Case Note & Summary
The petitioner, an accused in two criminal cases arising from alleged illegalities in the Initial Public Offerings (IPOs) of Yes Bank Limited and Infrastructure Development Finance Corporation, filed writ petitions under Article 227 of the Constitution of India and Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of the criminal proceedings. The Securities and Exchange Board of India (SEBI) had addressed a complaint to the Central Bureau of Investigation (CBI) regarding certain illegal acts committed in respect of those IPOs. It was alleged that the accused, including the petitioner, conspired to open bank and demat accounts in fictitious names, applied for shares in the retail investor category, cornered the shares, and sold them at higher prices, causing wrongful gain and loss to genuine investors. The CBI registered two FIRs (RC 3(E)/2006/BS&FC/Mumbai and RC 4(E)/2006/BS&FC/Mumbai) for offences under Sections 120-B read with 420, 467, 468, 471 of the Indian Penal Code, Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988, and Section 68-A of the Companies Act, 1956. SEBI also initiated proceedings under the SEBI Act, 1992, and issued show-cause notices and ad-interim orders against the petitioner. Subsequently, SEBI introduced a consent procedure, and the petitioner filed consent applications on 5th November 2008, seeking exoneration from all SEBI proceedings. The High Powered Advisory Committee of SEBI recommended settlement, and on 7th December 2009, the Whole Time Member of SEBI passed a Consent Order, disposing of the pending proceedings under Sections 11(4) and 11B of the SEBI Act, adjudication proceedings, and the proposed prosecution. The petitioner paid the settlement amount. Armed with the Consent Order, the petitioner earlier approached the High Court in Writ Petition No. 406 of 2018 to quash the criminal proceedings, but the petition was dismissed on 27th February 2018. The petitioner then filed a Special Leave Petition before the Supreme Court, which granted liberty to withdraw and raise the effect of the Consent Order before the High Court. Subsequently, the petitioner filed the present writ petitions challenging the orders of cognizance and issuance of process dated 10th March 2008 and 19th March 2008. A Single Judge of the High Court, by order dated 5th January 2022, quashed the proceedings against the petitioner as an abuse of process. The CBI challenged this order before the Supreme Court, which, by order dated 22nd August 2024, set aside the Single Judge’s order and remanded the matter to a Division Bench to independently decide the effect and legal consequences of the Consent Order without being influenced by previous orders. The matter was listed before the Division Bench, where the petitioner sought leave to amend the petition. The judgment text does not contain the final decision of the Division Bench.
Issue of Consideration
Effect and legal consequences of SEBI Consent Order dated 7th December 2009 on the pending criminal proceedings.
Case Details
2025 LawText (BOM) (11) 117
Criminal Writ Petition No. 245 of 2020 along with Criminal Writ Petition No. 730 of 2020
A.S. Gadkari, Ranjit Sinha Raja Bhonsale
Mr. Aabad Ponda (Senior Advocate for Petitioner), Smt. M. M. Deshmukh (Public Prosecutor for Respondent No.1), Mr. Kuldeep Patil (Advocate for Respondent No.2)
Manoj Gokulchand Seksaria (also referred as Manojdev Gokulchand Seksaria)
The State of Maharashtra and C.B.I., BS & FC, Mumbai
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Nature of Litigation
Criminal Writ Petition seeking quashing of FIR, chargesheet, and criminal proceedings.
Remedy Sought
Petitioner seeking to quash criminal proceedings in Special Case No. 47 of 2007 and Special Case No. 48 of 2007 and set aside orders of cognizance and issuance of process.
Filing Reason
Petitioner based the challenge on the SEBI Consent Order dated 7th December 2009, arguing that the settlement with SEBI should preclude criminal prosecution.
Previous Decisions
Earlier Writ Petition No. 406 of 2018 dismissed by High Court on 27th February 2018; SLP (Crl.) No. 3495/2018 dismissed as withdrawn with liberty on 7th January 2020; Single Judge of High Court allowed petitions and quashed proceedings on 5th January 2022; Supreme Court in SLP Nos. 12344 and 12345 of 2022 set aside Single Judge’s order and remanded to Division Bench on 22nd August 2024.
Issues
Effect and legal consequences of SEBI Consent Order dated 7th December 2009 on the pending criminal proceedings.
Judgment Excerpts
The Securities and Exchange Board of India (SEBI), addressed a complaint letter to the Central Bureau of Investigation (CBI/Respondent No.2), giving information in respect of certain illegal acts/offences which had been committed in respect of the Initial Public Offerings (IPO’s) of Yes Bank Limited (YBL) and Infrastructure Development Finance Corporation (IDFC).
The case of the prosecution is that, the accused including the Petitioner pursuant to a criminal conspiracy, opened Bank and Demat accounts in the name of fictitious persons and applied for shares, in the said fictitious names in the retail investor category (RII) i.e shares meant for retail investors, predatory cornered the shares meant for genuine retail investors.
On 7th December, 2009, the Whole Time Member, SEBI, accepted the recommendations of the High Powered Committee, and passed the Consent Order. The WTM, SEBI referred, to the ad interim ex-parte orders dated 12 th January,2006 and 27 th April, 2006, passed by SEBI under sections 11 and 11B of the SEBI Act,1992 , adjudication proceedings under Chapter VI A of the Act and proposed initiation of prosecution under section 24 of the Act against the Petitioner.
The Hon'ble Supreme Court vide Order dated 7 th January, 2020, granted the Petitioner liberty to withdraw the Petition and to raise the question as to the effect and legal consequences of Order dated 7 th December, 2009 passed by the SEBI before this Court.
The Hon'ble Supreme Court, by its Order dated 22 nd August, 2024, after considering the submission of the learned counsels for the parties, was please to dispose off the Special Leave Petition with the following observation as recorded in Paragraph No.23 of the said Order: “23. As to whether the respondent had made out a case for quashing the proceedings will be independently decided by the Division Bench which will now hear the matter on remand. The Division Bench will not be influenced by the observations of the previous Division Bench in Writ Petition 406 of 2018, the Order of this Court dated 07.10.2020, the Order of the Single Judge in Writ Petition No. 245 of 2020 and Writ Petition No. 730 of 2020 and also by the present Order which we have now passed. The Division Bench will independently decide the matter on its own merits and in accordance with law.”
Procedural History
CBI registered two FIRs in 2006. Chargesheets filed in 2007 and supplementary chargesheets later. SEBI passed Consent Order on 7th December 2009. Petitioner filed earlier writ petition (406/2018) which was dismissed on 27th February 2018. SLP (Crl.) 3495/2018 dismissed as withdrawn with liberty on 7th January 2020. Petitioner filed present writ petitions challenging cognizance orders. Single Judge of High Court quashed proceedings on 5th January 2022. CBI challenged in Supreme Court (SLP Nos. 12344-12345/2022). Supreme Court on 22nd August 2024 set aside Single Judge's order and remanded to Division Bench for fresh decision.
Acts & Sections
- Indian Penal Code: Section 120-B, Section 420, Section 467, Section 468, Section 471
- Prevention of Corruption Act, 1988: Section 13(2), Section 13(1)(d)
- Companies Act, 1956: Section 68-A
- Securities and Exchange Board of India Act, 1992: Section 11, Section 11B, Section 24
- Code of Criminal Procedure, 1973: Section 482
- Constitution of India: Article 227
