Jharkhand High Court
Jharkhand Against Corruption Through ... vs The State Of Jharkhand And Ors on 11 June, 2015
Author: D.N. Patel
Bench: D.N. Patel, Ratnaker Bhengra
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P. (PIL) No. 1635 of 2014
......
Jharkhand Against Corruption through its Vice President Santosh
Kumar Singh, Son of Sri S.N. Singh, Resident of Nai Basti, Post
Office-Ashok Nagar, Police Station-Argora, District- Ranchi.
.... Petitioner
Versus
1. The State of Jharkhand
2. The Home Secretary, Government of Jharkhand, Project Building,
Post Office & Post Office & Police Station-Dhurwa, District-Ranchi.
3. The Director General of Police, Jharkhand, Police Headquarter,
Post Office-Dhurwa, Police Station-Jagannathpur, District-Ranchi.
4. The Union of India.
5. The Secretary, Ministry of Finance, Government of India, North
Block, Post Office & Police Station-Northc Block, District-New Delhi.
6. The Central Bureau of Investigation, Lodhi Road, Post Office &
Police Station-Lodhi Road, District- New Delhi.
7. The Director, Central Bureau of Investigation, Lodhi Road, Post
Office & Police Station-Lodhi Road, District- New Delhi.
8. The Director, Enforcement Directorate, Shivaji Park, Lodhi Road,
Post Office & Police Station- Lodhi Road, District-New Delhi
9. The Director (Investigation), Income Tax, Income Tax Building, 7
Main Road, Post Office & Police Station-Chutia, District-Ranchi.
.... Respondents
CORAM: HON'BLE MR. JUSTICE D.N. PATEL
HON'BLE MR. JUSTICE RATNAKER BHENGRA
......
For the Petitioner : Mr. Rajeev Kumar, Adv.
For the Respondent nos. 1, 2 & 3: Mr. Jay Prakash, AAG
For the Respondent nos. 4 & 5 : Mr. Rajiv Sinha, ASGI
For the Respondent nos. 6 & 7 : Mr. K.P. Dev, Adv.
For the Respondent no. 8 : Mr. Amit Kumar Das, Adv.
For the Respondent no. 9 : Mr. Deepak Roshan, Adv.
.......
08/ Dated 11th May, 2015
Per D.N. Patel, J :
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1. This Public Interest Litigation has been preferred for the following prayers:-
"(1) That, with the instant writ application, the petitioners prays for issuance of an appropriate writ(s)/order(s) and/or direction(s) commanding upon the respondents for the following reliefs(s):-
(i) For, issuance of an appropriate writ(s)/order(s) and/or direction(s) commanding upon the respondents especially respondent nos. 6 to 9 to investigate/inquire the misdeeds of Alchemist Infra Reality Ltd. And its Directors, to submit the details of the names and address of the directors of Alchemist Infra Reality Ltd., number of criminal cases/First Information Report lodged against the company and its directors and also direction commanding upon the respondent nos. 2 & 3 to submit the report about the number of cases registered against these company in different district of State of Jharkhand and its directors and the stage of its investigation, so that this Hon'ble Court may handing over this matter to respondent nos. 6 to 9 for comprehensive, detail and complete investigation in the interest of poor investors who have deposited more than 1000 crores and they are having no specific remedy available against such a huge company which has branches all over India and his might has caused complete chaos and illegality in State of Jharkhand with the held of not only district police officials but also the members of other -3- community who have provided shelter in achieving their goal in escaping from the clutches of law.
(ii) For, issuance of an appropriate writ(s)/order(s) and/or direction(s) commanding upon the respondents especially respondent C.B.I. to find out the other illegality committee by these company through out the country as it has siphoned more than 1000 crores rupees from the State of Jharkhand as it has been admitted by the SEBI before this Hon'ble Court in L.P.A. No. 175/2013 with L.P.A. No. 176/2013 of the order dated 27.01.2013 passed by a Division Bench consisting of Hon'ble Mr. Justice D.N. Patel and Hon'ble Mr. Justice Shri Chandrashekhar and the same has not been implicated because of the complete compromise entered into by the specially Director General of Police, Home Secretary with the State Counsel, as a result the petitioner with this Public Interest Litigation brings to the notice of this Hon'ble Court for serious consideration of the handing of this matter to C.B.I.
