Shinepukur Holdings Ltd and others Vs. Securities and Exchange Commission and another, 50 DLR (AD) (1998) 189

Case No: Criminal petition for Leave to Appeal Nos. 52 to 54 of 1998

Judge: ATM Afzal ,

Court: Appellate Division ,,

Advocate: Mr. Rafique-ul-Huq,Md. Serajul Huq,Dr. M. Zahir,KS Nabi,,

Citation: 50 DLR (AD) (1998) 189

Case Year: 1998

Appellant: Shinepukur Holdings Ltd.

Respondent: Securities and Exchange Commission

Subject: Company Matter,Business and Commercial Law,Civil Law,

Delivery Date: 1998-5-13

 
Supreme Court
Appellate Division
(Civil)
 
Present:
ATM Afzal CJ
Latifur Rahman J
Md. Abdur Rouf J
Bimalendu Bikash Roy Choudhury J
 
Shinepukur Holdings Ltd. and others
………….Petitioners 
Beximco Pharmaceuticals Ltd. and others
………....Petitioners 
 
AKM Shamsuddin
………….Petitioner
Vs.
Securities and Exchange Commission and another
………….Respondents 
 
Judgment
May 13, 1998.
 
The Security and Exchange Commission Act, 1993
Section 25
The Code of Criminal Procedure, 1898
Sections 435, 438 & 439A
Objection raised by the petitioners as to lack of authority of the officer was premature in that they did not surrender before the CMM before whom the objection should have been raised first. The objection as to alleged lack of authority should be raised before the Court taking cognizance. There was sufficient compliance of the requirement of the law as regards authorisation of the officer who filed the report on behalf of the SEC.……..(13)
 
When the SEC was making a complaint of fraudulent act against certain companies and their directors on the basis of an enquiry undertaken by an expert Committee a Court would be well advised not to try to be more expert at the complaint stage because otherwise, it will be an example of nipping the prosecution in the bud………….(16)
 
The law should not be stretched too far so that big companies against whom serious allegation of foul play concerning national economy is being made before the Court by a statutory authority can themselves overtake the law by resourceful enterprise in raising ingenious contentions in order to frustrate the prosecution on the threshold……(18)
 
Lawyers Involved:
Serajul Huq and Rafique-ul Huq, Senior Advocates, instructed by Mvi. Md. Wahidullah, Advocate-on-Record — For the Petitioners (In all the petitions). 
Dr. M Zahir, Senior Advocate, instructed by Md. Aftab Hossain, Advocate-on-Record — For the Respondent No. 1 (In all the petitions). 
KS Nabi, Attorney-General —For Respondent No. 2 (In all the petitions).
 
Criminal petition for Leave to Appeal Nos. 52 to 54 of 1998.
(From the judgment and order dated December 9, 1997 passed by the High Court Division, Dhaka in Criminal Reference Nos. 1-3 011997 respectively). 
 
JUDGMENT
 
ATM Afzal CJ.
 
1. These three petitions by the respective accused-petitioners arise out of a common judgment and order dated 9 December, 1997 passed by a Division Bench of the High Court Division rejecting Criminal Reference Nos. 1-3 of 1997 made by the Sessions Judge, Dhaka by his judgment and order dated 1-6-97 under section 438 of the Code of Criminal Procedure recommending quashing of the proceedings of CR Case Nos. 1075, 1076 and 1080 of 1997 pending in the Court of the Chief Metropolitan Magistrate (CMM) Dhaka. 
 
2. Facts of the case, briefly, are that, the Securities and Exchange Commission (SEC) constituted under the Security and Exchange Commission Act, 1993 (Act No. 15 of 1993), briefly the Act, filed reports under section 25 of the Securities and Exchange Ordinance, 1969, briefly the Ordinance, through its Executive Director MA Rashid Khan before the Chief Metropolitan Magistrate, Dhaka alleging offences under section 17 read with section 24 of the said Ordinance against the present petitioners on 2-4-97 whereupon the CMM by orders passed on the same date took cognizance of offence under section 24 of the Ordinance and directed issuance of warrant of arrest against the accused petitioners in the following terms: 
 
