Andhra HC (Pre-Telangana)
Al-Faihad Fincom Limited And Anr. vs Central Economic Intelligence Bureau ... on 9 July, 2002
Equivalent citations: 2002(4)ALD830, [2003]114COMPCAS404(AP), [2004]50SCL354(AP)
JUDGMENT V.V.S. Rao, J.
1. Introduction and Reliefs Prayed :
The first petitioner is a Non-Banking Finance Company (NBFC) registered under the Companies Act, 1956. The registered office of the company is at 152, Sanghi Street, Mhow, Indore District, Madhya Pradesh. The company was started and promoted by second respondent inter alia with the objectives of carrying on in India or elsewhere the business of financing, money-lending, bills discounting, hire-purchasing, leasing etc. As per the list of Branch Offices given in the affidavit accompanying the writ petition, they have Branch Offices in New Delhi; Lucknow, Jaipur, Sharanpur and Noida in Uttar Pradesh; Mhow, Dewas, Bhopal, Sihore, Chavni, Reeva and Ratlam in Madhya Pradesh; Malegam, and Dhulia in Maharashtra; and Palanpur in Gujarat. It is also alleged that they have a Branch Office at Pathergatti Main Road in Hyderabad.
2. The writ petition filed by the petitioner-Company and its Managing Director is supported by a sworn affidavit filed by the second petitioner, who is the Managing Director of the Company. The petitioners prayed the following reliefs.
....to issue a writ of mandamus, writ order or direction declaring the action of the respondents in not taking necessary prohibitive steps for the safety of the petitioners and on the other hand, calling upon the writ petitioners to make payments on the basis of civil transactions between the petitioners and their investors/shareholders as arbitrary, illegal, unjust, unconstitutional without jurisdiction, without authority of law and violative of fundamental rights guaranteed under Articles 14, 19, 20 and 21 of the Constitution of India and also has the effect of violation of constitutional guarantees guaranteed to the petitioner under Articles 50 and 300A of the Constitution of India and also contrary to ratio laid down by this Hon'ble Court and direction to the 1st respondent to centralize all alleged complaints against the 1st and 2nd petitioners, if any and carry out the investigations in accordance with law and for consequential reliefs and directions to the police to take all such steps as are necessary for the protection of the petitioners and not to harass the petitioners on the basis of the complaints which are strictly civil in nature and more particularly, direct them to carry out their investigations, if any, on the alleged complaints against the petitioner strictly in accordance with the procedure under the Code of Criminal Procedure and pass such other or further orders as this Hon'ble Court may deem fit and proper in the circumstances of the case.
3. Analysing the reliefs it may be taken that the petitioners pray the following;
(i) to declare the action of respondents in not taking necessary prohibitive steps for the safely of the petitioners as illegal and unconstitutional; (ii) to declare the action of respondents in calling upon the petitioners to make payments on the basis of civil transactions between petitioners and their investors/shareholders is arbitrary, illegal and unjust and violative of fundamental rights guaranteed under Article 14, 19, 20 and 21 of the Constitution of India and constitutional guarantees under Articles 50 and 300A of the Constitution of India; (iii) to issue a direction to first respondent, namely, Central Economic Intelligence Bureau (CEIB), New Delhi, to centralize all the alleged complaints against petitioners, if any, and carry out investigation in accordance with law; (iv) to issue a consequential direction to police to take such steps as are necessary for protection of petitioners and not to harass petitioners on the basis of civil complaints; and (v) to direct respondents to carry out their investigations if any on the complaints against petitioners strictly in accordance with the procedure under Code of Criminal Procedure, 1973 (Cr.P.C.).
