Karnataka High Court
Mr Balraj Shetty vs State Of Karnataka on 20 May, 2020
Equivalent citations: AIRONLINE 2020 KAR 1369
Author: P.S.Dinesh Kumar
Bench: P.S.Dinesh Kumar
1
W.P. NO.15062/2019
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 20TH DAY OF MAY, 2020
BEFORE
THE HON'BLE MR.JUSTICE P.S.DINESH KUMAR
WRIT PETITION NO.15062/2019 (GM-RES)
BETWEEN:
1. Mr. Balraj Shetty
S/o B Raghuram Shetty
Aged about 60 years
Residing at Opposite Coral Apartments
Kadri Kaikattal
Mangalore-575003
2. Mahesh Kumar
S/o Gopal Karkera
Aged about 44 years
Residing at Urva Marigudi Cross Road
1st Lane, Urva, Mangalore-6
3. S.N. Faheem
S/o S.M. Rafiq
Aged about 34 years
Residing at Kings Court Apartment
T1, III Floor, Melinamuger
Attavar, Kaprigudda, Mangalore-2
... Petitioners
(By Shri Shashikiran Shetty, Senior Advocate
Smt. Anuparna Bordoloi, Advocate)
AND:
1. State of Karnataka
Represented by:
Sub Inspector of Police
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W.P. NO.15062/2019
Mangalore East Police Station
Represented by Public Prosecutor
D K Mangalore 575003
2. Praveen Chandra Shetty
S/o Late Y.K. Sanjeeva Shetty
311 - Kunil Complex
Bendoor Well
Mangalore 575 003
... Respondents
(By Shri Vijaykumar A. Patil, AGA for R1;
Shri Praveen Chandra Shetty, Party-in-person/R2)
....
This Writ Petition is filed under Articles 226 and 227 of
the Constitution of India read with section 482 of Criminal
Procedure Code, 1973, praying to:
a) Issue a writ to quash the complaint dated 19.05.2012 in
Crime No.70/2012 filed by the 2nd respondent to the 1st
respondent Police for offence punishable under Section 420
read with Section 34 of the Indian Penal Code, 1860
(Annexure A);
b) Issue writ to quash the FIR dated 19.05.2012 in Crime
No.70/2012 registered by the 1st respondent against the
petitioners (Annexure D);
c) Issue a writ quashing the order dated 02.03.2016 passed
in C.C.No.532/2013 passed by the learned JMFC (II Court),
Mangalore whereby the learned JMFC (II Court), Mangalore
directed to register the case against accused No.1 to 3 in
register No.III for the offences punishable under section
420 read with section 34 of IPC (Annexure B);
d) Issue a writ declaring that the petitioners have not
committed any offences punishable under Sections 420
read with section 34 of the Indian Penal Code, 1860 in so
far as petitioner concerned;
e) Issue a writ quashing the judgment dated 22.08.2016
passed by the IV Additional District & Session Judge
Dakshina Kannada, Mangaluru in Criminal Revision Petition
No.88/2016 (Annexure E);
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W.P. NO.15062/2019
f) Quashing the judgment dated 20.08.2016 passed by the I
Addl. District & Sessions Judge, Dakshina Kannada,
Mangalore in Crl.Rev.P.No.95/2016 (Annexure E1); and
g) Grant such other relief that this Court may deem fit in the
facts and circumstances of the matter.
This writ petition having been heard and reserved for
orders on 19.02.2020, coming on for pronouncement of
orders this day, the Court made the following:-
ORDER
This writ petition is presented praying inter alia to quash complaint dated 19.05.2012 in Crime No.70/2012 given by second respondent to East Police Station, Kadri Hills, Mangaluru; order dated 02.03.2016 directing registration of criminal case; and proceedings in C.C.No.532/2013 on the file of JMFC (II Court) Mangaluru.
2. Heard Shri. K. Shashikiran Shetty, learned Senior Advocate for the petitioners, Shri.Vijaykumar A.Patil, learned Additional Government Advocate for the State and Shri. Praveen Chandra Shetty, Party-in- person/second respondent.
4W.P. NO.15062/2019
3. Briefly stated the facts of the case are, on 19.05.2012, Praveen Chandra Shetty, respondent No.2 herein lodged a complaint with East Police Station, Kadri Hills, Mangaluru, stating inter alia that petitioners had traded in his trading account on an unapproved electronic trading platform and thus committed offence punishable under Section 420 of Indian Penal Code, 1860 (hereinafter for brevity referred to as 'IPC'). The said complaint was registered as FIR No.70/2012. Police after investigation, filed a 'B' report. Feeling aggrieved, second respondent filed a protest petition. The learned Magistrate, by his order dated 02.03.2016 directed registration of a criminal case and the same has been registered as C.C.No.567/2016.
