CHAPTER IX
 
INVESTIGATION AND ENFORCEMENT

 Appointment of investigating officers

 49. The Board may by issuing a Notification, appoint such number of investigation officers, not below the rank of Officer grade 'B', to be known as Investigating Officers of the Board, as it considers necessary for the following purposes, namely for:-
 

(b) carrying on investigation in respect of alleged violations of the provisions of this Act, or the Depositories Act, 1996, or the rules, regulations, orders or directions issued thereunder;

(c) searching suspected persons and to seize documents;

(d) searching any premises ;

(e) seizing any documents;

(f) examining any person;

(g) summoning persons to give evidence and produce documents.

 Powers of investigating officers regarding Discovery, Production of Evidence etc.

50. (1) An investigating officer of the Board appointed under section 49 shall, for the purposes of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908, when trying a suit in respect of the following matters:

(a) discovery and inspection;

(b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath;

(c) compelling the production of books of account and other documents;

(d) issuing commissions.

Provided that an Investigating Officer shall not -

  (a) impound any books of account or other documents without recording his reasons for so doing, or

(b) retain in his custody any such books or documents for a period exceeding fifteen days (excluding holidays) without obtaining the prior approval of the Chairman.

 (2) An investigating officer of the Board after obtaining the prior aprproval of the Chairman, compel the production of any telephone records of any person who is reasonably believed to be connected with breach or violation of the regulation relating to insider trading or prohibition of fraudulent practices or unfair trading practices or any other violation under this Act which carries a penalty of not less than simple imprisonment for one year or a fine of not less than one lakh .

Power to search Premises

51. (1) If an Investigating Officer appointed under section 49 has reason to believe that any documents, which in his opinion, will be useful for, or relevant to any, investigation or proceeding under the said Acts, are secreted at any place, the Investigating Officer may himself, or an authorised officer may search for and seize such documents.

(2) The provisions of the Code of Criminal Procedure, 1973 (2 of 1973 relating to searches, shall, so far as may be, apply to searches under this section subject to the modification that sub-section (5) of Section 165 of the said code shall have effect as if for the word 'Magistrate', wherever it occurs, the words 'Investigating Officer" or " authorised officer " were substituted.

Power to issue Search Warrants
52. (1) Any court having Jurisdiction to issue a search warrant under the Code of Criminal Procedure, may, on an application by an officer of the Board authorised in this behalf stating his belief that certain documents relating to selling or purchasing or dealing in securities in contravention of the provisions of the said Acts or rules and regulations made thereunder are secreted in any place within the local limits of the jurisdiction of such Court, issue a warrant to search for such documents.

Provided that before making such an application the authorised officer shall record reasons for applying for the issue of search Warrant.

Provided further that the record of such reasons shall be kept confidential.

(2) A warrant issued under sub-section (1) shall be executed in the same manner and shall have the same effect as a search warrant issued under the said Code.

Power to impound proceeds

53. If the Board has reason to believe that there have been insider trading, unfair trade practices or fraudulent practices including price manipulation or rigging in respect of any securities or otherwise; for the purpose of making an inquiry or investigations relating thereto, the Board may issue directions pending completion of such inquiry or investigations, to any stock exchange or any persons associated with the securities market including the following:

(a) freezing of all such transactions in the securities concerned, any monies paid or securities delivered including any money or securities offered or action in connection with the transactions under investigation and directing the stock exchange to retain the money or securities in the manner it deems fit.

(b) impounding and retaining in its custody any documents pertaining to the said transactions.

 Provided that the Board shall not - (i) suspend trading and dealings of the securities except by directing the Stock Exchange under sub-section (2) of section 44; and

(ii) impound and retain in its custody any documents pertaining to the said transactions for a period exceeding four months or till investigation is completed, whichever is earlier.

 Power to seize documents, etc.

54. Without prejudice to the provisions of section 53 above, if an Investigating Officer appointed under section 49 has reason to believe that any document or thing will be useful for, or relevant to, any investigation or proceeding under the said Acts or in respect of which a contravention of any of the provisions of the said Acts or of any rule or regulation, direction or order made thereunder has taken place, he may seize such document or thing.
Power to examine persons

55. An Investigating officer appointed under section 49 or an authorised officer, by general or special order, may during the course of any investigation or proceeding under this Act.

(a) require any person to produce or deliver any document relevant to the investigation of proceeding;

(b) examine any person acquainted with the facts and circumstances of the case.

 Power to summon persons to give evidence and produce documents

56. (1) An Investigating officer appointed under section 49 shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document during the course of any investigation or proceeding under this Act.

(2) A summons to produce documents may be for the production of certain specified documents or for the production of all Documents of a certain description in the possession of or under the control of the persons summoned.

(3) All persons so summoned shall be bound to attend either in person or by authorised agents, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject in respect of which they are examined or make statements and produce such documents, as may be required.

Provided that the exemption under section 132 of the Code of Civil Procedure, shall be applicable to any requisition for attendance under this section.

(4) Every such investigation or proceeding as aforesaid shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code, 1860 (45 of 1860).

(5)In the event of failure of such persons to respond to the summons by remaining absent or by not producing the documents which they are called upon to produce the Investigating officer may apply to the Criminal Court of competent jurisdiction for issue of a warrant or other suitable process so as to secure the compliance of the orders passed by the Investigating officer in the above respect.

Prohibition of Disclosure of documents or information except in certain cases.

