Karnataka High Court
Sri C Parthasarathy vs State Of Karnataka on 12 August, 2022
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF AUGUST, 2022
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.23317 OF 2021 (GM-RES)
BETWEEN:
SRI C.PARTHASARATHY
AGED ABOUT 66 YEARS
RESIDENT OF NO.31/P,
KARVI MILLENNIUM
NANKRMJUDA FINANCIAL
D.GACHIBOWLI, HYDERABAD
TELANGANA - 500 019.
... PETITIONER
(BY SRI C.V.NAGESH, SR.ADVOCTE A/W
SRI AJAY KADKOL T., ADVOCATE)
AND:
1. STATE OF KARNATAKA
BY THE STATION HOUSE OFFICER
SESHADRIPURAM POLICE STATION
BENGALURU - 560 026.
2. BKG MINING PVT. LTD.,
NO.2198, BKG HOUSE
KHB COLONY, SANDUR
BALLARI DISTRICT
KARNATAKA - 583 119.
... RESPONDENTS
(BY SMT.K.P.YASHODHA, HCGP FOR R1;
SRI KIRAN S.JAVALI, SR.ADVOCATE A/W
SMT.MONICA PATIL, ADVOCATE FOR R2)
2
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF
CR.P.C., PRAYING TO QUASH THE FIR IN CRIME NO.84/2021
REGISTERED AT THE SESHADRIPURAM POLICE STATION,
BANGALORE CITY AGAINST THE PETITIONER FOR OFFENCES
WHICH ARE MADE PENAL U/S 107, 424, 427, 34, 418, 421, 403,
406, 409, 411, 413, 414, 420, 468, 120, 120-A, 378, 405, 410,
415, 425, 463, 464 AND 117 OF THE INDIAN PENAL CODE
ARRAIGNING THE PETITIONER AS THE SECOND ACCUSED, AS
WELL AS THE COMPLAINT FILED ON THE BASIS OF WHICH THE
CRIME IS REGISTERED AND WHICH IS PRODUCED AT
ANNEXURE-A.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 12.07.2022, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
The petitioner in the subject petition calls in question registration of crime in Crime No.84 of 2021 registered for offences punishable under Sections 107, 424, 427, 34, 418, 421, 403, 406, 409, 411, 413, 414, 420, 468, 120, 120A, 378, 405, 410, 415, 425, 463, 464 and 117 of the IPC and pending before the IV Additional Chief Metropolitan Magistrate, Bangalore City.
2. Brief facts leading to the filing of the present petition, as borne out from the pleadings, are as follows:-
3
M/s Karvy Stock Broking Limited (hereinafter referred to as 'the Company' for short) is a Company involved in the business of share broking, financial advisory and other allied services. The petitioner is presently the Director of the Company. A complaint comes to be registered against the Company on 8-09-2021 by one M/s B.K.G. Mining Private Limited and its officers alleging that the Company through its officers has misutilized the Power of Attorney granted to it on the investments made which has resulted in huge losses to the investor/complainant for the wrong doing of the Company. The complaint becomes a crime in Crime No.84 of 2021 for several offences noted supra. Registration of FIR leads the petitioner/Company to this Court in the subject petition.
3. Heard Sri C.V.Nagesh, learned senior counsel appearing for the petitioner, Smt. K.P.Yashodha, learned High Court Government Pleader for respondent No.1 and Sri Kiran S.Javali, learned senior counsel appearing for respondent No.2.
4. The learned senior counsel representing the petitioner taking this Court through the documents appended to the petition, would contend that it is purely a matter of contract between the 4 parties and there is no element of criminal breach of trust or cheating or any of the offices so alleged. The crime is registered in a reckless manner. Definitions of offences are made as offences and since there is no application of mind in registering the crime, this Court should interfere and terminate such proceedings which are recklessly instituted against the petitioner.
5. On the other hand, the learned senior counsel representing the 2nd respondent/complainant would vehemently refute the submissions to contend that investors like the complainant invested their investments with the petitioner, who is the Director of the Company to deal with the funds in a proper manner in accordance with law and not to invest in places where it is convenient for the petitioner and then show up losses to them. The Securities and Exchange Board of India ('SEBI' for short) has clearly indicated as to what are the activities done by the petitioner and has further indicated how the petitioner has misutilized the Power of Attorney executed by the investors like the complainant.
