Bangalore District Court
Serious Fraud Investigation Office vs C P Yogeshwara on 22 February, 2025
KABC030815072021
Presented on : 10-11-2021
Registered on : 10-11-2021
Decided on : 22-02-2025
Duration : 3 years, 3 months, 12 days
IN THE COURT OF THE XLII ADDITIONAL CHIEF JUDICIAL
MAGISTRATE, BENGALURU CITY
Present: Shri.K.N.SHIVAKUMAR, B.Sc.,(Agri),L.L.M.,
XLII Addl.CJM, Bengaluru City
Dated this the 22nd day of February, 2025
C.C.No. 30757/2021
COMPLAINANT: Serious Fraud Investigation Office,
Ministry of Corporate Affairs
Government of India,
2nd Floor, Paryavaran Bhawan,
CGO Complex, Lodhi Road,
New Delhi - 110003.
Represented by Assistant Director
Mr. Saumendra Kumar Nanda.
(Represented By Smt. Anuparna
Bordolol, Advocate)
-Vs-
ACCUSED: 1. Sri. C.P. Yogeshwara,
S/o. Sh. Puttamadegowda,
Aged about 48 Years,
2 C.C.No. 30757/2021
Managing Director of Megacity
(Bengaluru) Developers
& Builders Limited
464, 1st 'G' Cross,
2nd Phase,
BSK 3rd Stage,
BENGALURU 560085.
(Represented by Sri. VKJ Advocate)
2. M/s. Megacity (Bengaluru)
Developers & Builders Pvt Ltd
(Presently Megacity (Bangalore)
Developers and Builders Ltd.,)
(Represented by its Nominee Director)
Mega Tower, 120, Kengal
Hanumanthaiah Road,
BENGALURU 560027.
Represented by its Nominee Director
Sri. C.V. Sanjeevan.
(Represented by Sri. KMN Advocate)
JUDGMENT
The Complainant has filed complaint U/Sec.200 of Code of Criminal Procedure R/w. Sec.621 of Companies Act, 1956 against the Accused for the offence punishable under Section 240(3) of Companies Act, 1956.
3 C.C.No. 30757/2021
2. The case of the prosecution in brief is as follows; The accused No.1 was the Managing Director of Accused No.1 company-M/s. Megacity (Bengaluru) Developers & Builders Ltd., (herein after referred to as 'MDBL'), Which was incorporated as a private limited company on 11/08/1994 and converted into a public limited company on 12/08/1998, with the object of carrying on the business to develop, construct, furnish, let-out, sell, deal in and to carry on all or any of the functions of Proprietors of lands, flats, dwelling houses, shops, offices, commercial complexes, factory sheds, buildings and accommodation of all kinds. The accused under the said company have floated a real estate project named 'Vajragiri' project and collected about Rs.60 Crores towards booking amounts in respect of the same. However, the said project was not materialized and large number of investors' money was not refunded. Accordingly, there were several complaints from the 4 C.C.No. 30757/2021 investors pointing towards the financial affairs of said company being conducted prejudicial to the interest of said investors. In view of such complaints regarding financial fraud against the company received by the Ministry of corporate Affairs, an inspection of the company U/Sec. 209A of the companies Act was ordered and accordingly, the inspection report was submitted to the Ministry of Corporate Affairs on 31/09/2007, which brought out violation of various provisions of the companies Act by the said company. Further, the Registrar of companies, Karnataka has also conducted a scrutiny of the balance sheet of said company as on 31/03/2006 U/Sec. 234(1) of the Companies Act, 1956 and submitted a report to the Ministry of Corporate Affairs, Government of India U/Sec. 234(6) of the Act, indicating the possible diversion and mis-utilization of funds by the promoters of said company. In the light of said reports, the Ministry of Corporate Affairs, Government of India has directed an investigation into 5 C.C.No. 30757/2021 the affairs of said MDBL company U/Sec. 235 of the Companies Act, by its order dated: 17/04/2009. Accordingly, a team of investigators was appointed to investigate into the financial and other irregularities, contraventions/violations of the provisions of the companies Act, 1956 or fraudulent Act committed by the said company and its Directors or