as :
"Thus, for the reasons stated above, the proceedings in SEBI Special Case No.177 of 2015 Rane 2/11 REVN-563-2019 before the SEBI Special Judge, Sessions Court, Mumbai, against the Applicants, shall remain stayed till the decision of the Hon'ble Apex Court in the Civil Appeal instituted by the SEBI against the decision of the Securities Appellate Tribunal in Appeal No.60/2008."
3. The corrections be carried out and the order be read accordingly.
(Sandeep K. Shinde, J.) Rane 3/11 REVN-563-2019 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION Criminal Revision Application No. 563 / 2019 Mega Corporation Ltd. and Ors. .. Applicants Versus.
Union of India and Ors. .. Respondents **** Advocate Samsher Garud, Santosh Avhad i/by Jayakar and Partners for the Applicants.
Ms. Purnima Kantharia, Advocate for Union of India. Advocate Sabiha Ansari for Respondent No.2. Smt. Sharmila Kaushik, APP for State.
****
CORAM : SANDEEP K. SHINDE J.
RESERVED ON : 06th OCTOBER, 2021.
PRONOUNCED ON : 14th OCTOBER, 2021.
ORDER. : -
1. This Revision Application challenges the
Rane 4/11 REVN-563-2019
correctness, legality and propriety of order dated 7th October, 2019 below Exhibit-13 in SEBI Special Case No.177/2015 passed by the Additional Sessions Court, Greater Mumbai, whereby the learned Judge declined to pass order of discharge.
2. Background facts : Securities and Exchange Board of India (SEBI Board for short), commenced investigation into the unusual price movements of the scrip of Mega Corporation Ltd, the Applicant - Company, during the period 25th January, 2005 to 16th September, 2005. Based on the finding in the investigation, the board charged the company with manipulating the market in its shares by several means. Board issued show cause notice dated 10 th October, 2007 alleging that the Applicant-company sought to generate investor interest in the scrip by publishing false and misleading announcement in the press about the company's prospects and business plans which projected unduly high revenues and profits for the Rane 5/11 REVN-563-2019 company. Whereafter interim exparte restrain order was passed by the Board on 24 th October, 2005. It was confirmed on 24th July, 2006 and was in force till the final order was passed on 28th February, 2008. Aggrieved by the order dated 28th February, 2008, Company filed the appeal under Section 15T of the Securities and Exchange Board of India Act, 1992 passed by the whole time member, SEBI by which the Applicant-Company was restrained from accessing the capital market in any manner whatsoever for a period of one year for violation of regulations 3(a)(b)(c) and (d) and 4(1), 4(2)(k) and 4(2)
(r) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations 2003 (FUTP Regulations for short). The appeal was heard by the Securities Appellate Tribunal, Mumbai and the charge of making false and misleading announcement as also that of manipulation in the annual accounts for the year 2004- 2005 in order to lure investors, was quashed and set Rane 6/11 REVN-563-2019 aside.
3. Pending proceedings under FUTP regulations, in June, 2008, SEBI filed complaint under Section 200 of the Code of Criminal Procedure, 1973 read with Section 24(1) of SEBI Act, 1992 alleging violation of Section 12 of the SEBI Act, on the following ground;
(i) The Accused No.1-Company, its promoters and directors, who are Accused Nos. 2 to 4 and associates entities/persons/brokers viz. Accused Nos. 5 to 7 acted fraudulently in concert with each other in order to have unlawful gain and indulged in prior manipulation, artificial, market creation. Thus, all the accused violated Regulation 3(a) (b) (c) and (d) and 4(1)(2)(k)(r) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 1995 and 3(i)(ii) of SEBI (Prohibition of Insider Trader) Regulations, 1992.
(ii) The Accused No.1-Company failed to follow the normal accounting practices and provided misleading information in the balance-sheet.
Rane 7/11 REVN-563-2019
(iii) That whole time directors i.e. Accused Nos. 2, 3 and 4 of the Company were responsible for making misleading announcement, declaring inflated and manipulated financial results and providing misleading information to SEBI.
