Delhi District Court
Sh. Anil Rai vs Serious Fraud Investigation Office ... on 21 November, 2009
1
IN THE COURT OF SH. DHARMESH SHARMA :
ADDITIONAL SESSIONS JUDGE-II, NORTH DISTRICT :
DELHI
CRIMINAL REVISION NO: 14/09 (total 7 Revisions)
SH. ANIL RAI
S/O SH. KULWANT RAI
R/O 12, AURANGZEB LANE,
NEW DELHI - 110 011 .......... PETITIONER
VERSUS
SERIOUS FRAUD INVESTIGATION OFFICE (SFIO)
Through its Assistant Director,
Ministry of Company Affairs,
2nd Floor, Paryavaran Bhawan,
CGO Complex, Lodhi Road,
New Delhi - 110 003 ...........RESPONDENT
Criminal Revision No.09/09 titled Varun Rai & Anr. vs. Serious Fraud
Investigation Office (SFIO) ;
CR No. 10/09 Varun Rai & Anr. Vs. Serious Fraud Investigation Office
(SFIO) ;
CR No.13/09 Anil Rai Vs. Serious Fraud Investigation Office (SFIO) &
State ;
C.R. No. 22/09 Dr. M. C. Gupta Vs. Serious Fraud Investigation Office
(SFIO) & State ;
C.R. 32/09 S. K. Bansal Vs. Serious Fraud Investigation Office (SFIO) &
State ;
and CR 33/09 S. K. Bansal Vs. Serious Fraud Investigation Office (SFIO)
& State ;
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APPEARANCE:-
Sh. Ramesh Gupta, Sr. Advocate with Sh. Shakeel Ahmed
and Yogesh Kumar Sharma, Advocates for
petitioners/revisionists Vinay Rai and Varun Rai.
Sh. Puneet Mittal, Adv. Along with Mohd. Akram, Adv. for
the petitioner/revisionist Anil Rai.
Sh. Ankur Sinhal, Adv. for petitioner/revisionist S.K. Bansal
Sh. Vinod Shukla, Adv. for petitioner/revisionist Dr. M.C.
Gupta.
Sh. Sanjay Agarwal, Counsel for the respondent.
O R D E R:-
1. This common order shall decide above noted seven Criminal Revisions which have been preferred by the petitioners / revisionists / accused persons assailing order passed by Ld. ACMM taking cognizance of offences under various provisions of Indian Penal Code and consequently issuing process against them. It is needless to point out that all the above noted criminal revisions raise common questions of law and facts. For the purposes of disposal, Criminal Revision no. 14/09 has been taken to be the main file which would reflect the entire gamut of the controversy. This revision arises from the complaint case no. 846/07 titled Serious Fraud Investigation Office Vs. M/s Koshika Telecom Ltd. and Ors. In the said complaint besides the accused no. 1 Company, there are arrayed 9 persons as accused in the complaint. It may be indicated that the Criminal Revision No.14/09, CR. No. 22/09 and CR No. 33/09 arise out of the said complaint only whereas Criminal Revision No. 10/09, CR No.32/09 and CR No. 13/09 arise out of the complaint case no. 845/07 wherein besides accused no. 1 company there are arrayed six more accused persons as the accused.
3FIRST THE FACTS :
2. In complaint case no. 846/07, the complaint has been instituted by Sh. Dinesh Kumar, Assistant Director pursuant to Central Government Notification No. GSR 284(E) dated 6.5.2005 published in Gazette of India on 11.5.2005. It is stated that accused no. 1, Company is registered under the Companies Act 1956 and during the relevant time accused no. 2 Vinay Rai was CMD and accused no. 3,4 & 5 namely Varun Rai, V.P. Saxena and Jogesh Nair were its Managing Directors. It is the case of the complainant that pursuant to Orders dt. 22.3.2005 by the Company Law Board u/s 237 (b) of the Act, an investigation was started into the affairs of the accused company by the Central Government vide an Order dt. 18.5.2005 (Annexure E).
