HC reserves order on Birla cheating case

Madhu Mardia, an investor, filed a complaint in February this year in the special court, trying cases under Maharashtra Prevention of Investors8217; Deposits Act MPID alleging that she was induced to buy shares of the company but the transaction did not materialise although she paid Rs 22.57 lakh by cheque.

Finding sufficient grounds to proceed against the respondents, the trial court had on July 14 issued process against them. Being aggrieved, they filed an appeal.

Counsel for the appellants, V R Manohar, contended that the trial court had no jurisdiction to try the case because no offence was disclosed under the provisions of MPID. He argued that investment of the applicant was not a deposit8217; laid down under Section 2 C of the Act. Hence, the case did not fall within the term mischief8217; defined under the Act.

On the other hand, Ramrao Adik, counsel for the investor, submitted that his client had put in hard-earned savings in a scheme floated by the company but shares had not been allotted to her.

The case of the complainant was that one Enam Securities Ltd were the underwriters of Polaris Software Lab Ltd which had a public subscription due to open on August 4 last year. Enam was the appointed agent for public issues by Birla Global Finance Ltd.

Enam approached the complainant and apprised her of the scheme saying that if she applied for substantial number of shares, numbering 60,000, in the public issue there was a possibility of getting a firm allotment.

The application money to be paid was Rs 210 per share. Since the complainant did not have such finance, Enam informed her that the company would arrange for the funding of the application money to be paid by her.

She was told to deposit with the company only the margin money and interest on the funded amount.

The complainant alleged that the respondents came out with a scheme that members of the public who were interested in making the application for the public issue of Polaris could approach the company and deposit the margin amount with them instead of making full payment to Polaris on application.

The complaint alleged that she was made to understand that upon receipt of margin money from depositors/investors the company would make an application to Polaris for public issue of shares of Polaris. The scheme was widely circulated by the company and their agents, the complainant alleged.

Before the trial court, the company had argued that the complainant had not been examined and they respondents were not given a chance to defend themselves by cross-examining her. The complaint was made with a haste to thwart the legal procedure required to be followed.