Gujarat High Court
Serious Fraud Investigation Office ... vs State Of Gujarat on 19 August, 2021
Author: Ashutosh J. Shastri
Bench: Ashutosh J. Shastri
R/CR.RA/378/2021 ORDER DATED: 19/08/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL REVISION APPLICATION NO. 378 of 2021
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SERIOUS FRAUD INVESTIGATION OFFICE (THRO ITS AUTHORIZED
OFFICER)
Versus
STATE OF GUJARAT
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Appearance:
MR DEVANG VYAS(2794) for the Applicant(s) No. 1
MR JK SHAH ADDITIONAL PUBLIC PROSECUTOR for the Respondent(s)
No. 1
YUVRAJ G THAKORE(7785) for the Respondent(s) No. 2,3,4,5
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CORAM:HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI
Date : 19/08/2021
ORAL ORDER
1. By way of present Criminal Revision Application under Section 397 read with Section 401 of the Code of Criminal Procedure as also read with Section 437 of the Companies Act, 1956 the original complainant i.e. Serious Fraud Investigation Office (authorized officer) has challenged the legality and validity of the order dated 17.03.2020 passed by the learned Principal District Judge and Designated Judge (Companies Act), Ahmedabad (Rural) in Special Case (Companies Act) No. 1 of 2020 insofar as it relates to non taking of cognizance against original accused nos. 21 to 24 who are respondent nos. 2 to 5.
2. The case of the petitioner is that the investigation order was originally passed by the Central Government i.e. Ministry of Corporate Affairs (hereinafter referred to as "MCA"), whereby 'in the public interest' on the basis of cogent material formed its opinion that the affairs of M/s. ABC Cotspin Private Limited are required to be investigated by Page 1 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021 R/CR.RA/378/2021 ORDER DATED: 19/08/2021 the present petitioner i.e. Serious Fraud Investigation Office and accordingly, passed an order on 31.03.2016 in exercise of powers conferred under Section 212(1) (c) of the Companies Act, 2013.
2.1. Upon completion of the investigation, report was submitted to the Ministry of Corporate Affairs on 17.01.2019 in terms of Section 212(12) of the Companies Act, 2013 recommending the prosecution qua various offences alleged to have been committed under the Companies Act 2013 and the Companies Act, 1956 as also Indian Penal Code, 1860. It was revealed during the investigation that ABCCPL is a Private Company, owned and controlled by one Ashish Jobanputra, which Company was exporting cotton since the year 2009 and mainly exporting to China under the Letter of Credit. With a view to avail trade credit from the Banks, Ashish Jobanputra referred to as 'AJ' had arranged with Customs House Agents to get the Checklists (Shipping bills prior to customs formalities) and the House BLs/MTDs before completion of exports. It was revealed that AJ entered into conspiracy with the employees/Directors of freight forwarding Companies with the object to misrepresent before the Banks, in particular to avail the credit facilities and resultantly, ABCCPL and AJ availed of the opportunity created and defrauded the Banks to the tune of Rs.1826.99 crores by availing export trade credits on fabricated and falsified export documents.
2.2. It is the case of the petitioner that upon examining the aforesaid investigation report, the Ministry of Corporate Affairs in exercise of powers under Section 212 (14) of the Companies Act, 2013, vide order dated 02.04.2019, issued necessary directions to the SFIO to initiate criminal prosecution qua offences punishable under the Companies Act, 2013, and Companies Act, 1956 as also Indian Penal Code, 1860 before Page 2 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021 R/CR.RA/378/2021 ORDER DATED: 19/08/2021 the jurisdictional court and it is the case of the petitioner that in view of such, on 29.02.2020, a criminal complaint bearing Case No. SPCS COMP/01/2020 came to be filed before the learned Principal District Judge and Sessions Judge, Special Judge (Companies Act) Ahmedabad (Rural). The Special Judge, vide order dated 17.03.2020 was pleased to take cognizance by issuing arrest warrant against all the accused, except the present respondent - accused who are original accused nos. 21 to 25. Without appreciating the provisions of Section 436(1)(a) of the Companies Act, 2013, erroneously, concluded that due to lack of territorial jurisdiction, the court cannot take cognizance of offence and after receipt of the said order, on 18.09.2020, the petitioner is constrained to approach this Court by way of present Criminal Revision Application, which was originally entertained by the co-ordinate Bench of this Court by passing the following order on 28.06.2021 :-
"1. Heard Mr. Devang Vyas, learned Additional Solicitor General of India appearing for the applicant Authority i.e. Serious Fraud Investigation Office and Ms. Krina Calla, learned APP for the Respondent State.