3. It is the case of the complainant that respondent no. 1 Company was granted license by the Department of Telecommunication (DoT) to establish, maintain and operate cellular mobile telephonic services upto the subscribers termination connection in the area of U.P. (East), U.P. (West), Bihar and Orissa Circles and to set up such infrastructure, respondent no. 1 company took a loan from Industrial Financial Corporation of India Ltd. with sanction amount upto 192.3 crores ; that interalia there was a stipulation that the company shall open an "Escrow Account" for receivable from dealings and IFCI shall have first charge on the balance amount after providing for charge in favour of DoT and Alcatel Modi Network System Ltd. to the extent of 30% ; that the company launched commercial services in certain cities of U.P. (East and West) on 1.7.97 and later from Bihar and Orissa from 1.1.98 and respondent no. 1 Company reflected about the Income earned by it on account of sales and revenue belongs as indicated in profit and loss account for the year ending 31.12.97, 30.6.99, 31.12.00. The grievance of the complainant is manifold: That during the 4 investigation it was found that the expenses on account of advertisement, printing, stationary reflected in the books of accounts were fictitious and manipulated for generation of cash funds amount was siphoned off for unlawful gains of the promoters of the company; that the services of one Hemant Kumar (arrayed as respondent no. 9) was utilized for such fraudulent entries and diversion of funds through various firms floated by accused no. 9; that the funds were rotated from one account to another; that services of one Sanjay Mittal was also utilized for over billing who acted possibly at the behest of promoters/Directors, that when the investigation started notices were issued to accused no. 3 as well as other promoters/Directors but they not only delayed but also supplied misleading information to the investigators to subvert the entire process; that diversion of funds after falsification of accounts of accused no. 1 company were done in a well planned manner, meticulously executed and controlled by the promoters of the Usha Group of Companies and, therefore, the complaint was filed u/s 403/408/418/420/468 and 477A of the Indian Penal Code read with Section 120B of the IPC. At this stage, it would be relevant to note that accused no. 2 and accused no. 4 Vinay Rai and Varun Rai respectively are stated to be other promoters/ Directors who have assailed the impugned order in Criminal Revision no. 09/09, accused no. 8 Dr. M. C. Gupta along with accused no. 5 and 7 is stated to be the Directors / Officers of Usha Group who allegedly played crucial role in the entire process who has assailed the impugned order in Criminal Revision no. 22/09, accused no. 10 S. K. Bansal, is a Chartered Accountant who allegedly played his role in the falsification of accounts and getting the same audited. This accused has challenged the impugned order in Criminal Revision no. 33/09.
4. Perusal of the record shows that complaint was instituted on 5 27.04.2007 and it came up for hearing before the Ld. ACMM on 02.05.2007. On that day, Sh. Dinesh Kumar, Assistant Director a public servant was exempted from personal appearance and his examination was dispensed with as per Section 200 Cr.P.C. Ld. ACMM on the basis of the allegations in the complaints and the documents placed on the record took cognizance of offences u/s 120B besides 403/408/418/420/468/471/470A of IPC. Accordingly, the accused persons were summoned to face trial.
5. In Criminal Revision No. 14/09 petitioner / revisionist Arun Rai has assailed the impugned order on the grounds that in the statement of co-accused Hemant Kumar it is nowhere stated or established any link with the present revisionist; that statement of the co-accused cannot be read against the present revisionist; that the complainant failed to trace out the alleged Sanjay Mittal who acted at the behest of co-accused Hemant Kumar and there is no material on record to proceed against the revisionist; that the action and grievance giving rise to the present complaint against the revisionist is identical to the one already investigated by the CBI in respect of which charge sheets have already been filed and the revisionist facing trial; that the Notification GSR 284 (E) dated 06.05.2005 published in the Gazette of India dt. 11.05.2005 does not empower Sh. Dinesh Kumar, Assistant Director to institute and prosecute any criminal complaint against any offender in respect of offences under the Indian Penal Code as it merely empowers him to institute and prosecute complaint cases under the Companies Act 1956; that the petitioner/revisionist is not even liable vicariously for the acts and omissions of the other co-accused assuming that they have committed any offence; that the impugned order passed by the Ld. ACMM is a mindless and mechanical order passed without giving any detailed reasons; that the petitioner was not 6 involved in day to day affairs of the company and cannot be held liable vicariously with other co-accused persons. It is thus prayed that the impugned order of taking cognizance and issuance of process against the petitioner/ revisionist be quashed.
