Telangana High Court
Mr. C.P. Khandelwal vs Serious Fraud Investigation Office on 23 July, 2025
THE HONOURABLE SMT JUSTICE K. SUJANA
CRIMINAL PETITION No.4576 of 2025
ORDER:
This Criminal Petition is filed by the petitioner/accused No.3 seeking to quash the proceedings against him in CCSR.No.3165 of 2024 dated 29.08.2024 on the file of the Special Judge for Economic Offences - cum - VIII Additional Metropolitan Sessions Judge, Hyderabad.
2. The brief facts of the case are that the petitioner, accused No.3, Chandra Prakash Khandelwal, served as the Managing Director of Systematix Corporate Services Limited (SCSL), which functioned as the merchant banker for the IPOs of Tele Data Informatics Limited (TDIL) and Softpro Systems Limited (SSL). Investigations conducted by the Serious Fraud Investigation Office (SFIO) was initiated following a whistleblower's disclosure, which unveiled alleged financial irregularities involving the manipulation of IPO processes, and the petitioner was found to have exerted control over multiple entities, namely, accused Nos. 5, 6, and 7, which engaged in inflated and deceptive transactions. These transactions were strategically used to misrepresent financial data in the IPO prospectus, thereby, misleading investors regarding the 2 SKS,J Crl.P.No.4576 of 2025 valuation and prior investment history of SSL. The investigation further revealed that shares were allotted to these affiliated entities at prices significantly lower than those disclosed in the prospectus, enabling unjust financial gains for the accused and causing losses to public investors. Despite knowledge of discrepancies, the firm, under leadership of petitioner, actively participated in the alleged misrepresentation. The SFIO's findings indicated that petitioner played a key role in fraudulent inducements to investors and was one of the primary beneficiaries of the IPO process, with SCSL earning substantial fees through its involvement.
3. The complaint was filed under Sections 63 and 68 of the Companies Act, 1956, for misstatements in the prospectus, and Sections 120B, 417, and 420 of the Indian Penal Code, 1860, for criminal conspiracy and cheating. Aggrieved thereby, the petitioner/accused No.3 preferred this criminal petition.
4. Heard Sri Pavan Kumar Annabatuni, learned counsel for petitioner, Sri Gadi Praveen Kumar, learned Deputy Solicitor General of India, appearing for respondent No.1, and Sri Arun Kumar, learned Additional Public Prosecutor, appearing for the respondent No.2 - State.
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5. Learned counsel for petitioner submitted that petitioner has been wrongly implicated in the present proceedings despite the absence of any direct evidence establishing his involvement in the alleged offenses. He contended that the accusations, even if taken at face value, do not prima facie constitute any offense against the petitioner, and the criminal proceedings initiated against him are a clear abuse of the process of law. He further contended that no specific overt act has been attributed to the petitioner, and the allegations made against him are vague and omnibus in nature.
6. He asserted that the petitioner merely acted as a Lead Manager along with PNB Capital Services Limited in the IPO of Softpro Systems Limited (SSL), and his role was limited to verifying transfer deeds, reviewing shareholder registers, and issuing the due diligence certificate. He emphasized that the petitioner was not involved in monitoring any share transfers between the company and purchasers, thereby, negating any culpability in the alleged fraudulent transactions. Additionally, he averred that the due diligence certificate for the IPO of SSL was issued by the petitioner on 03.01.2000, which predates 4 SKS,J Crl.P.No.4576 of 2025 the alleged share transactions said to have occurred on 25.02.2000, and that the same would conclusively prove that the share transactions were executed by the company and its Directors without the knowledge or involvement of petitioner.
7. Learned counsel for petitioner incessantly contended that there has been an inordinate delay in filing the complaint, and that despite the Ministry of Corporate Affairs directing that investigations be completed within six months, the SFIO took nearly six years to submit its investigation report on 13.05.2022. Moreover, even after submitting the report, the authorities took an additional eight years before initiating criminal proceedings, culminating in a 14-year delay, and that such prolonged delays, without any application for condonation, render the complaint entirely time-barred under Section 469 of the CrPC. He pointed out that the charges under Sections 63 and 68 of the Companies Act, 1956 are subject to statutory limitations and should not have been entertained by the Court at such a late stage. He asserted that the only charge that survives is Section 420 of the IPC, which pertains to cheating, but argued that the said provision is not applicable to the petitioner. Therefore, prayed this Court to 5 SKS,J Crl.P.No.4576 of 2025 allow the Criminal Petition by quashing the proceedings against the petitioner.
