Gujarat High Court
Bharatbhai Jayantilal Patel vs State Of Gujarat on 4 October, 2023
NEUTRAL CITATION
R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 19310 of 2019
With
R/CRIMINAL MISC.APPLICATION NO. 19313 of 2019
With
R/CRIMINAL MISC.APPLICATION NO. 18806 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE SANDEEP N. BHATT Sd/-
==========================================================
1 Whether Reporters of Local Papers may be allowed Yes
to see the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy No
of the judgment ?
4 Whether this case involves a substantial question No
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
BHARATBHAI JAYANTILAL PATEL
Versus
STATE OF GUJARAT
==========================================================
Appearance:
CRIMINAL MISC. APPLICATION Nos.19310 & 19313 of 2019
ADVOCATE NOTICE NOT RECD BACK for the Applicant(s) No. 1
MR ND NANAVATY, Senior Advocate with MR. RAHUL R
DHOLAKIA(6765) for the Applicant(s) No. 2
MR. YOGENDRA THAKORE(3975) for the Respondent(s) No. 3
NOTICE SERVED for the Respondent(s) No. 2
MR CHINTAN DAVE, APP for the Respondent(s) No. 1
CRIMINAL MISC. APPLICATION No.18806 of 2019
MR JS UNWALA, SENIOR ADVOCATE with MR NIKUNT RAVAL for
the petitioner.
MR. YOGENDRA THAKORE(3975) for the Respondent(s) No.2
Page 1 of 46
Downloaded on : Wed Oct 04 20:50:23 IST 2023
NEUTRAL CITATION
R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023
undefined
MR CHINTAN DAVE, APP for the Respondent(s) No. 1
=========================================================
CORAM:HONOURABLE MR. JUSTICE SANDEEP N. BHATT
Date : 04/10/2023
ORAL JUDGMENT
1. Present petitions are filed against the impugned FIR for the offences under Sections 406, 420, 120-B and 114 of IPC and, therefore, all the three petitions are heard and decided by this common judgment.
2. So far as Criminal Misc. Application Nos.19310 and 19313 of 2019 are concerned, the petitioners herein were either the Directors or the officers or professional advisors/consultants to the firm called M/s.Finquest Financial Solutions Private Limited at the relevant point of time. Since facts are somewhat similar in both these matters, facts of Criminal Misc. Application No.19310 of 2019 are stated here. M/s.Finquest Financial Solutions Private Limited is in the business of Non Banking Finance (NBFC) regulated by the Reserve Bank Of India. It is pertinent to state that loans and advances / investment of M/s. Finquest Financial Solutions Private Limited as on 31/3/2019 is about 1200 Crores and combined net worth of the petitioner no.1 and 2 as on 30/9/2019 is 487 Crores. The petitioner no.1 and 2, also, being the Chairman and the Director of M/s. Finquest Financial Solutions Private Limited not only having sound Page 2 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined financial status but having very high reputation in the financial market.
2.1 It is submitted that, Respondent no.3 has promoted the company called M/s. Manpasand Beverages Limited and listed on NSE & BSE engaged, inter-alia, in manufacturing and sale of fruit drinks under the various brands. Further, it is submitted that somewhere in August 2011, M/s. SAIF Partners (Equity Fund) had invested about US $ 10 Million for minority stake in the company and thereafter also invested in Pre-IPO round, thereafter, one Shri Vishal Sood of M/s. SAIF Partners came to be appointed as Nominee Director in M/s. Manpasand Beverages Ltd, who has also now been roped in the FIR as Accused No.7. It is pertinent to state that, Respondent no.3 through M/s. Manpasand Beverages Ltd. raised fund of Rs. 400 Crores by way IPO in the year 2015 and Rs.500 Crores by way of QIP in the year 2016.
2.2 It would not be out of place to state that; M/s. Deloitte Haskins & Sells India was the Statutory Auditors of M/s. Manpasand Beverages Ltd for 8 years, however, resigned w.e.f. 26/05/2018 on the ground of non cooperation by the Respondent no.3 by not providing significant and relevant information despite several reminders. It is pertinent to state Page 3 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined that, similarly in the May 2019, the then statutory auditors of company who were appointed in place of M/s. Deloitte Haskins & Sells India in May 2018 also resigned in July 2019 citing adverse development i.e. resignation of the independent directors of the company, arrest of the CFO and director of the company by the GST officials and alleged "frauds" committed by the management of the company by availing false input credits of the GST.
2.3 It is submitted that, as appears, Respondent no.3 after having raised huge amount from public at large by way of IPO and QIP started mismanaging the affairs of the company so as to deflect the funds for their personal benefits. It is also pertinent to point out that Respondent no.3 who raised Rs.900 Crore of the public by presenting false turnover and profits had duped the investors and the investors who had invested in the company at a price of Rs.500/- share are staring at huge losses as the current price of the share is at Rs.7/- per share which amounts to more than 90% erosion of their value. Further, on 23/5/2019 CGST and Customs carried out search and seizure at various premises and having found substantial illegalities to the tune of Rs.50 Crores, arrested the Son of the Respondent no.3 and also CFO of the company. It would not be out of place to state that the GST department issued a press release to the same effect Page 4 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined outlining the frauds committed by the M/s. Manpasand Beverages Ltd and Respondent no.3 and his son in collusion with the CFO and senior officials of the company had floated bogus firms across the country and availed of the false input credits of GST amounts and indulged in the circular trading for defrauding the revenue.