6. Sh. Puneet Mittal, Ld. Counsel for the petitioner/ revisionist has taken me through the main complaint and has pointed that the list of the witnesses along with the complainant names 10 witnesses out of which 5 are from SFIO, one person namely S. K. Bansal, Chartered Accountant and Auditor of the Company and remaining witnesses are unnamed persons from Registrar of Companies, Haryana, Delhi besides official from IFCI and IDBI; he pointed out that S. K. Bansal is arrayed as accused no. 10 as well as witness ; that no original documents have been filed by SFIO and the documents are photocopies which do not corroborate the allegations levelled in the complaint; that there is no concept or provision of vicarious liability in the whole of Indian Penal Code and every individual has to be prosecuted for his own wrong doings and criminal acts and no Ex- Director could be prosecuted just because he was Director of the Company at some point of time or the other; that the provisions of Section 403 IPC could only be prima facie established if it is shown that there was any mens rea on the part of the petitioner / accused in commission of alleged offences; it is also vehemently urged that the allegations in the complaint are akin to the one levelled in complaint case no. 947/07 in which cognizance was taken against the accused persons u/s 628 of the Companies Act vide order dated 04.07.2007 which has also assailed in Criminal Revision No. 06/09. It is, therefore, urged that the second complaint based on same facts by mere addition of few more sections of the IPC cannot be allowed to be filed; lastly, he assailed the power of Sh. Dinesh Kumar, Assistant Director to institute 7 and prosecute the present complaint de hor the provision of Companies Act 1956. In his submissions he placed reliance on decision in P.K. Choudhary Vs. Commander 48 BRTF 2008 (2) CCC (SC) 154 ; Manoj Kumar Vs. State 2009 V AD Delhi 137 ; Rajiv Kumar Vs. Registrar of Companies in Criminal Misc. No. 23/05 passed by Hon'ble Mr. Justice Mool Chand Garg, Judge High Court of Delhi dt. May 5, 2009 Sunair Hotel Ltd. v. The Registrar of Companies, (2009) 92 SCL 11 (Delhi) and State Vs. Anil Puri, ILR 1979 Delhi 350; Sesa Goa Limited & Ors. v. State of Maharashtra & Anr. 2009 CRL. L. J. 3185; Kailash Kumar Sanwatia v. The State of Bihar and Anr. 2003, IV AD (Cr) S. C. 141; State of Gujarat v. Jaswant Lal Nathalal, 1968 Crl. L. J. 803 (Vol. 74, C. N. 219); State of Punjab v. Sarwan Singh, 1982 C. L. R. 68 SC; Sham Sunder & Ors v. State of Haryana, (21.08.1989- SC); Maksud Saiyed v. State of Gujarat and Ors, (18.09.2007- SC);
[This becomes more relevant when notification JSR 284 (E) dt. 06.05.2005 published in the Gazette of India dt. 11.05.2005 he was conferred no power to the officer to institute or prosecute complaint in regard to the offences under the Indian Penal Code.]
7. Per contra respondent in the written submissions filed through Mr. Sanjay Aggarwal, Ld. Counsel for the respondent has urged that these complaints are filed by the Officers of SFIO, notified as complainant u/s 621 of the Act on behalf of the Central Government; that they are Officers under the Ministry of Corporate Affairs and they besides Registrar of Companies or share holders who have a locus standi to file a complaint, come under the third category i.e. a person authorised by the Central Government.
8. Mr. Aggarwal has urged that when crores of rupees were 8 siphoned off by falsification of accounts then the only inference would be that the accused persons who were promoters/directors were well aware of the entire transactions and the same was being done with their connivance.
9. I have given my thoughtful consideration to the submissions made by the Ld. Counsel for the petitioners/revisionists and written submissions filed on behalf of the respondent. I have also perused the relevant record of the case.
10. Undoubtedly, issuance of summons is not an inter locutory order within the meaning of Section 397 of Cr.P.C. per para 8 in the latest judgment Dhariwal Tobaco Products Ltd. & Ors v. State of Maharashtra & Anr., 2009 I AD (Crl.) SC 627. At the outset, the impugned order of taking cognizance of offence and summoning of the revisionist(s) passed by Ld. ACMM cannot be sustained. Pleas raised by Mr. Puneet Mittal, Ld. Counsel for the revisionist just cannot be brushed aside. In the case of Pepsi Food Ltd. Vs. Special Judicial Magistrate (1998) 5 SCC 749, the scope of powers of the Magistrate to take cognizance and issue process against the accused u/s 204 was discussed and it was observed as under :
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 9 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 offene is prima facie committed by all or any of the accused.
