SECURITIES AND EXCHANGE BOARD OF INDIA v. GAURAV VARSHNEY & ANR.

30Copy pinpoint30. The sequence of facts narrated hereinabove reveals, incorporation ofM/s. Gaurav Agrigenetics Ltd. after 25 .1.1995, and also, that it commenced a collective investment scheme prior to 15.10.1999 (the date, when the Collective Investment Regulations, were notified). Undoubtedly, M/s. Gaurav Agrigenetics Ltd., could have been proceeded against, for having violated Section 12(1B). And it would have been G fully justified for 'the Board', to proceed against Mis. Gaurav Agrigenetics Ltd., for having violated the said provision. The issue which has emerged for consideration is, whether the complaint filed by 'the Board' against the company under reference, as also, its directors, factually accused M/s. Gaurav Agrigenetics Ltd. and its directors, of having violated Section H 12(1 B) of the SEBI Act? Were the accused described as falling in the

SECURITIES AND EXCHANGE BOARD OF INDIA v. 43 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

non-proviso category? Were the accused, proceeded against on the A ground, that they had commenced activities concerning collective investment schemes after 25.1.1995, without seeking a certificate of registration? Answers to the aforesaid queries, by the erstwhile directors of Mis. Gaurav Agrigenetics Ltd., are in the negative. The above response of the accused, is seriously contested by Mr. Arvind Datar, B learned senior counsel representing 'the Board'. We shall endeavour, in the first instance, to determine the veracity of the submissions advanced at the hands of 'the Board', namely, whether the accused were proceeded against, as belonging to the non-proviso category.

31Copy pinpoint31. The contentions advanced at the hands of 'the Board' comprise of four independent submissions. First of all it was urged, that c a collective perusal of paragraphs 8 and 15 of the complaint dated 15.12.2003, would leave no room for any doubt, thatthe directors of the company concerned were pointedly accused of having violated Section 12(1B) of the SEBI Act. The said paragraphs 8 and 15 are reproduced herein below:- D "8. The accused no. 1 is operating collective investment schemes and raised an aggregate amount ofRs.14,63,279 (Rupees fourteen lakhs sixty three thousand two hundred seventy nine only) from the general public. *** *** *** E

15. However, the accused no. I neither applied for registration under the said regulations nor took any steps for winding up of the schemes and repayment to the investors as provided under the regulations and as such had violated the provisions of Section 12(1B) of Securities and Exchange Board oflndiaAct, 1992 and F Regulation 5(1) r/w Regulations 68(1), 68(2), 73 and 74 of the said regulations."

32Copy pinpoint32. Having given our tlroughtful consideration to the factual assertions contained in the complaint, it is not possible for tfs to agree with the learned senior counsel representing 'the Board', for the simple G reason, that a perusal of the above factual assertions, reveal two accusations against the accused. Firstly, that the accused did not apply for registration under the Collective Investment Regulations. And secondly, the accused did not take any steps for winding up of the collective investment scheme(s) being operated by them, refunding H

44 SUPREME COURT REPORTS [201 E] 7 S.C.R.

A deposits made by the investors, as per the provisions of the Collective Investment Regulations. The basis of the accusations levelled against the accused was not, that they had no right to commence a collective investment venture, during the period between 25.1.1995 when Section 12( lB) of the SEBI Act came to be inserted, till the requisite certificate of registration was sought. The complaint did not include any direct or B indirect insinuation, that the accused had unauthorisedly commenced operations of a collective investment scheme, after 25.1.1995. Even the date of commencement of the collective investment operations, by the accused, was not expressed in the complaint. It was imperative for 'the Board', to lay the above charge, through express assertions, for c proceeding against the accused, for violation of the non-proviso mandate, under Section 12(18).

33Copy pinpoint33. We are mindful of the fact that, paragraph 15 of the complaint relied upon by the learned senior counsel, does make a reference to the violation of Section 12( I B), but the violation alleged is on account of having not applied for registration, for carrying on the collective investment scheme, and alternatively, for not having taken steps to wind up the collective investment undertaking by making refunds to the investors, as provided for under the Collective Investment Regulations. In our considered view, reliance placed on the two paragraphs of the complaint is clearly insufficient, for the purpose canvassed by the learned senior counsel representing 'the Board'. We are of the view, that the above assertions in the complaint, assumed that the respondents were "existing" operators (-prior to 25.1.1995). Because in our view, only "existing" operators, had to wind up, if they choose not to conform with the Collective Investment Regulations (after theirnotification).

34Copy pinpoint34. There can be no doubt whatsoever, that the particulars of the offence, of which an accused is charged, have to be clearly stated to him. In case the accused in the present case were to be charged for having violated Section 12( 1B) as new operators under the non-proviso category, it was imperative to inform them ofall the relevant particulars, a namely, that they had unauthorisedly commenced a collective investment scheme, during the period when there was a complete bar, against commencing to sponsor or carry on a collective investment scheme. In the absence of the above particulars of the offence, they could not have been tried or punished for the same. No amount of evidence can be looked into, for an accusation not levelled or made out, in a complaint. H This is one of the basic tenets of the criminal jurisprudence.

SECURITIES AND EXCHANGE BOARD OF INDIA v. 45 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

35Copy pinpoint35. We will now proceed to deal with the second submission, advanced at the hands of the learned senior counsel, for 'the Board'. In support of his second submission, the learned senior counsel relied on Section 25 I of the Cr.P.C. The said provision is reproduced hereunder:- "251. Substance of accusation to be stated.- When in a summons- case the accused appears or is brought before the Magistrate, the particulars of the offence of which he is accused shall be stated to h:m, and he shall be asked whether he pleads guilty or has any defence to make, but it shall not be necessary to frame a formal charge."· A perusal of Section 251 leaves no room for any doubt, that " ... the c particulars of the offence of which he is accused shall be stated to him ... ". The particulars for an offence postulated for the non-proviso category (-where the activity of a collective investment scheme, is commenced after 25.1.1995), under Section 12( IB) of the SEBI Act, would be the date on which the accused commenced sponsoring or carrying on a collective investment scheme. If such date fell within the period when the initiation of a new collective investment endeavour stood barred under Section 12(1B), the accused had to be accosted of the same. And only thereupon, the accused would have understood, what charge was being levelled against him. Merely mention of the statutory provision, namely, Section 12( 1B) of the SEBI Act, would not amount to disclosing to the accused, the particulars of the offence of which they were accused. One cannot lose sight of the fact, that implications for the proviso category (-those who commenced operations before 25.1.1995) and the non- proviso category (-those who commenced operations after 25.1.1995) are different. A. perusal of the chargesheet reveals, that the respondents herein were being treated as belonging to the proviso category. But F learned counsel for 'the Board' desires us to treat them as belonging to the non-proviso category, and to proceed against them for having engaged themselves in activities concerning collective investment, on the basis of the material available on the record of the case. Th is, in our considered view is clearly impermissible. We are also of the view, that Section 251 G of the Cr.P.C. will not remedy the above defect and deficiency in the complaint. In the above view of the matter, for the reasons recorded hereinabove, and additionally, forthe reasons recorded while rejecting the first contention advanced at the hands of the learned senior counsel for 'the Board', we find no merit in the submission founded on Section 251 of the Cr.P.C. H

46 SUPREME COURT REPORTS [2016] 7 S.C.R.

36Copy pinpoint36. The third submission advanced on behalfof'the Board', was based on the determination rendered by the trial Court, that the accused had violated Section 12(1 B) of the SEBI Act. Learned senior counsel pointed out, that the date of incorporation of Mis. Gaurav Agrigenetics Ltd. (-3.7.1995), of which the respondents/accused were directors, was clearly brought out by way of concrete evidence, before the trial Court. B Mis. Gaurav Agrigenetics was undisputedly incorporated after 25.1.1995. It was further urged, that neither of the accused directors disputed the fact that the company of which they were promoter-directors, was actually carrying on a collective investment scheme. Such being the undisputed factual position, it was asserted, that a breach of Section c l 2( I B), as applicable to the non-proviso category, was clearly established. And further, that such breach was affirmed by the trial Court. It was, therefore, the contention of the learned senior counsel representing 'the Board', that it was no longer open to the accused to canvass, that the particulars of the offence under Section 12 (I B) were not clearly disclosed, in the complaint filed by 'the Board'. D

37Copy pinpoint37. We have given our thoughtful consideration to the contentions advanced at the hands of the learned senior counsel, in support of his third submission. We are, however, inclined to accept the submissions advanced at the hands of the accused. Neither the complaint nor the charge-sheet filed against the accused before the trial Court demonstrates, E that the company in question commenced its collective investment activities on its own for the first time after 25 .1.1995. It could well be, that an existing collective investment sc~eme covered by the proviso category under Section 12(1B), came to be purchased or taken over by the concerned company, after its incorporation. There is no bar against F a newly incorporated company, restraining it from taking over an existing business. If that was the case, there would be no violation of Section 12(1 B), since an existing collective investment scheme, which came into existence prior to 25.1.1995, could legitimately continue its operations under the proviso to Section 12(18), without a certificate ofregistration, till the framing of the Collective Investment Regulations. Therefore, G merely the fact that the company under consideration was incorporated after 25.1.1995, in our view, would not be sufficient to demonstrate the culpability of the accused, insofar as, the restraint against fresh commencement ofcollective investment activities under Section 12( 18) of the SEBI Act is concerned. In the above view of the matter, we find no merit even in the third submission advanced on behalfof 'the Board'.

