wp 5024 · PDF file 2020. 9. 2. · # karvy stock broking limited, reprsented by its vice- president (legal) mr. ch.viswanath. .. petitioner and $ the union of india, represented by

* THE HON’BLE SRI JUSTICE A.RAJASHEKER REDDY + W.P.NOS.5024 AND 8997 OF 2020

% 26.08.2020 W.P.NO.5024 OF 2020 # KARVY STOCK BROKING LIMITED, REPRSENTED BY ITS VICE- PRESIDENT (LEGAL) MR. CH.VISWANATH. .. Petitioner

And

$ THE UNION OF INDIA, REPRESENTED BY ITS SECRETARY, MINISTRY OF CORPORATE AFFAIRS, NEW DELHI AND FIVE OTHERS.

.. Respondents

W.P.NO.8997 OF 2020 # KARVY STOCK BROKING LIMITED, REPRESENTED BY ITS VICE-PRESIDENT (LEGAL) MR. CH.VISWNATH.

.. Petitioner

AND

$ THE UNION OF INDIA, REPRESENTED BY ITS SECRETARY, MINISTRY OF CORPORATE AFFAIRS, NEW DELHI AND FIVE OTHERS.

.. Respondents.

! Counsel for the petitioner : Sri S. Niranjan Reddy, learned Senior Counsel appeared for the learned counsel Sri Avinash Desai.

Counsel for respondents : Sri N.Rajeshwar Rao, Learned Assistant Solicitor General.

< Gist :

> Head Note :

? Citations:

1. 2018(1) ALD 734 2. 2016 SCC OnLine Bom 9276 3. 2000(1) ALD 388 4. (1966)1 SCR 466 = AIR 1966 SC 671 5. 1989 Supp. (2) SCC 462 6. (1996)4 SCC 69 7. (1966) Supp SCR 311

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8. (1969)1 SCC 325 9. 2019 SCC Online Del. 6465

DATE OF JUDGMENT PRONOUNCED : 26.08.2020 SUBMITTED FOR APPROVAL:

THE HON’BLE SRI JUSTICE A.RAJASHEKER REDDY

1. Whether Reporters of Local Newspapers : Yes / No may be allowed to see the Judgments ? 2. Whether the copies of judgment may be : Yes / No marked to Law Reporters/Journals 3. Whether Their Lordship wish to : Yes / No see the fair copy of the Judgment ? -------------------------------------------------------- A.RAJASHEKER REDDY,J

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THE HON’BLE SRI JUSTICE A.RAJASHEKER REDDY

W.P.NOS.5024 AND 8997 OF 2020

COMMON ORDER Since the issue involved in both the writ petitions is connected and the

parties are same, they are heard together and are being disposed of by this

common order.

2. The petitioner in both the writ petitions is M/s Karvey Stock

Broking Limited and it is represented by its Vice President (Legal)

Mr. Ch.Viswanath.

3. The 2nd respondent – Office of Director General, Ministry of

Corporate Affairs, represented by its Joint Director, in exercise of jurisdiction

under Section 212 (1) (a) and (c) of the Companies Act, 2013 (for short ‘the

Act’), ordered investigation into the affairs of the petitioner – company in the

public interest, vide order No.07/341/2015-CL II (SER) dated 27-02-2020.

In pursuance of the order dated 27.02.2020, the Investigating Officer issued

notice dated 16.06.2020 under Section 217 of the Act calling for

information, and vide communication dated 19.06.2020, intimated the

petitioner to strictly comply with Section 217 of the Act, with a default

clause.

4. Challenging the order passed by the 2nd respondent under

Section 212 (1) (a) and (c) of the Act dated 27.02.2020, petitioner -

company filed W.P.No.5024 of 2020, and challenging the consequential

notices issued under Section 217 of the Act dated 16.06.2020 and

19.06.2020, W.P.No.8997 of 2020 has been filed.