11. In the light of the said proposition of law, a bare perusal of the order dt. 02.05.2007 would show that it appears to have been passed mechanically without examining the nature of allegations made in the complaint as well as the documentary evidence filed there with. If I may say, the allegations in the complaint against the revisionist as well as other accused persons are of general nature. No specific act or omission has been attributed to the present revisionist as well as other accused persons as to how or in what manner they played any role in the alleged falsification of accounts, making of fictitious entries and siphoning off the funds of the company. At the cost of repetition, the allegations are too broad to be accepted. When the allegations are levelled that accused persons have committed offences u/s 403/408/ besides cheating as per Section 418/420 of the IPC, what must be satisfied is that the specific ingredients of such offences should be prima facie shown attributable to the accused persons. Merely because the accused happened to be the Promoters/ Directors does not make him ipso facto liable for all the wrongs that might have committed during the relevant course of time. There is plethora of case law that under the Penal Code, the issue of vicarious responsibility or liability does not arise. Vicarious responsibility of the Managing Director, Director, Promoters Directors or that of the Auditor could arise provided any proviso exist in that behalf in the statute. Reference in this connection can be had to decision in Maksud Saiyed v. State of Gujarat and Ors (Supra) relied by Ld. Counsel. Of course, there might be a case of accused persons having committed certain acts or 10 omissions pursuant to a criminal conspiracy. At the same time, there has to be some prima facie material that the revisionist was in collusion or criminal conspiracy with other accused persons thereby indulging in the act of diversion of funds. This does not come out from a bare reading of the allegations in the complaint and on consideration of documents filed. The same is the position in regard to petitioners/ revisionist in Criminal Revision no. 09/09, C. R. No. 22/09 as well as C. R. No. 33/09. To simplify, what this Court wishes to state is that the exact role of each and every accused in the alleged act of misappropriation and cheating has to be clearly brought out. The impugned order dated 02.05.2007 reflects that the Assistant Director being a public servant was exempted in view of proviso of section 200 Cr.P.C. from giving his evidence and the cognizance was taken on the basis of allegations levelled in the complaint as well as documents filed. The wording of Section 200 Cr.P.C leaves a discretion to the Magistrate indicating that the Magistrate need not examine the complainant and the witness if it has been made by a public servant acting or purporting to act in discharge of official duties. At the same time, where the allegations in the complaint are in the nature as described in the preceding para, to my mind, it was incumbent on the Ld. Court to postpone the issue of process and inquire into the case as per Section 200 of the Cr.P.C and the Ld. MM should have called upon the complainant to produce his evidence so as to reflect about the exact nature and role played by each of the accused persons.
12. Mr. Puneet Mittal has rightly pointed out that the list of witnesses is very strongly contemplated and accused persons on their summoning are highly prejudiced because they do not know what exactly is the evidence against them and what else would come against them during the trial. Merely because the present revisionist and the 11 other accused persons were holding high positions in the company, it cannot be inferred that they were responsible for the conduct of the day to day business or they actively consented or connived in the commission of alleged offence. There is another issue of filing more than one complaint on more or less on similar allegations albeit by edition of offences under the Penal Code. The Complaint Case no. 847/07, CC No. 946/07, CC no. 947/07 appeared to have been filed on the same cause of action. This calls for decision whether such course of action can be permitted or if at all the complaints have to be consolidated so as to make an effective inquiry in regard to nature of allegations levelled in the complaint.
13. In the background of the above said discussion, what confronts this Court is what course of action be now adopted. Since the impugned order suffers from patent illegality and also impropriety, this Revision Court could direct the concerned Court to hold further inquiry into the matter and satisfy itself whether any offence has been committed and, if so, whether the acts complained of prima facie could be attributed to the accused.
14. In the said view of the discussion, the impugned order dated 02.05.2007 is hereby set aside. The case is remitted back to the concerned Court with direction to have a fresh look into the allegations contained in the complaint, hold an inquiry as contemplated in Chapter XXV and XXVI of Cr.P.C. and then pass appropriate order as per law.