(iii) For, issuance of an appropriate writ(s)/order(s) and/or direction(s) commanding upon the respondents especially respondent nos. 6 & 7 to register a regular case against Director General of Police, Jharkhand and Home Secretary, Jharkhand for their alleged involvement in instructing the counsel appearing in the case to allow the withdrawal of L.P.A. No. 175/2013 with L.P.A. No. -4- 176/2013(Annexure-5), so that more than rupees 1000 crores may be siphoned out and these two respondents namely Director General of Police, Jharkhand and Home Secretary, Jharkhand, may also for share their booty in doing so such an illegal act.
(iv) For, issuance of any other appropriate relief or relief(s) as your Lordships may deem fit & proper in the facts & circumstances of this case for doing conscionable justice to the petitioner."
2. It is submitted by the counsel for the petitioner that in the State of Jharkhand openly several secret works are going on by the non-banking financial companies, who are collecting several thousands crores from the public at large, in utter violation of several Acts, including the Reserve Bank of India Act, 1934, the Securities and Exchange Board of India Act, 1992, the Companies Act, 1956, the Prevention of Corruption Act, 1988 and Prevention of Money Laundering Act, 2002 as well as the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 etc. The State Government is unable to look after there type of violations which are being done openly by more than two/ three dozen non-banking financial companies since long. If the State Government is unable to see at these violations of law, it tantamounts to connivance, and, therefore, this Public Interest Litigation has been preferred to curb there type of activities by several non-banking financial companies, which is a -5- mushroom growth of the State of Jharkhand. It has further been submitted by the counsel for the petitioner that as an eye wash, one or two F.I.Rs have been lodged, but, nothing much has been done by the police of the State of Jharkhand. On the contrary, Superintendent of Police, District-Deoghar, State of Jharkhand has shown his inability to investigate into the matter, because the matter involves economic offenses, which requires investigation by especially skilled Investigating Officers. It has also been submitted by the Superintendent of Police, District of Deoghar, that for proper investigation of this type of allegation against more than two and three dozens companies, the matter should be referred to Central Bureau of Investigation by the State. It is submitted by the counsel for the petitioner that thus, the police of the State of Jharkhand and that too Superintendent of Police, District-Deoghar is clearly of the opinion that the matter involves several companies, several influential persons like Directors and Manging Directors who are staying in different States, huge amount is involved of rupees more than 1600/- crores, for one company (total sum may cross Rs. 25 thousands crores for non-banking cheating companies which are more than two to three dozens in the State of Jharkhand). Several Acts have been violated, as stated herein above, for which investigation might have been carried out in different States of this Country or there may be a need of the investigating agency to go in other Countries also, because money laundering Act is also involved. Whenever, there is a misappropriation of few thousand crores by -6- few fortunates (in reality they are accused) the money has to be invested in this Country or out of the Country by these few fortunates, and, hence the officers with expertized knowledge and special skill are required with the investigating agency, and, as the police is not in a position to investigate the matter, let this matter be referred to the Central Bureau of Investigation.
3. It is submitted by the Additional Advocate General that a detailed counter affidavit has been filed on behalf of respondent no.3, who has brought on record several facts including the amount involved in one company being approximately of Rs. 1600/- crores and total figure may even cross Rs. 25000/- thousands crores. Few F.I.Rs have been referred to in the counter affidavit, but, investigation are yet to be over. It has also been stated by respondent no.3, that there is a need to constitute a committee for investigation by expertized investigating agency/officers. Respondent no. 3 has mentioned the violation of several Acts, as stated herein above. Even Superintendent of Police, District- Deoghar has shown his inclination, looking to the huge fraud, and, scam committed by several influensive persons who are Managing Director of not less than two and three dozens cheat fund type companies, of investigation to be carried out in more than one States. Even the investigating team has to go out of the country, and, therefore, they have no much objection, if this Court passes an order to hand over this investigation for all these non-banking financial institutions to the Central Bureau of Investigation. It is -7- fairly submitted by A.A.G of the State that at present the State of Jharkhand is having a list of 27 such type of non-banking financial companies, which are at page no. 37 of the counter affidavit filed by respondent no.3, and, as all these companies and such other companies are involved in the offence as stated in this counter affidavit filed by respondent no. 3, let this offence be investigated by the Central Bureau of Investigation. The Additional Advocate General submitted that the necessary logistic support will be given by the State of Jharkhand to the Central Bureau of Investigation, because to unearth the conspiracy and several offences under dozen of Acts, there is need to give full support to the C.B.I.
