Cognizance Of SCRA Offences Requires Complaint By Government, SEBI Or Stock Exchange: Gujarat High Court

The Gujarat High Court has quashed criminal proceedings against an accused in an alleged illegal securities trading case, holding that courts cannot take cognizance of offences under the Securities Contracts (Regulation) Act on the basis of a police report alone.

“A plain reading of Section 26 of the Act suggests that no court can take cognizance of any offense punishable under the Act except on a complaint made by the Central Government, the State Government, the Securities and Exchange Board of India, a recognized stock exchange, or any authorized person. Therefore, no case is made out under the provisions of the Securities Contract (Regulation) Act.,” Justice S.V. Pinto observed.

The court was hearing a petition filed by Sidharth Harshadbhai Padaliya seeking quashing of an FIR registered at Jamnagar for offences of criminal breach of trust, cheating, and violations of the Securities Contracts (Regulation) Act.

The FIR was registered in 2020 after a police raid at a shop in Jamnagar. Police alleged that the accused were trading in securities without licence, permission, or any agreement with SEBI. During the raid, police allegedly recovered documents, computers, registers and printouts containing codenames linked to certain accused persons.

Padaliya argued that he was falsely implicated and was not named in the original FIR. He also argued that the trial court could not have taken cognizance of offences under the Act on the basis of a police report because the law requires a complaint by specified authorities.

He further submitted that proceedings against the main accused had already been quashed by a coordinate Bench of the High Court.

The court found that there was no material to show entrustment of property, wrongful loss to any person, or wrongful gain by the applicant. It held that the ingredients of criminal breach of trust and cheating were not made out.

“Even if this fact is accepted, it constitutes merely a breach of the Securities Contract (Regulation) Act, which has been wrongly characterized as criminal breach of trust,” the court said.

Referring to precedents on the exercise of inherent powers under Section 482 CrPC, the court quashed the FIR and all consequential proceedings against Padaliya.

For Applicant: Advocate Yashdhar Y Sidra

For Respondent: Advocate Aditya Jadeja, APP