15. Needless to state that the Criminal Revision bearing no. 09/09 preferred by accused Varun Rai and Vinay Rai arrayed as accused no. 3 and 4 in complaint no. 846/07. Dr. M. C. Gupta in Criminal Revision 12 No. 22/09 arrayed accused no. 8 and accused S. K. Bansal arrayed accused no. 10 in CR No. 33/09 also challenge the same order dt. 02.05.2007. The said Criminal Revision also meet the same fate. The impugned orders assailed in the said criminal revisions are hereby set aside with direction to the Ld. Court to examine the nature of allegations afresh, hold an inquiry and then pass reasoned order.
16. That brings us to Criminal Revisions bearing no. 10/09 preferred by petitioner / accused Varun Rai and Vinay Rai, Criminal Revision No. 32/09 preferred by petitioner / accused S. K Bansal, Criminal Revision No. 13/09 preferred by petitioner / accused Anil Rai assailing an order dated 02.05.2007 passed in complaint case no. 845/07 titled Serious Fraud Investigation Office Vs. M/s Koshika Telecom Ltd. and Ors. There are arrayed seven accused in the said complaint including the company. Accused Vinay Rai and Varun Rai are accused no. 2 and 4 whereas accused Anil Rai is accused no. 3. S. K. Bansal happened to be accused no. 7. Accused no. 2 to 4 were Promoters/ Directors and accused no. 7 was the Auditor.
17. Suffice to state that the complaint indicates the same background of the case regarding orders passed by the Company Law Board dt. 22.03.2005 consequent to which investigation was conducted by the team from 18.05.2005 to 17.03.2006. It is alleged that accused persons in conspiracy with each other fraudulently created the share capital of KTL by rotation of funds without bringing in any money for the same and utilizing the loan finances of M/s Usha India Limited through various front/shell/companies; that the accounts were fabricated showing promoters contribution which was either non-existant or was wrongly confronted from the Usha Group of Companies; that this was done to increase promoters contribution in order to avail higher debt 13 financing from two financial institution and banks; and lastly, the accused no. 1 company defaulted in the payment of loans to the banks / financial institution.
18. Perusal of the order dt. 02.05.2007 shows that again Dinesh Kumar, Assistant Director was exempted from his examination as per Section 200 Cr.P.C. the cryptic order was passed that the sufficient material was available against the accused persons u/s 120B/403/408/418/420/468/471/470A of IPC.
19. Ex-facie the impugned order of summoning cannot be sustained and inquiry is warranted so as to prima facie find out the exact role played by each of the accused in falsification of share capital, fictitious allotment of shares besides diversion of funds. It needs to be inquired how and what manner the promoters / Directors were connected in decision regarding the increased in the quantum of authorized capital of the company who were signatures to decision of allotment of preference shares to Usha Group of Companies and its other funds and cells companies as reflected in para 10 to para 46 of the complaint. For this the complainant and the witnesses must be examined and also there must be an inquiry as to how the allegations in the complaint vis-a-vis documents filed prima facie connect the accused persons in commission of such offences. The result is that Criminal Revision bearing no. 10/09 preferred by petitioner / accused Varun Rai and Vinay Rai CR No. 32/09 preferred by S. K Bansal, CR no. 13/09 preferred by accused Anil Rai assailing an order dated 02.05.2007 passed in complaint case no. 845/07 are hereby allowed. The impugned order dt. 02.05.2007 is set aside. Ld. Court is directed to conduct an inquiry afresh and thereafter pass appropriate order as per 14 law. The main copy of this order be placed in Criminal Revision no. 14/09 and its signed photocopies be placed in other Criminal Revisions. Nothing contained herein shall tantamount to an expression of opinion on the merits and the outcome of the inquiry. Trial Court Record be sent back alongwith a copy of this order. Revision file be consigned to record room.
ANNOUNCED IN OPEN COURT (DHARMESH SHARMA)
TODAY: ON 21.11.2009. ASJ-II, NORTH DISTRICT,
DELHI.
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22.08.2009
Present: Counsel for the petitioners/revisionist.
Counsel for the respondent.
Vide separate detailed order Criminal Revision is allowed. The case is remanded back to the Ld. Trial Court with direction to give a hearing to the petitioners/revisionist and other accused persons and pass a fresh order as per law. The parties are directed to appear before the Ld. ACMM on 14.9.2009 at 10 a.m. for passing appropriate directions. A copy of the order disposing of a revision be sent along with Trial Court Record. Revision file be consigned to record room.
(DHARMESH SHARMA) ASJ-II, NORTH DISTRICT, DELHI.