The Pleading, Writ Affidavit :
4. Before briefly noticing the averments made in a lengthy writ affidavit, be it noted that all of the above reliefs are not supported by the necessary averments or pleadings. Be that as it may, as noticed, the petitioner is NBFC registered in Madhya Pradesh. According to the petitioners, being a company promoted by citizens of Islamic faith which prohibits the collection and payment of interest (Sood Haram) they evolved a scheme known as Shayee Funding Document Receipt. Under this scheme, it is alleged, the deposits collected from the investors would be utilised for allotment of shares to them and funds/deposits collected would be invested in other companies. The petitioners allege that they collected non-interest yielding/ profit sharing investments in the form of equity and invested in equity shares. There were baseless rumours of cheating against first petitioner and therefore some of the members of public filed complaints in various Police Stations including in the Police Station at Shahjahanabad, Bhopal, Madhya Pradesh; Sarafa Police Station, Indore; and New Friends Colony Police Station, New Delhi. The Directors of the Company obtained bail/anticipatory bail. As there was a threat to their lives, the second petitioner left the city of Mhow and is leading a subdued life elsewhere. It is also alleged that inspite of repeated requests to some of the Station House Officers (SHOs) to extend proper protection, those Police Officers instead of protecting the second petitioner are compelling to repay the deposits collected by the company. It is also alleged that sometime ago when some of the investors attacked the office of second petitioner and threatened with physical abuses, he sought protection from the third respondent, namely, the SHO, Mirchowk Police Station, Hyderabad in vain. Therefore, he filed the writ petition.
5. It is alleged that all the investors who have invested in the company are likely to earn profits/dividends provided the petitioners are permitted to carry on its trading and other non-finance business activities. Therefore, the petitioners aver that the company is willing to work under supervision of Court Commissioner, which arrangement would establish the bona fides of the company and benefit the large public, and that petitioner-Company is also willing to face any investigation in accordance with law. This according to the petitioners would ensure commercial survival of the company as well as public interest, but the Station House Officer is trying to convert civil claims into criminal demands and resorting to arm twisting methods. The disputes between the depositors and the petitioner-Company arc purely of civil nature and therefore it is alleged the police cannot interfere in the matter. It is also alleged that the petitioner has filed W.P.No.1936 of 2000 before Madhya Pradesh High Court and the same is pending.
6. Be it also noted that along with the writ petition the petitioner filed two miscellaneous petitions; (i) for a direction to respondents to give police protection to petitioners and their properties; and (ii) to appoint Court Commissioner/Receiver to take over properties of second petitioner and permit petitioners to take over the same under the supervision of receiver.
Interlocutory Proceedings before this Court :
7. The writ petition was filed before this Court on 9-10-2000 inter alia alleging that the Station House Officer is not giving proper protection and that he is compelling the petitioners to repay the deposits made by certain depositors. This Court ordered notice before admission on 11-10-2000. The matter was adjourned on eleven occasions and on 18-11-2001 His Lordship Hon'ble Sri Justice I. Venkatanarayana, passed orders appointing Sri P.V. Vidya Sagar as Advocate Commissioner to discharge the functions, namely, (i) to take charge of movable and immovable properties as per the list furnished by the petitioners; and (ii) to invite claims from all the creditors and to supervise the management of properties by ensuring that the properties are not alienated. When the matter was called on 19-4-2001 before His Lordship Hon'ble Sri Justice Goda Raghuram the learned Advocate Commissioner made oral request that he be discharged due to personal circumstances. Therefore, His Lordship by order dated 19.4.2001 while discharging Sri P.V. Vidyasagar as Advocate Commissioner, appointed Sri R. Raghunandan Rao, a practising Lawyer of this Court to take charge of the movable and immovable properties. The new Advocate Commissioner was also further directed as under:
The said Advocate Commissioner shall invite claims from all the creditors and also supervise the management of the properties ensuring that the properties are not alienated and in any way encumbered. The management and administration, wherever it is required in respect of the properties aforementioned shall be under the supervision and instructions of the Advocate Commissioner. The petitioners shall not be entitled to deal with the properties except with and in accordance with the written instructions of the Advocate Commissioner. The Advocate Commissioner shall submit an interim report as to the nature of the properties, their valuation, and adequacy of the value of the properties qua the liabilities of the petitioners to investors and shareholders and whether any of the properties above are encumbered in any manner as to detract from their viability to discharge claims of such investors and shareholders, as are raised on the first petitioner's company and/or the second petitioner. The interim report as directed above shall be submitted within a period of eight weeks from today.
8. The learned Advocate Commissioner visited different places in Madhya Pradesh and New Delhi. He submitted report on 6-6-2001.
Some more fads :
9. After having come to know about the writ petition before this Court when the Advocate Commissioner visited New Delhi one LT CDR Bhisham Kumar (Retired) of New Delhi addressed a letter dated 28-7-2001 to the Assistant Registrar of this Court informing that all the depositors of first petitioner belong to New Delhi and Indore and that he and other depositors like him were cheated by the petitioners and that they lodged FIR No. 290/2000 with Police Station, Friends Colony, New Delhi. A further reference to this letter would be made a little while later.
