1. Securities Law Violations
Securities and Exchange Board of India (SEBI) Regulations:
If the company made false or misleading representations (e.g., assured returns or promised IPO), this could violate SEBI regulations. SEBI strictly prohibits guarantees of returns in investment offerings.
Since there are 98 investors, it may qualify as a "collective investment scheme" (CIS), which requires prior SEBI approval. Operating a CIS without registration is illegal under the SEBI Act, 1992.
2. Breach of Contract
The issuance of post-dated cheques (PDCs) promising returns on investment may constitute a contractual obligation. Failing to honor these obligations or unilaterally altering terms (e.g., changing cheque dates) could be a breach of contract under the Indian Contract Act, 1872.
3. Cheque Dishonor and Stop Payment
Negotiable Instruments Act, 1881:
Stopping payment on post-dated cheques or dishonoring them may amount to an offense under Section 138, which deals with cheque bounce cases.
For a valid case:
The cheque must have been presented within its validity period.
A demand notice must be issued to the company within 30 days of receiving notice of dishonor.
The company has 15 days to pay after the notice; failing that, you can initiate legal proceedings.
4. Criminal Breach of Trust and Fraud
Indian Penal Code, 1860:
Section 406 (Criminal Breach of Trust): If the founders misused funds raised from investors for purposes other than those stated, they could face criminal liability.
Section 420 (Cheating and Dishonest Inducement): Promising assured returns or an IPO without realistic backing may constitute fraud.
5. Collective Action
Investors may consider acting together by forming an Investor Protection Group to:
Strengthen their legal position.
Negotiate collectively with the founders.
File a joint complaint with SEBI, police, or in court.
6. Civil Remedies
File a civil suit for recovery of your investment under Order 37 of the Civil Procedure Code (CPC), 1908, which allows for summary proceedings in cases involving financial instruments like cheques.
7. Interim Measures
You may approach the court for interim relief (e.g., injunctions) to prevent the founders from alienating company assets pending resolution.
Send a Legal Notice: Notify the founders of your intent to take legal action if commitments are not honored.
File a Complaint with SEBI: Highlight potential securities law violations.
Initiate Criminal or Civil Proceedings: Depending on the situation's urgency and evidence.
02/12/2024 08:04 am