HIGH COURT OF BOMBAY

Videocon International

v.

Securities and Exchange Board of India

B.H. Marlapalle, J.

CRIMINAL APPLICATION NOS. 2238  TO 2239 OF 2007

WRIT PETITION NOS. 338 of 2007

and criminal writ petition nos. 1154, 1557,1598, 1611 and 1773 OF 2007

JANUARY 16, 2008

Section 24, read with section 26, of the Securities Exchange Board of India Act, 1992 - Offences - Whether amendment in section 24 brought into force with effect from 29-10-2002 is a substantial amendment and amendment in section 26 is only consequential in view of enlargement of sentence period under section 24 - Held, yes - Whether when forum of trial has been changed in consequence of substantial amendment, it has to be read with main section providing for sentence and it cannot be read in isolation - Held, yes - Whether consequently, amendments to section 24, read with section 26, shall have prospective effect and not retrospective - Held, yes - Whether, therefore, complaints under section 24 filed before or after 29-10-2002 but in respect of alleged offences, that have taken place prior to said date, are required to be tried by Court to which they were presented and they are not required to be committed to Court of Session - Held, yes

Facts

The SEBI filed complaints against the various petitioners/ applicants for offences punishable under section 24, read with section 27, before the Court of Chief Metropolitan/Additional Chief Metropolitan/Metropolitan Magistrate. In all the complaints, the cause of action was prior to 29-10-2002, but some of them had been filed prior to 29-10-2002 and the remaining had been filed thereafter. Later, the SEBI filed an application for committal of the complaints under section 209 of the Code of Criminal Procedure, 1973 to the Session Court. That application was allowed. The applicants filed application before the Session Court, contending that the alleged offences pertained to the period prior to 29-10-2002 and, thus, in view of the guarantee under article 20 of the Constitution, the complaints were required to be tried by the Metropolitan Magistrate/Additional Chief Metropolitan/Chief Metropolitan Magistrate and the Session Court did not have jurisdiction to try the said complaints. In other set of cases, the applicants prayed for quashing of the committal order on the ground that it did not comply with requirements of sections 200,202 and 208 of the Code and, consequently, it was prayed that the complaints be returned to the Court of Metropolitan Magistrate so as to pass a fresh order of committal  after complying with the said provisions of Code. The Session Court dismissed said applications. Thus, instant petitions/ applications  were filed wherein common contention raised was that the complaints were not required to be committed/transferred to the Court of Session and they were to be tried by the Courts before whom they were presented by the authorized officer at the first instance, despite the SEBI (Amendment) Act, 2002 having been brought into force with effect from 29-10-2002.

Held

The first question, that arose for consideration in instant petitions/applications, was whether the amendments brought into force from 29-10-2002 in the Act are substantive in nature or they are procedural in nature or they are substantial in nature and by consequence, there are procedural changes regarding the forum of trial under section 26. [Para 9]

Prior to the SEBI (Amendment) Act, 2002 under sub-section (1) of section 24, the accused would be punishable with imprisonment for a term extending to one year or fine or with both. Whereas under sub-section (2), the accused was punishable with imprisonment for a term which would not be less than one month, but which might extend to three years or with fine which would not be less than two thousand rupees and might  extend to ten thousand rupees or with both. On amendment, the punishment has been substantially enhanced. Under sub-section (1), the accused shall be punishable with imprisonment for a term which may extend to ten years or with fine which may extend to twenty five crore rupees or with both. [Para 11]