4. First petitioner - Balraj Shetty challenged the order passed by the learned Magistrate before the learned Sessions Judge in Criminal Revision Petition No.88/2016. The same has been dismissed by order dated 22nd August, 2016. Second and third petitioners - 5 W.P. NO.15062/2019 Mahesh Kumar and S.N. Faheem challenged learned Magistrate's order in Criminal Revision Petition No.95/2016 and the said petition has also been dismissed by order dated 20th August, 2016. Hence, these writ petitions.
5. Shri Shashikiran Shetty, learned Senior Advocate submitted that first petitioner is associated with Way2Wealth Brokers Private Limited (hereinafter for brevity referred to as 'Way2Wealth'), a stock broking company as its client for doing transactions in shares and securities on the capital market segment of National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). He has been allotted client code number as AJ01. Petitioners No.2 and 3 are employees of Way2Wealth.
6. Second respondent is one of the customers of Way2Wealth. His trading account is maintained as SIA 00022 and mapped to the branch of Way2Wealth at Café Coffee Day, Oberle Towers, Balamata, Mangaluru. The 6 W.P. NO.15062/2019 shares are bought and sold for the client through computer terminals located in the branches and connected to NSE or BSE.
7. Second respondent entered into a Member Client Agreement dated 19.03.2009 with Way2Wealth. He opted for internet based trading facility.
8. The company has taken internet based trading software from M/s. Omnesys Technologies Private Limited (hereinafter for brevity referred to as 'M/s. Omnesys'). NSE has issued permission letter dated 22.07.2008 and 04.08.2008 to the company to use internet based trading.
9. Online trading facility was provided to second respondent and accordingly trades were executed through CTCL terminal. Second respondent lodged a complaint on 24.05.2010 stating that the software and the charts/graphs reflecting in the software were manipulated. Way2Wealth sent several communications 7 W.P. NO.15062/2019 to convince that software was approved by NSE. Way2Wealth also furnished permission letters dated 22.07.2008 and 04.08.2008 issued by NSE approving the internet based trading. Second respondent demanded approval from NSE for the software version NEST Trader 3.10.57.66. Way2Wealth approached the vendor of the software M/s. Omnesys and NSE for letter of approval of NEST Trader 3.10.57.66, version of the software. NSE clarified that they provide approval for base version of the software and not for upgraded version. With the said clarification NSE closed the complaint.
10. Second respondent lodged a complaint before the police on 19.05.2012. Petitioners submitted their responses to the police. Way2Wealth also submitted its reply to the Commissioner of Police Mangaluru. After investigation, police have filed a 'B' report. Second respondent filed a protest petition. The learned JMFC has rejected the 'B' report and by his order dated 12.02.2013 directed registration of a criminal case. Petitioners 8 W.P. NO.15062/2019 challenged the said order in Criminal Revision Petition No.117/2013. The learned I-Additional District and Sessions Judge, D.K., Mangaluru by his order dated 24.06.2015 allowed the Criminal Revision Petition and remitted the matter to the learned Magistrate for fresh consideration. The learned Magistrate, by order dated 02.03.2016 has directed registration of criminal case and accordingly C.C.No.567/2016 has been registered. Petitioners challenged the said order in two separate criminal revision petitions and the same have been dismissed by the learned Sessions Judge.
11. In support of this petition, Shri Shashikiran Shetty submitted-
• that the transactions were effected on the trading platform of NSE and BSE;
• that bye-laws and regulations of NSE and BSE provide for settlement of differences by way of arbitration; • the complainant had approached the NSE, and the NSE has closed the issue as no case was made out by the complainant; and 9 W.P. NO.15062/2019 • complainant is harassing the petitioners to extort money.
12. In substance, learned Senior Advocate submitted that trading was done on the software approved by the NSE and BSE. Dispute if any, have to be resolved by way of arbitration. Therefore, the criminal complaint is not maintainable. Consequently, all further proceedings are unsustainable in law.