its Officers or any other persons in the conduct of affairs of the company. After the investigation, the said team of investigators submitted the investigation report to the Government of India. On the basis of the findings given in the investigation report as to several irregularities, fraudulent acts and contravention / violation of the provisions of the companies Act, the Ministry of Corporate Affairs had directed the complainant office i.e., The Serious Fraud Investigation Office (herein after referred as 'SFIO'), Ministry of Corporate Affairs, Government of India, New Delhi to file complaints against the said company, its Directors and Officers by its letter dated: 14/09/2011. 6 C.C.No. 30757/2021 Accordingly, on the basis of one of the findings of said investigation report as to disobedience and willful ignorance of the summons issued by the investigating team of the complainant and failure to appear before the investigating team and failure to produce required information or documents to the investigating team of the complainant, which amounts to violation of provisions of Sec.240 of the Companies Act and liable to be punishable U/Sec. 240(3) of the Companies Act. It is the specific allegation that, though the accused No.1 was issued summons dated: 10/06/2011 asking to appear on 17/06/2011 at the Camp office of SFIO, Bengaluru for recording the statement, he did not turn up. He was again issued summons on 20/06/2011 asking to appear on 27/06/2011 at the office of SFIO at New Delhi and on that day also he did not appear. Further, a final summons was issued to him on 01/07/2011 asking him to appear on 07/07/2011 at New Delhi along with a show cause notice for non-cooperation in the 7 C.C.No. 30757/2021 investigation. But, he again chooses not to appear on the said date also. Thus he has fail to appear before the investigation team for the purpose of investigation and also fail to produce the documents / information required by the investigation team, which is an violation U/Sec. 240 of the Companies Act, punishable U/Sec. 240(3) of the Companies Act. Accordingly, the accused No.1 & 2 have committed the offence punishable U/Sec. 240(3) of the Companies Act.
3. After filing the complaint, the same was registered in PCR. As the complainant is a public servant, the sworn statement of the complainant was dispensed with and cognizance was taken against the accused for the offence punishable U/Sec. 240(3) of Companies Act, 1956 and this Criminal Case was registered and summons was issued to accused. On receipt of summons, the accused have appeared before 8 C.C.No. 30757/2021 the Court and enlarged on bail. The plea of the accused for the accusation U/Sec. 240(3) of Companies Act, 1956 was recorded, wherein, they have pleaded not guilty, but claimed to have defence. Hence the case was posted for recording the evidence from complainant side.
4. In order to prove his case, the complainant himself got examined as PW1 and also examined four more witnesses as PW.2 to 5 and got marked 11 & 11(a) documents as Ex.P1 to 11 & 11(a). Thereafter, the accused was examined U/sec.313 of Cr.P.C., wherein he has denied the incriminating evidences appeared against him in the evidence of complainant side and submitted to have no defence evidence.
5. Heard the arguments of the learned advocate for the complainant and the advocates for the accused and perused the materials available on record.
6. The points that arise for consideration are: 9 C.C.No. 30757/2021
1. Whether the complainant proves that the accused being the managing director of M/s. Megacity (Bangalore) Developers & Builders Limited, Bangalore, dealing with land developments, having responsibility of day to day affairs of the company, failed to produce required information or documents to the investigators of the complainant office and thereby committed the offence punishable U/sec.240(3) of Companies Act, 1956?