10. Be it also noted that after receiving notices the Inspector (Investigating Officer) of F&C Section of Economic Offences Wing, Crime Branch, New Delhi sent a letter dated 22-8-2001 enclosing a list of enclosures whose complaints were received by the said Police Station requesting to consider their cases. It is also reported by the said Inspector that the petitioners cheated innocent investors with lucrative scheme and accepted Fixed Deposits from public. The list of 94 investors enclosed to the letter dated 22-8-2001 shows that all the depositors of first petitioner-NBFC are from New Delhi, Punjab, Assam, Madhya Pradesh and Uttar Pradesh. There is no depositor from Andhra Pradesh.
Submissions of Petitioners' Counsel:
11. When the matter was called for admission before this Court on 14-2-2002 and 18-2-2002, the learned Counsel for the petitioners Sri L. Ravi Chancier submitted an argument which to say the least is full of rhetoric, hipe and hyperbole. Learned Counsel more than once repeated that in a democratic country governed by rule of law the police and investigating agencies cannot take law into their own hands and harass a NBFC to repay the amounts collected as deposits especially when in accordance with the Scheme first petitioner-NBFC is entitled to convert the same into shares. The learned Counsel did not place any material as to any complaint lodged with the third respondent or anywhere in Andhra Pradesh nor did he place any material that the second petitioner has lodged a complaint when allegedly some of the investors behaved in such a manner that the second petitioner reasonably apprehends that there is threat to his life. The learned Counsel is also not able to place any material to show that a part of cause of action arose within the territorial jurisdiction of this Court under Article 226 of the Constitution of India. The learned Counsel only makes a request that the Registrar of the Companies be directed to conduct enquiry under Section 241 of the Companies Act, 1956. Before adverting to these submissions, it is necessary to refer to the counter-affidavit filed by the Station House Officer, Mirchowk Police Station, Hyderabad on 9-11-2000 which was not brought to the notice of the Court when the two learned Judges passed orders appointing Advocate Commissioners.
Counter-averments:
12. The third respondent in the counter denied all the allegations made in the writ affidavit. It is also stated that the various allegations made by the petitioners insofar as the business of deposits received and the scheme of the first petitioner-Company are concerned respondents 2 and 3, namely, the Commissioner of Police, Hyderabad and the Station House Officer, Mirchowk Police Station, have nothing to do with the same. It is further stated that the petitioners never visited the third respondent nor did they seek police protection. It is also stated that the third respondent has not received any complaint against the petitioner-Company and petitioner also has not made any complaint to third respondent with regard to alleged attack on the petitioners. The third respondent has not taken any action against the petitioners, much less action for allegedly exhorting non-decretal amounts under the threat of investigating criminal offence. The petitioners were never called to Police Station to make payments to the investors/ shareholders and the petitioners never requested the police to take prohibitive action against the alleged attempts made on the petitioners' movable/ immovable properties and life.
Points for consideration :
13. After hearing the learned Counsel for the petitioners and considering the counter-affidavit filed by the third respondent as well as the letter addressed by Inspector of Police, Economic Offences Wing, Crime Branch, New Delhi, and the letter addressed by LT CDR Bhisham Kumar (Retd.,) New Delhi, the two points that arises for consideration are - (i) whether this Court has jurisdiction to entertain the writ petition; and (ii) whether the petitioner has not resorted to sharp practices and obtained interim orders from this Court by making all false and .incorrect statements.
In re Point No. (i) :
The jurisdiction of this Court:
14. Under sub-article (2) of Article 226 of the Constitution of India the power conferred on the High Court to issue directions, orders or writs can be exercised by this Court in relation to territories within which the cause of action wholly or in part arises for the exercise of such powers. If cause of action or part of cause of action had not arisen or the person fails to demonstrate such cause of action has having arisen within the territorial jurisdiction of the Court, issue of any writ or direction would be without jurisdiction.