SECURITIES AND EXCHANGE BOARD OF INDIA v. 47 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

38Copy pinpoint38. The last submission advanced at the hands of the learned senior counsel for 'the Board', was based on Section 465 of the Cr.P.C. The said provision is extracted hereunder:- "465. Finding or sentence when reversible by reason of error, omission or irregularity.- (1) Subject to the provisions hereinbefore contained, no finding, sentence or order passed by a Court of competent jurisdiction shall be reversed or altered by a Court of apptal, confirmation or revision on account of any error, omission or irregularity in the complaint, summons, warrant, proclamation, order, judgment or other proceedings before or during trial or in any inquiry or other proceedings under this Code, or any error, or irregularity in any sanction for the prosecution, unless in the opinion c of that Court, a failure of justice has in fact been occasioned thereby. (2) In determining whether any error, omission or irregularity in any proceeding under this Code, or any error, or irregularity in any sanction forthe prosecution has occasioned afailure ofjustice, the Court shall have regard to the fact whether the objection could and should have been raised at an earlier stage in the proceedings." Relying on Section 465 of the Cr.P.C. it was contended, that after the conclusion of a criminal case, resulting in recording an order of conviction, and also, the imposition of sentence, neither the findings nor the sentence were open to be revised or altered, merely " ... on account of any error, omission or irregularity in the complaint, summons, warrant, proclamation, order, judgment or other proceedings before or during trial or in any inquiry or other proceedings under this Code ... ". It was accordingly urged, that the mention of Section 12(1 B) of the SEBI Act in the complaint, should be taken as sufficient to understand the particulars, on the basis whereof, the accused were being proceeded against. It was accordingly submitted, that there was no justification whatsoever, in view of the clear mandate contained in Section 465 of the Cr.P.C., to interfere in the findings recorded by the trial Court, and/or to interfere with the sentence imposed. In addition to the aforesaid contention it was pointedly urged, that sub-Section (2) of Section 465 of the Cr.P.C. provided the benchmark, for interfering with 'such findings and sentence. It was submitted, that interference would only be permissible, in situations where the omission or irregularity would result in "failure ofjustice". H

48 SUPREME COURT REPORTS [2016] 7 S.C.R.

39Copy pinpoint39. It was submitted, that the entire factual scenario was clear and transparent, and known to one and all. The date of incorporation of the concerned company, wherein the accused were directors, is a matter of record, substantiated through cogent evidence produced before the trial Court. The fact that the accused were directors of Mis. Gaurav Agrigenetics Ltd., was also undisputed. Neither the company concerned B nor the accused, had contested the fact, that they had sponsored or had been carrying on a collective investment scheme, which was initiated after 25.J.I995. Based on the undisputed and clear factual position narrated above, it was asserted, that no one could arrive at the conclusion, in the facts and circumstances of the case, that the findings recorded by c the trial Court, had occasioned a "failure ofjustice".

40Copy pinpoint40. In order to support the above contention, the learned senior counsel for 'the Board', placed reliance on State of M. P. vs. Bhooraji, (2001) 7 SCC 679, wherefrom the Court's attention was drawn to the following observations:- D "8. The real question is whether the High Court necessarily should have quashed the trial proceedings to be repeated again only on account of the declaration ofthe legal position made by the Supreme Court concerning the procedural aspect about the cases involving offences under the SC/ST Act. A de novo trial should be the last resort ,and that too only when such a course becomes so desperately indispensable. It should be limited to the extreme exigency !<>avert "a failure of justice". Any omission or even the illegality in the procedure "hichgoes not affect the core of the case is not a ground for ordcri•!g" <le nova trial. This is because the appellate court has plcn;ir:- powers for revaluating and reappraising the evidence and even to take additional evidence by the appellate court itself or to direct such additional evidence to be collected by the trial court. But to replay the whole laborious exercise after erasing the bulky records relating to the earlier proceedings, by bringing down all the persons to the court once again for repeating the whole depositions would be a sheer waste of time, energy and _c;g~ts.unless there is miscarriage of justice otherwise. Hence the ·said course can be resorted to when it becomes unpreventable for the pur_pose of averting "a failure of justice". The superior court which orders a de novo trial cannot afford to overlook the realities and the serious impact on the H

SECURITIES AND EXCHANGE BOARD OF INDIA v. 49 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

pending cases in trial courts which are crammed with dockets, and how much that order would inflict hardship on many innocent persons who once took all the trouble to reach the court and deposed their versions in the very same case. To them and the public the re-enactment of the whole labour might give the impression that law is more pedantic than pragmatic. Law is not an instrument to be used for inflicting sufferings on the people but for the '."lrocess ofjustice dispensation. *** *** ***

12. Section 465 of the Code falls within Chapter XXXV under the caption "Irregular Proceedings". The Chapter consists of seven c sections starting with Section 460 containing a catalogue of irregularities which the legislature thought were not enough to axe down concluded proceedings in trials or enquiries. Section 46: of the Code contains another catalogue of irregularities which in the legislative perception would renderthe entire proceedings nu! I and void. It is pertinent to point out that the former catalogue D contains the instance of a Magistrate, who is not empowered to take cognizance of offence, taking cognizance erroneously and in good faith. The provision says that the proceedings adopted in such a case, though based on such erroneous order, "shall not be set aside merely on the ground of his not being so empowered". E

13. It is useful to refer to Section 462 of the Code which says that even proceedings conducted in a wrong sessions division are not liable to be set at naught merely on that ground. However. an exception is provided in that section that ifthe court is satisfied that proceedings conducted erroneously in a wrong sessions division F "has in fact occasioned a failure of justice" it is open to the higher court to interfere. While it is provided that all the instances enumerated in Section 461 would render the proceedings void, no other proceedings would get vitiated ipso facto merely on the ground that the proceedings were erroneous. The court of appeal or revision has to examine specifically whether such erroneous G steps had in fact occasioned a failure of justice. Then alone the proceedings can be set aside. Thus the entire purport of the provi5;ons subsumed in Chapter XXXV is to save the proceedings linked with such erroneous steps, unless the error is of such a nature that it had occasioned a failure of justice. H

50 SUPREME COURT REPORTS [2016) 7 S.C.R.

A 14. We have to examine Section 465( 1) of the Code in the above context. It is extracted below: "465. (I) Subject to the provisions herein before contained, no finding, sentence or order passed by a court of competent jurisdiction shall be reversed or altered by a court of appeal, B confirmation or revision on account of any error, omission or irregularity in the complaint, summons, warrant, proclamation, order, judgment or other proceedings before or during trial or in any enquiry or other proceedings under this Code, or any error, or irregularity in any sanction for the prosecution, unless in the opinion of that court, a failure ofjustice has in fact been c occasioned thereby."

15. A reading of the section makes it clear thatthe error, omission or irregularity in the proceedings held before or during the trial or in any enquiry were reckoned by the legislature as possible occurrences in criminal courts. Yet the legislature disfavoured axing D down the proceedings or to direct repetition of the whole proceedings afresh. Hence, the legislature imposed a prohibition that unless such error, omission or irregularity has occasioned "a failure of justice" the superior court shall not quash the proceedings merely on the ground of such error, omission or irregularity.

E 16. What is meant by "a failure ofjustice" occasioned on account of such error, omission or irregularity? This Court has observed in Shamnsaheb M. Multtani v. State of Karnataka, (2001) 2 SCC 577, thus: (SCC p. 585, para 23): "23. We often hear about 'failure of justice' and quite often F the submission in a criminal court is accentuatt:.: 'vith the said expression. Perhaps it is too pliable or facile an expression which could be fitted in any situation ofa case. The expression 'failure ofjustice' would appear, sometimes, as an etymological chameleon (the simile is borrowed from Lord Diplock in Town G Investments Ltd. v. Deptt. of the Environment), (1977) I All ER 813. The criminal cout1, particularly the superior cout1 should make a close examination to ascertain whether there was really a failure ofjustice or whether it is only a camouflage." *** *** ***

23. We conclude that the trial held by the Sessions Court reaching H

SECURITIES AND EXCHANGE BOARD OF INDIA v. 51 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

the judgment impugned before the High Court in appeal was A conducted by a court of competent jurisdiction and the same cannot be erased merely on account of a procedural lapse. particularly when the same happened at a time when the law which held the field in the State of Madhya Pradesh was governed by the decision of the Full Bench of the Madhya Pradesh High Court. The High B Court should have dealt with the appeal on merits and on the basis of the evidence already on record. To facilitate the said course, we set aside the judgment of the High Court impugned in this appeal. We remit the case back to the High Court for disposal of the appeal afresh on merits in accordance with law and subject to the observations made above." c

41Copy pinpoint41. We have given our thoughtful consideration to the last submission advanced at the hands of the learned senior counsel for 'the Board' It is, however, not possible for us to accept the same. We are of the considered view, which clearly emerges from the observations rendered in Bhooraji's case (supra), that Section 465 of the Cr.P.C. D pertains to omissions or irregularities in matters of procedure. It is, therefore, that both the sub-Sections of Section 465, pointedly refer to proceedings under the Cr.P.C. Added to the above it is of some significance, that Chapter XXXV of the Cr.P.C. include Sections 460 to

466. The heading of the instant Chapter is "Irregular Proceedings". Not only that, each one of the Sections in Chapter XXXV of the Cr.P.C. E make pointed reference only to matters of procedure. There can be no doubt, therefore, that omissions and/or irregularities in matters of procedure can be overlooked, subject to the condition, that such an omission or irregularity does not occasion "failure of justice". This is our understanding of Section 465 of the Cr.P.C. F

42Copy pinpoint42. Having so interpreted Section 465 of the Cr.P.C., we may also indicate, that material facts constituting the offence, for which an accused is being charged, must mandatorily be put to the accused. Lack of material facts, which are vital to establish the ingredients ofan offence, cannot be viewed as a procedural omission. The above requirement is G not procedural, but substantive. Accordingly, it is not possible for us to accept that the lapse which the appellant desires this Court to overlook and exemrt, can be overlooked under Section 465. We are also of the considered view, that irregularity and omission in the present case, in not disclosing to the accused, the particulars of the offence for which they H

52 SUPREME COURT REPORTS [2016] 7 S.C.R.

A were being proceeded against, would occasion "failure ofjustice". Thus viewed, it is not possible for us to accept the contention advanced at the hands of the learned senior counsel, that the pending proceedings before the trial Court, should not be interfered with.