6. In reply to the said submission, the learned senior counsel for the petitioner would contend that SEBI, being a statutory body 5 having enquired into the allegations made against the petitioner has in fact taken penal action of cancellation of licence under the provisions of the Securities and Exchange Board of India Act, 1992 ('SEBI Act' for short). Therefore both the proceedings under the SEBI Act and for offences under the IPC are not maintainable. Apart from this, he would submit that there is gross delay of 6 years in registering the crime as investments have been made in the year 2015.
7. I have given my anxious consideration to the submissions made by the respective learned senior counsel and perused the material on record.
8. Since the matter is at the stage of FIR, there are no facts that have emerged after the investigation that are before the Court for consideration. The afore-quoted facts, though limited, are not in dispute. What needs to be considered on the complaint and the proceedings before the SEBI is:
'Whether registration of crime was in accordance with law and further proceedings are to be permitted or not?' 6
9. The complaint so registered narrates that the accused approached the complainant to open a trading account with the accused No.1/company based on existing relationship between the complainant and accused No.1 through its Director. paragraph 4 of the complaint reads as follows:
"4. Thereafter, the accused No.3 again approached the undersigned to open a DEMAT and trading account with the accused No.1 company. Based on the existing relationship between the undersigned and the accused No.1 company through its Directors (Accused Nos. 2, 4, 5 and 6) and its key managerial personnel (Accused Nos. 7, 8 and 9) and the Accused NO.3 and the market reputation of the accused No.1, the Company opened an account with the Accused No.1 in October, 2015, having client ID 19578472 and Trading Code 10013734 with the Basavanagudi Branch, Bangalore of the accused No.1 ("our account")."
Likewise, the narration in the complaint is the aftermath of opening of the DEMAT and Trading account of the complainant with the Company. Paragraphs 16 and 17 of the complaint read as follows:
"16. It is further stated that, at this point of time, based on news reports as well as shares held by the undersigned in his personal capacity with a different stock broker, it was discovered that certain companies whose shares were also held by the Company in its account with the Accused No.1 Company, had declared dividends on the shares, and had consequently credited the dividend amount into the account of the shareholders. However, when Mr. Vijaya Kumar sought information regarding the deposit of the dividend that would have accrued to the Company based on its holdings from the accused No.3, the Accused No.3 outright denied that such companies had ever declared any dividend. In these circumstances, it came to be known to Mr. Viaya Kumar that the accused No.3, since the time of account opening 7 has not been crediting to our Account, the dividend that would have accrued upon its holdings till date. It has thus also become clear that the Accused Nos. 1, 2, 4, 5, 6, 7, 8 and 9 have also misappropriated the monies that ought to have been credited to our account in the form of dividend to unjustly enrich themselves.
17. In fact, it was also discovered that the Accused Nos. 1, 2, 4, 5, 6, 7, 8 and 9 with the active connivance of the Accused No.3 and 10, at the time of account opening, had created e-mail addresses and registered phone numbers without our knowledge and had saved the same as the Company's contact details in respect of our Account with the Accused No.1. As a result of the same, we have come to understand that the Company was deliberately prevented from accessing the particulars of our Account which included automated holding statements, transaction and fund transfer history, contract notes in respect of trades undertaken, etc. and had been misled by the accused regarding the transactions that are taking place in the account by way of the information that used to be shared with our office, sporadically which inter alia included - holding statements, ledger statements, statements of profit and loss, etc. The undersigned has also now come to understand that the accused Nos. 1, 2, 4, 5, 6, 7, 8 and 9 with the active connivance of the accused No.3 and 10 have deliberately concocted this whole scheme to divert the funds received from the Company to misappropriate the Company's money and embezzle the same for their personal gains and profits, by keeping us in the dark."