2.4 It is submitted that due to aforesaid arrests of the Director/CFO and GST searches and investigation, stock price of the company dropped and even many senior officials of the company resigned for their internal grievances and further due to said incidents and illegalities, loan sanctioned to the company came to be withheld by the banks and thereby Respondent no.3 was in acute need of finance, resultantly operations of the company came to a standstill and liabilities were piling up and company's position was going from bad to worse. In this dire situation, Respondent no.3 was introduced to the petitioner no.1 and 2 by one Mr. Vishal Sood who is the Managing Director of M/s. SAIF Partners (Private Equity Firm) being the shareholders and was then Nominee Director of M/s. Manpasand Beverages Ltd of Respondent no.3. It is submitted that in the said primary meeting held on in the end of June 2019 at New Delhi along with petitioner no.1 and 2, Respondent no.3, Shri Vishal Sood and the team of M/s. Ernst & Young (largest auditing firm in the world) it Page 5 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined was projected that M/s. Manpasand Beverages Ltd. is debt free company and its flagship brand "Mango Sip" is a well established brand in the market. However, the company facing acute liquidity problems and thereby requested the petitioners to sanction term of loan of Rs.100 Crores towards working capital and repaying certain existing liabilities. 2.5 It is submitted that as part of its business of Non Banking finance, M/s. Finquest Financial Solutions Private Limited had explained the Respondent no.3 about the terms and conditions including documentations and the way of working. It is pertinent to state that all the draft of the agreements were handed over to the Respondent no.3 for his perusal and satisfaction. Further, upon having agreed, Respondent no.3 vide its letter dated 25/06/2019 requested the M/s. Finquest Financial Solutions Pvt. Ltd to sanction secured term loan of Rs.100 Crores. It is pertinent to state that, in the said letter, Respondent no.3 has in unequivocal terms agreed to execute all the documents drafts of which were provided to Respondent no.3 in advance for his perusal. 2.6 Apropos to the aforesaid, vide letter dated 02/07/2019 M/s. Finquest Financial Solutions Pvt. Ltd showed readiness to sanction the loan to the tune of Rs.100 Crore on main terms and conditions stated therein over and above that may Page 6 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined be agreed by way of separate loan agreements etc., which was duly accepted and agreed upon by the Respondent no.3 by way of putting signature on the letter dated 2/7/2019. 2.7 It is submitted that in furtherance of the aforesaid acceptance by the Respondent no.3, on 11/07/2019 in the board meeting, crucial decision was unanimously taken whereby two new independent directors were inducted and resignation of 2 independent directors, nominee director, non executive director and 2 other directors, Company Secretary and Statutory Auditors was accepted. Further, Respondent no.3 was authorized for availing loan and escrow account were also resolved to be opened. It is pertinent to state that, Respondent no.3, later on, vide his letter dated 11/07/2019 intimated the BSE Limited and NSE Limited about appointing 2 new directors, availing 100 Cr. loan against mortgage / hypothecation of assets of the company and pledge of 100% shareholding of the Respondent no.3. 2.8 It is submitted that thereafter, as per the business transaction, formalities of necessary documentation such as Loan Agreement, Deed of Brand Pledge, Deed of Hypothecation, Deed of Irrevocable and Unconditional Guarantee came to be executed and duly signed by the Respondent no.3.
Page 7 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023
NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined 2.9 It is submitted that despite the fact that disbursement of loan amount was to be made only after due diligence, petitioners have, looking to acute urgency and upon trust in good faith, transferred an amount of Rs. 3 Crores approximately to the account of M/s. Manpasand Beverages Ltd between 12th July 2019 to 19th July 2010 to meet with the pending electric bills, salary and PF amount of the employees.
2.10 It is submitted that on 2/8/2019 in the board meeting amongst other agendas, one another independent director was inducted and M/s. Batliboi & Purohit were appointed as a Statutory Auditors to fill up the vacancy caused by the resignation of statutory auditors M/s. Mehra Goel & Co. It is submitted that, thereafter, upon opening of the new account of M/s. Manpasand Beverages Ltd in IDBI bank, another sum of Rs.8 Cr. have been transferred and paid to meet with day to day operations of the company and its liability. It is pertinent to state, at the cost of repetition, total sum of Rs.11 Cr.. transferred despite the fact that due diligence was pending.
2.11 It is submitted that on 05/09/2019, M/s. Batliboi & Purohit (Auditors) have submitted detailed report stating, inter-alia, huge illegalities, malpractice, discrepancy in various Page 8 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined heads. Further, recommended detail investigation for past 3 years and also suggested the company's director to cure the defect as early as possible.
2.12 It is submitted that petitioners have appointed M/s. Ernst & Young (one of the world's leading and largest auditing firm) to carry out due diligence, however, in the meanwhile son of the Respondent no.3 and the CFO came to be released by the Hon'ble Court on regular bail on 24/8/2019, thereby, entire behaviour and conduct of the Respondent no.3 changed and started non co-operation by not attending to the operations of the company and attending to board meetings. It is pertinent to state that on 06/09/2019 board meeting was scheduled at Mumbai which was not attended by the Respondent no.3 and dramatically CFO Shri Presh Thakkar resigned at the last moment and remained absent. Further, Ms. Bharti Naik and Ms. Shailika Soni who generally attend meeting on behalf of M/s. Manpasand Beverages Ltd. strangely though came to Mumbai but not remained present personally and participated on Audio Conference; same way Respondent no.3 participated on Audio Conference. It is submitted that in the said board meeting and audio conference, it was apprised to the board members that E&Y and Statutory Auditor's team have not been provided the records such as sales invoices, purchase invoices, Page 9 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined production record and bank statements. Further, statutory auditor has placed serious observation about unexplained customers, unexplained receipts in the ledger of ICICI bank account, purchase from unexplained vendors, purchase from unregistered dealers, high level of capital advances and thereby audited figures of FY 2017-18 have seriously been doubted and recommended for detailed investigation of books of accounts for 3 years by independent agency. It is submitted that over and above Ernst & Young team has prepared the report wherein major financial discrepancies found, therefore, petitioners have requested the forensic audit for further disbursement of loan amount. Thus, Respondent no.3 has informed the board that he is no more interested to participate, same way Ms. Bharti and Shailika Soni disconnected the phone.
2.13 It is submitted that Respondent no.3 having realised the seriousness of the statutory auditor report as well as E&Y's report, on 12/09/2019 called board meeting at Vadodara by keeping in dark the independent directors at Mumbai and started acting arbitrary. It is further submitted that even the statutory auditors have been not allowed to enter into the premise on 9/9/2019 for carrying out the audit. It is submitted that Respondent no.3 is well aware that if the forensic audit is allowed to be carried out than in that case Page 10 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined huge financial fraud of the public money would surface and he would be subjected to scrutiny by SFIO, the Investigating Wing under the Ministry of Corporate Affairs, therefore, as counter blast entire false FIR being C. R. No. I 41/2019 dated 27/09/2019 registered at Bhadarva Police Station at the instance of the Respondent no.3 for the offences punishable U/s. 120-B, 420, 406 and 114 of the IPC. Accordingly, both these petitions are filed by the petitioners.
