Delhi District Court
State vs : B.B.Sharma & Anr. on 21 January, 2016
IN THE COURT OF SH. SUDHANSHU KAUSHIK, ADDL. CHIEF METROPOLITAN MAGISTRATE-01 : CENTRAL DISTRICT :
TIS HAZARI COURTS : DELHI State Vs : B.B.Sharma & Anr.
FIR No. : 226/1998
U/s : 406/420 IPC
PS : Prasad Nagar
Date of Institution : 03.08.1998
Date of Judgment reserved on : 18.01.2016
Date of Judgment : 21.01.2016
Unique ID : 02401R0456162005
Brief details of the case
A) Sl. No. of the case : 122/CR
B) Offence complained of
or proved : U/s 420/120B IPC
C) Date of Offence : In the year 1997
D) Name of complainant : Maj. Gen. Ranjit Singh
R/o B-5/105,
Safdarjung Enclave,
New Delhi-110029
E) Name of accused : (1) M/s Hoffland Share Shoppe Ltd.
421, Ansal Chambers-2,
Bhikaji Cama Place,
New Delhi-110066
(2) Deen Bandhu Sharma
S/o Ram Babu Sharma
R/o 138-A, Vikrant Enclave,
Hari Nagar, New Delhi-110064
(3) Kishan Chand Aggarwal
(proceedings abated)
FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 1 of 18
S/o Mehar Chand
R/o 235, Raja Garden,
New Delhi
(4) Dev Raj Seth
(proceedings abated)
R/o C-2D/60C, Janakpuri,
New Delhi
(5) B.B.Sharma
S/o S.P.Sharma,
R/o B-2/54, Safdarjung
Enclave, New Delhi
F) Plea of accused : Pleaded not guilty
G) Final order : Accused D.B.Sharma acquitted
Accused B.B.Sharma convicted
U/s 420 IPC
H) Date of Order : 21.01.2016
Judgment
On the accusation of entering into a criminal conspiracy with the common object of luring investors to make deposits in their company and subsequently misappropriating the invested amount, Directors & principal employees of Hoffland Finance Ltd. Company and its sister-concerns were sent up to face trial for committing offences punishable under Section 420 IPC read with Section 120 IPC.
Brief facts as disclosed in the charge sheet
2. Hoffland Finance Ltd. Company (hereinafter referred to as 'the company') was a Non Banking Financial Company (NBFC) registered under FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 2 of 18 the Companies Act, 1956 having its registered office at premises No.1207, Hem Kunt Tower, Rajender Place, New Delhi. It is the case of prosecution that company and its Directors entered into a criminal conspiracy to cheat investors by inducing them to make deposits and in furtherance of this conspiracy, number of other subsidiaries were floated. B.B.Sharma was the Chairman-cum-Managing Director of the company while D.B.Sharma and K.C.Aggarwal were Directors of Hoffland Share Shoppe Limited which was a subsidiary company. After floating the companies, accused invited investments from the general public by promising high rate of interest on their investments. In order to induce the public, the company gave repeated advertisement in the Newspapers painting a very rosy picture about its financial solvency and future prospects. Believing upon the inducement given by the accused persons, number of investors invested their hard-earned money with the company but after accepting deposits, the company vanished. In order to convince the investors and create an impression about the genuineness of the entire transaction, the company handed over shares of various premium blue chip companies to the investors alongwith post-dated cheques. The shares of companies upto 60% of the invested amount and post-dated cheques towards interest and principal were given to the investors but on presentation, the cheques were returned back with remarks 'account closed'. The aggrieved investors lodged complaints with the police and present case bearing FIR No. FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 3 of 18 226/1998 under Section 420/406/409 IPC read with Section 120B IPS was registered at police station Prasad Nagar. After registration of FIR, statements of witnesses were recorded and all the accused were arrested. The accounts of the company were inspected by Reserve Bank of India (RBI). Investigation revealed that accused diverted the invested funds in various fictitious companies and illegally siphoned it. It was also revealed that the company did not maintain proper books of account which further facilitated the siphoning of funds in other non-functioning sister-concerns. From the perusal of a chart extracted from the statement of bank account No.1977 of Hoffland Share Shoppe Limited in Oriental Bank of Commerce, Safdarjung Enclave Branch, the manner in which the funds were siphoned out from Hoffland Share Shoppe was revealed. On conclusion of investigation, charge-sheet was put to the court with allegations that at the relevant time, accused D.B.Sharma and K.C.Aggarwal were Directors/Incharge of the conduct of business of Hoffland Share Shoppe Limited. Initially, charge-sheet was put to the court against accused D.B.Sharma and K.C.Aggarwal but subsequently, supplementary charge-sheet under Section 173(8) Cr.P.C was filed against accused B.B.Sharma who was Chairman-cum-Managing Director of the parent company.