Section 4 of the Code deals with the trial of offences under the Indian Penal Code and other laws. Thus, when the offence is punishable with imprisonment for more than seven years, it ought to be tried by a Court of Session when such offence is set out in other laws (other than the Indian Penal Code). The SEBI Act falls in the category of ‘other laws’ and, therefore, when the offence is punishable with imprisonment for more than seven years, necessarily, it has to be tried by a Court of Session and if the offence is punishable with imprisonment up to seven years, it ought to be tried by the Judicial Magistrate, First Class. In the unamended SEBI Act, the sentence of imprisonment provided was up to one year or three years as the case may be and, therefore, under section 26(2) of the unamended Act, the forum for trial of the complaints was that of Metropolitan Magistrate or Judicial Magistrate, First Class. On amendment to section 24 by the SEBI Amendment Act, 2002, the sentence under sub-section (1) as well as sub-section (2) has been enhanced up to ten years and, therefore, in consequence to this enhancement of sentence, the forum for trial of the complaint has been changed to the Court of Session which indicates that the forum of trial has been changed only on account of the enhancement of the sentence from one year to ten years or from three years to ten years. It, therefore, cannot be accepted that the amendment to section 26(2) is merely proce­dural in nature and it ought to be held that the said amendment is a consequential amendment in view of the enlargement of sentence period under section 24. Undoubtedly the amendment to section 24 is substantial in nature. When the forum of trial has been changed in consequence of the substantial amendment, it has to be read with the main section providing for sentence and it cannot be read in isolation. Consequently, the amendment to section 24, read with section 26, must be held to be prospective in operation. Both these sections are complimentary to each other and inseparable in operation. The amended provision has virtually repealed old provision, namely sections 24 and 26 bringing into effect the enhanced punishment and corresponding change in forum making it compatible with the Schedule to the Code. The effect of such a repeal is covered by section 6 of the General Clauses Act, 1897.

In view of article 20(1) of the Constitution and section 6 of the General Clauses Act, 1897, all the proceedings and the rights, privileges, obligations accrued or arising out of sections 24 and 26 of the unamended SEBI Act have remained intact and cannot be disturbed on the enforcement of the amended Act. The SEBI (Amendment) Act, 2002 is, therefore, prospective in operation and cannot be made retrospective only on the basis of the change in forum under section 26. [Para 12]

It is undoubtedly true that an accused does not have a vested right of selecting a forum for trial and what is guaranteed is a right of trial and that too a fair trial either to prosecute or to defend. However, in the instant case, the arguments advanced on behalf of the accused needed not be taken as the arguments insisting for a particular forum for trial. The case made out for the accused in those petitions in support of their contentions that the complaints must be tried by the Court to which they were presented, was based on the scheme of the Criminal Procedure Code in respect of the complaints filed otherwise than on the police report. It was in that context that the reference had been made to the provisions of sections 190, 200, 202, 204, 208 and 209 of the Code.

Section 190 of the Code confers powers on the Magistrate, to take cognizance of an offence, who are of the manners, therein prescribed and the term ‘Magistrate’ in the said section is a compendious term which includes Judicial Magistrate First Class, Metropolitan Magistrate, Judicial Magistrate of Second Class and Executive Magistrate. At the same time, there is another Court of original jurisdiction viz. the Court of Session also being set up under section 6 of the Code. Under section 193 of the Code, except as otherwise expressly provided therein or by any other law for the time being in force, no Court of Session shall take cognizance of any offence as a Court of original jurisdiction, unless the case has been committed to it by a Magistrate. In other words, a Court of Session can take cognizance of an offence only upon an order of committal made by the Magistrate under section 209 of the Code and in no other manner. If the Magistrate takes cognizance of an offence upon a complaint which appears to be exclusively triable by the Court of Session, he has to proceed according to sections 202(2), 208 and 209 of the Code. As per section 260(1) of the Code, notwithstanding anything contained in the Code, any Chief Judicial Magistrate, any Metropolitan Magistrate, any Magistrate of the First Class specially empowered in that behalf by the High Court, may, if he thinks fit, try in a summary way the offences not punishable with death, imprisonment for life or imprisonment for a term exceeding two years. It is, thus, clear that the offences under section 24 of the unamended SEBI Act could be tried by the Metropolitan Magistrate in a summary way in respect of the offences which are alleged to have taken place prior to 29-10-2002. The scheme of the Code provides for speedy trials in certain class of cases and with this view in mind, it makes four different sets of provisions for the trial of four classes of cases, i.e., summary trials, trial of summons cases, trial of warrant cases and trial of cases triable by the Court of Session. Broadly speaking, this classification of the offences for the purpose of applying these different sets of provisions is according to the gravity of the offences, though in classifying the offences fit for summary trial, the experience and power of the trying Magistrate has also been taken into consideration, but the net result of these provisions is that the offences, which are summarily triable, can be more speedily tried than summons cases, summons cases can be more speedily tried than warrant cases and warrant cases can be more speedily tried than the sessions cases. It was in that context that the petitioners insisted that in the respective complaints, the trial ought to be continued before the Metropolitan Magistrate, so that they would face the trial under Chapter XIX, XX or XXI, as the case might be. The submissions of the respondent that the summary trial could be conducted by the Session Court had no support in law. Part II of the First Schedule to the Code classifying the offences under the laws other than the IPC clearly states that the offences punishable with imprisonment for less than three years or with fine only are to be tried by the Magistrate which means the Magistrate of First Class or the Metropolitan Magistrate. There was one more danger in accepting the submissions of the respondent in that regard, viz., it would imply that the amendments to section 24 are prospective in nature, but the amendments in section 26 are retrospective. In fact, the scheme of sections 24 and 26 is complimentary to each other and inseparable in operation inasmuch as section 24 deals with the imposition of penalty whereas section 26(2) deals with the trial of such offences upon filing of complaint under section 26(1). All these steps/aspects of trial of offences under the SEBI Act are procedurally dependent upon the Code.

