The Allahabad High Court while allowing an application said the share market has its own risks and it is not right to register an FIR against the share broker to recover the invested amount.
A single-judge bench of Justice Anish Kumar Gupta passed this order while hearing an application under Section 482 filed by Jitendra Kumar Keshwani.
The application under Section 482 CrPC has been filed seeking quashing of charge-sheet dated 06.09.2018 and cognizance order dated 12.04.2019 as well as the entire criminal proceedings in Case under Sections 420, 409 of the India Penal Code, Police Station Hariparvat, District Agra, pending in the court of Chief Judicial Magistrate, Agra.
The facts of the case are that the opposite party no 2 has lodged an FIR being Case under Section 420 and 406 IPC alleging therein that the applicant herein is the Director/proprietor of M/s LDK Share and Securities Pvt Ltd, who was the licensed share broker.
In the FIR, it has been alleged that the opposite party no 2 and his younger brother Ram Kumar Sharma were having Demat Accounts with the Stock Holding Corporation of the applicant, where the equity shares of different IT companies were deposited by the opposite party no 2 and his brother. The opposite party no 2 and his brother used to trade in share equity shares through the applicant, who was the licensed share broker.
It is alleged that the applicant herein had contacted the opposite party no 2 and his brother and asked them to invest and trade in shares through the applicant, whereby he will provide various facilities. On such assurance, the opposite party no 2 and his brother had invested in equity shares and also subsequently sold the aforesaid shares. When the money of shares sold was asked by the opposite party no 2 from the applicant, he assured that the payment shall be made after sometime. Therefore, the aforesaid amount of shares sold by the opposite party no 2 was an amount kept in the entrustment of the applicant herein and despite repeated demands made by the opposite party no 2 the applicant has failed to make the payment of shares amounting Rs 9,69,450. When the said payment was not made by the applicant herein, a legal notice dated 30.11.2017 was given to the applicant.
Despite the said notice, the applicant had not paid the amount, therefore, it is alleged that the applicant has committed the breach of trust and misappropriation of the amount of the opposite party no 2.
It has been further prayed in the FIR that after registering the FIR and initiating the legal proceedings against the applicant, the amount of the opposite party no 2 be recovered. The matter was investigated by the police and the charge sheet dated 06.09.2018 was filed, on which cognizance was taken by the Chief Judicial Magistrate concerned on 12.04.2019, against which the instant application has been filed by the applicant herein.
The Court observed,
Having heard the rival submissions made by the counsels for the parties, the Court has carefully gone through the record of the case. Before proceeding further it would be relevant to note provisions of Sections 405, 420 and 409 IPC.
From the plain reading of provisions of Section 420 IPC it is apparent that if any person cheats and thereby dishonestly induces any person to deliver any property or to make alter or destroy the whole or any part of the valuable security or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punishable under Section 420 IPC.
In the case there is no element of cheating or dishonest inducement on the part of the applicant herein. The applicant herein was a share broker and the opposite party no 2 being fully conversant with the consequences of investment in shares, as having his eyes wide open and being aware of risk of such investment had made the investment through applicant.
Thus, a person cannot be held responsible for the offence under Section 409 IPC as well as Section 420 IPC on the basis of the same allegations as both the offences are contradictory and operate in different fields altogether. In the case of cheating, dishonest intention must be present from the inception of the transaction, which is categorically missing in the case. Thus, no offence under Section 420 IPC is made out. For the offence of criminal breach of trust the pre-condition is valid entrustment and subsequently its misappropriation. In the case, the opposite party no 2 was dealing in shares through the applicant and subsequently there is some accounting dispute between the parties in such dealing and no determined sum is entrusted. The Share Market has its own risks. Therefore, it cannot be said that there was any entrustment of the property by opposite party no 2 with the applicant. Thus, no offence under Section 409 IPC can be said to have been made out against the applicant.
The Court further observed that,
From the plain reading of the FIR, the tenor and prayer of the FIR is to get the recovery of money, which has been specifically deprecated by the Apex Court in the judgement of Lalit Chaturvedi (Supra), therefore, the FIR lodged by the opposite party no 2 to initiate the criminal proceeding for recovery of money is not sustainable and is self contradictory.
For the offences under Section 15F of the SEBI Act, Section 26 of the SEBI Act prohibits registration of the FIR for which only the complainant can be filed under Section 26 of this Act, by the Board.
The SEBI Act is an Special Act, which shall prevail over the general act, such as IPC or CrPC. It is a settled position of law that once a special Act holds the field, the provisions of general law would not apply and only the prosecution can be lodged in accordance with the provisions of such special law and the provisions of Section 26 of the SEBI Act, specifically. Reliance placed on section 26B of the SEBI Act by counsel for the opposite party no 2 is misconceived. It is applicable only for the purpose of filing of the complaint before the special courts and not for criminal prosecution under the provisions of IPC.
In view thereof, the Court allowed the application and the entire proceedings of cognizance order dated 12.04.2019 as well as the entire criminal proceedings along with the charge-sheet dated 06.09.2018, in Case under Section 420, 409 of IPC, Police Station Hariparvat, District Agra, pending in the court of Chief Judicial Magistrate, Agra, are hereby quashed.