ISSUES OF LAW

1. WHETHER THE CHARGES PRESSED AGAINST THE APPELLANTS UNDER

THE COMPANIES ACT 2013 ARE JUSTIFIED?

2. WHETHER THE APPELLANTS HAS VIOLATED THE PROVISIONS UNDER

SECURITIES CONTRACTS REGULATION ACT, 1956 & SEBI ACT, 1992?

3. WHETHER THE PENAL ACTIONS IMPOSED UPON THE CEO,

MANAGEMENT AND BOARD OF DIRECTORS UNDER IPC ARE VALID AND
JUSTIFIABLE?
 SUMMARY OF ARGUMENTS

1. THE CHARGES PRESSED AGAINST THE APPELLANTS UNDER THE

COMPANIES ACT 2013 ARE NOT JUSTIFIED.

The Counsel on behalf of the Mars Air Conditioners, CEO, Management, Board of Directors
and other officers (hereinafter Appellants) most humbly plead before the Hon’ble Court that
the charges pressed against the appellants under the Companies Act, 2013, are not justified.
The Courts below have failed to prove the most essential requirements for the said offences.
Hence, the conviction awarded by the lower courts are invalid.

2. THE APPELLANTS HAVE NOT VIOLATED THE PROVISIONS UNDER

SEBI ACT & SECURITIES CONTRACTS REGULATION ACT, 1956.

The Counsel on behalf of the Appellants humbly pleads before this Hon’ble Court that the
orders made by SEBI for De-listing and imposing such huge fines are valid and justifiable. In
the both SEBI Act & Securities Contracts Regulation Act, 1956, all the offences requires
certain intention to do acts or at least the knowledge of happening of such acts. Here, either
of the essentials are present and thus, it is totally unjust to convict the appellants under the
relevant provisions of the above said Acts.

3. THE PENAL ACTIONS IMPOSED UPON THE CEO, MANAGEMENT AND

BOARD OF DIRECTORS UNDER IPC ARE INVALID AND
UNJUSTIFIABLE.

The Counsel on behalf of the Appellants humbly pleads before this Hon’ble Court that the
penal actions imposed against the CEO, Management and Board of Directors are totally
irregular and unjustified. It is not correct on the part of the courts to convict the appellants,
when there are clear exemptions for certain offences and also when the essentials of the
offences are not met or proved by the prosecution. Therefore, the lower courts orders with
regard to conviction under these penal provisions are invalid and unjustified.
 ARGUMENTS ADVANCED

1. THE CHARGES PRESSED AGAINST THE APPELLANTS UNDER THE

COMPANIES ACT 2013 ARE UNJUSTIFIED.

The Counsel of behalf of the Mars Air Conditioners and Ors (hereinafter Appellants) most
humbly submit that the charges impressed pressed against the Mars Air Conditioners, Key
managerial persons, officers, an Board of Directors are completely unjustified. The
Designated Court and the High Court of Bombay have erroneously charged them u/s 447,
448, 449, and 451 of Companies Act, 2013 without any proper evidence.

1.1 The appellants are not liable for Fraud and for Fraud and for producing False
Statements.

As per Section 4471, “ ……Explanation. – For the purpose of this section – (i) “fraud” in
relation to affairs of a company or any body corporate, includes any act, omission,
concealment of any fact or abuse of position committed by any person or any other person
with that connivance in any manner, with intent to deceive, to gain undue advantage from,

1
§447, Companies Act , 2013
or to injure the interests of, the company or its shareholders or its creditors or any other
person, whether or not there is any wrongful gain or wrongful loss…..”

According to Section 4482, “…….if in any return, report, certificate, financial statement,
prospectus, statement or other document required by, or for, the purposes of any of the
provisions of this Act or the rules made thereunder, any person makes a statement,— (a)
which is false in any material particulars, knowing it to be false; or (b) which omits any
material fact, knowing it to be material, he shall be liable under section 447.”