The afore-quoted paragraphs make it clear that the activities of the Company came to light after they discovered huge losses that have occurred to them. Paragraph-16 makes it clear that the accused through the Company have misappropriated moneys that ought to have been credited to the account in the form of dividends to unjustly enrich themselves. It was also discovered that the accused have deliberately concocted the whole scheme to divert funds 8 received from the complainant to misappropriate complainant's money and embezzle for their personal gains and profits by keeping the complainant in dark. Such several instances are noticed. Paragraphs 25 to 31 of the complaint read as under:
"25. Amidst the above, despite the repeated assurances and guarantees given by the Accused No.3 that our contact details would be updated in the database of Accused No.1 Company, the same was not done. In fact, whenever the undersigned or the staff of our company sought clarification from the Accused No.3 regarding his failure and refusal to update the contact details in respect of my account, the Accused No.3 used to always state the same cannot be carried out without the approval of the Accused Nos. 2, 6, 7, 8 and 9 in Hyderabad. As a result, eventually, in or around June 2019, as a result, Mr. Vijaya Kumar travelled to Hyderabad personally and upon submitting authorization letters to the Head Office at Hyderabad, he was successful in changing the contact details of the account. True copies of his tickets, boarding pass, and hotel bill, evincing such travel are produced herewith as Document No.22. True copies of the authorization letters submitted at the Hyderabad office of the Accused No.1 Company are further produced herewith as Document No.23.
26. It was at this point of time that the undersigned was shocked to read in the news that the accused Nos. 1, 2, 4, 5, 6, 7, 8 and 9 had been accused of having been involved in a scam wherein they had transferred the shares and holdings to be held in the DEMAT account of its customers to their own pool account and had represented the aforesaid cumulative holdings, that were owned by their various customers as their own to banks and financial institutions to obtain loans to fund its other sister concerns. In this manner, the accused Nos. 1, 2, 4, 5, 6, 7, 8 and 9 had duped lakhs of innocent people many of whom had trusted them with their hard earned moneys and life's savings. True copies of newspaper reports reporting the scam pulled off by the accused Nos. 1, 2, 4, 5, 6, 7, 8 and 9 are attached herewith as Document No.24.9
27. It was at this point of time that we found that even the SEBI had taken note of the aforesaid scam that was carried out by the accused No.1 Company by duping innocent investors and account holders and siphoning their moneys to fund their other sister concerns. In fact, the SEBI, while noticing the magnitude of the aforesaid scam, in its Order dated 22-11-2019 noted as follows:
"17.... In the present case the report of NSE observes that KSBL has misused power of attorney given by its clients. KSBL has sold client securities in the market in disguised manner through own controlled entitles and have used the funds for its own purposes. KSBL in order to hide its misdeed has not even reported this DP account No.11458979, named KARVY STOCK BROKING LTD. (BSE) in the submissions made by it to NSE from January 2019 to August 2019. It is only during inspection by NSE, this account come to notice. NSE report finds that there are numerous transactions in DP account No.11458979, named KARVY STOCK BROKING LTD. (BSE) whereby securities of the clients have been moved.
Securities of client received in pay out are transferred from the pool account to this account and also securities lying in the demat account of the client(s) are also transferred into and form this account misusing power of attorney given by the client.
18. The securities lying in the aforesaid DP account actually belong to the clients which are the legitimate owners of the securities. Therefore, KSBL did not have any legal right to create any kind of pledge on these securities. Even if the client securities were pledged, it should have only been for meeting the obligations of the respective clients which was not observed in this case. Considering the issue of misuse of clients' securities by KSBL in unauthorized manner, for its own use and purposely not disclosing the DP account No.11458979, named KARVY STOCK BROKING LTD (BSE) to the Exchange in their reporting create a serious doubt on the conduct and integrity of KSBL.
19. The acts of KSBL are pirma facie in violatioin of Stock Broker Regulations, SEBI Circular No.SMD/ SED/CIR/93/23321 dated November 18, 1993, SEBI Circular No.MRD/DOP/SE/CIR.11/2008 dated April 17, 2008, SEBI 10 Circular No.SEBI/HO/MIRSD/MIRSD2 /CIR/P/2016/905 dated September 26, 2016, SEBI Circular No.SEBI/HO/MRD/DP/CIR/P/2016/13 dated December, 2016, SEBI Circular No.CIR/MRD/DP/54 /2017 dated June 13, 2017, SEBI Circular No.CIR/HO /HO/MIRSD/MIRSD2/P/2017/64 dated June 22, 2017 and Circular No.CIR/HO/MIRSD/DOP/CIR/P/2019 dated June 20, 2019, as discussed above."