5. Since the result in W.P.No.5024 of 2020 will have bearing on

W.P.No.8997 of 2020, the former is taken up for adjudication.

6. The case of the petitioner - company, as per the averments made

in the affidavit filed in support of the writ petition is that, it is involved in the

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business of stock broking, commodities trading, depository, wealth

management services and distribution of other financial produces.

7. As there were media reports stating that the petitioner – company

is violating the regulations of Securities Exchange Board of India (SEBI), the

5th respondent – Ministry of Corporate Affairs, O/o the Registrar of

Companies, through its Assistant Director – 6th respondent, vide letter in

Ref:ROCH/KSBL/2019/2410 dated 03.12.2019, called for certain information

from the petitioner – company with regard to current status of investigation

by SEBI, and the action taken against the petitioner and its group of

companies, and to submit a copy of the latest financial statement of the

company. The petitioner - company, vide letter dated 13.12.2019,

submitted a detailed reply with regard to information sought for by the

6th respondent.

8. Thereafter, the 6th respondent issued notice dated 14.01.2020

under Section 206(1) of the Act, calling upon the petitioner, to furnish some

more information and documents within seven days of receipt of notice. As

the information sought for by the 6th respondent is voluminous, petitioner

vide letter dated 22.01.2020, sought four weeks time. But, without

considering the request made by the petitioner vide letter dated 22.01.2020,

the 6th respondent issued notice dated 24.01.2020 under Section 206(3) of

the Act, to produce original documents/ registers maintained by the company

on 27.01.2020, in pursuance thereof, the officials of the company were

physically present on 27.01.2020, and submitted a preliminary reply, and

sought further time for producing some more documents and for personal

hearing.

09. As the respondents are proceeding with undue haste, petitioner

filed W.P.No.3143 of 2020, alleging that the respondents, without giving

adequate time to respond to the notice dated 14.01.2020 issued under

Section 206(1) of the Act, have issued further notice dated 24.01.2020 under

Section 206(3) of the Act, as such the same is illegal and arbitrary.

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10. In the said writ petition, the learned Assistant Solicitor General

represented before the court that the respondents would take into

consideration the explanation submitted by the petitioner on 03.02.2020,

and proceed with the inquiry in accordance with law, after giving opportunity

to the petitioner and considering the above representation of the learned

Assistant Solicitor General, this court, vide order dated 14.02.2020, disposed

of W.P.No.3143 of 2020, directing the respondents to proceed with the

inquiry initiated against the petitioner under Section 206(1) of the Act, by

duly taking into consideration the explanation submitted by the petitioner –

company, and conclude the same as expeditiously as possible, preferably

within a period of six months from the date of receipt of that order.

11. It is stated that as per the above directions of this court, the

petitioner approached the respondents vide letter dated 25.02.2020, to give

opportunity of hearing before the 6th respondent, but there was no response.

12. Petitioner also filed W.P.No.4742 of 2020 aggrieved by the action

of the respondents is not responding to its letter dated 25.02.2020. During

the hearing of the said writ petition, the Standing Counsel informed the court

that based on the inquiry report dated 24.02.2020 submitted by the

5th respondent – Registrar of Companies (ROC), under Section 208 of the

Act, the Joint Director of the 2nd respondent – Office of Director General,

Ministry of Corporate Affairs, New Delhi, passed the impugned order dated

27.02.2020, directing investigation into the affairs of the company under

Section 212(1)(a) and (c) of the Act. 14. The Chairman and the Managing

Director of the petitioner – company, vide email dated 20.02.2020, to the

Secretary of Ministry of Corporate Affairs, also gave the gist of the issues

with SEBI, and requested for a personal hearing. In response to the same,

vide email dated 27.02.2020, it was intimated that the petitioner could meet

the Secretary, Ministry of Corporate Affairs on 05.03.2020 at noon. In view

of the same, the said writ petition has become infructuous. Therefore,

challenging the order dated 27.02.2020, the present writ petition is filed.

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13. Counte