দরখাস্তকারীর নালিশি অভিযোগ দেখিলাম । বাদি একজন সরকারি কর্মকর্তা । তিনি মামলা করার জন্য একজন ক্ষমতা প্রাপ্ত ব্যক্তি  ক্ষমতা পত্র দেখলাম । সরকার পক্ষে বিজ্ঞ এটর্নি জেনারেলকে শুনলাম । মামলাটি সিকিউরিটি এন্ড এক্সচেঞ্জ অর্ডিনান্সের ২৪ ধারামতে আমলে লওয়া গেল । আসামিদের বিরুদ্ধে ডব্লিউ/এ দেওয়া হউক ।
 
3. The aforesaid CR cases were accordingly registered. In the reports made to the CMM, it was alleged, inter alia, that the accused companies and their directors were involved in fraudulent activities during the month of July to December, 1996 within the meaning of section 17 of the Ordinance and those were detected by an Enquiry Committee formed by the SEC under Section 21 of the Ordinance to enquire into the matter. In the reports filed relevant portions of the findings of the Enquiry Committee were quoted in respect of the petitioners as were relevant in each case. 
 
4. It appears that the accused-petitioners moved the High Court Division on the day following taking of cognizance by the CMM and obtained anticipatory bail. Then they filed Criminal Revision Cases No. 163-165 of 1997 before the Sessions Judge, Dhaka under sections 435 and 439A of the Code of Criminal Procedure for setting aside. the order dated 2-4-97 of the CMM taking cognizance as aforesaid. 
 
5. The learned Sessions Judge by his judgment and order dated 1-6-97 held that the CR cases were liable to be quashed and since he had no jurisdiction to quash he made a reference (3) to the High Court Division under section 438 of the Code of Criminal Procedure with his recommendation to quash the said proceedings. The learned Sessions Judge made the recommendation upon taking the view that MA Rashid Khan, Executive Director was not legally authorised to make the reports-under section 25 of the Ordinance, that the provisions of law were not complied with, that there was no application of mind by the CMM in taking cognizance, that the issuance of warrant of arrest against the accused persons instead of summons without showing reasonable grounds was contrary to law for which the accused persons have faced harassment and financial loss and the same has caused failure of justice and further that those irregularities are not curable under section 537 Cr.P.C. 
 
6. As already noticed, the High Court Division by the impugned judgment and order rejected all the references. 
 
7. Serajul Huq and Rafiqu-ul Huq, learned Counsel made submissions on behalf of the accused-petitioners making a common ground that the High Court Division acted wrongly in rejecting the references. Both the learned Counsel ultimately submit that even though they have assailed the order of taking cognizance on various grounds but their main contention is that the alleged report on the basis of which cognizance was taken by the learned CMM not having been filed in accordance with the provision of section 25 of the Ordinance i.e., the Executive Director not having been authorised by the Commission, the order taking cognizance was wholly bad and illegal. 
 
8. This being the main submission made on behalf of the petitioners, the same naturally deserves to be addressed first. Section 25 provides that no Court shall take cognizance of any offence punishable under the Ordinance except on a report in writing of the facts constituting the offence by an officer authorised in this behalf by the Commission; and no Court inferior to that of a Court of Session shall try any such offence. It appears from the report which was filed before the CMM that in the cause title it has been duly mentioned that it was a report under section 25 of the Ordinance, that the SEC was the complainant/ petitioner, that it contained extracts from the report of the Enquiry Committee which was set up by the SEC making various allegations against the petitioners which were alleged to be contravention of section 17 of the Ordinance and that it was ultimately stated that the SEC have authorised its Executive Director MA Rashid Khan to file the report/complaint. The said Executive Director was, however, authorised by the Chairman of the Commission to file the report before the CMM and not by the Commission as such. The authority letter which was on record was found to be dated 1-4-97 and the report/complaint was filed on 2-4-97. It is found from the Sessions Judge’s judgment that on behalf of the SEC papers were produced to show that in the 28th Board meeting of the SEC held on 2-4-97 at 9-00 AM under the president ship of the Chairman of the Commission the report of the Enquiry Committee on share market was considered under agenda No. 11 and it was unanimously decided to authorise the Chairman of the SEC fully to take all legal steps on the basis of the report of the Enquiry Committee. 
 