3. Copies of the charge-sheet were supplied to all the accused and vide order dated 12.11.2002, charges under Section 120B IPC and Section 420 FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 4 of 18 IPC read with Section 120B IPC were framed against them to which they pleaded not guilty and claimed trial.
4. During trial, accused B.B.Sharma stopped appearing before the court and he was declared as a 'proclaimed offender' while accused K.C.Aggarwal expired and proceedings against him were abated. Trial proceeded qua accused D.B.Sharma but in the meantime, accused B.B.Sharma was re-arrested and trial concluded qua both the accused.
Witnesses Examined
5. Sixty-One prosecution witnesses were examined. Investors PW-1 Brig. Sudhir Bhutani PW-1 Maj. Gen. (Retd.) Ranjit Singh (Complainant) PW-2 P.P.Verma PW-3 V.Subramaniam PW-4 Sonia Chandi Ram PW-5 Vidhya Bhutani PW-6 Priyanka Sachar PW-7 Dr. Vijay Kumar Shandilya PW-8 K.M.Nagar PW-9 Shashi Prabha PW-10 Kaushal Kishore Tyagi PW-11 Nandita Gaur PW-12 Bhawna Kumar PW-13 Rahul Kumar PW-14 Arun Kaushik PW-15 R.S.Ashwani PW-16 Maj. Gen. R.K.Chopra PW-16 Baldev Raj Arora PW-17 Gulshan PW-18 Kalpana Jain FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 5 of 18 PW-19 Raj Rani Arora PW-20 Gurjeet Kaur PW-21 Gurnam Singh PW-22 Mahender Pal Kohli PW-23 Preeti PW-24 S.C.Bansal PW-25 Dayanand PW-26 Shashi Sachar PW-27 Harjinder Kaur PW-29 Anupam Tyagi PW-30 Kailash Chander Sati PW-32 Krishan Dutt Sardana PW-33 Saloni Preeti Mathur PW-34 Parvati Rajan PW-35 Sharda Bhutani PW-36 Brig. Sudhir Bhutani PW-38 Vinod Kumar PW-39 Anil Kumar PW-40 Meenakshi Singh Rawat PW-42 Sharda Bhutani PW-43 Sunita S.Kulkarni PW-46 Brig. Kiran Kishan PW-48 Maj. Gen. (Retd.) Mohinder Singh PW-49 Lt. Col. (Retd.) R.D.Khattar PW-50 Dr. Ganesh Adhikari PW-51 Tripta Sabharwal PW-52 Seeta Devi PW-53 Medhavee Raja PW-54 Rolly Gupta PW-55 Ranjeeta Gupta PW-56 Asha Gupta PW-57 Nandni Kumar PW-58 Hira Nand Sachdeva PW-59 S.K.Bhalla PW-60 P.K.Jain PW-61 Umesh Chander Witnesses from Banks/ROC PW-28 Gunvir Singh (AGM, RBI) FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 6 of 18 PW-44 Sudharshan Lal (Retd. DGM, RBI) PW-45 Mohan Lal (Special Assistant, OBC) PW-47 R.K.Saini (Jr. Technical Assistant, ROC) Witnesses of Investigation PW-37 S.K.Mittal PW-40 SI Ataulla Khan (Duty Officer) PW-41 Ct. Ravinder Kumar
6. Separate statements of both the accused were recorded under Section 313 Cr.P.C. D.B.Sharma denied all the incriminating evidence stating that he was not holding the post of Managing Director of Hoffland Share Shoppe Limited Company. He mentioned that B.B.Sharma was looking after the day-to-day affairs of this company and he was made Director only on papers. He denied having met any investor or having made any false representation to them. It was his stand that he resigned from the