Share Market Has Its Own Risks; Lodging FIR For Recovery Of Investment Not Permissible: Allahabad HC
The Allahabad High Court observed that the Share Market has its own risks and lodging an FIR against a share broker for recovery of investment is not permissible.
The Court quashed criminal proceedings against a licensed share broker and Director/Proprietor of a share and securities company (applicant), against whom an FIR was lodged under Sections 420 and 409 of the IPC regarding an equity shares transaction dispute.
A Single Bench of Justice Anish Kumar Gupta observed, “The applicant herein was a share broker and the opposite party 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. There is some accounting dispute between the parties, for which the instant F.I.R. has been lodged praying therein the recovery of the amount, which is not permissible by criminal action.”
Advocate Deepak Kumar Kulshrestha appeared for the applicant, while Advocate Manish Trivedi represented the opposite parties.
The applicant filed an application under Section 482 of the CrPC seeking to quash the charge sheet and the criminal proceedings arguing that no elements of Sections 420 and 409 IPC were made out in the FIR. the applicant submitted that the dispute between the parties was related to a business transaction and was purely civil in nature, and hence the case fell within the purview of the Securities and Exchange Board of India (SEBI) Act, 1992.
The High Court referred to the decision in Lalit Chaturvedi v. State of U.P., wherein the Apex Court clarified that disputes over financial transactions, such as unpaid amounts from business dealings, cannot be grounds for criminal proceedings without proof of deception or misrepresentation at the inception of the transaction.
The Bench stated, “A person cannot be held responsible for the offence under Section 409 I.P.C. as well as Section 420 I.P.C. on the basis on the same allegations as both the offences are contradictory and operate in different fields altogether.”
“F.I.R. lodged by the opposite party to initiate the criminal proceeding for recovery of money is not sustainable and is self contradictory. At the most, from the allegations as made in the F.I.R., there can be an offence under Section 15-F of the SEBI Act,” the Court remarked.
The Court stated that Sections 15F and 26 of the SEBI Act prohibit the registration of an FIR for which only the Board can file the complainant under Section 26 of this Act.
Consequently, the Court observed, “The SEBI Act is an Special Act, which shall prevail over the general act, such as I.P.C. or Cr.P.C. It is 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.”
Accordingly, the High Court allowed the application.
Cause Title: Jitendra Kumar Keshwani v. State Of U.P. & Anr. (Neutral Citation: 2024:AHC:155804)
Appearance:
Applicant: Advocates Deepak Kumar Kulshrestha and Hitesh Pachori
Opposite Parties: Advocate Manish Trivedi; AGA Rajeev Kumar Singh