4. Counsel appearing for respondent no. 8 submitted that the investigation under the Prevention of Money Laundering Act, 2002 has to be carried out by the Director of Enforcement for breach out the Prevention of Money Laundering Act, 2002, by these two to three dozens of companies in-cooperation with the investigation which will be carried out by the Central Bureau of Investigation so that there may be proper synchronization of investigation by the different agencies.
5. Counsel appearing for the respondent no. 9 submitted that some preliminary enquiry is being done by the Income Tax authority to see undisclosed income of the companies, and, the Directors thereof, and, transaction of such a huge money, which has taken place in the State, as stated herein above. For one company, namely, Alchemist Infra Reality Ltd., Rs. 1600 crores is -8- involved, and, there are more than two to three dozen of such companies, and, thus, total amount may cross Rs. 25,000/- thousand crores. Such huge transaction cannot be over looked by the Income Tax Department.
6. Counsel appearing for the respondent no. 9 further submitted that they have no objection, if this investigation is being handed over to the Central Bureau of Investigation under the Prevention of Money Laundering Act, 2002. If, the investigation is being carried out by Directorate of Enforcement, Income Tax Department will also work in-cooperation with Central Bureau of Investigation as well as Director of Enforcement, so that if need arises, proper raids may be carried out at various places as per the investigation are being carried out by both the aforesaid agencies as well as as per the information given to the Income Tax Department.
7. Counsel appearing for respondent nos. 6 and 7 submitted that, sufficient logistic support may be provided by the State of Jharkhand, if this Court directs the Central Bureau of Investigation to carry out the investigation of the offences, as stated herein above, by several non-banking financial companies and, by the directors thereof, which involves large public interest, because several persons have been cheated, as per allegations, by those companies, and, a huge money of approximately of Rs. 25 thousands crores is also involved in this offence, the investigation will have to be carried out in more than one State of this country and if need arises, there may be need to carry out investigation in other countries, because -9- such a huge amount, siphoned away by the offenders might have been reinvested in other countries to convert black money into white one, and, thereby committed the offence of Prevention of Money Laundering Act, 2002. It is also submitted by the counsel for respondent nos. 6 and 7 that in the State of Jharkhand there are several scams and several matters are being referred to the C.B.I. Even sufficient infrastructure has been proved, insufficient for the investigation of variety of scams in the Sate of Jharkhand, and, therefore, suitable direction may be given to the State of Jharkhand to give necessary logistic support to the C.B.I so that the whole scam may be unearthed and the investigation may be completed at the earliest.
Reasons:-
8. Having heard for both the sides and looking to the facts and circumstances of the case, it appears;
(i) that in the State of Jharkhand, several non-banking financial companies are/were working and there are allegations that they have collected huge amount from the public at large for one such company, namely, viz. Alchemist Infra Realty Ltd. The amount involved is approximately Rs. 1600/- crores, and, similarly there are such type of 27 companies, list of which is given by respondent no. 3 - Director General of Police, State of Jharkhand. Thus, the total amount may cross even Rs. 25 thousand crores. This is a first need to handover the investigation to the C.B.I. -10-
(ii) that every actions of non-banking financial company is not out of ignorance. Looking to the huge amount involved in their offences committed by the companies, there may be preplanned and well designed action on their part. Whenever, there is a conspiracy or a preplanned well designed action to cheat several persons, through various offences under the various Acts, it requires thorough investigation, which requires scientific investigation and there will be a also need of especially skilled investigating officers/Teams. Perhaps this is pointed out by Superintendent of Police, District-Deoghar in his letter dated 27.04.2015 (Annexure-D series, to the counter affidavit filed by respondent no.3). This is also a major reason for handing over the investigation to the C. B. I.