43Copy pinpoint43. The sole allegation levelled against the respondents was, that B they were guilty of having breached the provisions of the Collective Investment Regulations, by failing to make any application to 'the Board' for registration of the collective investment scheme(s) being operated by them, and by failing to wind up their existing collective investment scheme(s), and/or in repaying the amounts collected from the investors. That alone constituted the factual foundation of the complaint made c against the respondents. Insofar as the instant charge against the respondents is concerned, it was the contention of learned counsel for the respondents, that the Collective Investment Regulations were notified on 15.10.1999. The said regulations, therefore, could not have been breached by the respondents, prior to 15 .10.1999. It was submitted, that the respondent no. 1 - Gaurav Varshney, can indisputably be taken to have resigned from the directorship of M/s. Gaurav Agrigenetics Ltd. with effect from 30. 7 .1998, and respondent no. 2 - Vi nod Kumar Varshney can likewise be taken to have resigned from the directorship of the said company with effect from 23.12.1998. Both respondent nos. 1 and 2, according to learned counsel representing them, ceased to have any concern/relationship with M/s. Gaurav Agrigenetics Ltd., well before 15.10.1999 (when the Collective Investment Regulations were enforced). It was, therefore contended on behalf of the respondents, that this Court should not interfere with the impugned order passed by the High Court dated 13.5.2010, quashing the complaint preferred bv 'the Board', as there were legally valid reasons for doing so.

44Copy pinpoint44. Having given our thoughtful consideration to the contentions advanced at the hands of learned counsel for the respondents, we are satisfied, that the quashing of the proceedings initiated by 'the Board', against respondent nos. 1 and 2, calls for no interference, for the simple reason, that they relate to an alleged breach by Mis. Gaurav Agrigenetics Ltd., of the Collective Investment Regulations, by treating them as existing collective investment undertaking. Those belonging to the proviso category, could only be proceeded against for having continued their activities relating to collective investment, without obtaining registration, after the notification of the Collective Investment Regulations (see H

SECURITIES AND EXCHANGE BOARD OF INDIA v. 53 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

paragraph 29 above). The said regulations came into existence with effect from 15.10.1999. By the time the Collective Investment Regulations were notified, respondent nos. I and 2 - Gaurav Varshney and Vinod Kumar Varshney, had already severed their relationship with M/s. Gaurav Agrigenetics Ltd. In view of the uncontroverted factual position expressed by learned counsel for the respondents, we find no difficulty in concluding, that proceedings which were initiated against respondent nos. 1 and 2, and were quashed by the High Court, cal I for no interference. Ordered accordingly.

45Copy pinpoint45. In the result, the appeals stand dismissed. Criminal Appeal nos. 833-836 of 2012 c

46Copy pinpoint46. It is not a matter of dispute, that the respondent herein - Mrs. Parvesh Varshney was one of the directors of Mis. Gaurav Agrigenetics Ltd., i.e. the same company involved in criminal appeal nos. 827-830 of 2012. We have, in our conclusions with reference to criminal appeal nos. 827-830 of2012, upheld the order dated 13.5.20 I 0 D passed by the High Court in Criminal Miscellaneous Case nos. 7468- 7471 of2006 and Criminal Miscellaneous no. 951 of2007, quashing the proceedings initiated against two of the directors of the above company, namely, Gaurav Varshney and Yi nod Kumar Varshney. The High Court in the above judgment (pertaining to Gaurav Varshney and Vi nod Kumar Varshney) had quashed the proceedings initiated against the co-directors E of the respondent herein, arising out of a complaint dated 15.12.2003 filed by 'the Board' before the Chief Metropolitan Magistrate, Tis Hazari Courts, Delhi, in exercise of its jurisdiction under Section 482 of the Cr.P.C .. The said proceedings against the co-directors were initiated on the basis of a complaint made by 'the Board' in the Court of the Chief F Metropolitan Magistrate, Tis Hazari Courts, Delhi against M/s. Gaurav Agrigenetics Ltd., and ten of its directors. In the above complaint, Gaurav Yarshney was arrayed as accused no. 5 and Yinod Kumar Varshney was impleaded as accused no. 8.

47Copy pinpoint47. Insofar as the instant criminal appeal is concerned, the same G has been filed againstthe impugned judgment and order dated 12.8.2010, rendered by the High Court in Criminal Miscellaneous Case nos. 7468- 7471 of2006 and Criminal Miscellaneous no. 951 of2007. It would be relevant to mention, that the respondent herein - Mrs. Parvesh Varshney had also assailed the same complaint dated 15.12.2003 filed by 'the Board' before the Chief Metropolitan Magistrate, Tis Hazari Courts, H

54 SUPREME COURT REPORTS [2016] 7 S.C.R.

A Delhi, wherein she was arrayed as accused no. 6. The High Court by its judgment and order dated 12.8.20 I0, had quashed the complaint filed against the respondent herein, in exercise of its jurisdiction under Section 482 of the Cr.P.C.

48Copy pinpoint48. The commonness of the factual position in the appeals B adjudicated upon by us (Criminal Appeal nos. 827-830of2012), and the present criminal appeals is, that whilst Gaurav Varshney - accused no. 5, had tendered his resignation from the position of director of Mis. Gaurav Agrigenetics Ltd. on 30. 7.1998, and Vi nod Kumar Varshney - accused no. 8, had tendered his resignation from the above company on 23.12.1998, the respondent herein - Mrs. Parvesh Varshney- accused c no. 6, had tendered her resignation from the position of director of Mis. Gaurav Agrigenetics Ltd. with effect from 6.4.1998. The resignation of the respondent herein, had taken effect before the Collective Investment Regulations were notified - on 15.10.1999. The said regulations, therefore, could not have been breached, by the respondent herein. D Therefore, for exactly the same consideration and reasons as have weighed with us, for not accepting the pleas raised by 'the Board' in Criminal Appeal nos. 827-830 of2012 against the other co-accuseo in the same complaint dated 15.12.2003, we decline to interfere with the impugned order passed by the High Court, dated 12.8.20 I0, with reference to the respondent - Mrs. Parvesh Varshney - accused no. 6; as well. E

49Copy pinpoint49. In the result, the instant appeals are dismissed. Criminal Appeal no. 252 of 2015

50Copy pinpoint50. Only a word of caution. In the connected earlier criminal appeals (nos. 827-830 of2012, and 833-836 of2012), 'the Board' was F the appellant, and the accused were the respondents. Herein, the accused - Major P.C. Thakur is the appellant, and 'the Board' is the respondent.

51Copy pinpoint51. The instant appeal relates to Mis. Accord Plantation Ltd., a company incorporated under the provisions of the Companies Act, 1956, G on 16.10.1996. Even though the list of dates describes the appellant - Major P.C. Thakur, as a promoter-director of the said company, learned counsel for the appellant was at pains to point out, that the appellant was inducted as director only in 1998. It was submitted, that the appellant's involvement in the functioning of Mis. Accord Plantation Ltd., was limited to tendering advice with reference to its agricultural activities, and that, H

SECURITIES AND EXCHANGE BOARD OF INDIA v. 55 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

the appellant- Major P.C. Thakur, was neither in charge of nor responsible A to the company, for the conduct of its business activities.

52Copy pinpoint52. In addition to the submissions noticed with reference to the earlier appeals (Criminal Appeal nos. 827-830 of 2012), it was the vehement contention of learned counsel for the appellant, that it was not open for 'the Board' to proceed against the appellant under Section 27 B of the SEBI Act, which is extracted hereunder:- "27.0ffences by Companies. - (!)Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the c company, as well as the company, shall be deemed to be guiltv of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (I), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. F Explanation.- For the purposes of this section, - (a) "company" means any body corporate and includes a firm or other association ofindividuals; and (b) "director", in relation to a firm, means a partner in the G firm." Based on Section 27 of the SEBI Act, it was contended, that besides a bald statement made by 'the Board', in the show-cause notice dated 12.5.2000, and the complaint dated 21.1.2003, there was no material on the record of the case to demonstrate, that the appellant was in any H

56 SUPREME COURT REPORTS [2016] 7 S.C.R.

A manner" ... in charge of, and was responsible to ... " the company for the conduct of its business. It was, therefore submitted, that it was not open to 'the Board' to proceed against the appellant. In order to substantiate the instant contention, learned counsel placed reliance on S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla, (2005) 8 SCC 89, wherefrom our attention was invited to the following observations:- B "4. In the present case, we are concerned with criminal liability on account of dishonour of a cheque. It primarily falls on the drawer company and is extended to officers of the company. The normal rule in the cases involving criminal liability is against vicarious liability, that is, no one is to be held criminally liable for an act of c another. This normal rule is, however, subject to exception on account of specific provision being made in the statutes extending liability to others. Section 141 of the Act is an instance of specific provision which in case an offence under Section 138 is committed by a company, extends criminal liability for dishonour ofa cheque to officers of the company. Section 141 contains conditions which have to be satisfied before the liability can be extended to officers of a company. Since the provision creates criminal liability, the conditions have to be strictly complied with. The conditions are intended to ensure that a person who is sought to be made vicariously liable for an offence of which the principal accused is the company, had a role to play in relation to the incriminating act l!nd further that such a person should know what is attributed to him to make him liable. In other words, persons who had nothing to do with the matter need not be roped in. A company being a juristic person, all its deeds and functions are the result of acts of others. Therefore, officers of a company who are responsible for acts done in the name of the company are sought to be made personally liable for acts which result in criminal action being taken against the company. It makes every person who, at the time the offence was committed, was in charge of, and was responsible to the company forthe conduct of business of the company. as well as the company. liable for the offence. The proviso to the sub- section contains an escape route for persons who are able to prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent commission of the offence. H *** *** ***