According to Section 4633. (1) If in any proceeding for negligence, default, breach of duty,
misfeasance or breach of trust against an officer of a company, it appears to the court hearing
the case that he is or may be liable in respect of the negligence, default, breach of duty,
misfeasance or breach of trust, but that he has acted honestly and reasonably, and that
having regard to all the circumstances of the case, including those connected with his
appointment, he ought fairly to be excused, the court may relieve him, either wholly or
partly, from his liability on such term, as it may think fit:…”

In the case of Budh Ram And Others4, it was held that, "A fraud is an act of deliberate
deception with the design of securing something by taking unfair advantage of another. It is a
deception in order to gain by another's loss. It is a cheating intended to get an advantage."

In the landmark judgement of Shewaram Dewanmal 5 “If a statement is demonstrably

false, and nobody can reasonably be expected to put it forward as true, then and only then the
party responsible for such a statement may be held criminally liable.

In the case of Pulin Chandra Daw vs Emperor6, the court held that “the liability of person
is made out only when he makes a statement which is false in any material particulars
knowing it to be false or omits to state any material facts knowingly.”

In the case of Sojourner v Robb 7   the decision indicated that “a director will not simply be
in breach of this duty if they acted incorrectly, but in good faith, and genuinely believed
that what they were doing was correct.”

2
§448, Companies Act , 2013
3
§443, Companies Act , 2013
4
Budh Ram And Others vs State Of Haryana And Others on 22 May, 2009
5
Official Liquidator of the Karachi Bank Ltd vs Shewaram Dewanmal 1933 3 Comp. CAS. 23 (Sind)
6
(1948) 18 Comp. Cas. 121 (Cal).
7
[2006] 3 NZLR 80817
In the case of Bank of Poona Ltd Case8 The good faith would require that all the endeavours
of the directors must be directed to the benefit of the company.

In Sunil Bharti Mittal v. CBI9, the Supreme Court held that “an individual can be held
liable for an offence by the company (i) if there is sufficient evidence of the individual’s
active role coupled with criminal intent; or (ii) where the statute itself stipulates the liability
of directors and other officials, such as under the PMLA. Under the Companies Act, an
exception has been specifically carved out for independent and non-executive directors,
ensuring that they are liable only in cases where their knowledge and involvement can be
established or where they, despite having knowledge, failed to act diligently.”

In the present case, by observing the provisions and authorities stated above, it is very
important for a prosecution to prove the essentials of the offence. According to section 447,
the act of appellant must be with an intention to deceive and to gain undue advantage. The
appellant company basically wanted to develop a software only for increase in AC’s
performance and to reduce the power consumption. 10 But, unfortunately, the software, on its
own, interfered with the correct indication levels and started indicating a wrong emission
levels which are lower than the actual outcome. Hence, as the appellants have clearly no
knowledge on such failure of the indication level, and as there was not even any suspicion
with regard to it, the provisions of fraud and false statements does not apply to the appellants
and hence the conviction under the said provisions are invalid and unjustifiable.

1.2 The Appellants are not liable for offence of false evidence.

According to Section 448. Punishment for false statement.—" Save as otherwise provided in
this Act, if in any return, report, certificate, financial statement, prospectus, statement or other
document required by, or for, the purposes of any of the provisions of this Act or the rules
made thereunder, any person makes a statement,— (a) which is false in any material
particulars, knowing it to be false, or (b) which omits any material fact, knowing it to be
material, he shall be liable under section 447.”

8
Bank of Poona Ltd v. Narayandas , AIR 1961 Bom 252 at 253
9
(2015) 4 SCC 609)
10
Page 2,3, ¶, Moot proposition, 6th Damodaram Sanjivayya Intra Moot Court Competition 2016.
In the instant case, the appellants, after observing all the CPCB and other investigating
agencies reports, have accepted that the reports given to SEBI and Registrar of Companies
included a false evidence, with regard to the HFC emission level. But, the to convict the
appellants under the section of false evidence, it is required that the evidence must be given
knowing that the evidence was false at the time of submitting it.

1.3 The Appellants are not liable for Repeated default.

It is most humbly submitted to this Hon’ble Court that, in the instant case, the counsel on
behalf of the Appellants clearly proved that the appellant company has not violated any
provisions under this Act and hence there is not point is discussing with respect to the
recurrence of same offence again and again. Therefore, the appellants cannot be made liable
under this section.

2. THE APPELLANTS HAVE NOT VIOLATED THE PROVISIONS UNDER

SEBI ACT & SECURITIES CONTRACTS REGULATIONS ACT, 1956.