directorship of the company much before the time on which the alleged offence was committed and therefore, he can not be held criminally liable. In order to support this version, he himself stepped into the witness box as DW-1 and relied upon the record produced from the Registrar of Companies (ROC). On the other hand, B.B.Sharma admitted that he was the Chairman-cum- Managing Director of the company. He denied the incriminating evidence and took defence that he never intended to cheat the investors. He stated that his company incurred huge losses in stock exchange and on account of said reason, the cheques of interest and the principal amount were dishonored. No defence witness was examined by him.
FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 7 of 18
Arguments
7. I have heard Ld. APP for State as well as Ld. Defence Counsel and carefully gone through the entire material available on record.
8. Ld. Counsel for accused D.B.Sharma argued that prosecution has failed to establish its case. He mentioned that B.B.Sharma was the mastermind behind the entire conspiracy and D.B.Sharma was only made a scapegoat. He stated that B.B.Sharma, in his capacity as Chairman-cum-Managing Director of the company, floated more than 30 fictitious companies and subsequently siphoned the money by rotating funds in these companies. He argued that evidence has come on record that B.B.Sharma was managing the bank account of Hoffland Share Shoppe Limited and funds were transferred only on his directions. He stated that there is not even an iota of evidence to suggest that D.B.Sharma played any role in the alleged conspiracy. Counsel has relied upon the judgments in 'Abdul Rahim Vs State (Delhi Administration)' 2010 (168 DLT 636, 'V.C.Shukla Vs State (Delhi Administration)' 1980(2) SCC 665, 'M.A.A.Annamalai Vs State of Karnataka & Anr.' 2010 VIII AD (SC)511 Criminal Appeal No.1504 of 2010 (order dated 26.05.2008), 'Harmanpreet Singh Ahluwalia & Ors Vs State of Punjab & Ors.' (2009) 7 SCC SCC 712, 'S.W.Palanitkar & Ors. Vs State of Bihar' VII(@001) SLT 439 SC, 'Suryalakshmi Cotton Mills Ltd. Vs Rajveer Industries Ltd. & Ors.' I(2008) CCR 93 (SC) + I(2008) DLT (Crl.) 329 (SC) =I(2008) SLT 353=JT 2008(1) SC 340 and 'Subodh S. Salaskar Vs Jyprakash M.Shah & Anr'. On the other hand, Counsel for B.B.Sharma argued that deposits were accepted under a bonafide FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 8 of 18 belief that the company would be in a position to provide handsome return to the investors. He mentioned that the invested amount could not be returned as the company suffered huge losses. He contended that default in repayment occurred due to circumstances beyond his control and no criminal liability can be fasten upon him. On the force of these submissions, counsels have prayed that both the accused should be acquitted.