Case Law on question of jurisdiction :
15. While considering the question whether this Court has territorial jurisdiction to entertain the writ petition the Court must take all the pleas and pleadings in support of cause of action into consideration without embarking about the correctness or otherwise of the facts. It was so held by the Supreme Court in Aligarh Muslim University v. Vinay Engineering Enterprises (?) Ltd., , as well as Oil And Natural Gas Commission v. Utpal Kumar Basu, . In Aligarh Muslim University's case (supra) it was held as under:
We are surprised, not a little, that the High Court of Calcutta should have exercised jurisdiction in a case where it had absolutely no jurisdiction. The contracts in question were executed at Aligarh, the construction work was to be carried out at Aligarh, even the contracts provided that in the event of dispute the Aligarh Court alone will have jurisdiction. The arbitrator was from Aligarh and was to function there. Merely because the respondent was a Calcutta-based firm, the High Court of Calcutta seems to have exercised jurisdiction where it had none by adopting a queer line of reasoning. We are constrained to say that this is a case of abuse of jurisdiction and we feel that the respondent deliberately moved the Calcutta High Court ignoring the fact that no part of the cause of action had arisen within the jurisdiction of that Court. It clearly shows that the litigation filed in the Calcutta High Court was thoroughly unsustainable,
16. In Utpal Kumar Basu's case (supra) Engineers India Limited (EIL), New Delhi, who are consultants of Oil and Natural Gas Commission (ONGC) issued a notice inviting tenders for setting up of Kerosene Recovery Processing Unit at Hazira Complex in Gujarat. Bid offers were to be sent to EIL at New Delhi. M/s. NICCO having its registered office at Calcutta became aware of the tender notice published in the Times of India, Calcutta and submitted a tender to EIL at New Delhi. The tenders were scrutinised at New Delhi and NICCO's tender was rejected. The steering committee decided to award the contract to M/s. CIMMCO Ltd., which was challenged by N1CCO in Calcutta High Court praying to restrain ONGC from awarding the contract. For the purpose of cause of action it was pleaded by NICCO that they came to know about the tender from Times of India, Calcutta, submitted its tender from Calcutta and had correspondence with EIL in Calcutta and therefore High Court of Judicature, Calcutta would have territorial jurisdiction. This plea found favour with Calcutta High Court which allowed the writ petition by overruling objection raised by ONGC. On appeal from ONGC a three-Judge Bench of Apex Court while interpreting Article 226 of the Constitution of India referred and followed Chand Kour v. Partab Singh, ILR (1889) 16 Cal 98 -15 IA 156, and held as under:
Therefore, in determining the objection of lack of territorial jurisdiction the Court must take all the facts pleaded in support of the cause of action into consideration albeit without embarking upon an enquiry as to the correctness or otherwise of the said facts. In other words, the question whether a High Court has territorial jurisdiction to entertain a writ petition must be answered on the basis of the averments made in the petition, the truth or otherwise whereof being immaterial. To put it differently, the question of territorial jurisdiction must be decided on the facts pleaded in the petition. Therefore, the question whether in the instant case the Calcutta High Court had jurisdiction to entertain and decide the writ petition in question even on the facts alleged must depend upon whether the averments made in paragraphs 5, 7, 18, 22, 26 and 43 are sufficient in law to establish that a part of the cause of action had arisen within the jurisdiction of the Calcutta High Court.
17. The Apex Court further held that merely because NICCO became aware of the contract advertisement in the Times of India, Calcutta and submitted their tender from Calcutta, it cannot be said that cause of action arose partly within the territorial jurisdiction of Calcutta High Court. Further, the Supreme Court observed:
...When it learnt that it was considered ineligible it sent representations, including fax messages, to EIL, ONGC, etc., at New Delhi, demanding justice. As stated earlier, the Steering Committee finally rejected the offer of NICCO and awarded the contract to CIMMCO at New Delhi on 27-1-1993. Therefore, broadly speaking, NICCO claims that a part of the cause of action arose within the jurisdiction of the Calcutta High Court because it became aware of the advertisement in Calcutta, it submitted its bid or tender from Calcutta and made representations demanding justice from Calcutta on learning about the rejection of its offer. The advertisement itself mentioned that the tenders should be submitted to EIL at New Delhi; that those would be scrutinised at New Delhi and that a final decision whether or not to award the contract to the tenderer would be taken at New Delhi. Of course, the execution of the contract work was to be carried out at Hazira in Gujarat. Therefore, merely because it read the advertisement at Calcutta and submitted the offer from Calcutta and made representations from Calcutta would not, in our opinion, constitute facts forming an integral part of the cause of action. So also the mere fact that it sent fax messages from Calcutta and received a reply thereto at Calcutta would not constitute an integral part of the cause of action. Besides the fax message of 15-1-1993. cannot be construed as conveying rejection of the offer as that fact occurred on 27-1-1993. We are, therefore, of the opinion that even if the averments in the writ petition are taken as true, it cannot be said that a part of the cause of action arose within the jurisdiction of the Calcutta High Court.