SECURITIES AND EXCHANGE BOARD OF INDIA v. 57 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

l 0. While analysing Section 141 of the Act, it will be seen that it A operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are "every person". These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words: B "Who. at the time the offence was committed. was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guiltv of the offence, etc." What is required is that the persons who are sought to be made criminally liable under Section 141 should be, at the time the offence c was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of F a company at the relevant time. Liability depends on the role one plays in the affairs ofa company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of"every person" the section would have said "every director, manager or secretary in a company is liable" ... , etc. The legislature is aware G that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action. *** *** *** H

58 SUPREME COURT REPORTS [2016] 7 S.C.R.

A 12. The conclusion is inevitable that the liabilitv arises on account of conduct, act or omission on the part ofa person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable. B *** *** ***

15. Cases have arisen under other Acts where similar provisions are contained creating vicarious liability for officers of a company in cases where primary liability is that of a company. State of Karnataka v. Pratap Chand, ( 1981) 2 SCC 335, was a case under c the Drugs and Cosmetics Act, 1940. Section 34 contains a similar provision making every person in charge of and responsible to the company for the conduct of its business liable for offence committed by a company. It was held that a person liable for criminal action under that provision should be a person in overall D control of the day-to-day affairs of the company or a firm. This was a case of a partner in a firm and it was held that a partner who was not in such overall control of the finn could not be held liable. In Municipal Corpn. ofDelhi v. Ram Kishan Rohtagi, (1983) 1 SCC I, the case was under the Prevention of Food Adulteration Act. It was first noticed that under Section 482 of the Criminal E Procedure Code in a complaint, the order of a Magistrate issuing process against the accused can be quashed or set aside in a case where the allegation made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients ofan offence which are arrived at against the accused. This emphasises the need for proper averments in a complaint before a person can be tried for the offence alleged in the complaint. I 6. In State of Haryana v. Brij Lal Mittal, (1998) 5 SCC 343, it was held that vicarious liability of a person for being prosecuted for an offence committed under the Act by a company arises if at the material time he was in charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of a company, it does not necessarily mean that he fulfils both the above requirements so as to make him liable. Conversely, without being a director a person can be in

SECURITIES AND EXCHANGE BOARD OF INDIA v. 59 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

·charge of and responsible to the company for the conduct of its business. For the same purpose, reliance was placed on National Small Industries Corporation Ltd. vs. Harmeet Singh Paintal, (2010) 3 SCC 330, and this Court's attention was drawn to the following observations recorded therein:- B "12.lt is very clear from the above provision that what is required is that the persons who are sought to be made vicariously liable for a criminal offence under Section 141 should be, at the time the offence was committed. was in charge of. and was responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within c the ambit of the provision. Only those persons who were in charge of and responsible for the conduct of the business of the company at the time of commission of an offence will be liable for criminal action. It follows from the fact that if a Director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable for a criminal offence under the provisions. The liability arises from being in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company.

13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. *** *** ***

22. Therefore, this Court has distinguished the case of persons who are in charge of and responsible for the conduct of the business of the company at the time of the offence and the persons H

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A who are merely holding the post in a company and are not in charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance with Section 141, the averment as to the role of the Directors concerned should be specific. The description should be clear and there should be some unambiguous allegations as to B how the Directors concerned were alleged to be in charge of and were responsible for the conduct and affairs of the company." Last of all, learned counsel invited our attention to Gunma la Sales Private Limited vs. Anu Mehta, (2015) I SCC I 03, wherefrom reliance was placed on the following observations:- c "22. In National Small Industries Corpn. Ltd. v. 1-Iarmeet Singh Paintal, (20 I 0) 3 SCC 330, this Court was dealing with the same question. After referring to S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (I), (2005) 8 SCC 89, S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2), (2007) 4 SCC 70, Saroj Kumar D Poddar v. State (NCT of Delhi), (2007) 3 SCC 693, N.K. Wah i v. Shekhar Singh, (2007) 9 SCC 481, N. Rangachari v. BSNL, (2007) 5 SCC I 08, Paresh P. Rajda v. State of Maharashtra, (2008) 7 SCC 442, K.K. Ahuja v. V.K. Vora, (2009) 10 SCC 48, and other relevant judgments, this Court laid down the following principles: (National Small Industries Corpn. Ltd. case (supra), sec pp. 345-46, para 39) "(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused H

SECURITIES AND EXCHANGE BOARD OF INDIA v. 61 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

therein vicariously liable foroffence committed by the company along with averments in the petition containing that accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part ofa person must be pleaded and proved and not inferred. (v, If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. C (vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint. (vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liabilitv of a Director in such cases."

28. We are concerned in this case with Directors who are not signatories to the cheques. So far as Directors who are not signatories to the cheques or who are not Managing Directors or Joint Managing Directors are concerned, it is clear from the conclusions drawn in the abovementioned cases that it is necessary to aver in the complaint filed under Section 138 read with Section 141 of the NI Act that at the relevant time when the offence was committed, the Directors were in charge of and were responsible for the conduct of the business of the company. This is a basic requirement. There is no deemed liability of such Directors. This averment assumes importance because it is the basic and essential averment which persuades the Magistrate to issue process against the Director. That is why this Court in SMS Pharma (I) (supra), observed that the question of requirement of averments in a complaint has to be considered on the basis of provisions contained in Sections 138 and 141 of the NI Act read in the light of the powers of a Magistrate referred to in Sections 200 to 204 of the Code which recognise the Magistrate's discretion to reject the H

62 SUPREME COURT REPORTS [2016] 7 S.C.R.

A complaint at the threshold if he finds that there is no sufficient ground for proceeding ..... " *** *** ***

34. We may summarise our conclusions as follows: 34.1. Once in a complaint filed under Section 138 read with Section 8 141 of the NI Act the basic averment is made that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director. 34.2. If a petition is filed under Section 482 of the Code for c quashing of such a complaint by the Director, the High Court may, in the facts of a pai1icular case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director. D 34.3. In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about the role of the Director in the complaint. It may do so having come across some unimpeachable, incontrovertible E evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a F case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm- twisting tactics, the High Court may quash the proceedings. It G bears repetition to state that to establish such case unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed.

SECURITIES AND EXCHANGE BOARD OF INDIA v. 63 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

34.4. No restriction can be placed on the High Court's powers under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent inter alia the abuse of the process of the court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director." It was pointed out, that even though the judgments relied upon and c referred to hereinabove, were with reference to Section 13 8 of the Negotiable Instruments Act, yet Section 141 thereof is exactly similar to Section 27 of the SE81 Act. And, therefore, insofar as the present issue is concerned, the cited judgments would be fully applicable to interpret and construe Section 27 of the SEBI Act. It was therefore asserted, that in the absence of any clear and firm assertion or material on the record of the case, to establish that the appellant was" ... in charge of, and was responsible to ... " the company for the conduct of its business, he could not be proceeded against.

53Copy pinpoint53. It is not necessary for us to deal with the pointed issue at hand, on account of the clear findings recorded by the High Court in the impugned order dated 29.1.2014, depicting the role and involvement of the appellant in the activities of Mis. Accord Plantation Ltd. The conclusions drawn by the High Court in the impugned order, are extracted hereunder:- F "18 .... As would be evident from the balance sheet of the company, remuneration was being paid by it to Mr. P.C. Thakur. It has also come in the deposition ofDW2, an official from Punjab and Sind Bank that an· authority letter from the company was received stating therein that Major P.C. Thakur was its director as on 24.2.1998 and he was authorized to operate the accounts of the G company with the aforesaid bank. A copy of the account opening form is Ex. DW2/B, whereas a copy of the extract from the minutes of the meeting of Board of Directors of the company is Ex. DW2/ C. A copy of the authority letter is Ex. DW2/D. The fact that Mr.. P.C. Thakur was getting remuneration from the company H

64 SUPREME COURT REPORTS [2016] 7 S.C.R.

A and was also authorized to operate its bank accounts clearly shows that he was also a person incharge and responsible to the COJlJ.lli!fil'. for conduct of its business, during the period he was its director." In view of the fact, that the above factual position has not been disputed by learned counsel for the appellant, we are therefore satisfied in 8 concluding, that the appellant - Major P.C. Thakur was in charge, and was responsible to the company, for the conduct of its business. It is not possible forus to accept, thatthe appellant-Major P.C. Thakur's activities concerning M/s. Accord Plantation Ltd., were confined to tendering advice with reference to its agricultural activities alone. In the above view of the matter, we find no difficulty whatsoever in affirming, that c the appellant was liable to shoulder the responsibilities of the company relatable to its business activities, and therefore, was justifiably proceeded against, under Section 27 of the SEBI Act.