3. So far as Criminal Misc. Application No.18806 of 2019 is concerned, the applicant submits that the impugned FIR is filed with an intention to falsely implicate the Applicant herein and in order to shift burden of the transactions done by the Complainant himself on the Applicant by claiming fake innocence and by falsely taking shelter of mental breakdown. The Complainant has conveniently concealed material facts only with a view to falsely frame the Applicant as an accused.
3.1 The applicant submits that the Applicant herein is a reputed investment professional. He is an engineer and an IIM, Ahmedabad pass out and has worked in senior positions in reputed companies such as L&T, SBI Capital Markets and Kotak Securities and served on the Board of listed companies such as Speciality Restaurants Ltd, KDDL Ltd, Pennar Page 11 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined Industries Ltd. Among others. He is currently working with SAIF Partners, in the position of managing director. SAIF Partners group is a private equity and venture capital investor based out of Mauritius SAIF Partners is a leading multiple-stage venture capital firm that provides capital to companies in Asia (primarily China, Hong Kong and India). SAIF's primary areas of focus include Technology, e- Commerce, Financial Services, Consumer Services, Education Services, Healthcare, and Manufacturing. SAIF Partners was founded in 2001, and is a long-term investor in India. SAIF Partners Group has made investments in 50+ companies in listed and unlisted companies in India, including National Stock Exchange (NSE), One97 Communications (Paytm), Mindtree, MakeMyTrip.com, JustDial, Manpasand Beverages, Edelweiss, BlueStar, etc and has assets under management of more than 2 Bn USD in India.SAIF Partners fund (SAIF Partners India IV Limited) had invested an amount to the tune of Rs. 90 Crore on different dates in the month of July, 2011, August, 2011 and June,2014 in Manpasand Beverages Ltd. The Company was listed on the stock exchange in June. 2015. It also had a subsequent qualified institutional placement on September 2016. The Applicant was the deal partner and till, 24-09-2019 the non-executive nominee director of SAIF Partners on the board of Manpasand Beverages Ltd. It is submitted that as on date, the Page 12 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined Applicant's Company is holding around 18% equity shares of the Manpasand Beverages Ltd. It is submitted that in the year 2018, Deloitte part of the Big 4 auditing firm, which was the statutory auditor of Manpasand Beverages Ltd. for more than 5 previous years, had resigned from the company due to delay in providing information by the management which is a very rare occurrence for a listed company. It is submitted that thereafter, one Mehra Goel and Co. was appointed as statutory auditor of Manpasand Beverages Ltd. It is submitted that thereafter on 23-05-2019, C GST officers carried out raids and search at factory premise of the Manpasand Beverages Ltd. and as per the press release of the C GST Department, Vadodara they had unearthed a network of more than 30 fake units located in various parts of country and a huge amount of tax evasion which had finally came to Rs. 17 Crore 77 lacs as per the Complainants own statement. It is submitted that the Sons of Complainant Mr. Harshvardhan Sinh and Abhishek Sinh alongwith C.FO were arrested by the department. It is submitted that the Applicant had immediately resigned from the board of directors as nominee director of SAIF Partners from Manpasand Beverages Ltd. on receiving news of the GST fraud and arrests. Subsequently other independent directors and Mehra Goel and Co. have also resigned from the Company.
Page 13 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023
NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined 3.2 It is submitted that the Complainant had contacted and negotiated with different financial institutions and persons for finances. A team of crisis management namely EY crisis management team (EY CMT for short) was also contacted to help in the situation. It is submitted that in the meanwhile, one Finquest Finanacial Solutions Pvt. Ltd. was ready to finance on certain terms and conditions. SAIF Partners or the Applicant have no relationship with Finquest Solutions Pvt. Ltd. It is pertinent to note here that the terms and conditions between Finquest Financial Solution Pvt. Ltd. and the Complainant were discussed in detail between the Complainant including on one to one basis in meetings between them. Further, in the meetings, Mr. Vinod Jain, (owner of Mehra Goel and Co.) was representing the Complainant and negotiating on his behalf with Finquest Financial Solutions Pvt. Ltd. Thereforethe Applicant in no way could have influenced the Complainant who was taking his own decisions and having his own advisors present. In fact, even after the arrest of the Complainants son and the CFO of the Company the Complainant has actively negotiated on deal terms and documents. The Complainant is a seasoned businessman and the Complainant used to general meetings as well as one on one meetings to procure finances and has settled all the terms and conditions with the said Finquest Page 14 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined Financial Solutions Pvt. Ltd. andsigned all documents with full awareness and capacity. Subsequently, thereafter, due to differences between the Complainant and Finquest Financial Solutions Pvt. Ltd. and his unwillingness to cooperate for a forensic audit as requested by the then independent directors and statutory auditor, the Complainant has filed the impugned FIR wherein the Applicant is also falsely roped in as an accused. Therefore, present application for quashing of the impugned FIR is being preferred under Section 482 of the CrPC.
4. Heard learned Senior Counsel, Mr.N.D.Nanavati appearing for the applicant in Criminal Misc.Application No.19310 of 2019 and 19313 of 2019 and learned Senior Counsel, Mr.Unwala for the petitioner of Criminal Misc.Application No.18806 2019 and learned APP, Mr.Chintan Dave appearing for the respondent-State and learned advocate, Mr.Yogendra Thakore appearing for respond No.3- original complainant.
5. Learned Senior Counsel, Mr.N.D.Nanavati has submitted that prima facie no case is made out against the present petitioners. He submitted that the petitioner nos.1 and 2 are the Chairman and Director of the firm called Messrs Finquest Financial Solutions Private Limited and now Page 15 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined petitioner no.1 has expired during the pendency of the proceedings on 29.5.2021. In view of this statement, petition qua petition no.1 stands abated.