9. Ld. APP has countered the arguments of defence arguing that the prosecution's case stands proved beyond reasonable doubt. He contended that in case of criminal conspiracy, there is hardly any possibility of bringing on record direct evidence and the conspiracy has to be inferred from circumstantial evidence. He argued that the testimony of witnesses, coupled with the documents seized by the Investigating Officer, leaves no scope for doubt that both the accused were acting in furtherance of criminal conspiracy. He contended that although there are minor contradictions in the testimony of witnesses but the same are inconsequential. It has been argued by him that invariably, conspiracy is hatched behind closed doors and the possibility of obtaining direct evidence is remote. He mentioned that investors have categorically deposed that they were carried away by the rosy picture painted by the accused and the lucrative interest promised by their company. He argued that there is no evidence to show that the company suffered huge losses or the default occurred due to circumstances beyond the control of accused. He mentioned that in a very calculated manner, accused siphoned the invested money by transferring the invested amount in the parent company and other FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 9 of 18 sister-concerns and cheated the innocent investors.
Brief reasons for decision
10. I have perused the record in the light of respective arguments.
11. On appreciating the record, I have reached a conclusion that there is sufficient evidence to establish that accused B.B.Sharma committed an offence punishable under Section 420 IPC. Section 420 IPC provides punishment for cheating and states that whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of valuable security or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with the imprisonment provided under the said Section. The term cheating has been defined under Section 415 IPC. It provides that whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he was not so deceived, and which act of omission causes or his likely to cause damage or harm to that person in body, mind, reputation or property, is said to cheat. Thus, to conclude that a person has cheated a person, the first and foremost ingredient is that there should be a dishonest inducement to deceive a person to deliver any property and the person so deceived must act on the said dishonest inducement.
12. In order to demonstrate the inducement part, prosecution relied FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 10 of 18 upon the testimony of investors who invested money in the company. Maj. Gen. (Retd.) Ranjit Singh (PW-1) stated that he read the advertisement of the company wherein lucrative rate of interest on investment was promised. His testimony shows that he believed the false representation made by the company and acting upon the said representation, invested a sum of Rs.1,00,000/- (Rupees One Lac only) in the company. He stated that his family members were also carried away with the advertisement and they deposited a sum of Rs.5,55,000/- (Rupees Five Lac Fifty-Five Thousand only) with the company. He stated that the company offered an interest of 24% to 30% on the investment alongwith collateral securities of various blue-chip companies. He stated that believing upon the rosy picture projected by the company, he and his family members invested huge amount. Similarly, P.P.Verma (PW-2), V.Subramaniam (PW-3), Vidya Bhutani (PW-5), K.M.Sagar (PW-8), Priyanka Sachar (PW-6), Shashi Prabha (PW-9), Kushal Kishore Tyagi (PW-
10), Bhawna Kumar (PW-12), Rahul Kumar (PW-13), Arun Kaushik (PW-
14), Maj. Gen. R.K.Chopra (PW-16), Dayanand (PW-25), Shashi Sachar (PW-26), Harinder Kaur (PW-27) and other investors have also deposed that they were persuaded by the rosy picture painted by the company in the advertisement. The cutting of the advertisement is on record wherein it has been mentioned that a person would get a return of as much as 27% per annum on the amount invested with the company. The investors have deposed that at one point or the other, the agents of the company assured them high rate of interest and they deposited the amount on the said assurance. In view of FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 11 of 18 the testimony of investors, there is absolutely no doubt that the advertisement given by the company painting a rosy picture and promising exceptionally high rate of interest did play on their mind. Believing upon the assurances given to them, the investors invested money in the company. Thus, the inducement part stands established.
13. It has also been established that the investors did part with the money and deposited the amount in the company. Each investor has given details of the cheque and narrated the manner in which the amount was invested in the company. The investors have deposed that at the time of investing money, the company handed over post-dated cheques towards assured return on their investment. The details of the cheques have been given by them and the copies of the cheques are on record. These cheques were dishonoured and returned back with remarks 'account closed'. The cheque return memos are also on record. Thus, it has been established that the company failed to honour its commitment and return the invested amount. Gurveer Singh (PW-28), Asstt. General Manager from RBI deposed that he inspected the accounts of the company and found that the funds were generated under Secured Investment Scheme without obtaining the requisite license from RBI. He mentioned that the generated amount was transferred from Hoffland Finance Ltd. to Hoffland Share Shoppe Ltd. through out the year but only one entry on 31.03.1997 debiting the security deposit account to Rs. 600.26 lacs and crediting in the account of Hoffland Share Shoppe Ltd. was found in the accounts. He mentioned that in the absence of this entry, the FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 12 of 18 balance security deposit as on 31.03.1997 would have been Rs.1826.61 lacs. He stated that the possibility of similar entries could not be ruled out as the company did not show him the complete record. His testimony demonstrates that the amount was diverted on regular basis but the requisite entries were not made in the accounts.