Since it is the accused who is charged with the offence and is also the person whose life/liberty is at peril, it is but fair to say that he has a right to be tried speedily. Being an accused of crime is cause for concern and it affects the reputation and the standing of the person in the society. It is a cause for worry and expense. The provisions of the Criminal Procedure Code, as noted hereinabove, provide for different trials before different forums as set out under Chapters XVIII to XXI. Comparatively, the trial by the Session Court may prolong for a long period than a summary trial/summons case trial or a warrant case trial. The accused, therefore, were justified in claiming that they would be deprived of a speedy trial if the pending complaints were transferred/committed to the Court of Session for trial as per the amended SEBI Act. [Para 13]

There is one more aspect which also requires consideration and that is the absence of a specific provision for transfer of the pending complaints from the Court of Metropolitan Magistrate/Judicial Magistrate First Class to the Court of Session in the amended SEBI Act. This is one more test in support of the prospectivity in operation of the SEBI (Amendment) Act. [Para 14]

The revision application under section 397, read with section 401, of the Code is a statutory remedy and if the complaints are allowed to be tried by the Session Court, in the absence of any specific provision in the amended SEBI Act for transfer of the cases from the Court of Metropolitan Magistrate to the Session Court, the accused will be deprived of such a statutory remedy of revision and on that count also, the complaints were required to be tried by the Courts before whom they were presented by the authorised officer. From the eight complaints, some of them had been filed after 29-10-2002 though the cause of action arose prior to the said date. [Para 20]

Section 11C was introduced in the Act by the Amendment of 2002 and it provides for investigation to be undertaken by the Board through an investigating authority. The complaints filed after 29-10-2002 clearly showed that no investigation was carried out under section 11C and, consequently, even though the complaints had been committed, they were without any investigation papers including the statement of witnesses recorded on oath during the course of investigation. [Para 21]

The accused rightly submitted that the intention of the Parliament in introducing section 11C was to provide for an investigation to be carried out by the investigat­ing authority at the instance of the Board and to empower the investigating officer with consequential authority, on par with the scheme of sections 164 and 165 of the Code and the said report could be filed with the complaint to be presented to the Court of Metropolitan Magistrate/Judicial Magistrate, First Class at the first instance and the same would also comply with the requirements of section 208 so as to pass an order of committal under section 209 of the Code. In the absence of the powers of investiga­tion with the Board prior to 29-10-2002 and in the absence of such investigation having been carried out under section 11C in the complaints filed after 29-10-2002, there would be no compliance of the requirements of section 208 before passing the order of committal under section 209. In the absence of the compliance of section 208, there would be no material for the prosecutor to proceed with the trial of the complaint before the Session Court and the complaints would have to be dismissed and, consequently, the accused would have to be discharged under section 227 of the Code. Chapter XIV of the Code sets out conditions requisite for initiation of proceedings and section 190 thereunder specifies the power of a Magis­trate to take cognizance of the offence by three different courses, i.e., (a) upon receiving a complaint of facts which con­stitutes such offence, (b) upon a police report of such facts, and (c) upon information received from any person other than a police officer or upon his own knowledge that such offence has been committed. Taking cognizance of the offence involves the exercise of deciding whether process should be issued to the accused as envisaged under section 204 of the Code. However, there is an interregnum stage between the filing of the complaint and issuance of process and that is section 202 of the Code which deals with postponement of the process and it is under Chapter XV - ‘Complaints to Magistrates’. Sub-section (1) states that any Magistrate, on receipt of complaint of offence, may, if he thinks fit, postpone the issue of process against the accused for resorting to any of the two courses, i.e., either enquire into the case himself or direct an investigation to be made. But if the offence is triable by the Court of Session, the Magistrate cannot make a direction for investigation. Hence, the Magistrate taking cognizance of an offence upon a complaint, when such offence is not triable by the Session Court, can adopt either of the three courses, viz., (i) straightway issue the process, or (ii) he can postpone the issue of process for holding an enquiry, or (iii) he can direct an investigation to be made but if the offence is triable by a Court of Session, it is impermissible for the Magistrate to direct an investigation, as per the proviso below sub-section (2) of section 202. [Para 22]