57. (1) If an Investigating officer is of the opinion that the contents of any documents which have come into his possession or control during the course of any investigation or proceeding under this Act would he useful for, or relevant to, any proceeding which is in progress or may be started under any other law for the time being in force, he may disclose such document or any information contained therein as he thinks fit, to an officer duly authorised by or under such other law.

(2) If any officer, except in the discharge of his duty in good faith as such officer in accordance with sub-section (1), or in compliance with any requisition made under any law for the time being in force, discloses any document or information obtained by him in his official capacity, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

Power to tender Immunity from Prosecution

58. (1) The Board may, if it is of the opinion the reasons for such opinion being recorded in writing that with a view to obtaining the evidence of any person appearing to have been directly or indirectly concerned in, or privy to the contravention of any of the provisions of this Act or any rule, regulations, direction or order made thereunder, it is necessary or expedient so to do, tender to such person the immunity from prosecution for any offence under this Act as also from imposition of any penalty under this Act on the condition of his making a full and true disclosure of the whole circumstances relating to such contravention.

  (2) A tender of immunity made to, and accepted by, the person concerned, shall, to the extent to which the immunity extends, render him immune from prosecution for any offence in respect of which tender was made or from the imposition of any penalty under this Act.

(3) If it appears to the Board that any person to whom immunity has been tendered under this section has not complied with the condition on which the tender was made or is wilfully concealing anything or is giving false evidence, the Board may record a finding to that effect, and thereupon the immunity shall be deemed to have been withdrawn and such person may be tried for the offence in respect of which the tender of immunity was made or for any other offence of which he appears to have been guilty in connection with the same matter and shall also become liable to the imposition of any penalty under this Act to which he would otherwise have been liable.

Vexatious search, etc.

59. (1) Any officer of the Board exercising powers under this Act or any Rule or Regulation made thereunder who, -

(a) without reasonable ground or suspicion, searches or causes to be searched any place or premises ; or

(b) vexatiously detains or searches any person,

 

 shall, for every such offence, upon conviction by a court, be punishable with imprisonment for a term which may extend to two years or with fine which may extend to ten thousand rupees or with both.

(2) Any person wilfully and maliciously giving false information and so causing a search to be made under this Act, shall upon conviction by a Court, be punishable with imprisonment for a term which may extend to two years or with fine which may extend to ten thousand rupees or with both.

Presumption of culpable mental state
60. (1) In any proceeding or prosecution for any offence relating to fraudulent and unfair trade practices in respect of the securities market and insider trading under this Act or the Regulations, which requires a culpable mental state on the part of the accused, the Court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.

Explanation: In this section, "culpable mental state" includes intention, motive, knowledge of a fact and belief in, or reason to believe a fact.

(2) For the purposes of this section, a fact is said to be proved only when the Court believes beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.

(3) The provisions of this section shall, as far as may be, apply in relation to any proceeding before an adjudicating officer as they apply in relating to any prosecution for an offence under this Act.

Burden of proof in certain cases

61. (1) Where any person is prosecuted or proceeded against for contravening any of the provisions of this Act or of any rule, regulation, direction or order made thereunder which prohibits him from doing an act without obtaining approval or certificate of registration from the Board, the burden of proving that he had the requisite approval or certificate shall be on him.

(2) Where any person is prosecuted or proceeded against for contravening the provisions of any regulations made under this Act, the burden of proving that he has not violated any such regulation shall be on him.

Certain officers to assist officers of the Board.

62. (1) Notwithstanding anything to the contrary contained in any other law for the time being in force, Officers of the following statutory or other authorities as may be designated by the respective authority, should on request in writing received from the Board, extend requisite co-operation in the investigations under and enforcement of this Act and regulations, namely:

(a) revenue authorities, including Income Tax Department;

(b) Reserve Bank of India;

(c) law enforcing authorities including the enforcement directorate, Central Bureau of Investigation or any other police authorities;

(d) Commercial and Co-operative banks;

(e) Public financial institutions as defined in Section 4A of the Companies Act;

(f) Stock Exchanges in India;

(g) Department of Telecommunication (DoT) or any licensee or service provide in relation to telecommunications including but not limited to Mahanagar Telephone Nigam Ltd.(MTNL), Videsh Sanchar Nigam Ltd. (VSNL) or any other licensee under section 4 of the Indian Telegraph Act; and

(h) any other authority, as may be specified by the Central Government, by notification in this behalf.

 (2) The officers of the Board, as may be approved by the Board, shall similarly extend co-operation to the designated officers of the authorities included under sub-section (1), in the investigation and enforcement of the Acts, regulations and rules under the jurisdiction of the concerned authorities, if a written request is received from any such authority by the Board.

 No police officer and other officers to investigate, etc. offences punishable under the Acts.

Notwithstanding anything contained in the Code of Criminal Procedure, no police officer or any other officer of the Central Government or State Government shall investigate an offence, or take cognizance thereof in respect of the alleged offence under the said Acts or rules or regulations made thereunder, without the prior consent of the Central Government or the Board.
 Provided that in the cases involving investigation in respect of alleged offences punishable under other acts or where the accused is charged with composite offences or where it is not practicable to separate the part of the transaction involving offences punishable under the act and the remaining part concerning offences punishable under other acts, the jurisdiction and powers of police and other authorities to investigate in to the matter shall remain unaffected by the above referred provision.

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