(iii) that the aforesaid letter written by Superintendent of Police, District-Deoghar dated 27.04.2015 also reflects that the police of the State of Jharkhand is not capable enough to unearth such a huge scam committed by several companies and several directors thereof, and for several other persons including employees of those non-banking financial companies who have siphoned away more than Rs. 25000/- thousand crores, and, might have re-invested the same in different parts of this country or in the countries other than this country. For this the police of the State of Jharkhand may not be in a position to carry out proper and thorough -11- investigation. This is one more reason to handover the investigation to Central Bureau of Investigation.
(iv) that following are the companies which are non- banking financial companies who are under the gauge of the investigation by the Jharkhand State Police as under:-
No. Name of Companies
1. Suraha Micro Finance.
2. Sunplant Agro Group.
3. Prayag Infotech Hi Rise Ltd.
4. Sai Prasad Properties Ltd.
5. Fedral Agro Commercial Ltd.
6. Gulsan Nirman India Ltd.
7. Tirubalaji Rising Real State Pvt. Ltd.
8. Alchemist Infra Realty Ltd.
9. Dhanolti Devlopers Ltd.
10. Kolkata Wear Industries Ltd.
11. Sankalp Group of Companies
12. Weared Infra Structured Corporation Ltd.
13. Rupharsh Marketing Ltd.
14. Sunshine Global Agro Ltd.
15. Ramal Industries Ltd.
16. Inormas Industries Ltd.
17. Axela Infra-structure and Development Ltd.
18. Gitanjali Udyog Ltd.
19. M.P.A. Agro animals Projects Ltd.
20. Jugantar Reality Ltd.
21. ATM Group of Companies.
22. Care Vision Mutual Benefit Ltd.
23. Matribhum Manufacturing Marketing (I) Ltd.
24. Rosevalley Hotels and Intertainment Ltd.
25. Bardhman Summarg Welfare Sociaety
26. Apna Parivar Agro farming Devlopers Ltd.
27. Waris Group and Arshdip Finance Ltd.
-12-The aforesaid list is not an exhaustive. More the ignorant people, more such companies come into existence.
(v) that these companies have selected also the State of Jharkhand for making operational their offensive activities, as alleged in the F.I.R. The aforesaid 27 of the companies have been referred by the Superintendent of Police, District- Deoghar, State of Jharkhand, but, there may be many more such type of non-banking financial companies, which are more observing the laws, in breach, than in compliance. These companies must have minimum two directors. Every public limited company is having minimum seven directors and private companies are having minimum two directors. Thus, the total figure of influential persons will also be many more. Keeping in mind this type of magnitude of several non- banking financial companies, investigation is to be handed over to the C.B.I.
(vi) that there is one more reason to hand over the investigation to C.B.I. in view of the fact that there is violation of several Acts, few of them are as under:-
(a) The Reserve Bank of India Act, 1934, Section 58 B of the Reserve Bank of India Act, 1934, and, the rules made thereunder
(b) Violation of Section 15 (A)(B)(C)(D)(E)(F)(G) & (H), Section 15(Ha), Section 15(Hb) of Securities and Exchange Board of India Act, 1992, and, the rules -13- made thereunder
(c) Violation of Section 59 of the Companies Act, 1956, and, the rules made thereunder
(d) Violation of Section 8/10 of the Prevention of Corruption Act, 1988, and, the rules made thereunder
(e) Violation of Section 3 and 4 of the Prevention of Money Laundering Act, 2002, and, the rules made thereunder.
(f) Violation of the Prize Chits and Money Circulation Schemes (Banning) Act,1978, and, the rules made thereunder, and, offences under Section 420,426,465 read with Section 102 B of the I.P.C. and such other Sections of the Indian Penal Code, 1860.
These are the Acts, involved in the offence as alleged against these companies for investigation of all these type of offences committed by the influensive persons, especially when the offence is not committed out of the ignorance, highly skilled investigation ought to be carried out, for which investigating agencies has to move to one State to another, and, from one country to another.
This is one more reason to handover the
investigation of the C.B.I.