54Copy pinpoint54. Insofar as the present appeal is concerned, a show cause notice dated 12.5 .2000 was issued by the SEBI to Mis. Accord Plantation D Ltd. A few of the relevant paragraphs of the show cause notice dated 12.5.2000 are extracted hereunder:- "As you are aware, SEBI (Collective Investment Scheme) Regulations, 1999 (hereinafter referred to as Regulations) came into force on October 15, 1999. As per regulation 5( I}, any person E who immediately prior to the commencement of these Regulations was operating a Collective Investment Scheme, shall subject to the provisions of Chapter IX of these Regulations make an application to SEBI for grant of certificate ofregistration within a period of two months from the date of notification (i.e. October F 15, I 999). Subsequently, having regard to the interests of investors and requests received from entities, SEBI had extended the last date for submitting application by existing entities upto March 31, 2000 and the same was intimated by SEBI by a Press Release and Public Notice. Thus, you as an existing Collective Investment Scheme entity, subject to the provisions of Chapter IX of these G Regulations, were required to apply for registration by March 31, 2000. As per Regulation 73( I) an existing Collective Investment Scheme (CIS) which has failed to make an application for registration to SEBL shal I wind up the existing scheme and repay the investors. H

SECURITIES AND EXCHANGE BOARD OF INDIA v. 65 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

Further. as per Regulation 74, an existing CIS which is not desirous A ofobtaining provisional registration from SEBI shall formulate a scheme of repayment and make such repayment to the existing investors in the manner specified in Regulation 73(2). The existing Collective Investment Scheme to be wound up shall send an information memorandum to the investors who have subscribed 8 to the schemes, within two months from the date of receipt of intimation from SEBI. Vide our letter dated December 15/29, 1999 and also by way ofa public notice dated December I 0, 1999 all the existing Collective Investment Schemes, including you, which were not desirous of obtaining provisional registration from SEBI or had failed to make c an application for registration from SEBI were given individual intimation in terms ofregulation 73(2) that casts an obligation on you to send an information memorandum to the investors detailing the sate of affairs of the scheme, the amount repayable to each investors and the manner in which such amount is determined. D Accordingly you were required to send the information memorandum to the investors by February 28, 2000. It is noted that you have not applied for registration by March 3 1, 2000 and also appear to have failed to take steps for winding up of the scheme(s) in terms of Regulations. You have. therefore, E prima facie violated the provisions of Section 12( I 8) of SEBI Act, 1992 and regulation 5( I) read with regulations 68( I), 68(2), 73 and 74 ofSEBI (Collective Investment Schemes) Regulations, 1999."

55Copy pinpoint55. Even in the complaint filed by 'the Board' under Section 200 F of the Cr.P.C. read with Sections 24(1) and 27 of the SEBI Act, the accusations levelled against Mis. Accord Plantation Ltd., as also, the appellant herein, were similar. Relevant paragraphs of the complaint dated 21.1.2003 are being extracted hereunder:- "7. The accused no. I company filed infonnation/details with SEBI G regarding the collective investment schemes pursuant to SEBI press release dated November 26. 1997 and/or public notice dated Dec<-1nber 18. 1997.

8. In terms of Chapter IX of the said regulations. any person who had been operating a collective investment scheme at the H

66 SUPREME COURT REPORTS [2016] 7 S.C.R.

A time of commencement of the said regulations shall be deemed to be an existing collective investment scheme and shall comply with the provisions of the said Chapter IX. Further, in terms of the said Chapter IX any person who immediately prior to the commencement of the said regulations was operating a collective investment scheme shall make an ap12!ication to SEBI for grant of B registration within a period of two months from the date of notification of the said regulations.

9. SEB! having regard to the interest of investors and request received from various 12ersons operating collective investment schemes extended the last date of submitting the application by c existing entities upto March 31. 2000 and the same was declared by SEBI vide a press release and a public notice.

10. However, the accused no. I failed to make any application with SEBI for registration of the collective investments schemes being operated by it as r.er the said regulations. D

11. It is submitted that in terms of regulation 73( 1) of the said regulations an existing collective investment scheme which failed to make an apr.lication for registration with SEBI, shall wind up the existing collective investment schemes and reray the amounts collected from the investors. Further, in terms ofregulation 74 of E the said regulations, an existing collective investment scheme which is not desirous ofobtaining provisional registration from SEBI shall formulate a scheme of repayment and make such repayment to the existing investors in the manner specified in regulation 73.

12. SEBI vide its letter dated December I 0, 1999 and December F 29, 1999 and also by way of a public notice dated Dl'Ccmber I 0, 1999 gave intimation in terms of regulation 73(2) to the accused no. 1 which casts an obligation on the accused no. 1 to send an information memorandum to all the investors detailing the state of affairs of the schemes, the amount repayable to each investor and the manner in which such amount is determined. As per the aforesaid letters of SEBI, the information memorandum to the investors was required to be sent latest by February 28, 2000. SEBJ vide another public notice published in newspapers on February 22, 2000 infonned to the company that all the companie~ carrying out collective investment schemes who had not made any application for grant of registration or were not desirous of

SECURITIES AND EXCHANGE BOARD OF INDIA v. 67 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

obtaining provisional registration were required to compulsorily windup their existing schemes as per the provisions ofregulation 73( I) of the said regulations.

13. However, the accused no. I neither applied for registration under the said regulations nor took any steps for winding up of the schemes and repayment to the investors as provided under the regul~tions and as such had violated the provisions of section 11 8, 12(1 B) of Securities and Exchange Board oflndiaAct, 1992 and regulation 5(1) r/w regulations 68(1), 68(2), 73 and 74 of the said regulations."

56Copy pinpoint56. Based on the above show-cause notice and complaint (dated 12.5.2000 and 21.1.2003, respectively), it was the contention of learned c counsel for the appellant, that 'the Board' treated M/s. Accord Plantation Ltd. as an "existing" collective investment enterprise, namely, a collective investment scheme falling within the meaning of the proviso under Section 12( I B) of the SEBI Act. Referring to the show-cause notice it was pointed out, that 'the Board' had accused the appellant for not having made an application under Regulation 5 of the Collective Investment Regulations, upto 31.3.2000. It was pointed out that Regulation 5, pertains to "existing" collective investment schemes. It was contended, that even though under the Collective Investment Regulations originally drawn, such an application had to be preferred by 15.12.1999 (i.e. within the period of two months from the date of commencement of the Collective Investment Regulations), the said date was subsequently extended to 31.3 .2000. It was submitted, that the imputations contained in the show- cause notice were clearly misconceived, as the appellant had ceased to have any concern with the company, with effect from 20.2.2000. The instant factual position was sought to be demonstrated by placing reliance on Form-32, submitted with the Registrar of Companies. Our attention was also drawn to the statement of DW6 - Vikram, Senior Dealing Assistant Of the office of the Registrar of Companies, Jalandhar, who in his examination-in-chief, had acknowledged that in Form-32 (exhibited as DW6/l ), Major P.C. Thakur was shown to have resigned from the directorship ofM/s. Accord Plantation Ltd., with effect from 20.2.2000. Premised on the above factual position, it was submitted, thatthe appellant cannot be implicated fo.· not having complied with the Collective Investment Regulations, because he had already resigned (-on 20.2.2000), before the cause of disobedience could have arisen (-on 31.3.2000, the extended last date for submitting applications for registration, by"existing" H

68 SUPREME COURT REPORTS (2016] 7 S.C.R.

A entities). We find merit in the contention advanced by learned counsel for the appellant, that since it has been effectively established, that the appellant ceased to be a director on 20.2.2000, and culpability, if at all, would arise only on 31.3.2000, the proceedings initiated against the appellant were not sustainable, and would be liable to be quashed.

57Copy pinpoint57. Learned counsel for 'the Board' however seriously contested, that the appellant - Major P.C. Thakur had resigned from M/s. Accord Plantation Ltd. on 20.2.2000. In this behalf, he placed reliance on the statement of DW6 - Vikram, Senior Dealing Assistant of the office of the Registrar of Companies, Jalandhar. Even though in his examination- in-chief, DW6- Vikram had clearly affirmed, that in terms ofForm-32 c (exhibited as DW6/I ), Major P.C. Thakur was shown to have resigned from the directorship of Mis. Accord Plantation Ltd. with effect from 20.2.2000, yet in his cross-examination, he acknowledged" ..... as per my record, the persons named as members of the Board of directors in the annual return of 201h September, 2002 - Exhibit DW6/4 and 5 are D Sh. Ajay Vohra, Tej inder Singh, P.C. Thakur, Rajan Rana and Rajkumar Sharma. These returns have been submitted by the company ..... ". It was the contention of learned counsel, that annual returns are tiled by a company under Section 159 of the Companies Act, 1956. Sub-Section (I) of Section 159 is extracted below:-

E " 159. Annual return to be made by company having a share capital.- ( I) Every company having a share capital shall within sixty days from the day on which each of the annual general meetings referred to in section 166 is held, prepare and file with the Registrar a F return containing the particulars specified in Pan I cf Schedule V, as they stood on that day, regarding - (a) its registered office, (b) the register of its members, ( c) the register of its debenture-holders, G (d) its shares and debentures, ( e) its indebtedness, (t) its members and debenture-holders, past and present, and (g) its directors, managing directors, managers and secretaries, past and present: H

SECURITIES AND EXCHANGE BOARD OF INDIA v. 69 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

Provided that any of the five immediately preceding returns has given as at the date of the annual general meeting with reference to which it was submitted, the full particulars required as to past and present members and the shares held and transferred by them, the return in question may contain only such of the particulars as relate to persons ceasing to be or becoming members since that date and to shares transferred since that date or to changes as compared with that date in the number of shares held by a member. Explanation.- Any reference in this section or in section 160 or 161 or in any other section or in Schedule V to the day on which an annual general meeting is held or to the date of the annual general meeting shall, where the annual general meeting for any year has c not been held, be construed as a reference to the latest day on or before which that meeting should have been held in accordance with the provisions of this Act." Relying on Section 159(1) extracted above, it was submitted, that annual returns filed by a company are submitted on a prescribed proforma, and as such, the same being a statutory requirement, will have to be accepted as correct, unless it was shown otherwise.