13. Learned AGA and Shri Praveen Chandra Shetty, Party-in-person argued opposing the petition.
14. Shri Praveen Chandra Shetty submitted that due to manipulation in the software he has suffered huge losses.
15. I have carefully considered rival contentions and perused the records.
16. Precise allegation of second respondent is that 'unapproved' software was used while trading the stocks and shares. This has caused financial loss to him. 10 W.P. NO.15062/2019
17. Admittedly, complainant demanded for a letter of approval by the NSE/BSE with regard to NEST Trader 3.10.57.66, version of the software. The communication as per Annexure-H1 by the NSE to the Chairman of Way2Wealth shows that provisional permission was granted for modification of internet based trading software with effect from July 2008. The said communication contained certain riders. The said letter reads as follows:
"NATIONAL STOCK EXCHANGE OF INDIA LIMITED Ref.No.NSEIL/INET/80585-P Mr. V G Siddharta Chairman Way2Wealth Brokers Pvt. Ltd 4072, B-Wing, Oberoi Gardens Off. Chandivli Farms Road Chandivli, Andheri (East) Mumbai-400 072 Sub: Permission for modification of internet based trading software in the Capital Markets segment and Futures & Options segment Dear Sir, This has reference to the modified version of your internet based trading software which includes Exe based product developed by empanelled vendor M/s Omnesys Technologies Pvt. Ltd in Capital Markets segment and Futures & Options segment of the Exchange name of website: www.way2wealth.com 11 W.P. NO.15062/2019 Based on the discussions in this regard and demonstrations of your modified software you are hereby granted provisional permission for the modification in internet based trading software w.e.f. July 25, 2008.
Additionally you are requested to take note of the following:
1) Providing trade date wise number of trades, traded value (Rs. In cores and number of registered clients at the end of every trading week for internet based trading facility as per circular ref.no.NSE/CMO/30/2008 (Download no.BSE/CMTR/07960)
2) Uploading CTCL data in the integrated Database through ENIT as per circular ref.no.547 (Download no NSE/MEM/7913) dated September 25th 2006 prior to commencement of trading.
You are required to ensure continuous fulfillment of all the conditions undertaken by the undertaking date November 28, 2002 executed by you in favor of NSDL. Please note that you also required to ensure continuous compliance with all the requirements in respect of internet-based trading stipulated by SEBI/ Dot/NSE/any other authority vide there guidelines, circular etc from time to time.
Thanking you, Yours faithfully, For National Stock Exchange of India Limited Sd/-
SuprabhatLala Asst. Vice President"
(Emphasis supplied)
18. Petitioners have also annexed a communication by M/s. Omnesys dated 28.05.2012 12 W.P. NO.15062/2019 stating that software used by Way2Wealth having trading terminal version NEST Trader 3.10.57.66 is an approved product.
19. It is averred in paragraph No.9 of writ petition that Way2Weatlh approached M/s. Omensys and NSE for letter of approval of NEST Trader 3.10.57.66, version of software. NSE clarified that it provides approval for base version and not for upgraded version. In support of this pleading, petitioners have relied upon communication dated 28.05.2012 (Annexure-J) issued by M/s.Omnesys. The said letter is in the form of a declaration with a heading 'To whomsoever it may concern' and it reads as follows:
"To whomsoever it may concern We are an empanelled vendor for providing IBT solutions for the capital market segment, Future & Option segment and Currency Derivatives segment of NSE. We have been empanelled with the exchange since 2003. We presently have more than 200 clients using our software in different segments of the industry like institutional, Retail and automated trading. Way 2 wealth Brokers Pvt. Ltd is 13 W.P. NO.15062/2019 one of our clients. They are using our products in the retail segment since May 2008.
The software deployed at Way 2 wealth Brokers Pvt. Ltd., having a Trading Terminal version: Nest Trader 3.10.57.66 is an exchange approved product.
For Omnesys Technologies Pvt. Ltd.
Date: 28.05.2012 Sd/-
Place: Bangalore Shrikant Pandit
Managing Director"
20. Thus, the above letter is a self declaration by M/s. Omnesys that software is an approved product. There is no document/communication by NSE that the software was approved by it.
21. Hence, the grievance of second respondent with regard to approval of the software NEST Trader 3.10.57.66 by the National Stock Exchange remained unresolved.
22. Praveen Chandra Shetty, Party-in-person contended that the software utilized for trading is not approved by NSE and it is a manipulated one. This aspect has not been clarified by the petitioners nor M/s. Omnesys nor NSE/BSE. On the other hand, petitioners 14 W.P. NO.15062/2019 have specifically pleaded in this writ petition that Way2Wealth sought for approval from the NSE but NSE has clarified that it approves only the base version and not the upgraded version. Thus this is clear admission on the part of petitioners that the software used is not approved by NSE.
23. In these facts and circumstances, the learned Magistrate has directed registration of criminal case for offence punishable under section 420 IPC. The entire case hinges upon the allegation of manipulation of the software. Manipulation if any, can be proved only after trial.
24. In the premise, no exception can be taken to the order passed by the learned Magistrate and dismissal of the revision petitions by the learned Sessions Judge.
25. Resultantly this writ petition fails and it is accordingly dismissed. It is made clear that any observation made in this writ petition is for the purpose 15 W.P. NO.15062/2019 of adjudication of this petition and shall not influence the trial in any manner.
Sd/-
JUDGE Swk/SPS