5.1 Learned Senior Counsel, Mr.N.D.Nanavati has further submitted that other persons who were nominee director and partners of the firm have also approached this Court by filing another Criminal Misc. Application No.19313 of 2019. He has submitted that the complainant i.e. respondent No.3 was the Chairman of one company viz. Man Pasand Beverages Limited at the relevant point of time and such company was listed on NSE and BSE and engaged in manufacturing fruit drinks under various brands. He has further submitted that somewhere in August 2011, Messrs SAIF Partners (equity fund) has invested about 10 million US dollars for minority stake in the company i.e. Man Pasand Beverages. Thereafter also invested principally in IPO round. Thereafter, one Shri Vishal Sood of Messrs SAIF Partners came to be appointed as a Nominee Director in Messrs Man Pasand Beverages Limited, who is now been roped in the FIR as accused no.7. He has further submitted that it is pertinent to note that respondent no.3 through Messrs Man Pasand Beverages Limited, raised fund of Rs.400 crores by way of IPO in the year 2015 and Rs.500 crores by of QIP in the year 2016. It is also appropriate to note that Page 16 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined Messrs Deloitte Haskins and Sales India was statutory auditors of Man Pasand Beverages Limited for eight years, however, they have resigned with effect from 26.5.2018, on the ground of non-cooperation by respondent no.3 by not providing stock and relevant information despite several remainders. Mr.Nanavati has further submitted that similarly in the May 2019, the then statutory auditors of the company, who were appointed in place of M/s. Deloitte Haskins & Sells India also resigned in July 2019 citing adverse development i.e. resignation of independent directors of the company, arrest of CFO and director of the company by GST officials and alleged "frauds" committed by the management of the company by availing false input credits of GST. He has further submitted that thereafter there were certain problems and stock price of the company dropped and even many senior officials of the company have resigned for their internal grievances and due to certain incidents and illegalities, loans sanctioned to the company came to be withheld by the bank and, therefore, respondent no.3 was in acute need of finance. Resultantly, operations of the company came to a stand-still and liabilities were piling up and company's position was going from bad to worse. He has submitted that, in this dire situation, respondent No.3 was introduced to petitioner nos.1 and 2 by Mr.Vishal Sood, who is the Managing Director of M/s.SAIF Parners (Private Equity Page 17 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined Firm) being the shareholders and was then nominee Director of Manpasand Beverages Limited of respondent no.3. He has further submitted that in the private meeting held at New Delhi along with petitioner nos.1 and 2, respondent no.3, Mr.Vishal Sood and the team of M/s.Ernst & Young, it was projected that M/s.Manpasand Beverages Limited is debt free company and its flagship brand "Mango Sip" is well established brand in the market. However, as the company was facing liquidity problem, requested the petitioners to sanction term of loan of Rs.100 Crore towards working capital and repaying certain existing liabilities. 5.2 As a part of its business of Non Banking Finance, M/s. Finquest Financial Solutions Private Limited, had explained respondent no.3 about the terms and conditions including documentations and way of working. Vide letter dated 2.7.2019, M/s.Finquest Financial Solutions Pvt. Limited showed readiness to sanction the loan to the tune of Rs.100 Crore on certain terms and conditions stated in the agreement and respond no.3 has also accepted the same by putting his signature on letter dated 2.7.2019. On 11.7.2019, in the board meeting crucial decision was uninamiously taken whereby two new independent directors were inducted and resignation of two independent directors, nominee director, non-executive director and two other directors, company Page 18 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined secretary and statutory auditors were accepted and respondent no.3 was authorized to avail the loan and escrow accounts were also resolved to be opened. Thereafter, as per the business transaction, formalities of necessary documents such as loan Agreement, Deed of brand pledge, Deed of Hypothecation, Deed of Irrevocable and Unconditional Guarantee came to be executed and duly signed by respondent no.3. Disbursement of amount was to be made only after due diligence, however, looking to acute urgency and upon trust in good faith, the petitioners have transferred Rs.3 Crores to M/s.Manpasand Beverage between 12.7.2010 to 19.7.2010. He has further submitted that thereafter in further meeting another director is also inducted and statutory auditors M/s.Batliboi and Purohit were appointed, who have submitted adverse report to the present petitioner about such finance to be made to the Manpasand Beverages and suggested company's director to cure the defect. The petitioners have appointed M/s.Ernst & Young to carry out due diligence, however, as the son of respondent no.3 and CFO came to be released by the Court on regular bail, entire conduct and behaviour of respondent no.3 has changed and started non-cooperation by not attending the operations of the company and attending to board meeting.
Page 19 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023
NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined 5.3 It seems that as a counter-blast and with a view not to pay any amount availed from the petitioners, present FIR being CR No.41/2019 dated 27/9/2019 came to be lodged at Bhadarava Police Station for the offences under Sections 120- B, 420, 406 and 114 of IPC and thereafter the investigation is carried out. Charge sheet is also filed before the Court of learned JMFC, which culminated into Criminal Case No.1767 of 2022, which is pending adjudication. Therefore, he prays that since the impugned FIR is filed as a counter blast and with a view to shirk the liability to repay the amount, it is nothing but an abuse of process of law.
5.4 He further submitted that respondent no.3 has converted a pure civil business/ commercial transaction into a criminal offence only with a view to achieve his mala fide intention. He has further submitted that even if the allegations levelled in the FIR are taken on the face value then also no element of cheating or criminal breach of trust on any kind of mens rea would surface. He has submitted that in the business of non-banking finance and thereby in the course of business, they have entered into an agreement so as to avail the loan amount of Rs.100 Crore subject to due diligence. Therefore, it cannot be said that any element of cheating or criminal breach of trust exists at the instance of respondent no.3. He has submitted that main condition of Page 20 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined disbursement of loan amount was after due diligence, however, looking to the acute urgency and in good faith, the petitioners have released total sum of Rs.10 Crore so as to meet with the electricity bill, TDS, employees salary, PF amount and to avail certain basic raw materials suppliers even before due diligence report comes. However, once the statutory auditor as well as Ernst & Young report of huge financial fraud and/or suspect fund diversion by respondent no.3, petitioner became conscious and sought forensic audit with a view to secure loan money, which respond no.3 is not permitting to be carried out. On the contrary, respondent no.3 has committed fraud, cheating and criminal breach of trust and, therefore, he prays praise to allow this petition in view of the judgment in the case of Bhajan Lal as the categories is given in the said case are squarely applicable in the present case. In the case of Mohammed Ali versus state of UP more particular in 1957 of 2015 in the case of the power system. He has also relied upon this judgment and submitted that the present petition is required to be allowed as no prima facie case can be considered to have been made out against the present petitioners and continuation of the proceedings will amount to abuse of process of law. 5.5 Mr.Nanavati has also submitted that there are proceedings initiated before the NCLT and civil suit is also Page 21 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined filed at Mumbai and report of summary is filed before the concern Court in the similar FIR. Considering all these aspects, it is clear that present FIR is filed with mala-fide intention and it is required to be quashed and set aside.