2. In a case filed by the Serious Fraud Investigation Office before the Designated Judge, Ahmedabad (Rural) for the offence under Sections 447 & 137 of the Companies Act, Section 628 read with Section 211, 211(3C), Section 217, 628, 227 and Section 233 of the Companies Act, 1936, Section 420 read with Section 120(b) and 477-A of the Indian Penal Code, 1860, wherein, the learned Designated Judge refused to take cognizance qua the offence of Section 217 (8) of the Act and accordingly, did not issue the process against the accused persons on a ground that the said offence has been committed at Mumbai and therefore, the Court has no territorial jurisdiction qua the said offence.
3. Feeling aggrieved by the said order of learned Designated Judge, Ahmedabad (Rural), the applicant being the original complainant has preferred present revision.
4. Considering the issue raised in this application, present revision Page 3 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021 R/CR.RA/378/2021 ORDER DATED: 19/08/2021 application requires consideration. Hence, Rule, returnable on 29.07.2021. Ms. Krina Calla, learned APP waives service of Rule for the Respondent State. Private Respondents be served through the concerned Police Station."
3. Pursuant to the aforesaid order, the respondents having been served, learned advocate Mr. Yuvraj G. Thakore appears on behalf of original accused i.e. respondent nos. 2 3, 4, and 5 and with the aforesaid background when the matter was taken up for hearing on 18.08.2021, time was sought to submit affidavit-in-reply and accordingly, the matter is placed today for further hearing.
4. Mr. Devang Vyas, learned Additional Solicitor General of India appearing on behalf of the petitioner has contended that in such a serious fraud having been committed of huge magnitude, the court below has erroneously come to the conclusion that it has no territorial jurisdiction to take cognizance against original accused nos. 21 to 24. Mr. Vyas, learned Additional Solicitor General of India has submitted that the order under challenge is absolutely non speaking order in respect of respondent - accused and no circumstances are stated as to under which situation, the court has no territorial jurisdiction.
4.1. Mr. Vyas, learned Additional Solicitor General of India has submitted in brief the written submission to the effect that the order under challenge is a non speaking order and there is no subjective satisfaction reflecting as to why and how there is no territorial jurisdiction. Accordingly to Mr. Vyas, learned Additional Solicitor General of India, reasons are the heart beats of decision making process and by virtue of series of decisions of the Hon'ble Supreme Court, some reasons are necessary to be incorporated which may reflect that the court has applied its mind and here according to Mr. Vyas, learned Additional Solicitor General of India, a bare reading of the order indicates that on the issue of Page 4 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021 R/CR.RA/378/2021 ORDER DATED: 19/08/2021 lack of territorial jurisdiction, the court below has not assigned any reasons.
4.2. Mr. Vyas, learned Additional Solicitor General of India has submitted that according to the learned Special Judge himself, the applicant complainant has produce huge documentary evidence as well as oral evidence in the form of statements and prima facie, supporting evidence against accused person is reflecting on record and as such, has on the contrary, come to the conclusion to proceed against all other co- accused by issuing appropriate order. It has been submitted that though by analyzing the provisions, the court below has come to the conclusion that the offence is triable by the special court established under the Companies Act, but there is no cogent reason assigned as to why there is a lack of territorial jurisdiction insofar as it relates to respondent nos. 2 to 5 herein who are original accused nos. 21 to 24. Mr. Vyas, learned Additional Solicitor General of India has heavily relied upon on the decisions delivered by the Hon'ble Supreme Court in the case of Sant Lal Gupta & Ors. v. Modern Co-operative Group Housing Society Limited & Ors. reported (2010) 13 SCC 336 as well as in the case of Union of India & Ors. v. Essel Mininig & Industries Ltd. & Anr.. reported in (2005) 6 SCC 675 and has submitted that such a non speaking order is not sustainable in the eye of law.