2. What Order ?
7. My answer to the above points are as follows :
Point No.1 : In the Negative Point No.2: As per final order for the following;
REASONS
8. Point No.1 :- It is the specific case of the complainant that, the accused being the managing director of M/s. Megacity (Bangalore) Developers & Builders Limited, Bangalore, dealing with land developments, having responsibility of day to day affairs of the company, failed to produce the information or data 10 C.C.No. 30757/2021 about (1) proof of lands purchased by him as MD of said MDBL out of the fund of Rs.5 Crores given to him by said MDBL as land advance. (2) Construction of building with the help of MDBL funds in his native village Chakkere. (3) Proof of his income as shown in the affidavit furnished to the Returning officer during the year 2008, (4) Proof of source of income of share application money i.e., Rs.199 Lakhs brought in by him and his family members & (5) complete details of utilization of Rs.20 Crores, Rs. 26 Crores & Rs.49 Crores received from Prestige Bidadi Holdings Pvt Ltd.,. to the investigation team constituted under the SFIO - complainant office by the Ministry of Corporate Affairs Government of India and as such he has violated the provisions of Sec.240(1) & (2) of the Companies Act and accordingly committed the offence P/U/Sec. 240(3) of Companies Act, 1956.
9. In order to prove it's case, the complainant got examined himself as PW1 and examined four witness as 11 C.C.No. 30757/2021 PW2 to PW5. PW1 being complainant, in his evidence, he has reiterated the allegations of complaint and the findings of investigation report submitted by the team of investigators as per Ex.P8. Though, he has stated in his evidence about the findings as to the financial and other irregularities committed by the accused as reported in the said investigation report, this complaint is only with regard to one of said findings as to non-furnishing of required information / documents / data relating to the affairs of the accused company to the investigating team and non-cooperation for the investigation. As such, the evidence of PW1 relating to said specific finding has to be scrutinized.
10. No doubt, the PW1 in his examination in chief clearly deposed about the fact that, the investigation team headed by one Sri. J.K. Teotia - the PW2 had recorded the statement of accused No.1 in the course of investigation with regard to proof of lands purchased by 12 C.C.No. 30757/2021 him as the MD of said MDBL out of the fund of Rs.5 Crores given to him by said MDBL as land advance, constructions of building with the help of said MDBL funds in his native village Chakkere, proof of his income as shown in the affidavit furnished to the Returning Officer during the year 2008, proof of source of income of share application money of Rs.199 Lakhs brought in by him and his family members and complete details of utilization of Rs.20 crores, Rs.26 Crores & Rs.49 crores received from M/s Prestige Bidadi Holdings Pvt Ltd.,. He also deposed that, the accused No.1 has not given any proper information about the same. He also got produced and marked alleged statement as per Ex.P9. In the course of cross examination also the accused has neither denied nor disputed giving statement before the investigating team.
11. Further, it is specifically alleged that, after recording the statement of the accused, the investigation 13 C.C.No. 30757/2021 team had issued 3 summons on 10/06/2011, 20/06/2011 & 01/07/2011 asking the accused No.1 to appear at the camp office, Bengaluru and the Head office, New Delhi and also with a direction of show cause notice for non-cooperation in the investigation. The PW1 got produced two out of said three summons as Ex.P10 & 11 & nothing was stated as to what happened the third one. It is deposed by PW1 that, pursuant said notices the accused neither provided requisite information nor appeared before the investigating team.
12. In the course of his cross examination as well as the arguments, it is the specific defence of the accused that, no such summons as alleged in the complaint and the testimony of PW1 were severed on him. When no such summons was served on him, the question of he furnishing any information or document and appearing before the said investigating team would not arise. As such, as the accused had no knowledge of any such 14 C.C.No. 30757/2021 summons or summoning by the investigating team, he did not appear before the investigation team. Therefore, the non-appearance of the accused and non-production of alleged information cannot be construed as the violation of provisions of Sec.240(1) & (2) of the Companies Act.
13. In this regard, it was clearly admitted by PW1 in his cross examination that, he do not know as to whether the said summons at Ex.P10 & 11 were served on the accused. He also categorically admitted that, he has filed this complaint only on the basis of information furnished to him by the investigating team, but he has not applied his mind to the investigation report. He also categorically admitted that, he has deposed before this court as to what is stated to him by the investigating agency. Thus, from the evidence of PW1 there appear nothing to show as to whether said summons at Ex.P10 & 11 were served on the accused.