6. On the other hand, learned Senior Counsel, Mr.Jal Unwala appearing for the petitioners in Criminal Misc.Application No.18806 of 2019 has submitted that the only role attributed to the petitioner in the FIR is that he has introduced the petitioners of other petition to the present complainant i.e. response no.3. He also submitted that reading the FIR, ingredients of Sections 406 and 420 are not satisfied neither it can be said that any conspiracy can be can be said to have been committed under Section 120-B. He has further submitted that, in fact, no role of Mr.Vishal Sood can be attributed in the facts of present case, who is having highest qualification and graduate from the prestigious institution and is connected with various business and merely in view of this background, he has introduced the petitioner of other petition to respondent no.3, who was in need of financial help, otherwise he has not played any other role. 6.1 Learned Senior Advocate, Mr.Unwala has further submitted that considering the FIR the present petitioner is implicated in the incident and he has no role to play in this Page 22 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined case except introducing respondent no.3 to the petitioners of the other petition. He has also submitted that this itself is not an offence under any provision of law, more particularly, considering Sections 406, 420 and 120-B of IPC, it cannot be said that the petitioner has an intention to deceive the complainant from the very inception. Therefore, no ingredients of Sections 406, 420 and 120-B can be said to have been satisfied. He has relied upon the judgment of the Honorable Apex Court in Satish Ramanlal Shah v. State of Gujarat reported in 2019 (9) SCC 148 and more particularly paragraph 12 to 15 and submitted that in view of this judgment, no fruitful purpose will be served to continue the proceeding against the present petitioner.
7. On the other hand, Mr.Yogendra Thakore, learned advocate for the complainant has strongly opposed the prayers made in these petitions and submitted that the petitioners have joined hands with each other and have played vital role in collusion with each other, whereby the complainant is put in great trouble. He has referred to the affidavit-in-reply filed in present petition and has submitted that from the bear reading of the affidavit in reply, it transpires that prima facie offence is made out against present petitioners. He has further submitted that it is required to be noted that serious fraud is committed by Page 23 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined unilaterally mortgage dated 24/7/2019 executed by the accused in favour of IDBI Trusteeship Services Limited without any concurrence and written consent of the complainant and without any contractual contingency and without signature of other directors. He further submitted that Rs.100 Crores are not disbursed to the company of the complainant, in furtherance to the criminal conspirary and fraud, documents of pledge are caused to be executed and without any legal reason and without written consent, the properties of the company as well as the complainant are mortgaged to IDBI Trusteeship Services Limited, which itself establishes serious fraud, cheating and forgery. He has further submitted that it is also to be noted that some of the cheques that were lying in the chamber of the complainant were stolen by the accused and those blank signed cheques were used by the accused to commit financial fraud and the amount has been withdrawn without the consent and concurrence of the complainant and the money thereof is siphoned away to the personal accounts of the accused i.e. the wife of Mr Bharat Patel. He has further submitted that the Honourable Apex Court in the case of Dineshbhai Chandubhai Patel v. State of Gujarat reported in 2018 (3) SCC 104 held that in order to examine as to whether the factual contents of the FIR disclose any prima facie cognizable offences or not, the High Court cannot act like an investigating agency and nor can Page 24 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined exercise the powers like an appellate Court. The question is required to be examined keeping in view the contents of the FIR and prima facie material, if any, requiring no proof. While in the present case, charge sheet is already filed and criminal case is also going on, therefore, it is not proper for this Court to exercise powers under Section 482 of the Criminal Procedure Code. He has also relied upon decision of the Honourable Apex Court in the case of S.P Chengalvaraya Naidu vs Jagannath reported in 1994 (1) SCC 1, wherein it is held that A fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another and it is a deception in order to gain by another's loss. It is a cheating intended to get an advantage. In view of aforesaid circumstances, all the ingredients of fraud are established on record and, therefore, all the petitions are required to be dismissed. He has also relied upon the decision in the case of Vijay Kumar v. State of Rajasthan reported in 2014 (3) SCC 389, wherein it is held that in given set of facts may make out a civil wrong as a criminal offence and only because civil remedy may also be available to the informant that itself is not a ground to quash criminal proceedings. He has also relied upon the judgment of Honorable Apex Court in the case of CBI v. Maninder Singh reported in 2016 (1) SCC 389, wherein it is held that economic offences are public wrong or crimes committed Page 25 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined against society and gravity and magnitude thereof affect public at large, the Court must not be swayed by return of money to the bank, which has been defrauded, but also consider the interest of the society at large. He has relied upon a decision in the case of Ram Chandra Singh vs Savitri Devi And Others reported in 2003 (8) SCC 319 wherein it is held that fraud as is well-known vitiates every solemn act. Fraud and justice never dwells together. Fraud is a conduct either by letter or words, which induces the other person, or authority to take a definite determinative stand as a response to the conduct of former either by word or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentations may also give reason to claim relief against fraud. He has submitted that case of the present complainant is covered by various judgments of Honourabe Apex Court.
7.1 He has also relied upon judgment reported in 1994 (3) SCC 254, 1999 (8) SCC 686, 2004 (1) SCC 555, in support of his submissions. He has submitted that in view of these judgments and judgment in the case of Neeharika Infrastructure Pvt. Ltd. versus State of Maharashtra and Others reported in 2021 SCC OnLine SC 315, present petition is required to be dismissed as prima facie case is made out and now Criminal Case has also preceded and no Page 26 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined case is made out for exercising powers under Section 482 of Criminal Procedure Code.
8. Learned APP, Mr.Dhawan Jaiswal has supported the submissions made at bar by learned advocate Mr.Yogendra Thakore and further submitted that the petitioner of Criminal Misc. Application No.18806 of 2019, Mr.Vishal Sood, is not cooperating with the investigation and since the investigating agency is required to investigate against him, though he was called on several occasion, he has not made himself available. He submitted that therefore his petition may not be considered at this stage.