18. A reference may also be made to a latest judgment of the Supreme Court in Union of India v. Adorn Exports Ltd, (2000) I SCC 567, In the said case the respondents invoked the jurisdiction of Gujarat High Court, at Ahmedabad alleging that they carried on business of export and import from Ahmedabad; orders for export and import are placed and accepted from Ahmedabad; documents and payments for exports and imports were sent/made at Ahmedabad; the credit of duty claimed is in respect of exports handled from Ahmedabad and therefore substantial part of cause of action had arisen within the jurisdiction of Gujarat High Court. The Union of India opposed the writ petitions on the ground of territorial jurisdiction contending that the licence was issued to respondents at Chennai by the designated authority and that the transactions concerning the passbook (for recording granting of the credit) were made from Chennai Port and therefore the cause of action lies at Chennai notwithstanding the fact that the petitioners have their office at Ahmedabad and that no part of cause of action has arisen within the territorial jurisdiction of the High Court at Ahmedabad. The High Court of Ahmedabad accepted the plea of the respondents holding that the existence of registered office of the Company would ipso facto give cause of action to the High Court within whose jurisdiction the registered office is situated. Before the Supreme Court a question arose whether any of the facts mentioned in the respondents' application would give rise to part of cause of action at Ahmedabad at least for the purpose of conferring territorial jurisdiction of High Court at Ahmedabad. After noticing the facts disclosed by the respondents in paragraph 16 as summarised above the Supreme Court observed that mere fact that respondent-Company is receiving export and import orders and making payments from Ahmedabad has no connection whatsoever with the dispute that is involved in the case and therefore the same would not give rise to any cause of action to a Court at Ahmedabad to adjudicate on the actions complained against Union of India. After referring to Utpal Kumar Basil's case (supra) the Supreme Court held:
It is seen from the above that in order to confer jurisdiction on a High Court to entertain a writ petition or a special civil application as in this case, the High Court must be satisfied from the entire facts pleaded in support of the cause of a action that those facts do constitute a cause so as to empower the Court to decide a dispute which has, at least in part, arisen within its jurisdiction. It is clear from the above judgment that each and every fact pleaded by the respondents in their application does not ipso facto lead to the conclusion that (hose fads give rise to a cause of action within the Court's territorial jurisdiction unless those facts pleaded are such which have a nexus or relevance with the Us that is involved in the case. Facts which have no bearing with the lis or the dispute involved in the case, do not give rise to a cause of action so as to confer territorial jurisdiction on the Court concerned.
Facts on this case in support of cause of action ?
19. The question whether this Court has territorial jurisdiction to entertain the writ petition shall have to be examined with reference to the allegations made in the writ affidavit. A1. Fahad Fincom Ltd., has its Registered Office under the Companies Act at 152, Sanghi Street, Mhow, Indoor District, Madhya Pradesh. The company is involved in Banking and Corporate Finance and is governed by various provisions of the Reserve Bank of India Act, 1934 (RBI Act), Be it noted Chapter IIIB of the RBI Act contains provisions relating to Non-Banking Institutions receiving deposits and Financial-Institutions. Be it noted that as per Clause (f) of Section 45-1 of the RBI Act the first petitioner is a NBFC because it received deposits under a scheme or arrangement and admittedly obtained licence under the provisions of the RBI Act. Further under Section 45-QA of the RBI Act first petitioner is under obligation to repay every deposit accepted by it. If the deposit is not repaid the aggrieved party can file application before the Company Law Board (CLB) constituted under Section 10E of the Companies Act which may direct the NBFC to make payment of such deposit. Any order passed by the CLB is appealable order under Section 1 OF of the Companies Act before the High Court within whose territorial jurisdiction the Company has its Registered Office. From this view of the matter High Court of Andhra Pradesh is not a Court to which an appeal would have lied under Section 10-F of the Companies Act.