14. It has been the stand of defence that there is no evidence to infer that the company or the accused committed the offence with a criminal intention. Counsels have argued that in a criminal trial under Section 420 IPC, it is essential to establish that accused committed the alleged offence with the requisite criminal intention. They have argued that mens-rea is an essential ingredient of the offence of cheating and the accused can not be convicted merely because the company could not provide the promised return on the investment made by the investors. They have contended that neither the company nor the accused can be held criminally liable unless it is established that at the time of accepting deposits, they had criminal intention to cheat the investors. Ld. APP has argued that the criminal intention of the accused can be inferred from the record. He mentioned that there can not be any direct evidence to establish mens-rea and it can be gathered only from the circumstances in which the transaction was done and the manner in which the accused conducted themselves. He argued that after accepting huge deposits from various investors, accused transferred the money to various subsidiaries of Hoffland Finance Ltd. and subsequently, the invested amount was siphoned by them. He mentioned that in a very calculated manner, accused cheated the FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 13 of 18 investors and disappeared. He stated that the criminal intention to cheat is writ large on record.
15. On perusing the evidence in the light of respective arguments, I have reached a conclusion that there is sufficient evidence to conclude that B.B.Sharma committed the offence with criminal intention to cheat the investors. The company advertised in the daily Newspapers that any person investing money in the company would get a high rate of interest. The exceptionally high rate of interest promised by the company was a ploy to lure the investors. The investors fell in the trap and believing upon the false assurance, they parted with their money and deposited huge amount. In order to convince the investors, company issued post-dated cheques and in some case, shares of blue chip companies having value upto 60% of the invested amount were also given to the investors. All these tactics were adopted just to gain trust of the investors. Subsequently, the deposits were siphoned by B.B.Sharma by rotating the invested amount in various subsidiaries. It is proved beyond reasonable doubt that the company deceived the investors by fraudulently and dishonestly inducing them to deposit money against the fictitious schemes and subsequently, misappropriated the invested amount. The liability of the company has been established. It is an admitted position that B.B.Sharma was the Chairman-cum-Managing Director of the company and he was responsible for the day-to-day affairs. He was the Incharge of the company who was at the helm of affairs. He was managing the entire affairs behind the corporate veil. It has been proved that B.B.Sharma cheated the FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 14 of 18 investors and caused wrongful loss to them. Thus, the charge under Section 420 IPC has been established against accused B.B.Sharma. However, the evidence is not sufficient to bring home the charge against D.B.Sharma.
16. Counsel for D.B.Sharma has put forward two lines of defence. Firstly that there is no evidence to show the involvement of this accused and secondly that, at the time of commission of alleged offence, the accused was no longer the Director of the company. It has been the arguments of his counsel that none of the investors has deposed anything against the accused. He mentioned that Maj. Gen. Ranjit Singh is the only witness who deposed against this accused but his testimony is not reliable. He stated that apart from this witness, no other investor has whispered even a word against this accused. He contended that there is no evidence to show that D.B.Sharma entered into conspiracy to cheat the investors. He mentioned that B.B.Sharma was the mastermind behind the entire conspiracy and D.B.Sharma was himself a victim. He stated that D.B.Sharma was made only a non-active Director in the company and it was B.B.Sharma who committed fraud upon the investors by diverting the funds in the sister-concerns and subsequently siphoning off the money. It was argued by the counsel that there is evidence on record to show that D.B.Sharma retired from the Directorship of the company on 29.11.1997 and under such circumstances, he can not be held criminally liable for the alleged acts of the company. These arguments find support from the record.