8.1 Learned APP also submitted that so far is rest of the petitions are concerned, he has submitted that since petitioner of Criminal Misc. Application No.19310 of 2019, Bharatbhai Jayantilal Patel, has expired, petition qua him stands abated. He submits that rest of the petitioners are arrested by investigating agency and after proper investigation, it is found that the properties of the Manpasand Beverages Limited at Mandsaur and Ambala are also mortgaged with IDBI Trusteeship as security and IDBI Trusteeship has also informed the same to the investigating agency and that without prior permission of the accused person such properties cannot be transferred in anyone or Page 27 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined mortgaged to anyone. It is also revealed that during the course of investigation that shares of the complainant of about five crores in number, which are pledged to the Finquest Company. Out of this 5 Crore shares, about 2,53,65,600 shares are intended to be sold by accused person and for that notice is issued to the complainant by the accused persons and the complainant immediately filed complaint before NCLT, whereupon stay is granted by NCLT on 13/9/2019 and, therefore, those shares could not be sold by the accused. Upon investigation said shares are found to be pledged with Finquest Solutions Pvt. Ltd. He has further submitted that since on investigation also various documentary evidence are found like promissory note and other documents, it is revealed from the CDR that on 19.7.2019 the complainant has not visited Mumbai and on the same day the complainant was at Delhi. Considering various loan agreements executed between the accused and the complainant at Delhi, therefore, his presence could not be found at Mumbai on 19.7.2019 and, therefore also, said facts are required to be considered and, on conclusion of investigation, charge sheet is also filed against the accused person except Mr.Vishal Sood, as he is not cooperating with the investigation and now criminal case is also registered and trial is going on. He has submitted that a prima facie case is made out against the present accused persons and Page 28 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined sufficient material is available which is required to be considered at the time of trial, therefore, no interference is called for, at the hands of this Honourable Court while exercising powers under Section 482 of the Criminal Procedure Code. He has also submitted that such power is to be exercised very sparingly, in view of various decisions of Honourable Apex Court. He further submitted that the petitioners can take all the available defence during the course of trial and at this stage present petitions are required to be dismissed, in view of the decision in the case of Neeharika Infrastructure Pvt. Ltd. versus State of Maharashtra and Others reported in 2021 SCC OnLine SC
315.
9. I have considered the rival submissions. I have also considered the fact that looking to the chain of incidents, prima facie, it is not in dispute that the complainant was facing financial crunch due to levy of GST and there are several cases find against the complainant and his son and his son was also arrested and due to that financial situation, business of Manpasand Beverages has also deteriorated and, therefore, he was in search of good finance. Thereafter, he came into contact with present petitioners through Mr.Vishal Sood, who is petitioner of Criminal Misc. Application No.18806 of 2019. It transpires that thereafter some Page 29 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined documents were executed and the petitioners have promised the complainant to pay Rs.100 Crores towards finance and in lieu of that several documents were signed by the complainant-respondent no.3. From record, it transpires that such documents are misused or used without authority by the petitioners, by mortgaging the properties of the present complainant with IDBI Trusteeship. It also transpires that attempts were made to transfer the shares of the complainant by present petitioners, which is failed due to interim relief granted by NCLT. It also transpires that ingredients of offences under Sections 406 420 and 120-B of IPC are made out. These provisions are reproduced hereunder:-
"120-B. Punishment of criminal conspiracy.--(1) Whoever is a party to a criminal conspiracy to commit an offence punishable with death, 2[imprisonment for life] or rigorous imprisonment for a term of two years or upwards, shall, where no express provision is made in this Code for the punishment of such a conspiracy, be punished in the same manner as if he had abetted such offence. (2) Whoever is a party to a criminal conspiracy other than a criminal conspiracy to commit an offence punishable as aforesaid shall be punished with imprisonment of either description for a term not exceeding six months, or with fine or with both.] Page 30 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined
405. Criminal breach of trust.
Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits "criminal breach of trust".
Section 406. Punishment for criminal breach of trust. Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both. ...........
Section 415. Cheating.
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 were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".
Page 31 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023
NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined ....................
Section 420. Cheating and dishonestly inducing delivery of property.
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 a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine."
10. Considering the role attributed to the present petitioners and considering the fact that at the relevant point of time, under the guise of granting financial aid or a promise to pay Rs.100 Crore was made by the accused. Present petitioners have only granted Rs 10 Crores that is also in piecemeal and against that they have entered into the management of the company. In view of subsequent proceedings, some professionals are arrested by NCLT but the fact remains that at the relevant point of time, the petitioners have tried to defraud the company under the guise of financial assistance with mala fide intention.
11. The judgments, which are cited by the learned advocate Page 32 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined for the complainant are squarely applicable to the facts of the present case. All these judgments are relevant for consideration. So far as judgments cited by learned counsel for the petitioners are concerned, there is no dispute about the fact that the Court can exercise powers under Section 482 of IPC, if no prima facie case is made out, however, in the present case, there is ample material available on record which constitutes not only a prima facie case but strong prima facie case against the present petitioners and charge sheet is also filed. Not only that trial has also begun. Moreover, considering the judgment in the case of Satishchandra Ratanlal Shah v. State of Gujarat reported in 2019 (0) AIJEL-SC 63859, which is relied upon by learned Senior Counsel, Mr.Unwala, wherein it is held that there is a distinction between mere breach of contract and cheating, which would depend upon fraudulent inducement and mens rea. Facts of that case are similar to the facts of the present case but the material which is available on record in the present case suggest that there is prima facie case made out against the present petitioners and it cannot be said that there is fraudulent and dishonest intention right from the beginning of the transaction on the part of the petitioners. Therefore, there is mens rea and prima facie case of criminal breach of Trust is also made out. In the facts of the present case, ingredients of offence under Sections 406 and 420 are Page 33 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined also satisfied. Moreover, looking to the role of the accused, it can be said that the conduct of the petitioners suggest that prima facie offence under Section 120-B is also made out. Considering the fact that petitioner of Criminal Misc.Application No.18806 of 2019 is not cooperating with the investigation and considering the conduct of the petitioners no discretionary powers can be exercised in favour of the petitioners. Otherwise also looking to the prima facie involvement of the petitioners, the matter is required to be decided by leading cogent and convincing evidence at the time of trial. Therefore, all the defences raised in the present petitions by the petitioners as well as the contentions raised by the complainant can be taken at the time of trial before the trial Court. The trial Court may pass appropriate order after considering all the evidence available on record. However, at this stage, powers under Section 482 of the Criminal Procedure Code cannot be exercised.