20. The Registered Office of the Company is in Mhow, Madhya Pradesh. When the company admittedly failed to repay the deposits complaints were made to police alleging cheating. One such complaint was registered as FIR No. 290/2000 under Sections 406, 409, 420 and 120B of Indian Penal Code (IPC) in Police Station, New Friends Colony, New Delhi. The petitioners approached this Court alleging that there were serious threats to their life from the investors/depositors and that respondents failed to gfve protection and they are compelling the petitioners to repay the deposits. The counter-affidavit filed by the third respondent as well as the letters addressed by LT CDR Bhisham Kumar (Retd.,) as well as Inspector of Police (Economic Offences Wing) Crime Branch, New Delhi would show that no cause of action whatsoever arose in the State of Andhra Pradesh, much less in Hyderabad except the petitioners allegedly have branch office at SYJ Shopping Mall, Pathergatti Main Road, Hyderabad. Further, it is the case of the petitioners that the respondents, including the first respondent, namely, Central Economic Intelligence Bureau, Janpath, New Delhi are harassing them. If that be the case, one fails to understand as to how the petitioners chose to file present writ petition and obtained an order from this Court appointing Advocate Commissioner.
21. The report of the Advocate Commissioner would show that by the time the Advocate Commissioner visited the places where properties were situated in the Month of May 2001 some of the properties were sold by M/s. Dena Bank. It is also in the report of the Advocate Commissioner that there are no substantial money deposits in the name of first petitioner-Company, but there were deposits in the name of wife of second petitioner and personal account of first petitioner. It is also disclosed that properties were sold under Revenue Recovery Act by Dena Bank and cold storage units at Jambi were still under construction and that the office at Meena Bazar, Indore was seized by the police in connection with some criminal case. There was also complaint with Sarafa Police Station which was registered as Crime No. 188 of 2000 which was under investigation. It is reasonable to infer that the petitioners have intentionally withheld the information from this Court and obtained order. It is also reasonable to infer that petitioners having failed to obtain necessary orders of bail or otherwise, have approached this Court and chose to file the writ petition seeking the relief the granting of which would preempt any authority in the country to investigate further into the acts of malfeasance and misfeasance and deny justice to the depositors. The Inspector of Police, Economic Offences Wing, Crime Branch, New Delhi enclosed a list of 94 depositors as noticed earlier and none of them is resident or hails from Hyderabad or Andhra Pradesh.
22. After perusing the various documents on record, the affidavit in support of the writ petition as well as the report of the Advocate Commissioner dated 6-6-2001 irresistible conclusion is that the petitioners have no cause of action to file writ petition and no part of cause of action arose within the territorial jurisdiction of this Court. Be it noted that the categorical averment made by the third respondent in the counter-affidavit that the petitioners have not lodged any complaint with Police Station, Mirchowk and that the petitioners have never approached them and that there was no complaint made against them stand unrebutted thereby supporting the view that no part of cause of action arose in Andhra Pradesh. Therefore, it must be held that this Court has no territorial jurisdiction to entertain the writ petition.
23. In ordinary circumstances, as the writ petition is not admitted and Rule nisi is not ordered, the dismissal of the writ petition would be sufficient, but by filing the writ petition and obtaining order appointing Advocate Commissioner the petitioners have resorted to sharp practices and should be condemned. This aspect is considered under Point No. (M) In re Point No. (ii) :
24. Whether filing of this writ petition by the petitioners in I ligh Court of Judicature, Andhra Pradesh is a proceeding taken bonafide by them or whether it was a sharp practice designed to abuse the process of law and to take unfair advantage over the law enforcing agencies and depositors/ investors of the Company. A reference to counter-affidavit filed by third respondent as well as letters addressed by the Investigating Officer, Economic Offences Wing, Crime Branch, New Delhi and an investor has already been made. These would disclose that none of the depositors lodged complaint with the respondents 2 and 3, The so called depositors/investors who allegedly threatened the second petitioner have not been made parties to this case. Indeed, none of the depositors allegedly at whose instance respondents 2 and 3 are interfering with petitioners' business are not made parties to this case. Further, a reading of the Advocate Commissioner's report would show that there are cases pending against petitioners in different places in the States of Delhi and Madhya Pradesli.
