Section 26 bars cognizance of Securities Contracts Act offences on a police report.

The applicants invoked Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of FIR C.R. No. II-401 of 2014 registered at City ‘B’ Division Police Station, Jamnagar, for alleged offences under Sections 13, 16, 17, 19 and 23(1)(b), (c), (e) and (f) of the Securities Contracts (Regulation) Act, 1956 (“SCRA”), together with the consequential charge-sheet and Sessions Case No. 90 of 2017.

The applicants contended that Section 26 of the SCRA barred the Court from taking cognizance on a police report and required a complaint by one of the statutorily specified persons or authorities.

The State accepted the legal position concerning the Section 26 bar, while seeking liberty to initiate appropriate proceedings by way of a private complaint.

Whether, in view of Section 26 of the SCRA, the Court could take cognizance of offences under the SCRA on the basis of a police report/charge-sheet filed pursuant to an FIR.

Whether the FIR, charge-sheet and consequential criminal proceedings against the applicants were liable to be quashed under Section 482 CrPC because of the statutory bar on cognizance.

Whether the competent authority could be granted liberty to initiate fresh proceedings in accordance with law.

The Court applied Section 26(1) of the SCRA, which provides that no Court shall take cognizance of an offence punishable under the SCRA, or its rules, regulations or bye-laws, except upon a complaint made by the Central Government, State Government, SEBI, a recognised stock exchange or any person; Section 26(2) further provides that no Court inferior to a Court of Session shall try such an offence.

The Court distinguished the power of police to investigate cognizable offences under Section 25 of the SCRA from the Court’s power to take cognizance, holding that investigation may proceed but cognizance cannot be founded on a police report where Section 26 requires a complaint.

The Court also applied the inherent jurisdiction under Section 482 CrPC and the principles in State of Haryana v. Bhajan Lal, AIR 1992 SC 604, particularly Category 6, concerning proceedings barred by an express legal prohibition in the Code or the relevant statute.

The Court held that although the offences under Section 23 of the SCRA are cognizable and the police were competent to investigate, the statutory requirement under Section 26 remained applicable at the stage of cognizance.

A “complaint” under Section 26 meant a written complaint before the Court as contemplated by Section 2(d) CrPC, and could not be substituted by an FIR followed by a police report or charge-sheet.

Consequently, the Sessions Court could not validly take cognizance of the alleged SCRA offences on the charge-sheet filed in the present case.

Since the continuation of the proceedings was affected by an express statutory bar, the case fell within the sixth category identified in Bhajan Lal, warranting exercise of the High Court’s inherent powers under Section 482 CrPC.

The Court clarified that the competent authority remained at liberty to initiate appropriate proceedings afresh against the applicants in accordance with law, including through a legally permissible complaint under Section 26 of the SCRA.

The Rule was made absolute accordingly.