(vii) that first information report has been lodged at
Tilaiya police station bearing P.S. Case No. 69 of 2013, dated -14- 25.03.2013, and the State police is still investigating the matter. Similar is the position with other districts also, e.g. East Singhbhum, Jamshedpur, Jadugora, P.S. Case No. 61/13 is also pending at the same police station. One more case has been registered, and, there are several such F.I.Rs. at such other districts, as per the counsel appearing for the C.B.I., and, the counsel appearing for the petitioner like Dhanbad etc. Looking to this aspect of the matter also, the investigation has to be handed over to the C.B.I. Moreover, looking to Annexure annexed with the counter affidavit filed by respondent no. 3--Director General of Police of the State of Jharkhand, especially reading as page 23 of the said affidavit, that Directors of these companies are in West Bengal, Andhra Pradesh, Bihar, Gujrat, Chandigarh, etc. Thus, these Directors are staying in several States of this country, money might have been shifted to those States, and, therefore, the investigation has to be handed over to the authority which can carry out the investigation efficiently, in other States, and, if need arises, other countries also.
9. As a cumulative effect of the aforesaid facts and reasons, we direct that;
(a) the Offences registered at
(i) Tilaiya Police Station being Tilaiya P.S. Case No. 69 of 2013;
(ii) Deoghar Town P.S. Case No. 543 of 2013;
(iii) Jadugora P.S. Case No. 67 of 2013;
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(iv) Ghatshila P.S. Case No. 26 of 2013;
(v) Mahgama P.S. Case No. 36 of 2013;
(vi) Rajmahal P.S. Case No. 111 of 2013;, and, such other similar offences shall be investigated by the C.B.I. The papers of investigation, so far carried out by the Jharkhand State Police, shall be handed over to the C.B.I., at the earliest and latest within the period of four weeks from today.
(b) the C.B.I. shall carry out investigation and will complete the investigation as early as possible. Necessary logistic support to the C.B.I, including communications facilities through mobile etc. necessary vehicles, human resources including police, because they may carry out the necessary raids at necessary premises, shall be provided by the State, to unearth the vast scam, and, such other infrastructure shall also be supplied by the State, so that the C.B.I. can carry out, and, complete effective and efficient investigation.
(c) the aforesaid list of cases of which the investigation is handed over to the C.B.I. is not an exhaustive list. Complete list will be supplied by the State of Jharkhand to the C.B.I., and, all these F.I.Rs. will be handed over to the C.B.I. including of the aforesaid categorically mentioned F.I.Rs. for investigation by C.B.I.
10. It has been held in the case of Subrata Chattoraj Vs. Union of India, reported in (2014)8 S.C.C. 800, especially at paragraph nos. 10, 11, 37, 38, 44 and 45 thereof, as under:-
"10. We are in the case at hand dealing with a major financial scam nicknamed "Chit Fund Scam" affecting lakhs of depositors across several States in the eastern parts of this country. -16- Affidavits and status reports filed in these proceedings reveal that several companies were engaged in the business of receiving deposits from the public at large. The modus operandi of the companies involved in such Ponzi schemes was in no way different from the ordinary except that they appear to have evolved newer and more ingenious ways of tantalising gullible public to make deposits and, thereby fall prey to temptation and the designs of those promoting such companies. For instance, Saradha Group of Companies which is a major player in the field, had floated several schemes to allure the depositors to collect from the market a sizeable amount on the promise of the depositors getting attractive rewards and returns. These fraudulent (Ponzi) schemes included land allotment schemes, flat allotment schemes, and tours and travel schemes. The group had floated as many as 160 companies although four out of them were the front runners in this sordid affair.
11. An interim forensic audit report submitted to SEBI by Sarath & Associate, Chartered Accountants on 27-2-2014 sums up in the following words, the background in which the schemes are floated and the public defrauded:
"The company M/s Saradha Realty India Ltd. was involved in financial fraud involving in an attempt to deliberately mislead the general public by announcing dubious money multiplier schemes. It has also indulged in misleading the financial status of the group companies by incorrect disclosures in the financial statements in an attempt to deceive financial statement users and regulatory authorities.
The investors lured to extraordinary returns is typically attributed to something that sounds impressive but is intentionally vague, such as hedge fund in land, resorts, tours and travel plans, high yield investment programmes.