4. On 27th September, 2016, Applicants (Accused) moved an application for discharge from SEBI Special Case No.177/2015, on the ground that the Securities Appellate Tribunal, Mumbai in its decision dated 15 th October, 2018 having held that charge of manipulative trading by the Company in its own shares by the Applicant had failed in absence of any link being established by the Respondent-Board between any of the traders and the Company, Prosecution cannot sustained and the continuation of the proceeding would an abuse of process of Court. Thus, urged that, since Applicants have been exonerated on merits in the adjudication proceedings and findings are binding on the Complainant, Rane 8/11 REVN-563-2019 the allegations that Accused-Applicant violated the Regulations FUTP and 3(i)(ii) of SEBI (Prohibition of Insider Trading) Regulations, 1992 and offence under Section 24(1) of SEBI Act cannot be sustained.
5. The learned Additional Sessions Judge rejected the application and refused to pass the discharge order. Feeling aggrieved by this order, Applicants have preferred this revision.
6. Heard. Learned Counsel for the parties.
7. Perused the complaint, order dated 15th October, 2018 passed by the Securities Appellate Tribunal, Mumbai and the complaint in question.
8. Learned Counsel for the Applicants would submit that findings in adjudication proceedings being binding and conclusive, Prosecution cannot be sustained. It is argued that although the SEBI has preferred an appeal against the decision of Securities Appellate Tribunal, the Rane 9/11 REVN-563-2019 Hon'ble Apex Court vide order dated 27 th March, 2019 admitted the appeal; but application for stay was dismissed. Learned Counsel in support of his submission would rely on the judgment of the Hon'ble Apex Court in the case of Radheshyam Kejriwal Vs. State of W.B. (2011) 3 SCC 581.
9. In the case in hand, Applicants have been exonerated in the adjudication proceedings on the allegations for which, they have been prosecuted by the SEBI. In the case of K.C. Builders (2004) 2 SCC 731; the Hon'ble Apex Court had taken a view that when there is categorical finding in the adjudication proceedings exonerating the person, it is binding and conclusive and thus, the Prosecution cannot be allowed to stand. In the case of Radheyshyam Kejriwal (Supra), the Hon'ble Apex Court has held that;
"Adjudication proceedings and criminal Prosecution can be launched simultaneously and the finding in the adjudication proceedings in Rane 10/11 REVN-563-2019 favour of the person facing trial for identical violation will depend upon the nature of finding. If the exoneration in adjudication proceedings is on technical ground and not on merit, Prosecution may continue and in case of exoneration, is on merits where the allegation is found to be not sustainable at all and the person held innocent, criminal Prosecution on the same set of facts and circumstances cannot be allowed to continue."
10. In case in hand, the Applicants have been exonerated in the adjudication proceedings on merits and not on technical ground, and therefore the Prosecution for identical violation shall continue, if the order passed by Securities Appellate Tribunal is quashed and set aside by the Hon'ble Supreme Court in Civil Appeal, preferred by the SEBI against the decision of Securities Appellate Tribunal, Mumbai in Appeal No.60/2008. Thus, for the reasons stated above, the proceedings in SEBI Special Case No.177 of 2015 before the SEBI Special Judge, Sessions Court, Mumbai, against the Applicants, shall remain stayed till the decision of the Hon'ble Apex Court in the Civil Appeal instituted by the SEBI against the Rane 11/11 REVN-563-2019 decision of the Securities Appellate Tribunal in Appeal No. 60/2008.
11. Revision Application is admitted. Hence, Rule.
(SANDEEP K. SHINDE, J.) Najeeb..
Note : Correction is carried out in para-10 in the last line only, pursuant to speaking to minutes order dated 22nd October, 2021.
Digitally
signed by
NEETA
NEETA SHAILESH
SHAILESH SAWANT
SAWANT Date:
2021.10.22
14:08:18
+0530