58Copy pinpoint58. It was also submitted, that the aforesaid statutory requirement is akin to the statutory requirement under Section 303 of the Companies Act, 1956, inter alia, pertaining to the details of the existing directors and/or any change among the directors, managing directors, managers or secretaries ofa company. Insofar as the instant aspect of the matter is concerned, section 303(2) of the Companies Act, 1956, which was also relied upon, is extracted hereunder:- "303. Register of directors etc. - (I) *** *** *** (2) The company shall, within the periods respectively mentioned in this sub-section, send to the Registrar a return in the prescribed form containing the particulars specified in the said register and a notification in the prescribed form of any change among its directors managing directors, managers or secretaries, specifying the date of the change. G The period within which the said return is to be sent shall be a period of thirty days from the appointment of the first directors of the company and the period within which the said notification of a change is to be sent shall be thirty days from the happening thereof;" H

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59Copy pinpoint59. It was contended, that while it cannot be disputed that the name of Major P.C. Thakur existed on Form-32 sent to the Registrar of Companies, and DW6- Vikram in his statement duly brought out, that as per the record of the Registrar of Companies, Major P.C. Thakur had resigned from the directorship of the company with effect from 20.2.2000, yet an equally significant fact is, that in the annual return filed by M/s. B Accord Plantation Ltd. on 30.9.2002, Major P.C. Thakur was shown as one of the directors. It was, therefore submitted on behalf of'thc Board', that Major P.C. Thakur had not been in a position to clearly and effectively establish, that he had resigned from the concerned company, with effect from 20.2.2000. c 60. In order to repudiate the above contention, learned counsel representing the appellant - Major P.C. Thakur, placed reliance on the decision of this Court in Harshendra Kumar D. vs. Rebatilata Koley, (20 I I) 3 SCC 351, and highlighted the issue under consideration, by emphasizing on the following observations recorded therein:- D "16.Every company is required to keep at its registered office a register of its Directors, Managing Director, manager and secretary containing the particulars with respect to each of them as set out in clauses (a) to (e) of sub-section (I) of Section 303 of the Companies Act, 1956. Sub-section (2) of Section 303 mandates every company to send to the Registrar a return in duplicate containing the particulars specified in the register. Any change among its Directors, Managing Directors, managers or secretaries specifying the date of change is also required to be furnished to the Registrar of Companies in the prescribed form within 30 days of such change. There is, thus, statutory requirement of informing the Registrar of Companies about change among Directors of the company.

17. In this view of the matter. in our opinion. it must be held that a Director. whose resignation has been acceP.ted by the company and that has been duly notified to the Registrar of Companies .. cannot be made accountable and fastened with liability for anything done by the company after the acceptance of his resignation. The words "every person who, at the time the offence was committed'', occurring in Section 141 (I) of the NI Act are not without significance and these words indicate that criminal liability of a Director must be determined on the date the offence is alleged to have been committed."

SECURITIES AND EXCHANGE BOARD OF INDIA v. 71 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

Based on the above, it was submitted, that no one could be permitted to dispute the fact that the appellant - Major P.C. Thakur, had resigned from Mis. Accord Plantation Ltd. with effect from 20.2.2000.

61Copy pinpoint61. We have given our thoughtful consideration to the afore-stated contention, pertaining to the date when Major P.C. Thakur severed his relationship with M/s. Accord Plantation Ltd., by tendering his resignation and submitting the same with the Registrar of Companies in Form-32. Based on the judgment rendered by this Court in the Harshendra Kumar D's case (supra), there can be no doubt, that the submissions advanced on behalf of the appellant have to be accepted, unless the same can be effectively repudiated. The mere mention of the name of Major P.C. Thakur in the annual return filed on 30.9.2002, in our considered view, c' cannot per se lead to the inference, that Major P.C. Thakur, was still on the Board of directors ofM/s. Accord Plantation Ltd .. We say so because, Section 159( I )(g) of the Companies Act, 1956, requires that alongwith the annual return, the particulars of the directors, managing directors, 1irnnagers and secretaries," ... past and present. .. ", have to be indicated. D That being the mandate of Section 159, the assertion made at the hands oflearned counsel for 'the Board' could only be justified ifthe name of Major P.C. Thakur(in the annual return submitted on 30.9.2002) projected him as a "present" director. It is, therefore, that we examined photocopies ofDW6/4 and DW6/5, (referred to in the statement ofDW6- Vikram). DW6/5 was a part of the annual return of the concerned company. E Details were provided therein by the said company, in the format prescribed in Schedule V of the Companies Act, 1956. At S.No. IV of the format, information was to be provided pertaining to the past and present directors/manager/secretary. In the information so provided by the concerned company at S.No. IV, the names of Ajay Vohra, Tejinder F Singh, PC Thakur, Rajan Rana and Rajkumar Sharma were admittedly depicted. The dates of their appointment as directors were also mentioned. Exhibit DW6/5 is silent, as to whether the names reflected in the annual return were of the past directors, or of the present directors. Since information of the past directors was also to be reflected at S.No. IV, in our considered view, no clear inference can be drawn from Exhibit G DW6/5, that Major P.C. Thakur, was a "present" director at the time of filing of the above return. We are therefore of the view, that in the present case, there is no material to contradict the factual position depicted in Form-32, namely, that the appel !ant- Major P.C. Thakur had resigned fro!n t~e company on 20.2.2000. H

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62Copy pinpoint62. In addition to above, it is also relevant to mention, that a copy ofForm-32, relating to the resignation of Major P.C. Thakur from Mis. Accord Plantation Ltd. on 20.2.2000, was placed on the record of the case (as Annexure P-3). The same was produced by DW7 - Ajay Vohra, while deposing before the trial Court in the case on hand. The veracity of Form-32 depicting the resignation of Major P.C. Thakur, was 8 not contested by 'the Board', before the trial Court. Thus viewed, we find no justification whatsoever, in permitting 'the Board' to contest the same, before this Court. We, therefore, hereby affirm that Major P.C. Thakur had duly resigned from the directorship ofM/s. Accord Plantation Ltd. on 20.2.2000. c 63. On the issue ofliability of the appellant- Major P.C. Thakur, we also consider it appropriate to make a reference to Section 2 7 of the SEBI Act. The above provision has already been extracted above, and the debate with reference thereto, and its conclusion, have also been recorded by us. The reference which we wish to make to Section 27 at D the instant juncture, is for a different purpose. Section 27 makes every person, who at the time when the offence was committed, was in charge of, and responsible for, the conduct of the company's business, guilty of the offence allegedly committed by the company. There can be no dispute about the fact, that a director of a company, may well be in charge of, and responsible forthe conduct of the business of the company E (though the above position would not emerge ipso facto, by holding the position of a director). Yet, after the concerned individual has resigned from the position of director, in our view, he cannot be considered to be responsible to the company, for the conduct of its business. Any action of omission or commission of the coinpany, after the date on which the F concerned director has resigned, would not affect him, insofar as, his culpability under Section 27 of the SEBI Act is concerned. Thus viewed, there can be no doubt, that Major P.C. Thakur ceased to be in a position, as would make him in charge of or responsible for the conduct of the business of the company, after 20.2.2000.

64Copy pinpoint64. Based on the factual position noticed in the preceding paragraph, we are of the view, that for exactly the same reasons as have been recorded by us in Criminal Appeal nos. 827-830of2012, the appellant herein was not accused of having violated the substantive provision of Section 12(18) of the SEBI Act, by commencing a collective investment undertaking as a new operator belonging to the non-proviso H

SECURITIES AND EXCHANGE BOARD OF INDIA v. 73 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

category (-who had not commenced the above activity before 25.1.1995). A The appellant was only accused of having breached Regulation 5 of the Collective Investment Regulations, read with Chapter IX of the said regulations, and more particularly Regulations 68, 73 and 74 (see extracts of show cause notice dated 12.5.2000, and paragraph 13 of the complaint dated 21.1.2003). We are sati.sfied that the last date for moving an B appropriate application under Regulation 5, having been extended from 15.12.1999 to 31.3.2000, the aforesaid regulations could be deemed to have been breached by Mis. Accord Plantation Ltd., as also, by the appellant herein, in case such an application had not been filed under Regulation 5 on or before 31.3.2000. The instant conclusion drawn by us is sufficient to exculpate the appellant, who had severed his relationship, c with Mis. Accord Plantation Ltd. with effect from 20.2.2000, and to accept his plea that proceedings initiated against him, were not pennissible in law.