9. The learned Counsel has argued that the Chairman was not the competent person to authorise and so the report filed on his authority was incompetent. Secondly, even if the Chairman could authorise being empowered by the Commission, the authority in the present case was bad because the Commission empowered the Chairman on 2nd April but the Chairman executed the letter of authority in favour of the Executive Director on 1st April at a time when the Chairman was not empowered. So the contention is that the report was filed with unauthorised authorisation. 
 
10. We must say that in the facts and circumstances of the case, the objection raised is only technical and not of any substance. The purpose of authority from the Commission is to ensure that it is the Commission which should authorise/permit the prosecution to be launched. No officer, not even the Chairman can file a report on his own but the decision must come from the Commission. It has been found that the Commission did decide and authorise the Chairman to take legal steps in the light of the report of the Enquiry Committee on 2nd April before the report was filed before the CMM (we are told in the afternoon). So, the report cannot be said to be unauthorized. Had the Chairman executed the letter of authority in favour of the Executive Director after the Board meeting, there would have been no scope for any objection. Much ado is being made on the ground that the letter of authority was executed before the Board meeting was held. The technical objection will be ignored because the spirit behind the provision has been satisfied by the decision of the Commission before filing of the report. 
 
11. The objection in any case is based on a disputed fact which cannot be resolved without evidence. From the impugned judgment it appears that there is a dispute over the date 1-4-97 as it appears on the letter of authority. It was submitted on behalf of the SEC that there was no date mentioned in the letter of authority but it (date) appeared mysteriously while the same was lying in Court. The High Court Division observed that it was not possible to decide the disputed question. 
 
12. Be that as it may, what does it matter if the Chairman had already authorised the Executive Director to file the report and the Commission immediately thereafter authorised the Chairman to initiate the legal proceeding? After all, who is the Chairman? The Chairman is not a stranger to the Commission. He is not only a member of the Commission but he is the Chief Executive thereof. The Chairman, therefore, occupies a pivotal role in the Commission and, so to say, is its driving force. But this is not to say that the law should be ignored and authority from the Chairman should be considered sufficient for the purpose of initiating proceeding under section 25 of the Ordinance. It will be a matter for consideration in the facts of each case whether the authority given for filing a report is sufficient to meet the requirements of law. What is of importance is that there must be something to show or it may be shown by evidence later on that the initiative to set the legal proceeding in motion was authorised by the Commission itself and not by an individual member. Ordinarily, however, a letter of authority from the Chairman should be prima facie evidence of authority from the Commission itself and a Court will be competent to take cognizance upon looking at such authority. 
 
13. At this stage, we would like to observe that the objection raised by the petitioners as to lack of authority of the officer was premature in that they did not surrender before the CMM before whom the objection should have been raised first. The Sessions Judge, in our opinion, would have been well-advised to reject the revision petitions upon the view that the objection as to alleged lack of authority should be raised before the Court taking cognizance. In the facts of the present case, we are satisfied that there was sufficient compliance of the requirement of the law as regards authorisation of the officer who filed the report on behalf of the SEC. 
 
14. The learned Sessions Judge held that there was no application of mind by the CMM in taking cognizance which finding the High Court Division has rightly reversed. The learned Counsel have argued that the order of the CMM does not show that he was prima facie satisfied about the truth of the allegations. 
 
15. The High Court Division correctly held: 
Since there is no requirement of law to record reasons for taking cognizance we find no illegality in those orders on that court. Learned Advocates for the accused 1st party could not show any decision that reasons are to be recorded for taking cognizance but persisted to say that there should be something in the order to show application of the mind of the Magistrate to the facts of the complaint to satisfy him to take cognizance of the offence. From the perusal of the extracts of the report (Complaint) by the CMM and hearing given to the learned Advocate of the complainant and the learned Attorney General it appears to us that the CMM applied his mind to the allegation made against the accused persons and on being satisfied that offence under section 24 of the Ordinance has been disclosed in the report/complaint took cognizance of the said offence, so, we find that there was application of mind by the CMM and his satisfaction in taking cognizance of the offence in question against the accused persons. 
 