8. In support of the contentions made, learned counsel for petitioner filed written submissions, whereunder, reliance was placed on the judgments rendered in the cases of Hasmukhlal D.Vora and Another vs. State of Tamil Nadu 1 and Serious Fraud Investigation Office, Vs. Shonkh Technologies Limited and Others 2.
9. On the other hand, the learned counsel for respondent No.1, and the learned Additional Public Prosecutor, respectively, opposed the submissions made by learned counsel for petitioner, and contended that there are clear set of allegations leveled against the petitioner, and that though the learned counsel for petitioner contended that limitation aspect comes into picture, it is to be noted that the specific allegations against the petitioner are under Section 420 of IPC, and not under Section 68 of the Companies Act, 1956, due to which the limitation ground cannot be considered to quash the proceedings against the petitioner. It is specifically averred that the petitioner controlled all the companies which are related to 1 2022 (15) SCC 164 2 2023 SCC OnLine Del 277 6 SKS,J Crl.P.No.4576 of 2025 each other and a total of Rs.37,50,000/- shares were sold to these entities. It is lamented that the petitioner played a key role in all these transactions and that he was controlling A5 to A6 entities. It was asserted that A5 to A7 had originally purchased the shares and thereby induced the investors to invest funds amounting to Rs.12.75 crores through IPO. Therefore, while advocating that petitioner is not entitled for quashing of proceedings at this stage, they prayed this Court to dismiss the Criminal Petition.
10. Having regard to the rival submissions made, and on going through the material placed on record, it is noted that the contention of learned counsel for petitioner is that petitioner is innocent of the offences as alleged, and mainly focused on the aspect of limitation stating that respondent No.1 had carried out the investigation in the year 2000 for which a letter of whistle blower was received in the month of September 2015 stating that some transactions were not covered by SFIO that were undertaken by the Ketan Parekh Group in association with petitioner, as such, it obtained permission on 01.11.2016, and basing on the order of the NCLT, the Director SFIO, who constituted investigation in the year 2016, was reconstituted only in the year 2021 for several 7 SKS,J Crl.P.No.4576 of 2025 times, and thereafter, report was submitted on 13.05.2022 which was after lapse of six years and that the investigation ought to have completed in six months. In support of the said submission, reliance was placed upon the judgment rendered by the Hon'ble Supreme Court in the case of Hasmukhlal (supra), whereunder, in paragraph Nos.23 to 25, it was held as under:
"23. In the present case, the respondent has provided no explanation for the extraordinary delay of more than four years between the initial site inspection, the show-cause notice, and the complaint. In fact, the absence of such an explanation only prompts the Court to infer some sinister motive behind initiating the criminal proceedings.
24. While inordinate delay in itself may not be ground for quashing of a criminal complaint, in such cases, unexplained inordinate delay of such length must be taken into consideration as a very crucial factor as grounds for quashing a criminal complaint.8
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25. While this Court does not expect a full- blown investigation at the stage of a criminal complaint, however, in such cases where the accused has been subjected to the anxiety of a potential initiation of criminal proceedings for such a length of time, it is only reasonable for the court to expect bare-minimum evidence from the investigating authorities."
11. On perusing the material on record, it is seen that the averments made on behalf of petitioner are basing on Sections 63 and 68 of the Companies Act, 1956, whereas, it is pertinent to mention that petitioner is prosecuted mainly for the offences punishable under Sections 120B, 417, and 420 of IPC. That being so, as the offence under Section 420 of IPC is punishable upto 7 years, the Section 468 of Cr.P.C., is not applicable as it can only come in aid when the punishment does not exceed 3 years. In view of the above, this Court is of the opinion that the aspect of delay cannot be ground to quash the proceedings initiated against the petitioner.
12. The other contention of learned counsel for petitioner is that petitioner is no way connected with alleged offences, whereas, it is imperative to note that the report filed by SFIO 9 SKS,J Crl.P.No.4576 of 2025 would show that petitioner is main culprit as he was managing A5 to A7, and there are serious allegations of fraud and cheating by companies that were controlled by the petitioner. Therefore, this Court is of the firm view that the proceedings initiated against the petitioner cannot be quashed at this stage. There are no merits in this Criminal Petition, and the same is liable to be dismissed.
13. Accordingly, this Criminal Petition is dismissed.
Miscellaneous applications, if any pending, shall also stand closed.
_______________ K. SUJANA, J Date: 23.07.2025 PT