4.3. In addition to it, Mr. Vyas, learned Additional Solicitor General of India has submitted that the court below is required to take cognizance of offence and not of the offender and so far as original accused nos. 21 to 24 who are respondent nos. 2 to 5 herein are concerned, they are major shareholders of ABCCPL having its registered office at Ahmedabad. The court below ought to have appreciated that these accused persons were summoned by an Inspector in exercise of their power under Section 217 (1) of the Companies Act, 2013 for the purpose of recording of Page 5 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021 R/CR.RA/378/2021 ORDER DATED: 19/08/2021 statements and to provide the documents concerned that of ABCCPL Company. However, such mandatory requirement is disobeyed and have even chosen not to remain present or co-operate with the said inquiry and this circumstance is very much part of the record, still the court below has thought it fit not to assign any single reason as to why the court has no territorial jurisdiction. If no case is made out against the respondent - accused, then also it is expected that some minimum reason be assigned and having not done so, the order impugned deserves to be corrected insofar as it relates to concerned respondent accused. The said brief written submission is taken on record.
5. As against this, learned advocate Mr. Yuvraj Thakore appearing on behalf of the respondents i.e. respondent nos. 2 to 5 who are original accused nos. 21 to 24 has submitted that the material on record as indicated to the court below that for want of territorial jurisdiction, no order to be passed against them and, therefore, rightly exercised the discretion. It has been contended that even assuming everything against the respondents, then also, at the best the only provisions which may attract against the respondents is Section 217(8) of the Companies Act, 2013 which is merely punishable with imprisonment of six months and in view of the embargo contained under Sections 435 and 436 of the Companies Act, 2013, the court below is not vested with the jurisdiction to take cognizance of the offence which are punishable below two years and as such, apart from fact of territorial jurisdiction, otherwise also, respondent nos.2 to 5 are not to be dealt with by the court below and as such rightly passed the order which does not call for any interference. In addition to this, it has been submitted that summons were served after the date on which, the appearance of respondent was sought (in respect of respondent nos. 2 to 4 served) and insofar as respondent no. 5 is concerned, just before one day, before appearance, summons came to be served and except that no other summons have been served and to that Page 6 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021 R/CR.RA/378/2021 ORDER DATED: 19/08/2021 effect in addition to the affidavit-in-reply, a written brief submission has been tendered which is taken on record.
5.1. In counter to the submission of Mr. Vyas, learned Additional Solicitor General of India, learned advocate Mr. Thakore, has raised not much resistance on the issue of non speaking order and has left it to the discretion of the Court. However, it has been submitted that for fresh consideration, the court below may take into consideration all these relevant provisions of the Companies Act and the material in the said context which is very much part of the record and then pass appropriate order in accordance with law and as such, what is borne out from the submissions of both the learned advocates is that there appears to be a mere request to remand the matter back to the court below for taking a fresh decision after setting aside the impugned non speaking order insofar it relates to respondent nos. 2 to 5 who are original accused nos. 21 to 24 are concerned. No other submissions have been made.
6. Having heard the learned advocates appearing for the respective parties and having gone through the aforesaid submissions which are made limited in nature, the Court instead of examining the issue at length since not called upon nor submitted by either side is considering the impugned order as to whether the same is a non speaking order or not and in that context, the order under challenge is examined by the Court without expressing anything on merit on any other submissions which are mentioned in the pleadings and never canvassed.
