SUMMARY OF CASE LAW
Mere allegations contained in a line or two against the directors without specifying the violative act committed by any of the directors would not suffice to make the directors offenders so as to summon them for the offences under SEBI Act; mere bald averments in the complaint do not make the directors offenders; minimum averments to be made in a complaint has to contain that the person sought to be arraigned as an accused was in charge of the affairs of the company or responsible for the conduct of its business in such capacity at the time when the offence was committed, before he is deemed to be guilty of an offence committed by the company.
CASE LAW DETAILS
Decided by: HIGH COURT OF DELHI, In The case of: Rashima Verma v. SEBI, Appeal No.: Crl. MC No. 3080 of 2007, Decided on: January 23, 2009
RELEVENT PARAGRAPH
12. Perusal of the complaint shows accusations as to the violation of SEBI Regulations and commission of offence under SEBI Act are essentially against the company, M/s. Divyabhoomi Agro (I) Ltd. The complaint contains the details as to the manner in which the accused company had potentially violated the SEBI regulations and committed offences under SEBI Act. However, assertion of offences committed, putting the liability on the directors as contained in paragraph 7 and 20 and reproduced above, only state that, as the company had committed offences, all directors would be liable and are liable for the functioning and for conducting the day to day business of the company. Mere allegations contained in a line or two against the directors in paragraphs 7 and 20 without specifying the violative act committed by any of the directors would not suffice to make the directors offenders so as to summon them for the offences under SEBI Act.
13. Complainant is required to be specific and explicit as to the nature of allegations should be definite and coherent to the role played by the director in committing such offence in the complaint against the directors of the company. Mere bald averments in the complaint do not make the directors offenders. Minimum averments to be made in a complaint has to contain that the person sought to be arraigned as an accused was in charge of the affairs of the company or responsible for the conduct of its business in such capacity at the time when the offence was committed, before he is deemed to be guilty of an offence committed by the company. A director, manager or secretary or any other officer of the company would also be deemed to be guilty, if an offence is committed with his consent or connivance or is attributable to any neglect on his part. For that purpose, he need not be in charge of and responsible to the company for the conduct of its business.
14. The initial burden is on the complainant to show that accused was in charge of the affairs of the company and was responsible for the conduct of its business or the offence had been committed with his consent or connivance or is attributable to any neglect on his part. Necessary averments in this behalf have to be there in the complaint. In case the complaint lacks such averments, and a person is arrayed as accused only on the ground that he was a director, such a complaint qua him has to be quashed and no summoning orders in such like circumstance are called for. There has to be a specific accusation against the director or each of the persons arrayed as accused in the complaint and simple narration of the contents of the provisions under the statute or the requirements of law would not be enough to summon such person as accused.
15. In the present case, the complainant has only averred that petitioner was director and was in charge of the affairs of the company and was responsible for the conduct of its day to day business. But there is no further elaboration as to how petitioner was in charge of the affairs of the company and was responsible for the conduct of its business. There is not even a whisper nor a shred of evidence or anything else to show, apart from the presumption drawn by the complainant in the complaint that there is an act committed by the director from which a reasonable inference could be drawn that petitioner could be vicariously liable. It was necessary for the complainant to make averments elaborating the role of such a director in respect of her working in the company from which the court could come to a prima facie conclusion that she was responsible for the conduct of the business of the company. In the present case, only Mr. G.S. Verma was the Chairman-cum- Managing Director of the Company at the time of commission of the alleged offence and therefore, was the person responsible for the business of the company. However the summons have been issued against all the accused persons who are impleaded as Directors despite prime accused being the company in the absence of a specific averments against the petitioner. Even without taking care of requirements of law whether prima facie case was made out against the petitioner, the Magistrate acted mechanically in passing the impugned order against the petitioner.
26 In view of my detailed discussion as above, the complaint as against the petitioner (accused No. 6 in the complaint) is not maintainable. Hence, the complaint and the impugned summoning order qua the petitioner is accordingly quashed.
