Delhi District Court
State vs : B.B.Sharma & Ors. on 21 September, 2015
IN THE COURT OF SH. SUDHANSHU KAUSHIK, ADDL. CHIEF METROPOLITAN MAGISTRATE-01 : CENTRAL DISTRICT :
TIS HAZARI COURTS : DELHI State Vs : B.B.Sharma & Ors.
FIR No. : 157/1998
U/s : 406/420/409/120 IPC
PS : R.K.Puram
Date of Institution : 01.12.1998
Date of Judgment reserved on : 21.09.2015
Date of Judgment : 21.09.2015
Unique ID : 02401R0857902005
Brief details of the case
A) Sl. No. of the case : 54/CR
B) Offence complained of
or proved : U/s 409/420/120B IPC
C) Date of Offence : In the year 1997-98
D) Name of complainant : Santosh K.Sethi
R/o G-1, National Instt. of
Immunology, Aruna Asaf Ali
Marg, New Delhi-110067
E) Name of accused : (1) B.B.Sharma
S/o S.P.Sharma,
R/o B-2/54, Safdarjung Enclave.
New Delhi
(2) M.N.Badam (Acquitted)
S/o Shridharjoo,
R/o 302, Vipin Garden,
Kakrola More, Uttam Nagar,
New Delhi-110059
(3) A.Subba Rao (Acquitted)
S/o A.Srinivasayya,
R/o 153/1A, West Azad Nagar,
Gali No.14, Krishna Nagar,
Delhi
F) Plea of accused : Pleaded not guilty
G) Final order : Convicted U/s 420 IPC
H) Date of Order : 21.09.2015
FIR No.157/1998 State Vs B.B.Sharma & Ors. Page 1 of 10
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, accused B.B.Sharma, M.N.Badam and A.Subba Rao (Directors of M/s Hoffland Finance Ltd. Company) were sent up to face trial for committing offences punishable under Section 409/420 IPC read with Section 120 IPC.
Brief facts as disclosed in the charge sheet
2. It is the case of prosecution that somewhere in the year 1997-98, accused entered into a criminal conspiracy to cheat investors by inducing them to make deposits in their company and in furtherance of this conspiracy, they floated number of companies including M/s Hoffland Share Shoppe Ltd. which was a subsidiary of M/s Hoffland Finance Ltd. B.B.Sharma was the Chairman-cum- Managing Director of the parent company while M.N.Badam and A.Subba Rao were the Directors of the subsidiary company. After floating the company, 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 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 FIR No.157/1998 State Vs B.B.Sharma & Ors. Page 2 of 10 invested amount and post-dated cheques towards interest and principal were given to some investors but on presentation, the cheques were returned back with remarks ' account closed' . On these set of allegations, present FIR bearing No.157/1998 under Section 420/406/409/120B IPC was registered at Police Station R.K.Puram on the complaint of one of the investors and during investigation, the other investors were also joined. Statements of witnesses were recorded and all the accused were arrested. The accounts of the company were inspected by the officials of Reserve Bank of India. The report (Ex.PW-21/A) submitted by the officials was collected and on conclusion of investigation, charge-sheet was put to the court.
3. Copies of the charge-sheet were supplied to all the accused and vide order dated 01.12.1999, charges under Section 409/420 IPC read with Section 120B IPC were framed against them to which they pleaded not guilty and claimed trial.
4. After examination of prosecution witnesses, B.B.Sharma stopped appearing before the court and vide order dated 11.01.2008, he was declared to be a ' proclaimed offender' . The trial concluded qua the other two accused and vide order dated 20.08.2010 passed by the Ld. Predecessor, both were acquitted. Subsequently, B.B.Sharma was arrested and trial qua him also concluded.