25. The Advocate Commissioner's report would also show that some of the properties like, Cold Storage Unit at Indore was already sold away by Dena Bank under the Revenue Recovery Act and first petitioner-Company was evicted from the tenanted premises. When the Advocate Commissioner visited certain premises there were no documents left in the office. The allegation of the petitioners that there is sufficient liquidity and sufficient assets to meet the demands of the depositors if the company is allowed to run business proved to be false. The report of the Advocate Commissioner would show that in Union Bank of India, Indore the funds were meager whereas the personal account of wife of second petitioner has substantial funds. All this would show that the petitioner has not approached this Court with clean hands. The attempt to suppress the facts is glaring. Only to make out case within the jurisdiction of this Court bald allegations were made against respondents 2 and 3 which are proved to be false, baseless and this shows that the petitioners are not only guilty of suppressio veri suggestio faisi, but these proceedings are not bona fide. These proceedings are only a sharp practice designed to abuse the process of law and take unfair advantage from depositors/ investors and law enforcing agencies. At every moment and at every stage the petitioners made a mockery of Rule of law. The extraordinary special jurisdiction under Article 226 of the Constitution was never intended to redress the spurious grievance of persons like petitioners to force miscarriage of justice.
26. In this context a reference may be made to the decision of the Supreme Court in Municipal Corporation of Delhi v. Kamla Devi, . In the said case the Delhi Municipal Corporation determined the rental value and ratable value of the property situated in Delhi and determined the taxes payable thereon. Kamla Devi, owner of the property, appealed against the assessment. Again she filed a suit in the Court of Civil Judge, Ghaziabad, State of Uttar Pradesli alleging that the officials of the Corporation were trying to attach the properties in Uttar Pradesli and sought the relief of declaration that the assessment order passed by the Delhi Municipal Corporation is illegal, void and ab initio. She also sought prohibitory injunction against the attachment of her property. An ex parte decree was passed against Delhi Municipal Corporation though no document was filed showing that any attempt was made by the Corporation or its fficials to restrain or attach the property. Before the Supreme Court the Municipal Corporation contended that Kamla Devi has filed suit in Ghaziabad, deliberately concealing the fact of filing appeal before the appellate authority and obtained decree hoodwinking the Courts below. It was also contended that the Corporation did not receive any notice from Ghaziabad Court and that filing of suit by Kamla Devi in Ghaziabad Court by making false allegations amounted to abuse of process of the Court. The Supreme Court held that filing of suit by Kamla Devi in Ghaziabad Court which has no jurisdiction concealing the factum of filing appeal and making false allegations amounted to sharp practice designed to abuse process of the Court and allowed the appeal. It is apposite to excerpt the following from the Head Note of the reported decision (AIR).
...The suit instituted in a Court in Uttar Pradesh against the assessment order passed by the Assessor of Delhi Municipal Corporation was not bona fide and it was only a sharp practice designed to abuse the process of law and to take unfair advantage over the corporation. The averment made in plaint to the effect that the officers of the Corporation went in Uttar Pradesh to attach the movables of the owner or her grand children to realise the tax under the assessment order was a total falsehood and was a mere pretence to create jurisdiction in the Court in Uttar Pradesh. Not a single document or any other scrap of paper has been filed before the Court in support of the said allegation. Moreover, the frame of the suit and the language and terms in which the declaration and prohibitory injunction are asked for suggest a clear attempt to overreach the process of Court. The object clearly was to obtain a declaration that the assessment order is illegal and invalid from a Court outside Delhi. The fact that owner (plaintiff) chose to conceal the fact of her filing the appeal against !he assessment order is also indicative of the mala fides on her part, it is true that the Court has limited the prohibitory injunction only to properties in Uttar Pradesh but it has granted a declaration that the very assessment order is void and illegal which means that it cannot be enforced even within the limits of Delhi Municipal Corporation. Such practices of gross abuse of the process of Court ought to he put down with a stern hand so that others similarly minded may desist from indulging in similar acts. Exemplary costs in a sum of Rupees, fifty thousand awarded against the legal representatives of the deceased-owner.