In the instant complaints, though the list of witnesses had been placed on record, the statements of such witnesses had not been recorded either in the course of investigation under section 11C or by the Metropolitan Magistrate before issuance of process by himself by postponing the issuance of process under section 202 of the Code as the complaint was filed by a public servant purporting to act in the discharge of his official duties. Conse­quently, while the committal order was passed under section 209 in the complaints (except two), the requirements of section 208 were not complied with inasmuch as there were no statements recorded under section 200 or section 202 of any persons examined by the Magistrate or any statement recorded during the course of investigation undertaken under section 11C of the SEBI Act before filing of the complaint and, hence, the accused were right in their contentions that the order of committal so passed was vitiated and the same was unsustainable. [Para 23]

The committal order in all the committed complaints had been passed only on the basis of the notification dated 9-6-2003 issued by the Law and Judiciary Department and published in the State Government Gazette. As per the said notification, a Special Court for offences arising from the SEBI Act has been constituted so as to conduct the trials for the offences punishable under section 24, read with section 27. The order in the instant case further stated that as the complaint was filed before the constitution of such a Special Court and cognizance was taken thereof by the Court to which the complaint was presented, the case was required to be committed for trial to the Special Court under section 209. The committal order did not speak about the compliance of section 208 which undoubtedly is the condition precedent for passing the committal order. No application was moved by the SEBI for committal of the complaints from the Court of Metropolitan Magistrate to the Session Court and in fact, it is not proper to say that a Special Court was constituted for trial of these complaints. The complaints are required to be tried as per section 26 by the Court of Session and not by a Special Court. As a specific Session Court has been designated to try these complaints, perhaps, the Magistrate referred to the same as a Special Court. The nomenclature as ‘Special Court’ does not have support even in the amended SEBI Act. The fact remained that the order of committal had been obviously passed without application of mind and that was one more reason to quash and set aside the order of acquittal. At the same time, the issue as to whether the Session Court had the powers to adjudicate upon the committal order was not raised. [Para 24]

In the premises, those petitions/applications succeeded and the same were hereby allowed in terms of the following directions:

  (a)  The amendment in section 24 of the SEBI Act brought into force with effect from 29-10-2002 is a substantial amendment and the amendment in section 26 of the said Act is only consequential, though procedural.

  (b)  The said amendments shall have prospective effect and not retrospective and, therefore, were not applicable to the above stated complaints.

  (c)  The complaints filed before or after 29-10-2002 but in respect of the alleged offences, that had taken place prior to the said date, were required to be tried by the Court to which they were presented and they were not required to be committed to the Court of Session. Hence, the complaints in question would be tried by the Court to which they were presented at the first instance.

  (d)  The committal orders passed by the Court of Metropolitan Magistrate/Addl. Chief Metropolitan Magistrate/Chief Metropolitan Magistrate in the complaints were to be quashed and set aside. The Court of Session was to be directed to return the concerned complaints to the respective Courts which had passed the committal order.

  (e)  Trial of the complaints would be expedited. [Para 25]