15 C.C.No. 30757/2021
14. Further, the other witnesses examined on behalf of the complainant i.e., the PW2 to 5 who are stated to be the inspectors of said investigating team also in their cross examination categorically admitted that there is no endorsement as to service of said summons-Ex.P10 & 11 on the accused. Similarly, all these witnesses have also categorically admitted that no document is produced in this case as to the proof of service of said summons on the accused. More over on perusal of the records and the documentary evidences produced by the complainant, it appears very clear that no such documents as to service of said summons Ex.P10 & 11 on the accused or in the address of the accused are being produced.
15. Further, in the course of cross examination the PW2 & PW5 have categorically admitted that in the summons at Ex.P10 though, accused was asked to appear before the camp office of SFIO, Bengaluru, the address of said camp office is not mentioned therein. On 16 C.C.No. 30757/2021 perusal of Ex.P10 also it is evident that the accused was asked to appear before the investigators at the camp office, Bengaluru on 17/06/2011 at 10-00 am. But, there is no mention of the address of said camp office of SFIO in Bengaluru.
16. Further, the PW4 in the course of his evidence got marked a postal receipt as Ex.P11(a) stating that under the said receipt the summons or notice at Ex.P11 was sent through speed post to the accused. In the said postal receipt there is no clear mention as to whether that was a speed post or a registered post. More so, there is no mention of the address of the accused in detail. Even though said postal receipt is accepted and considered to be the receipt under which alleged notice Ex.P11 was sent to the address of the accused, that would not prove that said notice or summons was duly served on the accused. In this regard, the Lrd. counsel for the complainant has argued that once it is proved that 17 C.C.No. 30757/2021 a notice was sent to the address of the addressee, even if said notice is returned un-served or not returned back, a presumption as to service of said notice on the addressee would come in favour of the sender as per Sec.27 of the General Clauses Act, 1897. In support of her contention she has relied on the judgment of Hon'ble High Court of Delhi in the case of Commissioner of Income Tax V/s. Madhsy Films Pvt Ltd., reported in (2008) 301 ITR 69 (Delhi).
17. In the light of said contention of the counsel for the complainant on perusal of the materials available in this case and the evidence adduced by the complainant, as already discussed herein above, there is no proof of due service of said notices / summons at Ex.P10 & 11. More so, it is not the case of the complainant that, said notices were returned undelivered or received back. As such no doubt, as held by Hon'ble High Court of Delhi in the above case, a presumption as to service of such 18 C.C.No. 30757/2021 notice within a reasonable time would arise unless the contrary is proved. More so, as per the provisions of Sec.27 of the General Clauses Act, 1897 also, if it is proved that such notice by post was effected by properly addressing and sending by registered post, such notice is required to be served. Unless the contrary is proved the service is deemed to have been effected at the time when the letter would be delivered in the ordinary course of post.