Typical to the Ponzi schemes the investors who are economically very poor have invested relatively small amounts such as Rs 100 and wait to see if the promised returns are paid. After one month the investor received maturity amounts, so the investor truly believes she has earned the promised return. What the investor doesn't realise is that Rs 100 was a RETURN OF THE INVESTMENT AND NOT A RETURN ON THE INVESTMENT. In other words, the Rs 100 return came from the Rs 100 principal initially invested or from a newly-recruited investor, rather than from any profits generated by the investment opportunity. After a second month yields another Rs 100 payment, the investor is 'hooked' and typically will invest larger amounts in the scheme and will enthusiastically inform friends and family members about this 'fantastic' investment opportunity.
Since these early investors have actually received the promised returns, their promotion of the investment comes across as genuine and instils an almost irresistible urge in friends and family members to invest as well.-17-
If pressed by sceptical investors for more detail, the promoters typically evade answering the question and instead talk about how recently recruited investors have been receiving the promised returns.
Since little of the victims' funds are actually invested into a legitimate profit-generating activity, the scheme continued for only as long as the cash inflows to existing investors. However, as the number of investors grown rapidly, the pool of new investors unavoidably shrinks. At one point, the cash flow situation collapsed resulting in four possible outcomes: (1) the investment promoters disappear, taking remaining investment money with them; (2) the scheme collapsed of its own weight, and the promoters have problems paying out the promised returns and, as the word spread, more people start asking for their money creating a run-on-the-bank situation; (3) the investment promoters turn themselves in and confess."
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37. Investigation by the State Police in a scam that involves thousands of crores collected from the public allegedly because of the patronage of people occupying high positions in the system will hardly carry conviction especially when even the regulators who were expected to prevent or check such a scam appear to have turned a blind eye to what was going on. The State Police Agency has done well in making seizures, in registering cases, in completing investigations in most of the cases and filing charge-sheets and bringing those who are responsible to book. The question, however, is not whether the State Police has faltered. The question is whether what is done by the State Police is sufficient to inspire confidence of those who are aggrieved.
38. While we do not consider it necessary to go into the question whether the State Police have done all that it ought to have done, we need to point out that money trail has not yet been traced. The collections made from the public far exceed the visible investment that the investigating agencies have till now identified. So also the larger conspiracy angle in the States of Assam, Odisha and West Bengal although under investigation has not made much headway partly because of the inter-State ramifications, which the investigating agencies need to examine but are handicapped in examining.
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44. Transfer of investigation to the Central Bureau of Investigation (CBI) in terms of this order shall not, however, affect the proceedings pending before the Commissions of Enquiry established by the State Government or stall any action that is legally permissible for recovery of the amount for payment to the depositors. Needless to say that the State Police Agencies currently investigating the cases shall provide the fullest cooperation to CBI including assistance in terms of men and material to enable the latter to conduct and complete the investigation expeditiously.-18-
45. The Enforcement Directorate shall, in the meantime, expedite the investigation initiated by it into the scam and institute appropriate proceedings based on the same in accordance with law."
(Emphasis supplied)
11. In the case of Rubabbuddin Sheikh vs. State of Gujarat & Ors., as reported in (2012) 2 SCC 200, it has been held that investigation can be handed over to the CBI authority even after charge-sheet has been submitted and trial was going on. It has also been held in that case that because high police officials were involved as accused, if investigation is allowed to be carried on by the local police authorities, all concerned including the relatives of the deceased may feel that the investigation was not proper. According to the Supreme Court, in an appropriate case when the Court feels that the investigation by the police authorities is not in proper direction and in order to do complete justice in the case, it was always open to the Court to handover investigation to independent agency like CBI, even after charge-sheet has been submitted.
12. In view of the aforesaid facts, reasons and judicial pronouncements, the investigation of the aforesaid offences are handed over to the C.B.I.
13. Over and above the aforesaid offences, similarly situated other First Information Reports, registered at various other police stations about Chit Fund Companies are also handed over to the C.B.I. for further investigation. These cases shall be identified by the C.B.I. with the help of the State of Jharkhand. We also direct that -19- all other agencies like State of Jharkhand, Enforcement Directorate etc. shall cooperate with the investigation, to be carried out by the C.B.I., so that the C.B.I. can complete the investigation effectively and efficiently.
14. This writ petition is, accordingly, disposed of, at this stage. Nonetheless, liberty is reserved with the parties to this writ petition to move appropriate proceedings before the appropriate forum, in case of necessity.
(D.N. Patel, J.) (Ratnaker Bhengra, J.) S.Dutta/Amardeep