17. In order to establish criminal conspiracy, the prosecution is under an obligation to show that there was an agreement or meeting of minds of two FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 15 of 18 or more persons to commit an offence. It has been held in 'V.C.Shukla Vs State (Delhi Administration)', 1980(2) SCC 665 that, to prove criminal conspiracy, there must be evidence director or circumstantial to show that there was an agreement between two or more persons to commit an offence. There must be a meeting of the minds resulting in an ultimate decision taken by the conspirators regarding the commission of an offence and where the factum of conspiracy is sought to be inferred from circumstances, the prosecution has to show that the circumstances give rise to a conclusive or irresistible inference of an agreement between two or more persons to commit an offence. As in all other criminal offences, the prosecution has to discharge its onus of proving the case against the accused beyond reasonable doubt. The circumstances in a case, when taken together on their face value, should indicate the meeting of minds between the conspirators for the intended object of committing an illegal act or an act which is not illegal, by illegal means. A few bits here and a few bits thereon which the prosecution relies can not be held to be adequate for connecting the accused with the commission of the crime of criminal conspiracy. In the present case, there is no evidence which may show that D.B.Sharma entered into criminal conspiracy to cheat the investors.
18. Admittedly, for establishing charge under Section 420 IPC, the prosecution must show that the fraudulent or dishonest intention on the part of accused was existing at the inception and not at a subsequent stage. Reference in this regard can be made in the under 'Surayalakshmi Cotton Mills Ltd. Vs Rajveer Industries Ltd. & Ors.' I(2008) DLT (Crl.) 329 SC. There is no FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 16 of 18 evidence to arrive at a conclusive finding that accused was carrying the requisite criminal intention from the inception i.e. from the time when the deposits were invited. Although, the cheques issued by the company were returned back with endorsement that the account of the company was closed but no presumption about the criminal intention can be raised merely because of this fact. Reliance in this regard can be placed upon 'Subodh S.Salaskar Vs Jyprakash M.Shah & Anr.' VII (2008) SLT 127 (SC) wherein in a case of dishonour of cheque, court refused to draw any presumption about the criminal intention merely because the account was closed subsequently.
19. Record further shows that D.B.Sharma resigned from the Directorship of Hoffland Share Shoppe Limited on 29.11.1997. R.K.Sahni (PW-47), official from Registrar of Companies deposed that D.B.Sharma retired from the Directorship on the said date and on the same day, Ramnish Prabhakar was inducted as a new Director. Thus, the accused resigned from the Directorship much before the time when the alleged offences were committed by the company. Moreover, there is evidence to demonstrate that B.B.Sharma was managing the entire affairs of the company. He was running the entire show. Mohan Lal (PW-45), official from Oriental Bank of Commerce stepped into the witness box and stated that B.B.Sharma was operating the account of Hoffland Share Shoppe Limited. There is overwhelming evidence to show that B.B.Sharma was managing the affairs of the parent company as well as sister-concerns. However, the evidence is not sufficient to show the involvement of D.B.Sharma. Accordingly, accused FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 17 of 18 D.B.Sharma stands acquitted while accused B.B.Sharma stands convicted for committing the offence punishable under Section 420 IPC.
Be heard separately on the point of sentence.
Announced in open Court (SUDHANSHU KAUSHIK)
on 21.01.2016 ACMM-01, Central District,
Tis Hazari Courts, Delhi
It is certified that this judgment contains Eighteen (18) pages and each page bears my signatures.
(SUDHANSHU KAUSHIK) ACMM-01, Central District, Tis Hazari Courts, Delhi FIR No.226/1998 State Vs B.B.Sharma & Ors. Page 18 of 18