16. The learned Counsels have next argued that the report does not disclose any offence under section 17 of the Ordinance but is capable of being interpreted as innocent activities of the petitioners rather than committing any offence. We have gone through the extracts from the enquiry report which have been made part of the complaint/report and we are satisfied that there is prima facie allegation of contravention of section 17 of the Ordinance. When the SEC was making a complaint of fraudulent act against certain companies and their directors on the basis of an enquiry undertaken by an expert Committee a Court would be well advised not to try to be more expert at the complaint stage because otherwise, it will be an example of nipping the prosecution in the bud. We do not at all approve of the manner in which the revision petitions were disposed of by the learned Sessions Judge. 
 
17. It was argued that the CMM acted wrongly in directing issuance of warrant of arrest all at once instead of issuing summons at the first instance. It was further argued that in the absence of list of witnesses and copies of complaint the order of issuance of warrant of arrest was violative of section 204 (IA) (B) Cr.P.C. We agree with the reasons given by the High Court Division for rejecting these contentions. The learned Counsels before us have not put much emphasis on these contentions either for obvious reasons. As already stated their main submission was with regard to the competence and contents of the report on the basis of which cognizance was taken by the CMM. We would like to observe again that the learned Sessions Judge should not have given any importance to the above submissions because law permitted issuance of warrant of arrest and copies of complaint and list of witnesses were filed before him and no warrant of arrest was issued at all before the accused petitioners hurried to the Court of the Sessions Judge with revision petitions. They did not wait for any warrant of arrest to be issued but promptly appeared before the High Court Division on the next day and obtained anticipatory bail. Therefore, the objections as to warrant of arrest or absence of list of witnesses were but thin grounds to raise question as to the taking of cognizance by the CMM. 
 
I8. It is true that in criminal matters the accused should get all protection under the law but it is also important that the law should not be stretched too far so that big companies against whom serious allegation of foul play concerning national economy is being made before the Court by a statutory authority can themselves overtake the law by resourceful enterprise in raising ingenious contentions in order to frustrate the prosecution on the threshold. The Court must strike a balance. We are of the view that the learned Sessions Judge failed to maintain that balance which has been restored by the High Court Division. 
 
19. At the same time we must say that there are some observations in the High Court Division judgment which cannot be supported and were better not to have been made. For example, its observation as to ‘report’ as mentioned in section 25 of the Ordinance appears to suffer from a confusion. The report mentioned in section 190(1) (b) of the Cr.P.C. or section 27 of the Special Powers Act is not the same as it has been mentioned in section 25 of the Ordinance. The simple reason is that the ‘report’ as in the Cr.P.C or Special Powers Act as aforesaid is not any other report but made by a Police officer. The Police officer upon investigation of a case submits report under section 173 Cr.P.C. It is not the same thing as in section 25 of the Ordinance. There is no provision in the Ordinance that a report can only be made under section 25 following an enquiry or investigation. Here the Ordinary meaning is required to be given to the word ‘report’ unlike a report filed by a Police Officer upon investigation. The High Court Division is plainly wrong in holding that “it is clear when there is provision for taking cognizance on the basis of a report, such report must be prepared and submitted by a person authorised to hold enquiry or investigation.” The High Court Division also completely went wrong in holding as follows: 
 
“Had he (Executive Director) himself enquired into any allegation of contravention of the provision of section 17 of the said Ordinance and prepared and submitted a report giving facts constituting the offence then the question of authorizing him by the SEC would have arisen. He having not enquired and submitted any report in the matter and he having merely presented the extracts of the report of a duly authorised committee stating the facts constituting the offence, in our view, there was no requirement of the provisions of section 25 of the said Ordinance to authorise him separately by the SEC and, as such, there was no violation of the provisions of that section in taking cognizance.” 
 
20. Except that there was a confusion in the mindset of the learned Judges as to the word “report” occurring in the usual criminal laws and as in section 25 of the Ordinance which resulted in some unwarranted observations, we think the views taken by the High Court Division on other points were perfectly correct. 
 
21. Before parting, we would like to observe that the reference made by the Sessions Judge was misconceived because he himself could set aside the order of the CMM which was actually prayed for. 
 
All the petitions are dismissed. 
 
Ed.