18. However, with due respect this court is of the opinion that, the facts & circumstances of the case as well as nature of issue in the said decision of Hon'ble High Court of Delhi is quite different from the facts & circumstances of this case. In the said case it was the statutory compliance of issuing notice to the Assessee, which was mandatory under the said Income Tax Act, 1961. As such, to avoid technical defences as to service of such notices, the concept of deemed service could be invoked to facilitate initiating or proceeding with further 19 C.C.No. 30757/2021 proceedings under said act. It is pertinent to note here that, U/Sec. 138 of the Negotiable Instruments Act, 1881 also there is a requirement of such statutory compliance of issuing notice of dishonour of cheque to the drawer of the cheque / accused before filing the complaint U/Sec. 138 of the N.I. Act. Unless said statutory requirement is complied, the drawee / complainant cannot initiate the criminal proceeding against the drawer / accused and the court cannot take cognizance of said offence. As such, in a catena of decision Hon'ble Apex court as well as the Hon'ble High courts have evolved the concept of deemed service to enable the complainant / drawee to lodge complaints and the courts to take cognizance on the basis of such deemed service. In this regard it appears proper to quote a decision of Hon'ble Apex court in the case of M/s. Indo Automobiles Vs. M/s. Jaidurga Enterprises reported in 2008 (2) DCR 499, wherein it was held that 'When the statutory notice is sent to the correct address of the addressee, even if the same is 20 C.C.No. 30757/2021 returned unserved on the grounds of either refusal or not claim or absence of the addressee, the same amounts to deemed service'
19. Thus, it is very clear that, when there is any such statutory requirement of issuing a notice or summons as a mere compliance, such deemed service can be taken into account. But, in the cases like this, it may not be proper to incorporate such a concept of deemed service. Because in this case, issuance of said notice or summons at Ex.P10 & 11 is not a mere compliance of statutory requirement, rather as a principle of natural justice it is an intimation to the accused to appear before the investigating agency and to produce the documents as sought for. As such, unless such intimation is received by the accused or known by the accused, he cannot know about the date of appearance before such investigating agency and the nature of information / documents / data sought by 21 C.C.No. 30757/2021 such investigating agency. That apart, it is pertinent to note that, to attract the offence punishable U/Sec. 240(3) of the Companies Act, it should be proved that, the accused fails or refuses to appear before the investigating agency or to produce the information / documents / data to the investigating agency 'without reasonable cause'. For reference said provision of Sec.240(3) of the Companies Act is extracted herein below:
" if any person fails without reasonable cause or refuses
-
(a) to produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government any book or paper which it is his duty under sub-section (1) or sub-section (1-A) to produce;
or
(b) to furnish any information which it is his duty under sub-section (1A) to furnish; or
(c) to appear before the inspector personally when required to do so under sub-section(2) or to answer any question which is put to him by the inspector in pursuance of that sub-section, or
(d) to sign the notes of any examination referred to in sub-section (5), he shall be punishable with imprisonment for a term which may extend to six months, or with fine, which may extend to twenty thousand rupees or with both, and also with a further fine which may extend to 22 C.C.No. 30757/2021 two thousand rupees for every day after the first during which the failure or refusal continues.
20. Therefore, it is evident that to prosecute a person U/Sec. 240(3) of the Companies Act, said person should have failed or refused to appear before the inspectors or to produce the required documents / information / data before the inspectors as sought for without any reasonable cause. As such, it is very much necessary to show that, the accused has become defaulter without any such reasonable cause. But, as already discussed herein above, the accused had a reasonable cause for his non- appearance before the said investigating team and non-production of any documents before said investigating team i.e., he had no knowledge about the date on which he was asked to appear before the said investigating team and also no knowledge about what are the documents / information / data sought by said team as the alleged notices Ex.P10 & 11 were not duly served on him.
23 C.C.No. 30757/2021
21. Further, the PW4 in his cross examination admits that, in the office of the complainant they used to maintain inward - outward register. He also categorically admits that, any letters or other communications sent to any persons from that office would be entered in the said register. Similarly, any notice / letter / receipt / acknowledgment received from any person would be entered in the inward register. He also admits that, without looking in to such inward register he could not say as to whether the notices sent to the accused were served on the accused. The complainant had not produced any such inward - outward register of SFIO in this case. If at all, they had sent any such notices at Ex.P10 & 11 to the accused and any receipt or acknowledgment as to service of said notices were received back, the same might had been entered in the said inward - outward register. If the complainant had produced said register it would have been beneficial to ascertain the said fact. But, for the reasons best known 24 C.C.No. 30757/2021 to him, the complainant has not produced any such register.