65Copy pinpoint65. We will be failing in effectively discharging our responsibility, if we do not examine another legal contention advanced on behalf of the appellant. It was also pointed out, that the question of initiation of proceedings against Mis. Accord Plantation Ltd. or the appellant, on account of a breach of Regulation 5 and Regulations 68 to 72 under Chapter IX of the Collective Investment Regulations, did not arise at all. Insofar as the instant aspect of the matter is concerned, learned counsel invited our attention to a communication dated 7.2.2000, which was addressed by Mis. Accord Plantation Ltd. to SEBI. The aforesaid communication is extracted hereunder:- "ACCORD PLANTATION LTD. HO Blue Peak Office Complex (Near Gainda Mull Stairs) The Mall Shim la 171 00 I F Corp Office 19 A Swastik Vihar Panchkula HR Phone No. 172-552962 Date Feb 07, 2000 Ref. No. H0/101/775100 G Shri Suresh Gupta Division Chief SEBI Earnest House, 194, Nariman Point Mumbai 400 021 H

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A Kind Attn.: Mr. Suresh Gupta, Divisional Chief Dear Sir, This is with reference to plantation schemes of the Company and its registration with SEBI as per latest guidelines on registration. We wish to inform you that we are no more interested in operating B this scheme due to stringent guidelines ofSEBI. However, the company intends to pay all the deposits from sale of tree on due date for year wise detail of income and payment of maturities is enclosed. We are ready to provide any other information required at your c end. Thanking you. Yours faithfully, Sd/- Managing Director" D Based on the aforesaid letter dated 7.2.2000, it was contended, that Ml s. Accord Plantation Ltd. had decided to wind up its operations on account of the fact, that it was not possible for it to continue its erstwhile activities, because of the stringent conditions imposed in the Collective Investment Regulations. In the instant view of the matter, it was the contention of learned counsel for the appellant, that the question of making an application for registration under Regulation 5 of the Collective Investment Regulations, or for M/s. Accord Plantation Ltd. to follow the procedure stipulated under the Collective Investment Regulations, for seeking a ce1iificate ofregistration, did not arise.

66Copy pinpoint66. In the aforesaid context, learned counsel for the appellant also placed reliance on Regulations 73 and 74 to contend, that Mis. Accord Plantation Ltd. was required to repay to the investors the deposits made by them " ... within two months from the date of receipt of intimation from the respondent-Board, detailing the state of affairs of the scheme, the amount repayable to each investor and the manner in which such amount is determined ... ". Regulations 73 and 74 are reproduced hereunder:- "Manner ofrepayment and winding up

73. ( 1) An existing collective investment scheme which: (a) has failed to make an application for registration to the H Board; or

SECURITIES AND EXCHANGE BOARD OF INDIA v. 75 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

(b) has not been granted provisional registration by the Board: A or (c) having obtained provisional registration fails to comply with the provisions of regulation 7 I; shall wind up the existing scheme. (2) The existing Collective Investment Scheme to be wound up B under sub-regulation (I) shall send an information memorandum to the investors who have subscribed to the schemes. within two months from the date of receipt of intimation from the Board, detailing the state of affairs of the scheme. the amount repayable to each investor and the manner in which such amount is c determined. (3) The information memorandum referred to in sub-regulation (2) shall be dated and signed by all the directors of the scheme. (4) The Board may specify such other disclosures to be made in the information memorandum, as it deems fit. D (5) The information inemorandum shall be sent to the investors within one week from the date of the information memorandum. (6) The information memorandum shall explicitly state that investors desirous of continuing with the scheme shall have to give a positive consent within one month from the date of the information memorandum to continue with the scheme. E (7) The investors who give positive consent under sub-regulation (6), shall continue with the scheme at their risk and responsibility : Provided that ifthe positive consent to continue with the scheme, is received from only twenty-five per cent or less of the total number of existing investors, the scheme shall be wound up. F (8) The paymentto the investors. shall be made within three months of the date of the information memorandum. (9) On completion of the winding up, the existing collective investment scheme shall file with the Board such reports, as may be specified by the Board. G Existing scheme not desirous of obtaining registration to repay

74. An existing collective investment scheme which is not desirous ofobtaining provisional registration from the Board shall formulate a scheme of repayment and make such repayment to the existing investors in the manner specified in regulation 73 ." H

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A It was submitted, that intimation as was required to be furnished by 'the Board' under Regulation 73(2), was never furnished by the respondent- Board, either to Mis. Accord Plantation Ltd. or to the appellant herein, and as such, no question of repayment of the deposits made by the investors arose, by the time the appellant relinquished his position as director of the company (with effect from 20.2.2000). B

67Copy pinpoint67. Since the respondent-Board had not denied the fact, that Ml s. Accord Plantation Ltd. did address the Jetter dated 7 .2.2000 (extracted above), to the respondent-Board, making its intentions clear, that it was not desirous of continuing its activities any further, because of the stringent conditions postulated under the Collective Investment Regulations notified c on 25. I .1995, the question of refund would arise only after intimation was furnished by 'the Board' under Regulation 73(2) to Mis. Accord Plantation Ltd., or to the appellant. Since details of such intimation by 'the Board' were not brought to the notice of this Court on behalfof 'the Board', we are of the view, that it was not open to 'the Board' to initiate action against Mis. Accord Plantation Ltd. or its directors, till the expiry of two months from the date of receipt of intimation from 'the Board'.

68Copy pinpoint68. In view of the conclusions recorded hereinabove we are satisfied, that the proceedings initiated againstthe appellant were wholly misconceived, as it has not been established, that the appellant either violated Regulation 5 read with Regulations 68 to 72, or Regulations 73 and 74 of the Collective Investment Regulations.

69Copy pinpoint69. The instant appeal is accordingly allowed. The conviction and sentence imposed on the appellant - Major P.C. Thakur are set aside, and the complaint stands dismissed. F Criminal Appeal no. 251 of 2015

70Copy pinpoint70. The instant appeal has been preferred by Sunita Bhagat, an accused in a complaint filed by 'the Board'. Obviously, therefore, 'the Board' is the respondent herein.

71Copy pinpoint71. A complaint of the nature referred to in the earlier matters, G was filed by the respondent-Board on 21.1.2003 under Section 200 of the Cr.P.C. read with Sections 24( I) and 27 of the SEBI Act, against Ml s. Accord Plantation Ltd., and five of its directors. Sunita Bhagat, wife ofVinodh Bhagat was arrayed as accused no. 4. The charges levelled against the appellant - Sunita Bhagat emerge from paragraphs 13, 15 H and 18 of the complaint, which are extracted hereunder:-

SECURITIES AND EXCHANGE BOARD OF INDIA v. 77 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

"13.However, the accused no. I neither applied for registration under the said regulations nor took any steps for winding up of the schemes and repayment to the investors as provided under the regulations and as such had violated the provisions of Section 11B,12(1 B) of Securities and Exchange Board oflndia Act, 1992 and Regulation 5( 1) r/w Regulations 68( I), 68(2), 73 and 74 of the said regulations. *** *** ***

15. On January 31, 2001, SEBI by exercising its powers conferred upon it under Section 118 of Securities and Exchange Board of India Act, 1992 directed the accused no. 1 to refund the money collected under the aforesaid collective investment schemes of c the accused no. 1 to the persons who invested therein within a period of one month from the date of the said directions ... *** *** ***

18. In view of the above, it is charged that the accused no. 1 has committed the violations of Section 11 B, 12( 1B) of Securities and D Exchange Board of India Act, 1992 r/w Regulation 5( 1) r/w Regulations 68( I), 68(2), 73 and 74 of the Securities and Exchange Board oflndia (Collective Investment Schemes) Regulations, 1999 which is punishable under Section 24( I) of Securities and Exchange Board oflndia Act, 1992. The accused nos. 2 to 5 are the directors and/or persons in charge of and responsible to the accused no. I for the conduct of its business and are liable for the violations of the accused no. I, in tenns of Section 27 of Securities and Exchange Board oflndiaAct, 1992." It is apparent from the complaint, that the appellant- Sunita Bhagat was accused, firstly, of not applying for a certificate of registration under the Collective Investment Regulations, and secondly, for not having taken steps for winding up the collective investment business being carried on by M/s. Accord Plantation Ltd., by way of repayment to the investors, as provided under the Collective Investment Regulations. After the complaint was preferred before the Additional Chief Metropolitan G Magistrate, Tis Haz.ari Court, Delhi, the concerned Magistrate summoned the appellant vide an order dated 21.1.2003. On her appearance, the accused was given a notice of the accusations, alongwith the complaint preferred by 'the Board'. On 5.8.2005, the accused pleaded not guilty and claimed trial. The trial was conducted by the Additional Sessions H

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A Judge (Central-0 l ), Delhi. After recording the evidence furnished by the complainant, as also the evidence produced in defence, the trial Court vi de its judgment dated 25.3.2010 arrived at the conclusion, that the guilt of the accused-company - M/s. Accord Plantation Ltd., as also, of accused numbers 2 to 5 (-who were its directors), had been duly established. B

72Copy pinpoint72. The trial Court held, that the accused had floated a collective investment scheme, and mobilized funds from the general public, without obtaining a certificate ofregistration, as required under Section 12( I B) of the SEBI Act. The trial Court also concluded, that despite the notification of the Collective Investment Regulations on 15.10.1999, the c accused-company had failed to apply for the registration of its collective investment scheme. Further, M/s. Accord Plantation Ltd. was found to have neither wound up its collective investment scheme, nor repaid its investors as per Regulations 73 and 74 of the Collective Investment Regulations. The accused were accordingly held guilty of violating D Regulations 5( I) read with Regulations 68( I), 68(2), 73 and 74 of the Collective Investment Regulations read with Sections 26 and 27 of the SEBI Act. By a separate order passed on 26.3 .20 I 0, the trial Court sentenced accused numbers 2 to 5 to rigorous imprisonment for six months each. The accused-company and accused nos. 2 to 5 were ordered to pay a fine of Rs. I 0 lakhs each, and in default thereof, accused E nos. 2 to 5 were required to undergo simple imprisonment for a further period of three months each.

73Copy pinpoint73. Dissatisfied with the orders of conviction and sentence, dated 25.3.2010 and 26.3.2010 respectively, the present appellant - Sunita Bhagat filed Criminal Appeal no. 442 of2010 before the High Court. F The appeal preferred by the appellant - Sunita Bhagat alongwith the appeal preferred by Major P.C. Thakur (Criminal Appeal no. 464 of 20 I 0) and the other appeals filed on behalf of the directors of Mis. Accord Plantation Ltd., were dismissed by the High Court on 29.1.2014. The instant criminal appeal arises from the said common judgment and G order of the High Court, dated 29.1.2014.