12. It is relevant to refer to the judgment in the case of CBI v. Maninder Singh reported in 2016 (1) SCC 389, wherein it is observed as under:-
"15. The case at hand is clearly distinguishable on facts. The chargesheet referred to number of transactions based on such forged documents bank money was credited to the Page 34 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined accounts of firms of the respondent. For instance, respondent Maninder Singh and Suresh Kumar Puri are said to have submitted the forged documents of shipment for bill purchased on 27.11.1986. These documents included Bill of Lading and invoices which were found forged and according to the prosecution no consignment was sent by the respondent to foreign companies. It is further alleged that the Bill of Lading and G.R. Form and Shipping Bill also contained forged signatures of customs officers.
16. The allegation against the respondent is 'forgery' for the purpose of cheating and use of forged documents as genuine in order to embezzle the public money. After facing such serious charges of forgery, the respondent wants the proceedings to be quashed on account of settlement with the bank. The development in means of communication, science & technology etc. have led to an enormous increase in economic crimes viz. phishing, ATM frauds etc. which are being committed by intelligent but devious individuals involving huge sums of public or government money. These are actually public wrongs or crimes committed against society and the gravity and magnitude attached to these offences is concentrated at public at large.
17. The inherent power of the High Court under Section 482 Cr.P.C. should be sparingly used. Only when the Court comes to the conclusion that there would be manifest injustice or there would be abuse of the process of the Court Page 35 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined if such power is not exercised, Court would quash the proceedings. In economic offences Court must not only keep in view that money has been paid to the bank which has been defrauded but also the society at large. It is not a case of simple assault or a theft of a trivial amount; but the offence with which we are concerned is a well planned and was committed with a deliberate design with an eye of personal profit regardless of consequence to the society at large. To quash the proceeding merely on the ground that the accused has settled the amount with the bank would be a misplaced sympathy. If the prosecution against the economic offenders are not allowed to continue, the entire community is aggrieved.
18. In recent decision in Vikram Anantrai Doshi (supra), this Court distinguished Nikhil Merchant's case and Narendra Lal Jain's case where the compromise was a part of the decree of the court and by which the parties withdrew all allegations against each other. After referring to various case laws under subject in Vikram Anantrai Doshi's case, this Court observed that cheating by bank exposits fiscal impurity and such financial fraud is an offence against society at large in para (23), this Court held as under:-
"26. ...Be it stated, that availing of money from a nationalized bank in the manner, as alleged by the investigating agency, vividly exposits fiscal impurity and, in a way, financial fraud. The modus operandi as narrated in the chargesheet cannot be put in the Page 36 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined compartment of an individual or personal wrong. It is a social wrong and it has immense societal impact. It is an accepted principle of handling of finance that whenever there is manipulation and cleverly conceived contrivance to avail of these kind of benefits it cannot be regarded as a case having overwhelmingly and predominantingly of civil character. The ultimate victim is the collective. It creates a hazard in the financial interest of the society. The gravity of the offence creates a dent in the economic spine of the nation. The cleverness which has been skillfully contrived, if the allegations are true, has a serious consequence. A crime of this nature, in our view, would definitely fall in the category of offences which travel far ahead of personal or private wrong. It has the potentiality to usher in economic crisis. Its implications have its own seriousness, for it creates a concavity in the solemnity that is expected in financial transactions. It is not such a case where one can pay the amount and obtain a "no due certificate" and enjoy the benefit of quashing of the criminal proceedings on the hypostasis that nothing more remains to be done. The collective interest of which the Court is the guardian cannot be a silent or a mute spectator to allow the proceedings to be withdrawn, or for that matter yield to the ingenuous dexterity of the accused persons to invoke the jurisdiction under Article 226 of the Constitution or under Section 482 of the Code and quash the proceeding. It is not legally permissible. The Court is expected to be on guard to these kinds of adroit moves. The High Court, we humbly remind, should have dealt with the matter Page 37 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined keeping in mind that in these kind of litigations the accused when perceives a tiny gleam of success, readily invokes the inherent jurisdiction for quashing of the criminal proceeding. The court's principal duty, at that juncture, should be to scan the entire facts to find out the thrust of allegations and the crux of the settlement. It is the experience of the Judge comes to his aid and the said experience should be used with care, caution, circumspection and courageous prudence. As we find in the case at hand the learned Single Judge has not taken pains to scrutinize the entire conspectus of facts in proper perspective and quashed the criminal proceeding. The said quashment neither helps to secure the ends of justice nor does it prevent the abuse of the process of the Court nor can it be also said that as there is a settlement no evidence will come on record and there will be remote chance of conviction. Such a finding in our view would be difficult to record. Be that as it may, the fact remains that the social interest would be on peril and the prosecuting agency, in these circumstances, cannot be treated as an alien to the whole case. Ergo, we have no other option but to hold that the order of the High Court is wholly indefensible".
19. In this case, the High Court while exercising its inherent power ignored all the facts viz. the impact of the offence, the use of the State machinery to keep the matter pending for so many years coupled with the fraudulent conduct of the respondent. Considering the facts and Page 38 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined circumstances of the case at hand in the light of the decision in Vikram Anantrai Doshi's case, the order of the High Court cannot be sustained."
13. Considering the facts of the case, prima facie there is material against present petitioners. Since prima case is made out against present petitioners, no case is made out to exercise powers of this Court under Section 482 of the Criminal Procedure Code. The petitioners can raise all the contentions during their defence at the time of trial. In the case of Neeharika Infrastructure Pvt. Ltd. versus State of Maharashtra and Others reported in 2021 SCC OnLine SC 315, the Hon'ble Apex Court has held as under:
"80. In view of the above and for the reasons stated above, our final conclusions on the principal/core issue, whether the High Court would be justified in passing an interim order of stay of investigation and/ or "no coercive steps to be adopted", during the pendency of the quashing petition under Section 482 Cr.P.C and/or under Article 226 of the Constitution of India and in what circumstances and whether the High Court would be justified in passing the order of not to arrest the accused or "no coercive steps to be adopted" during the investigation or till the final report/chargesheet is filed under Section 173 Cr.P.C., Page 39 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined while dismissing/disposing of/not entertaining/not quashing the criminal proceedings/complaint/FIR in exercise of powers under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of India, our final conclusions are as under:
i) Police has the statutory right and duty under the relevant provisions of the Code of Criminal Procedure contained in Chapter XIV of the Code to investigate into a cognizable offence;
ii) Courts would not thwart any investigation into the cognizable offences;
iii) It is only in cases where no cognizable offence or offence of any kind is disclosed in the first information report that the Court will not permit an investigation to go on;
iv) The power of quashing should be exercised sparingly with circumspection, as it has been observed, in the 'rarest of rare cases (not to be confused with the formation in the context of death penalty).