27. The writ petition is also liable to be rejected at the threshold as the petitioners have suppressed necessary facts and also came to this Court with unclean hands. The petitioners are not entitled to any indulgence. Being NBFC the first petitioner is bound to follow the law especially the provisions contained in Chapter I1I-B of the RBI Act and Section 58A(9) of the Companies Act, Be it also noted that a defaulting NBFC is liable to be subjected to procedure for recovery to Company Law Board under Section 58A(9) of the Companies Act as well as Section 45-QA of the RBI Act. This Court has no doubt whatsoever that this writ petition is filed by the petitioners only to preempt any action by respondents as well as scores of helpless depositors. As already observed by me the allegations made in the writ affidavit to the effect that the respondents 2 and 3 failed to protect the life of second petitioner and the property of petitioners inspite of giving complaint that there is a grave threat to the petitioners is a total falsehood and mere pretence to create jurisdiction in High Court of Judicature. Andhra Pradesh. Further, the report submitted by the Advocate Commissioner falsified the rosy picture given by the second petitioner about the financial soundness of first petitioner-Company. In these circumstances, any submission of the learned Counsel for the petitioners that an enquiry be ordered by the Registrar of the Companies is wholly misconceived and is rejected.
28. In this context, a reference may be made to the decision of the Supreme Court in Sri Ramdas Motor Transport (SRMT) Ltd v. Tadi Adhinarayana Reddy, . A writ petition, in effect, was filed before this Court praying for investigation into the affairs of the SRMT Ltd., and for action against appellants 2 and 3. There was also interlocutory prayer to appoint administrator to take charge of the affairs of the SRMT Limited and to direct enquiry by the Central Bureau of Investigation (CBI). The writ petition was dismissed by a learned single Judge of this Court. This was reversed by a Division Bench in Writ Appeal No. 1409 of 1996 dated 4-12-1996. The Supreme Court while reversing the judgment of the Division Bench observed as under:
Learned single Judge before whom the present writ petition came up for hearing very rightly held that the Companies Act provides a forum to consider the grievances made out by (he first respondent in the writ petition. When such a forum, statutory constituted, exists, it is but appropriate that resort to Article 226 should be discouraged. There is an efficacious alternative remedy available under the statute. In fact under (he Companies Act, a more satisfactory solution is available. The single Judge was right in pointing out that some of the shareholders have initiated proceedings before the Company Law Board. The only grievance of the petitioner in the writ petition is that no orders have been passed therein. The single Judge has rightly held that such a grievance cannot constitute a ground for invoking the jurisdiction of the High Court under Article 226. He, therefore, dismissed the writ petition. In appeal, however, the Division Bench of the Andhra Pradesh High Court presided over by the Chief Justice, entertained the appeal on the ground (hat the petition raised many serious issues as to falsification of the accounts of a public limited company. It said that the acts of the company would jeopardize public interest. Therefore, the petition involved wider 'public interest' and should be entertained. In the result the Division Bench issued a direction to the Central Government to make its own verification of the allegations in the writ petition. In other words, the Division Bench of the High Court directed an investigation into the affairs of the company, by passing the detailed provisions with inbuilt safeguards under the Companies Act, designed specially for (his purpose. The only ground for intervention appears to be 'public interest'. We fail to see what public interest is involved in disputes of the kind referred to in the writ petition. They basically deal with mismanagement of the affairs of the company and oppression of the minority shareholders. The company is only a deemed public limited company. Its shareholding is very closely held. The only other factor referred to in the writ petition to invoke the doctrine of so called public interest is the fact that the company had borrowed moneys from public institutions This is no ground for not availing of the statutory remedies provided under the Companies Act before the appropriate statutory forums which are designed for (his very purpose. We are distress to find that the well reasoned judgment of the single Judge was interfered with in a casual manner. The impugned judgment rests on fragile foundations and reads more like an ipsi dixit.
29. The judgments of the Supreme Court in Kamla Devi case (supra) and S.R.M.T's case (supra) squarely apply to the facts of this case. The petitioners in fact have remedies both under the Companies Act and the RBI Act before the Company Law Board.
30. In the result, for the aforesaid reasons, the writ petition fails and is accordingly dismissed holding that these proceedings arc not bona fide and only a sharp practice designed to abuse the process of the Court to take unfair advantage before the law enforcing agencies, investigating agencies and the depositors of the first petition Company. The petitioners therefore have to be burdened with heavy exemplary costs of Rs. 20,000/- (Rupees twenty thousand only). It is open to any depositor of the first petitioner-Company to enforce this order for recovery of the costs.