6.1. It appears from the impugned order that the petitioner - complainant has produce huge documentary evidence as well as oral evidence in the form of submissions and thereby to support the case, prima facie the evidence is a part of the record which the court below is also well within knowledge. Even the court below has taken note of the Page 7 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021 R/CR.RA/378/2021 ORDER DATED: 19/08/2021 offence which is alleged by the petitioner, but has come to the conclusion that since the offences are committed by original accused nos. 21 to 24 i.e. respondent nos. 2 to 5 herein in Mumbai and Maharashtra and not in Gujarat, there appears to be lack of territorial jurisdiction, but a bare reading of the impugned order indicates that how and in what manner the said prima facie conclusion is arrived at is not reflecting in the order itself and as such in a way, Mr. Vyas, learned Additional Solicitor General of India is justified in contending that no subjective satisfaction on the issue of territorial jurisdiction is reflecting. There appears to be no remote reason visible from the order and the same is despite the fact that voluminous documents are forming part of the complaint, the court below was expected to assign minimum reasons to come to such a prima facie conclusion so as to understood as to why there is lack of territorial jurisdiction and since that is not visible from the order in question, the Court is of the opinion that the order suffers from vice of non application of mind as well as non assigning of cogent reasons.
6.2. The Court is of the opinion that no detailed analysis of the material to arrive at such a conclusion is to be undertaken at this stage, but at least, to prima facie come to the conclusion, that the respondent - accused have not committed offence in Gujarat and committed in Mumbai and Maharashtra some justification or discussion must have been reflected and so far as lack of territorial jurisdiction is concerned, the said minimum discussion in the form of reasons must have been reflected in the order. Hence, the order under challenge appears to be a non speaking order.
6.3. The Hon'ble Supreme Court time and again has emphasized upon the reasons to be assigned in a decision making process at every level and significance of assigning of reasons is spelt out in two of the decisions which are relied upon by Mr. Vyas, learned Additional Solicitor General Page 8 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021 R/CR.RA/378/2021 ORDER DATED: 19/08/2021 and in respect of the said observations, the Court is of the opinion that the order under challenge is a non speaking order and is also lacking with cogent reasons.
6.4. The Hon'ble Supreme Court in the case of Santlal Gupta & Ors., (supra) has emphasized reasons while passing a judicial order and the observations contained in para 27 are sufficient enough to indicate. The relevant observations are reproduced hereunder :-
28. It is a settled legal proposition that not only administrative but also judicial order must be supported by reasons, recorded in it. Thus, while deciding an issue, the Court is bound to give reasons for its conclusion. It is the duty and obligation on the part of the Court to record reasons while disposing of the case. The hallmark of order and exercise of judicial power by a judicial forum is for the forum to disclose its reasons by itself and giving of reasons has always been insisted upon as one of the fundamentals of sound administration of the justice - delivery system, to make it known that there had been proper and due application of mind to the issue before the Court and also as an essential requisite of the principles of natural justice.
"3..........The giving of reasons for a decision is an essential attribute of judicial and judicious disposal of a matter before Courts, and which is the only indication to know about the manner and quality of exercise undertaken, as also the fact that the Court concerned had really applied its mind."
The reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same, the order becomes lifeless. Reasons substitute subjectivity with objectivity. The absence of reasons renders an order indefensible/unsustainable particularly when the order is subject to further challenge before a higher forum. Recording of reasons is principle of natural justice and every judicial order must be supported by reasons recorded in writing. It ensures transparency and fairness in decision making. The person who is adversely affected must know why his application has been rejected. [Vide:
State of Orissa v. Dhaniram Luhar AIR 2004 SC 1794; State of Rajasthan v. Sohan Lal & Ors. (2004) 5 SCC 573; Vishnu Dev Sharma v. State of Uttar Pradesh & Ors. (2008) 3 SCC 172; Steel Authority of India Ltd. v. Sales Tax Officer, Rourkela I Circle & Ors. (2008) 9 SCC 407; State of Uttaranchal & Anr. v. Sunil Kumar Page 9 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021 R/CR.RA/378/2021 ORDER DATED: 19/08/2021 Singh Negi AIR 2008 SC 2026; U.P.S.R.T.C. v. Jagdish Prasad Gupta AIR 2009 SC 2328; Ram Phal v. State of Haryana & Ors. (2009) 3 SCC 258; State of Himachal Pradesh v. Sada Ram & Anr. (2009) 4 SCC 422; and The Secretary & Curator, Victoria Memorial Hall v. Howrah Ganatantrik Nagrik Samity & Ors., AIR 2010 SC 1285)."