v) While examining an FIR/complaint, quashing of which is sought, the court cannot embark upon an Page 40 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR/complaint;
vi) Criminal proceedings ought not to be scuttled at the initial stage;
vii) Quashing of a complaint/FIR should be an exception rather than an ordinary rule;
viii) Ordinarily, the courts are barred from usurping the jurisdiction of the police, since the two organs of the State operate in two specific spheres of activities and one ought not to tread over the other sphere;
ix) The functions of the judiciary and the police are complementary, not overlapping;
x) Save in exceptional cases where non-interference would result in miscarriage of justice, the Court and the judicial process should not interfere at the stage of investigation of offences;
xi) Extraordinary and inherent powers of the Court do not confer an arbitrary jurisdiction on the Court to act according to its whims or caprice;Page 41 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023
NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined
xii) The first information report is not an encyclopedia which must disclose all facts and details relating to the offence reported. Therefore, when the investigation by the police is in progress, the court should not go into the merits of the allegations in the FIR. Police must be permitted to complete the investigation. It would be premature to pronounce the conclusion based on hazy facts that the complaint/FIR does not deserve to be investigated or that it amounts to abuse of process of law. After investigation, if the investigating officer finds that there is no substance in the application made by the complainant, the investigating officer may file an appropriate report/summary before the learned Magistrate which may be considered by the learned Magistrate in accordance with the known procedure;
xiii) The power under Section 482 Cr.P.C. is very wide, but conferment of wide power requires the court to be more cautious. It casts an onerous and more diligent duty on the court;
xiv) However, at the same time, the court, if it thinks fit, regard being had to the parameters of quashing and the self-restraint imposed by law, more particularly the parameters laid down by this Court in the cases of R.P. Kapur (supra) and Bhajan Lal Page 42 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined (supra), has the jurisdiction to quash the FIR/complaint;
xv) When a prayer for quashing the FIR is made by the alleged accused and the court when it exercises the power under Section 482 Cr.P.C., only has to consider whether the allegations in the FIR disclose commission of a cognizable offence or not. The court is not required to consider on merits whether or not the merits of the allegations make out a cognizable offence and the court has to permit the investigating agency/police to investigate the allegations in the FIR; xvi) The aforesaid parameters would be applicable and/or the aforesaid aspects are required to be considered by the High Court while passing an interim order in a quashing petition in exercise of powers under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of India. However, an interim order of stay of investigation during the pendency of the quashing petition can be passed with circumspection. Such an interim order should not require to be passed routinely, casually and/or mechanically. Normally, when the investigation is in progress and the facts are hazy and the entire evidence/material is not before the High Court, the High Court should restrain itself from passing the Page 43 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined interim order of not to arrest or "no coercive steps to be adopted" and the accused should be relegated to apply for anticipatory bail under Section 438 Cr.P.C. before the competent court. The High Court shall not and as such is not justified in passing the order of not to arrest and/or "no coercive steps" either during the investigation or till the investigation is completed and/or till the final report/chargesheet is filed under Section 173 Cr.P.C., while dismissing/disposing of the quashing petition under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of India. xvii) Even in a case where the High Court is prima facie of the opinion that an exceptional case is made out for grant of interim stay of further investigation, after considering the broad parameters while exercising the powers under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of India referred to hereinabove, the High Court has to give brief reasons why such an interim order is warranted and/or is required to be passed so that it can demonstrate the application of mind by the Court and the higher forum can consider what was weighed with the High Court while passing such an interim order.
xviii) Whenever an interim order is passed by the High Court of "no coercive steps to be adopted" Page 44 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023
NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined within the aforesaid parameters, the High Court must clarify what does it mean by "no coercive steps to be adopted" as the term "no coercive steps to be adopted" can be said to be too vague and/or broad which can be misunderstood and/or misapplied."
14. The powers under Section 482 of the Criminal Procedure Code are to be exercised very sparingly. The Court has to remain cautious while exercising such power with a view to prevent the abuse of process of law. Upon bare reading of FIR, it cannot be said that no offence is made out or that such FIR is filed with mala fide intention and with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge and continuation of proceedings of FIR will amount to abuse of process of law. In the present case, prima facie, offence is made out on the bare reading of FIR. In view of the aforesaid decisions, I am of the view that this is not a case to entertain present petition for quashing of complaint.
15. For the foregoing reasons, I am of the opinion that since prima facie case is made out against the present petitioners, all the three petitions are required to be dismissed and the criminal case is required to be proceeded in accordance with law. Powers under Section 482 cannot be Page 45 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023 NEUTRAL CITATION R/CR.MA/19310/2019 JUDGMENT DATED: 04/10/2023 undefined exercised in present case, as it will amount to encourage the accused, who are allegedly duping the persons with their dishonest intention of cheating. The petitioners are required to face the criminal trial and they can put their defence in the case before the trial Court. Accordingly all these petitions are found meritless and all are dismissed. Interim relief granted earlier stands vacated. Notice is discharged in the respective petitions.
Sd/-
(SANDEEP N. BHATT,J) FURTHER ORDER :-
At this stage, learned advocates, Mr.Rahul Dholakia and Mr.Nikunt Raval, appearing for the respective petitioners pray for staying this order for sometime. Considering the fact that present petitions are pending since 2019 and, due to interim relief granted by this Court during pendency of present petitions, further proceedings pursuant to impugned FIR could not be conducted expeditiously, therefore, I am of the opinion that request made by learned advocates for the respective petitioners is not required to be entertained. Accordingly, request to stay this order is rejected.
Sd/-
(SANDEEP N. BHATT,J) R.S. MALEK Page 46 of 46 Downloaded on : Wed Oct 04 20:50:23 IST 2023