74Copy pinpoint74. During the course of hearing it was submitted, that M/s. Accord Plantation Ltd. was incorporated under the Companies Act, 1956, on 16.10.1996. The appellant herein - Sunita Bhagat was admittedly one of the promoter-directors of the said company. It was asserted that the appellant - Sunita Bhagat had resigned from the company on H

SECURITIES AND EXCHANGE BOARD OF INDIA v. 79 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

31.8.1999 with immediate effect. It is not a matter of dispute, that Fonn- A 32, depicting the resignation of the appellant, was submitted and received in the office of the Registrar of Companies on 20.9.1999. The above factual position stands affirmed in the narration recorded by the High Court in the impugned judgment and order dated 29. 1.2014. Paragraph 17 of the impugned judgment, is extracted hereunder:- B "17.As far as the appellant. Sunita Bhagat is concerned, admittedly she was a Director of the appellant Company on 25.1.1995 when sub-section ( 1B) of Section 12 of the Act came to be notified, she having resigned only on 20.9.1999. She has also been operating the bank account of the Company. Therefore. the offence to the extent of contravention of sub section (I B) of Section 12 by the c Company was committed during the period she was its Director. The first letter sent to SEBI on 9.12.1997, stating therein the main objects of the Company and giving information with respect to the funds mobmzed from the investors and also enclosing returns, copies of offer documents and bio datas of Promoters was sent by her. She was also a Promoter of the Company and one of its first directors, as stated by DW6 Vikram besides being a Director in another company, Blue Peeks Floriculture Limited. A perusal of the balance sheet of the Company would show that she was also paid remuneration by the Company during the financial year 1997-1998. All these documents leave no reasonable doubt that she also was a person in-charge of and responsible to the Company for conduct of its business. No evidence has been led by her to prove that the contravention of sub-section (I B) of Section 12 of the Act was committed without her knowledge or that she had exercised all due diligence to prevent the commission of the aforesaid offence by the Company."

75Copy pinpoint75. On the issue ofresignation of the appellant- Sunita Bhagat from the company, our attention was invited to the statement of DW3 - Yashpal, JTA, Registrar of Companies, Jalandhar. The same is extracted hereunder:- G " I have brought the summoned records relating to the company Accord Plantation Ltd, The certified copy of Form 32 placed in the judicial record had been issued by our office. The same is Ex. DW3/A. The Fonn 32 reflects that as on 31.8.1999, the accused no. 4 Sunita Bhagat had resigned as Director of the Accord H

80 SUPREME COURT REPORTS [2016] 7 S.C.R.

A Plantation Ltd. The resignation letter is on my record. Copy of the same is Ex. DW3/B. XXXX by counsel Sh. Sachit Setia for the SEBI We have received the resignation letter on 20.9.1999. It is correct that no date of receipt had been mentioned on the B resignation letter Ex. DW3/B. On receipt of the resignation letter we have placed it on the record, being accepted. XXXX by counsel Sh. Neeraj Tiwari for A-5, Rajan Rai We did not prepare any list of directors after accepting the resignation ofSmt. Sunita Bhagat. However, the modified list of c directors would have been furnished by the company alongwith the annual returns filed by the company. As per the record, the directors of the company prior to the resignation of Smt. Sunita Bhagat were Sh. Ajay Vora, Sh. Tejender Singh, Sh. P.C. Thakur, Sh. Pradeep Dewan and Mrs. Sunita Bhagat as per annual return dated 28.9.99. The copy of the same is Ex. DW3/C (OSR). XXXX by counsel for accused no. 2. It is correct that fees have to be deposited by the person applying for change in Board of Directors on the basis of resignation and the receipt No. 21181 dated 20.9.99. The copy of the receipt is Ex. DW3/D (OSR) ..... " Learned counsel for the appellant reiterated the legal submissions advanced before this Court in the connected appeals, and submitted, that for exactly the reasons mentioned by a co-accused - Major P.C. Thakur, the proceedings initiated against the appellant herein, were also unsustainable, because the appellant herein had also resigned as director (-on 31.8. I 999)just as Major P.C. Thakur had resigned (-on 20.2.2000).

76Copy pinpoint76. Without going into the details of the matter, we have no hesitation in concluding, for exactly the same reasons as have been recorded by us in Criminal Appeal no. 252of2015 (Major P.C. Thakur G vs. Securities and Exchange Board oflndia}, that the proceedings initiated against the appellant - Sunita Bhagat, were wholly misconceived, as there was no occasion whatsoever for the appellant to have violated Regulation 5, read with Regulations 68 to 72, or in the alternative, Regulations 73 and 74 of the Collective Investment Regulations.

77Copy pinpoint77. Learned counsel for the appellant herein, had emphatically

SECURITIES AND EXCHANGE BOARD OF INDIA v. 81 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

raised the plea oflimitation, also. Since the contention was pressed, and A also responded to, we consider it just and appropriate to deal with the same. It was the contention of learned counsel for the appellant, that the complaint preferred by 'the Board' on 21.1.2003 before the Additional Chief Metropolitan Magistrate, was incompetent in law, in view of the period of limitation stipulated under the provisions of the Cr.P.C. In 8 order to support his claim under Section 468 of the Cr.P.C., learned counsel, ir. the first instance, placed reliance on Section 32 of the SEBI Act, which is reproduced below:- "32.Application of other laws not barred.- The provisions of this • Act shall be in addition to, and not in derogation of, the provisions of any other Jaw for the time being in force." c Relying on Section 32 it was contended, that the provisions under the SEBI Act were in addition to, and not in derogation of, the provisions of any other law for the time being in force, including the Cr.P.C. This position was not repudiated on behalf of 'the Board'. We are satisfied in recording, that the above contention, advanced on behalf of the D appellant, is fully justified.

78Copy pinpoint78. With reference to the provisions of the Cr.P.C., and to substantiate the plea of limitation, reliance was placd.on Section 468, which is reproduced below:- E "468. Bar to taking cognizance after lapse of the period of limitation.- (I) Except as otherwise provided elsewhere in this Code, no Court, shall take cognizance ofan offence of the category specified in sub-section (2), after the expiry of the period of limitation. (2) The period oflimitation shall be- F (a) six months, ifthe offence is punishable with fine only; (b) one year, ifthe offence is punishable with imprisonment for a term not exceeding one year; (c) three years, ifthe offence is punishable with imprisonment for a term exceeding one year but not exceeding three G years."

79Copy pinpoint79. For invoking the pleaoflimitation, learned counsel also pointed out, that under Section 24 of the SEBI Act, before its amendment on 29.10.2002, a punishment of imprisonment of one year or fine or both, was postulated. Since the punishment contemplated under Section 24 of H

82 SUPREME COURT REPORTS [2016] 7 S.C.R.

A the SEBl Act was not in excess of one year, for the violation alleged against the appellant, it was submitted, that the competence to taking cognizance, would lapse after a period of one year, on account of the bar created by Section 468(2)(b) of the Cr.P.C (extracted above).

80Copy pinpoint80. Referring to the factual position in the present controversy, it B was asserted, that the appellant had ceased to be a director of Mis. Accord Plantation Ltd., with effect from 20.9.1999, and as such, her liability for any alleged act of omission or commission, with reference to Mis. Accord Plantation Ltd., could not legally extended beyond 20.9.1999. As such, according to learned counsel for the appellant, in view of the mandate contained in Section 468 of the Cr.P.C., the period oflimitation c for filing a complaint by 'the Board' against the appellant- Sunita Bhagat would expire one year after she severed her relationship with Mis. Accord Plantation Ltd., i.e. on 20.9.2000. It was asserted, that the admitted factual position is, that the complaint in the instant case came to be filed on 21.1.2003. In the above view of the matter it was asserted, that D besides the other legal pleas raised at the hands of the appellant, the complaint filed by 'the Board' against the appellant was barred by limitation.

81Copy pinpoint81. We have, during the course of recording our consideration hereinabove, upheld the contention advanced on behalf of the appellant- E Sunita Bhagat, that Section 468 of the Cr.P.C. could be relied upon, in criminal proceedings initiated under the provisions of the SEBI Act. Having so concluded we are of the view, that since the punishment contemplated under Section 24 of the SEBI Act at the relevant juncture, did not exceed one year, the period of limitation for taking cognizance under Section 468 of the Cr.P.C. would be one year. We are also inclined to accept the contention advanced at the hands of learned counsel for the appellant, that the period of limitation in the present case would commence to run with effect from.the date the appellant- Sunita Bhagat tendered her resignation from the position of director of Mis. Accord Plantation Ltd., namely, with effect from 20.9.1999. Thus viewed, the bar of taking cognizance against the appellant - Sunita Bhagat, would operate with effect from 20.9.2000. Admittedly, the complaint in the present case was preferred by 'the Board' before the Additional Chief Metropolitan Magistrate, Tis Hazari Courts, Delhi, on 21.1.2003. The trial Court could not have taken cognizance of the same, in view of the clear bar contemplated under Section 468 of the Cr.P.C. H

SECURITIES AND EXCHANGE BOARD OF INDIA v. 83 GAURAVVARSHNEY & ANR. [JAGDISH SINGH KHEHAR, J.]

82Copy pinpoint82. For the reasons recorded hereinabove, not only on account of A the legal position expressed above, but also, on account of the plea of limitation, the proceedings initiated against the appellant were not sustainable in law. The instant appeal is accordingly allowed, and the conviction and sentence imposed on the appellant-Sunita Bhagat is set aside, and the complaint filed against the appellant, stands dismissed. B Criminal A;meal no. 832 of 2012