The Counsel on behalf of the………

2.1 The Appellants cannot be de-listed under the relevant provisions of Securities
Contracts (Regulation) Act, 1956.

As per Section 2411 of SCRA – “…. Provided that nothing contained in this sub-section
shall render any such person liable to any punishment provided in this Act, if he proves
that the offence was committed without his knowledge or that he exercised all due
diligence to prevent the commission of such offence.”

The offence under this section is being totally exempted, if at all, the persons while
committing such offence he had no knowledge of the wrong happened. In the instant case it is
very clear, as discussed in the first contention, that the appellants had no knowledge of what
is happening in the software and how is it affecting the indication level. Hence, as the
appellants have qualified for the eligibility under the exemption of this Section, it is not
justified in making them liable under this Act and related provisions.

11
24 of Securities Contracts Regulation Act, 1956
 2.2 The Appellants are not liable for any offence of Insider Trading under the
relevant provisions of SEBI Act, 1992.

As per Section 4. (1)12 “No insider shall trade in securities that are listed or proposed to
be listed on a stock exchange when in possession of Unpublished Price Sensitive
Information:….”

In the Landmark Case of Rajesh Agarwal vs SEBI13, it was held that “What is sought to be
prohibited is gaining an unfair advantage by the insider over the public investors a t large. If
an insider has dealt in securities without any intention if gaining any unfair advantage then
the charge of insider trading would not be sustainable.

The Counsel here most humbly pleads before this hon’ble Court, that the Appellants were
acting fully in compliance with the SEBI Act and have not violated any of the provisions
relating to the offence of Insider Trading. To be liable for this offence, it is very important
that the appellant company was in possession of such UPSI while performing the trading.
Thus, as the most essential part of the offence is missing, the appellants are not liable under
section.

3. THE PENAL ACTIONS IMPOSED UPON THE CEO, MANAGEMENT AND

BOARD OF DIRECTORS ARE INVALID AND UNJUSTIFIABLE.

3.1 The Appellants are not liable for the offence of Vitiating the Air.

According to the Section 27814. Making atmosphere noxious to health.—Whoever

voluntarily vitiates the atmosphere in any place so as to make it noxious to the health of
persons in general dwelling or carrying on business in the neighbourhood or passing
along a public way, shall be punished with fine which may extend to five hundred
rupees.

In the recently held Montreal Convention and other International Conventions and protocols
on climate change, many Countries have agreed to the plan of reducing the HFC emissions as
12
Securities And Exchange Board Of India (Prohibition Of Insider Trading) Regulations, 2015
13
SEBI and Corporate Laws, January 19-25, 2004, pp-351-420.
14
§415, Indian Penal Code, 1860
it is depleting the Ozone and is very harmful to the humans. But as most of the HFC’s are
from the AC’s and other refringent units, many developing countries have delayed the
initiation of the plan of HFC phase downs. India, being in the A5 Countries list and under
group two of developing countries list, have agreed to freeze the HFC emissions by the 2028-
203015 and start reducing them from 2030 onwards16. Hence, as there are no regulations on
HFC emissions and also the exemption given by international law, the appellants are not
liable for vitiating the air, even though, the air is actually vitiated.

3.2 The Appellants are not liable for the offence of Cheating.

According to Section 41517. Cheating.—Whoever, by deceiving any person, fraudulently or

dishonestly induces the person so deceived to deliver any property to any person, or to
consent that any person shall retain any property, or intentionally induces the person so
deceived to do or omit to do anything which he would not do or omit if he were not so
deceived, and which act or omission causes or is likely to cause damage or harm to that
person in body, mind, reputation or property, is said to “cheat”. Explanation.—A dishonest
concealment of facts is a deception within the meaning of this section.

ARCI vs Nimra Cerglass Technics Ltd 18, “Held in order to bring a case for offense of
cheating, it is not merely sufficient to prove that a false representation was made, but, it is
further necessary to prove that the representation was false to the knowledge of accused and
was made in order to deceive complainant.”

In the case of Inder Mohan Goswami19 , it was observed that “to hold a person guilty of
cheating it is necessary to show that he had a fraudulent or dishonest intention at the time of
making the promise.”

