SC sets aside SEBI's order against minors
The Supreme Court has held that minors cannot be prosecuted or barred from operating in the securities market for unfair market trade practices even if irregularities have been committed in their names.
By PTI |
NEW DELHI: The Supreme Court has held that minors cannot be prosecuted or barred from operating in the securities market for unfair market trade practices even if irregularities have been committed in their names.
SEBI had barred Ritesh Polyester and its promoters -- Ritesh Exports, Surendra Kumar Agarwal and his wife Roop Rekha Agarwal and their minor sons Ritesh and Deepak -- from operating in the capital market for a period of 10 years for violating the SEBI Act and SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 1995.
A bench headed by Justice S B Sinha while allowing Ritesh and Deepak's appeal said that the minors, as was apparent from their birth certificates, could not have committed fraud and thus the impugned directions would not be binding on them as minors cannot enter into a contract.
"If they were minors, they being not party to the fraud, could not have been subjected to penalty under the SEBI Act. The person who committed the fraud in their names, viz., Surender himself, should have been proceeded against not only for commission of act of fraud on his own behalf but also on behalf of the minors."
However, it allowed the market regulator to go ahead with the prosecution against other promoters including Surender and Rooprekha.
"We, however, uphold other directions issued by the Board including the action taken in respect of the offences purported to have been committed. We also grant liberty to the authorities to proceed against the offenders not only for other or further charges to which they made themselves liable under the SEBI Act but also under the Companies Act, 1956 and other penal statutes, if attracted." the court said.
While stating that the FUTP Regulations are prospective in nature, the court said that SEBI cannot proceed against the promoters under the FUTP Regulations as they had committed the irregularities prior to coming into force of these regulations on October 25, 1995.
SEBI had barred Ritesh Polyester and its promoters -- Ritesh Exports, Surendra Kumar Agarwal and his wife Roop Rekha Agarwal and their minor sons Ritesh and Deepak -- from operating in the capital market for a period of 10 years for violating the SEBI Act and SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 1995.
A bench headed by Justice S B Sinha while allowing Ritesh and Deepak's appeal said that the minors, as was apparent from their birth certificates, could not have committed fraud and thus the impugned directions would not be binding on them as minors cannot enter into a contract.
"If they were minors, they being not party to the fraud, could not have been subjected to penalty under the SEBI Act. The person who committed the fraud in their names, viz., Surender himself, should have been proceeded against not only for commission of act of fraud on his own behalf but also on behalf of the minors."
However, it allowed the market regulator to go ahead with the prosecution against other promoters including Surender and Rooprekha.
"We, however, uphold other directions issued by the Board including the action taken in respect of the offences purported to have been committed. We also grant liberty to the authorities to proceed against the offenders not only for other or further charges to which they made themselves liable under the SEBI Act but also under the Companies Act, 1956 and other penal statutes, if attracted." the court said.
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While stating that the FUTP Regulations are prospective in nature, the court said that SEBI cannot proceed against the promoters under the FUTP Regulations as they had committed the irregularities prior to coming into force of these regulations on October 25, 1995.
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