Court Cannot Take Cognizance of SCRA Offences on Police Report Due to Statutory Bar Under Section 26.

The applicant sought to quash FIR No. 11206062210543 of 2021 registered at Satlasana Police Station for offences under Sections 406, 420, and 120B of the IPC; Sections 13 and 14 of the Securities Contracts (Regulation) Act (SCRA), 1956; and Sections 66(C) and 66(D) of the IT Act

The prosecution alleged that several accused persons conspired to conduct unauthorized "Dabba trading" (illegal stock trading) using a mobile application to cause financial loss to the Government and violate SEBI rules

The applicant's name surfaced during the investigation, though he was not named in the initial raid

1. Whether a court can take cognizance of offences under the Securities Contracts (Regulation) Act, 1956 based on a police report (FIR/Charge-sheet)

2. Whether the allegations in the FIR satisfy the essential ingredients of Sections 406 and 420 of the IPC and Sections 66(C) and 66(D) of the IT Act regarding the applicant

The court primarily applied Section 26 of the Securities Contracts (Regulation) Act, 1956, which provides a statutory bar against taking cognizance of any offence under the Act except upon a written complaint by the Central/State Government, SEBI, or a recognized stock exchange

It relied on the precedent Vipulkumar Avantilal Shah v. State of Gujarat (2018), which held that while police may investigate cognizable offences under the Act, the court cannot take cognizance on a police report due to the specific bar in Section 26

Regarding the IPC and IT Act, the court applied the principle that an FIR must prima facie disclose the ingredients of the alleged offences to proceed

The court observed that while Section 25 of the SCRA makes certain offences cognizable, Section 26 explicitly mandates that cognizance can only be taken via a private "complaint" as defined under Section 2(d) of the CrPC, notably excluding police reports

Consequently, even if a charge-sheet were filed, the trial court would be legally barred from acting upon it

Regarding the IPC charges, the court found that even if the prosecution's story were accepted as true, the essential ingredients for criminal breach of trust (S. 406) and cheating (S. 420) were not established

Similarly, the IT Act charges under Sections 66(C) and 66(D) were deemed inapplicable as the FIR failed to show how the applicant engaged in identity theft or personation

The court allowed the application and quashed the FIR and all consequential proceedings against the applicant, clarifying that materials collected by the investigation could still be used by the authorized agencies to initiate appropriate legal proceedings in the correct forum