Witnesses Examined
5. Thirty-Seven prosecution witnesses were examined. Investors PW-1 D.N.Sharma PW-3 Santosh Kumar Seth PW-4 D.S.Bakshi PW-6 Durgabn Goswami FIR No.157/1998 State Vs B.B.Sharma & Ors. Page 3 of 10 PW-8 Manju Sharma PW-9 Prem Kumari Sharma PW-10 P.S.Bawa PW-11 K.B.Rai PW-12 Raj Kumari PW-12A Prakash Yadav PW-13 S.N.Aggarwal PW-14 Col. P.M.Dubey PW-15 Ram Lubhaya PW-16 Santosh Anand PW-17 Anil Gupta PW-18 Anjali Gupta PW-19 N.J.Tikoo PW-21 H.S.Chawla PW-22 V.K.Mehta PW-23 Rashmi Mehta PW-24 Krishna Kaul PW-25 K.Krishan Kaul PW-26 V.K.Gupta PW-27 Kusum Lata Nigam PW-28 Babu Ram PW-29 Sudarshan Lal PW-30 Pahu Lal PW-31 Jatin Chopra PW-32 B.S.Sandhu PW-33 B.D.Sharma PW-36 S.K.Sharma Witnesses from Bank/Registrar of Companies PW-2 Sharda (Assistant from Registrar of Companies) PW-7 Gurveer Singh (Assistant General Manager, RBI) PW-11A Sharad Kumar (Clerk, Oriental Bank of Commerce) PW-20 Gurveer Singh (examined again) Police Officials PW-34 HC Prahalad Singh (Duty Officer) PW-37 Insp. Anil Kumar (Investigating Officer)
6. Statement of accused B.B.Sharma was recorded under Section 313 Cr.P.C wherein he 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 FIR No.157/1998 State Vs B.B.Sharma & Ors. Page 4 of 10 stock exchange and on account of said reason, the cheques of interest and the principal amount were dishonored. No defence witness was examined.
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. Defence Counsel has argued that prosecution has failed to establish its case. He contended that there is no evidence to infer that the company had criminal intention to cheat the investors. He argued that the deposits were accepted under a bonafide 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 mentioned that the ingredients of Section 409 IPC have not been proved. Counsel contended that default in repayment occurred due to circumstances beyond the control of accused and no criminal liability can be fasten upon him. He argued that B.B.Sharma can not be held liable for criminal conspiracy as the other two accused have already been acquitted. On the force of these submissions, counsel has prayed that 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 all 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 FIR No.157/1998 State Vs B.B.Sharma & Ors. Page 5 of 10 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 sister-concerns and cheated the innocent investors.
Brief reasons for decision
10. I have perused the record in the light of respective arguments.
11. Admittedly, M.N.Badam and A.Subba Rao have already been acquitted by the Ld. Predecessor. In view of their acquittal, the argument of the defence that accused can not be held liable for the offence of criminal conspiracy is well founded as a single person can not be made accountable for criminal conspiracy. However, there is sufficient evidence on record to establish that accused 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 FIR No.157/1998 State Vs B.B.Sharma & Ors. Page 6 of 10 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 upon the testimony of investors who invested money in the company. D.N.Sharma (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. Similarly, Prem Kumari Sharma (PW-9), K.B.Rai (PW-11) and S.N.Aggarwal (PW-13) 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 other investors have also 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 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.
FIR No.157/1998 State Vs B.B.Sharma & Ors. Page 7 of 10
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 it commitment and return the invested amount. Gurveer Singh (PW-20), 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 Shhope 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 Shhope Ltd. was found in the accounts. He mentioned that in the absence of this entry, the 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. Counsel has 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 FIR No.157/1998 State Vs B.B.Sharma & Ors. Page 8 of 10 intention. He 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. He has 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 himself. 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 him. He mentioned that in a very calculated manner, accused cheated the 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 accused 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 accused 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 FIR No.157/1998 State Vs B.B.Sharma & Ors. Page 9 of 10 adopted just to gain trust of the investors. Subsequently, the deposits were siphoned by the accused 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.
16. The liability of the company has been established. It is an admitted position that accused 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 accused cheated the investors and caused wrongful loss to them. However, the ingredients of the offence punishable under Section 409 IPC have not been established. The evidence is insufficient to conclude that accused was a public servant/banker/merchant or agent of the investors or that he committed criminal breach of trust in the said capacity. Thus, only the charge under Section 420 IPC has been established. Accused B.B.Sharma stands convicted for committing the said offence.
Be heard separately on the point of sentence.
Announced in open Court (SUDHANSHU KAUSHIK)
on 21.09.2015 ACMM-01, Central District,
Tis Hazari Courts, Delhi
It is certified that this judgment contains Ten (10) pages and each page bears my signatures.
(SUDHANSHU KAUSHIK) ACMM-01, Central District, Tis Hazari Courts, Delhi FIR No.157/1998 State Vs B.B.Sharma & Ors. Page 10 of 10