Investigation/prosecution by SEBI does not preclude police from carrying its own investigation: Delhi High Court

The Delhi High Court recently held that an investigation or prosecution by the Securities and Exchange Board of India (SEBI) does not preclude the police/investigating agency from carrying its own investigation into the commission of offences punishable under the Indian Penal Code (DK Arora vs State & Ors)..The order was passed by a Single Judge Bench of Justice Vibhu Bakhru in a plea seeking quashing of an FIR registered by Delhi Police under Section 420/406/120-B of the Indian Penal Code (IPC)..The petitioner, DK Arora, was a director of a stock broking company, M/s. Modex Internation Secutities Limited. .As per the FIR by an investor, the firm and its directors indulged in fraud and misappropriation of funds and valuable securities worth over Rs. 126 crore. .Following the Karvy International scam, the complainant i.e an investor decided to withdraw his securities from Modex International and accordingly, requested that his securities be transferred to another DEMAT account of his with JM Financials. .However, in spite of promises, the securities were never transferred. .Seeking to quash the FIR, the petitioner argued that it did not disclose any cognizable offence as there was no allegation that he entered into transactions with the complainant/investor with the intention of cheating. .Further, since a complaint had also been made with SEBI, which is duly empowered to take necessary steps with regard to the grievances of the complainant, the present FIR could not be sustained, it was said. .Lastly, the petitioner claimed that the disputes arose out of the commercial transactions and were thus essentially civil in nature..The Court observed that the FIR disclosed cognizable offences and thus to seek its quashing for not disclosing any cognizable offence, was "clearly unmerited"..It further held that the argument that the SEBI investigation should result in its quashing is also unmerited as the regulator's jurisdiction did not extend to prosecuting offences under the IPC..The court said, ."SEBI’s jurisdiction extends to investigate complaints and take appropriate action for violation of Securities and Exchange Board of India Act, 1992 (SEBI Act) and the Rules and Regulations made thereunder. It does not extend to prosecuting offences under the IPC. The fact that SEBI is investigating or prosecuting the petitioner for offences under the SEBI Act, or the relevant regulations made thereunder does not in any manner warrant quashing of the present FIR. It also does not preclude the investigating agency from investigating the allegations regarding offences punishable under the Indian Penal Code, 1860.".The petition was, therefore, dismissed..Advocate Abhi Kumar represented the petitioner. Additional Standing Counsel RS Kundu appeared for State..The complianant/investor was represented by Advocate Kaadambari and Advocate Mansi Sinha. .[Read Order]