22. As already stated herein above, as per the provisions of Sec.240(3) of Companies Act, it is an offence punishable under the said Section if the accused fails or refuses to appear before the investigating team without reasonable cause. But, in this case on perusal of the materials available on record and also the allegations of complaint and the testimony of witnesses PW1 to 5, it is very clear that, the accused had appeared before the said investigating team and given his statement on 08/02/2011. On perusal of said statement which is marked as Ex.P9, it appears that, after giving the said statement the accused had taken adjournment for giving further statement and under took to re-appear himself for further recording of his statement 'as and when called for either at his mobile number : 9845022657 / 9980522657 or being communicated for the same in any means'. 25 C.C.No. 30757/2021
23. Thus, it is very clear that, the accused had appeared once before the said investigating team. Further, his appearance was upon receipt of intimation either through telephonic message through his above stated mobile numbers or other modes of communication. Therefore, it may not be proper to hold that the accused should have appeared before the investigating team even without any such intimation. It is not the case of the complainant that, they have communicated the date and time of his next appearance before them either at the time of recording said statement Ex.P9 or subsequently through any such telephonic communication. That being the case, it is the burden of complainant to show that the date & time of appearance of the accused before the investigating team was communicated to him through any of said modes. As already discussed & held herein above, they have failed to prove that, the notices or summons at Ex.P10 & 11 were communicated to the 26 C.C.No. 30757/2021 accused. That being the case, the accused cannot be found fault with for his non-appearance before the investigating team and non-production of any information / document / data, which is not known to him.
24. From all the above discussed facts, circumstance, evidences and the reasons, it can be concluded that the complainant has failed to prove that the accused has failed or refused to appear before the investigating team of SFIO and to produce the information / documents / data to the said investigating team 'without reasonable cause'. As such, it can be held that the complainant has failed to prove the guilt of the accused for the offence punishable U/Sec.240(3) of Companies Act, 1956 beyond reasonable doubts. Accordingly, Point No.1 is answered in the Affirmative.
25. Point No.2- In view of the above findings on point No.1, the following order is passed; 27 C.C.No. 30757/2021
ORDER Acting under section 248(1) of Cr.P.C., the accused No.1 & 2 are hereby acquitted of the offence punishable under Sections 240(3) of the Companies Act.
Bail bond and surety bond of the accused shall stand canceled.
(Dictated to the Stenographer directly on computer, after her typing, corrected, signed and then pronounced by me in open Court this the 22nd day of February, 2025).
(K.N. SHIVAKUMAR) XLII Addl. CJM,Bengaluru (Spl.Court for trial of cases filed against sitting as well as former MPs/MLAs, triable by the Magistrate in the State of Karnataka) ANNEXURE Witnesses examined for the Prosecution:
PW.1 - Somendra Kumar Nanda PW.2 - J.K. Teotia PW.3 - Indrani Sen Chawdhuree PW.4 - Anupam Vasishista PW.5 - R.S. Chaudhary Documents exhibited for the Prosecution:
Ex.P1 - Gazatte Notification
Ex.P2 - Order copy dated: 17/10/2011
Ex.P3 - Incorporation
Ex.P4 - Copy of Memorandum of Association
Ex.P5 - Order dated: 17/04/2009
Ex.P6 - Order dated: 30/12/2009
Ex.P7 - Sanction order
28 C.C.No. 30757/2021
Ex.P8 - Investigation report into the Affairs
Ex.P9 - Statements
Ex.P10 & 11 - Summons
Ex.P11(a) - Receipt
Witnesses examined for the Defence:
- Nil -
Documents exhibited for the defence:
- Nil -
Material objections:
- Nil -
(K.N. SHIVAKUMAR)
XLII Addl. CJM,Bengaluru
(Spl.Court for trial of cases filed against sitting as well as former MPs/MLAs, triable by the Magistrate in the State of Karnataka) 29 C.C.No. 30757/2021 (Order pronounced in open court Vide Separate Judgment ) ORDER Acting under section 248(1) of Cr.P.C., the accused No.1 & 2 are hereby acquitted of the offence punishable under Sections 240(3) of the Companies Act.
Bail bond and surety bond of the accused shall stand canceled.
( K.N. SHIVAKUMAR ) XLII Addl. CJM,Bengaluru (Spl.Court for trial of cases filed against sitting as well as former MPs/MLAs, triable by the Magistrate in the State of Karnataka)