Iridium india telecom ltd vs Motorola incorporated (2011) 1 scc 74:AIR 2011 SC 20

Non-disclosure of relevant information would also be treated as a misrepresentation of facts

leading to deception.

In the case of Mohabat20, “by deceiving another intentionally induces the person so deceived
to do an act which causes or is likely to cause damage or harm….”

15

16

17
§415, Indian Penal Code, 1860
18
(2016) 1 SCC (Cri) 269
19
Inder Mohan Goswami vs State of Uttaranchal (2007) 12 SCC 1
20
1889 PR No 20/1889
In the famous Madhu Gangadhardas case21, it was held that, “Where there is no evidence
to show that the accused had dishonest intention right from the beginning, no offence of
cheating could be made out.”

In the landmark Judgement of Ramnish vs CBI22, “While causing mischief, there must be an
intention behind that. In the present case, the petitioners were discharging their official duty.
Therefore, they had no intention to cause an injury or mischief.”

In the case of Ramesh Chandra Patil vs State of Gujarat 2011 CrLJ 1395 Guj it was held
that, “…even from the evidence of the prosecution it is the duty of the prosecution to
establish its case in order to constitute an offence of cheating, the intention to deceive should
be in existence at the time when the inducement was made. It is necessary to show that a
person had fraudulent or dishonest intention at the time of making the promise too say that he
committed an act of cheating. Mere failure to keep a promise subsequently cannot be
presumed as an act leading to cheating.”

In the instant case, the appellants had no knowledge regarding the failure in the indication
meter and they do not even have any intention to make such kind of software. As they did not
have any knowledge on it, it is not correct to say that the contracts with the shareholders and
consumers were entered with a wrong motive at the time of entering it. As the main
ingredient of this offence is entering or performing contract with a intention of not to perform
it, which is clearly absent in the present case, the appellants do not come under this section
and thus, must be relieved from the charge.

3.3 The Appellants are not liable for the offence of Mischief.

According to Section 42523. Mischief.—Whoever with intent to cause, or knowing that he

is likely to cause, wrongful loss or damage to the public or to any person, causes the
destruction of any property, or any such change in any property or in the situation thereof as
destroys or diminishes its value or utility, or affects it injuriously, commits “mischief”.
Explanation 1.—It is not essential to the offence of mischief that the offender should intend
to cause loss or damage to the owner of the property injured or destroyed. It is sufficient if he
intends to cause, or knows that he is likely to cause, wrongful loss or damage to any person
by injuring any property, whether it belongs to that person or not.

21
1979 CrLJ NOC 201( Cal)
22
2016 CrLJ 2371 (Del) :2016 V AD (Del) 574
23
§ 425 of Indian Penal Code, 1860.
In the case of Ved Prakash vs Chaman Singh24, It was observed that “The main ingredient
of the offense under section 425 is that there should be intent to cause wrongful loss and
damage to anybody’s property and with that intent the destruction and damage should be
caused resulting diminishing of the value or the utility of the property. Where no such
evidence was led that the accused had an intention to cause mischief or they caused any
destruction to the property of the complainant, resulting in its diminishing value then it does
not constitute an offense under mischief.”

In the landmark case of Moti lal25, “This section deals with a physical injury from a physical
cause.”

In the famous case of Akidullah26, “The offense of mischief imports an act done wilfully and
not merely negligently.”In the case of Ramchandra27 the court stated that, “Acts done or
attempted to be done in bona fide assertion of a right however ill founded in law that right
may be, cannot amount to the offense of mischief within section 425.”

The Counsel on behalf of the Appellants most humbly pleads before this Hon’ble Court that
the essential ingredients of the offence of mischief includes the intent or knowledge to cause
such damage. It is also important that the damage or diminish of value must be caused to the
property. Here property means any tangible property and not the other way round. Hence, as
discussing from the first issue that there was no intention or at least knowledge on part of the
appellants. And the prosecution also has not been sure on what tangible property they want to
sue us. Hence, there is no proper evidence and compliance with the provision of IPC and
thus, the offence of mischief is not committed by the appellants.

24
, 1995 CrLJ 3890 All
25
(1901) 24 All 155, 156
26
(1911) 5 SLR 263
27
AIR 1969 Bom 20