6.5. Yet another decision delivered by the Hon'ble Supreme Court in the case of State of Orissa v. Dhaniram Luhar reported in (2004) 5 SCC 568 in which also in para 7, 8 and 9 it has been clearly observed significance of assignment of reasons, and the Court since considering the same, the observations of said paragraphs are reproduced hereunder :-
"7. Reason is the heartbeat of every conclusion, and without the same it becomes lifeless. (See Raj Kishore Jha v. State of Bihar and Ors. (2003 (7) Supreme 152).
8. Even in respect of administrative orders Lord Denning M.R. in Breen v. Amalgamated Engineering Union (1971 (1) All E.R. 1148) observed "The giving of reasons is one of the fundamentals of good administration". In Alexander Machinery (Dudley) Ltd. v. Crabtree (1974 ICR 120)(NIRC) it was observed: "Failure to give reasons amounts to denial of justice". Reasons are live links between the mind of the decision-taker to the controversy in question and the decision or conclusion arrived at". Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the "inscrutable face of the sphinx", it can, by its silence, render it virtually impossible for the Courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before Court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made; in other words, a speaking out. The "inscrutable face of a sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance.
9. The above position was highlighted by us in State of Punjab v. Bhag Singh (2004 (1) SCC 547)."Page 10 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021
R/CR.RA/378/2021 ORDER DATED: 19/08/2021 6.6. Further, in the very recent decision in the case of Krishna Lal Chawla & Ors., v. State of Uttar Pradesh & Anr., reported in (2021) 5 SCC 435, the Hon'ble Supreme Court has observed about the role of lower judiciary in respect of exercise of powers. Para 18 of the said decision based upon the previous decision since, relevant to the issue, the Court deems it proper to reproduce hereunder :-
"18. The aforesaid powers bestowed on the Magistrate have grave repercussions on individual citizens life and liberty. Thus, these powers also confer great responsibility on the shoulders of the Magistrate and must be exercised with great caution, and after suitable judicial application of mind. Observations in a similar vein were made by this Court in Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749:
28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused. (emphasis supplied)."
This Court, thus, clearly emphasised that the power to issue a summoning order is a matter of grave importance, and that the Magistrate must only allow criminal law to take its course after satisfying himself that there is a real case to be made."
7. From the aforesaid observations and in view of the peculiar background of present facts on hand, the order under challenge since appears to be non speaking order on the core issue about lack of territorial Page 11 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021 R/CR.RA/378/2021 ORDER DATED: 19/08/2021 jurisdiction, the Court is of the considered opinion that the same is required to be quashed and set aside on that count alone only insofar as it relates to present respondent nos. 2 to 5 are concerned.
8. In view of the aforesaid background of fact and in view of the broad consensus and submissions on this limited issue about non assigning of reasons, the Court is inclined to quash and set aside the impugned order with the following directions which would meet the ends of justice.
8.1. The impugned order dated 17.03.2020 passed by the learned Principal District Judge and Designated Judge (Companies Act), Ahmedabad (Rural) in Special Case (Companies Act) No. 1 of 2020 is hereby quashed and set aside and as a consequence thereof, the court below is directed to reconsider the case insofar as respondent nos. 2 to 5 herein are concerned and shall pass a fresh order after assigning appropriate reasons. While reconsidering the issue insofar as respondent nos. 2 to 5 are concerned, the court below shall take into consideration the relevant provisions of law and the submissions which may be made before the court concerned and shall pass a fresh order strictly in accordance with law and it is made clear that that this Court has not expressed any opinion on merit with regard to the stand taken in the present proceedings on merits in any form and it is independently left it open for the court below to pass a fresh reasoned order in accordance with law.
9. With the aforesaid observations and directions, the present criminal revision application stands allowed. Rule is made absolute to the aforesaid extent.
(ASHUTOSH J. SHASTRI, J) phalguni Page 12 of 12 Downloaded on : Mon Sep 06 07:39:07 IST 2021