The order dated 22-11-2019 was thereafter confirmed vide Oder dated 24-11-2010 passed by the SEBI, wherein it was observed that transfer of funds/securities made by the Accused Noo.1 to its clients subsequent to SEBI order dated 22-11-2019 would not absolve accused Nos. 1, 2, 4, 5, 6, 7, 8 and 9 from violations of the provisions of the securities laws, as have been found in the forensic audit report received in the matter. The Appeal preferred by the accused NO.1 before the Securities Appellate Tribunal (SAT) also came to be dismissed vide Order dated 23-04-2021. True copies of the aforesaid order of the SEBI dated 22-11-2019 and 24-11-2020 along with the order of SAT dated 23-04-2021 are produced herewith as Document No.25 to Document No.27 respectively.
28. Upon reading the various news reports and the orders passed by the SEBI, we came to realize that the accused Nos. 1, 2, 4, 5, 6, 7 8 and 9 have undertaken a massive scam to dupe its innocent customers including the Company, by misusing the power of attorney granted at the time of account opening to misappropriate funds and assets of its customers and to divert them to its sister concerns for its own private benefit. It thus became clear to us that this entire scam, which includes the transfer of the Company's funds and securities to the pool account and the subsequent failure to restore the same has taken place at the sole behest and connivance of the accused Nos. 1, 2, 4, 5, 6, 7, 8 and 9 with the active connivance and deliberate support, involvement and connivance of the Accused Nos. 3 to 10. We have come to understand that the Accused are willful and habitual defaulters, who have duped several thousands of people, including the under-signed and the Company of our hard earned monies and life savings.
29. We state that the accused have deliberately orchestrated this entire scam to enable themselves to be able to illegally procure funds for their other business, thus unjustly enriching themselves 11 at the expense of their innocent customers and clients, including the Company.
30. Thus, while at first, we were under the impression that these are tactics that were being employed by the accused No.3 to delay the processing of the transfer of our holdings, we have now come to understand that this entire transaction forms part of a scam that has been orchestrated by the accused Nos. 2, 4, 5, 6, 7, 8 and 9 of the accused No.1 company.
31. In these facts and circumstances, during our numerous meeting with the accused No.3 attempting to reconcile differences and obtain a transfer of the company's securities, we were informed by him that the holdings depicted to be held in our name in the pool account of the accused No.1 company have been liquidated to fund other business belonging to the Karvy Group of Companies that the accused Nos. 2, 4, 5, 6, 7, 8 and 9 are Directors of. Our suspicions in this regard were confirmed when the same came to be observed by the SEBI as well in its order dated 22-11-2019 wherein it was noted that a tentative amount of INR 1096,00,00,000/- was transferred by the accused No.1 Company to its group company. Karvy Reality (India) Private Limited. It is pertinent to highlight that the accused No.2 is also a Director of Karvy Realty (India) Private Limited."
(Emphasis applied) In all, the investors like the complainant come to know of all the activities of the Company only after the SEBI takes up the issue and penalizes the Company. The tentative amount that was arrived to be the losses was close to Rs.1096,00,00,000/-. It is further germane to notice paragraphs 37 and 38 of the complaint where it is clearly alleged that the funds are transferred to different company which had resulted in losses. Paragraphs 37, 38 and 41 read as follows:
12
"37. Finally, the undersigned received an e-mail from the accused No.1 company dated 18-01-2021 providing the procedure to fill out a Transfer-cum-closure form in order to initiate the process of the transfer of holdings. Accordingly, we immediately completed the necessary formalities and shared the transfer cum-closure form along with the self certified PAN copy. Client Master List attested by the Depositary Participant and the list of holdings an requested the Accused No.1 company to transfer our holdings worth INR 78,90,68,060 into the Company's other DEMAT Account with JM Financial Services Limited. A true copy of the letter dated 20-01-2021 along with the attached annexures is produced as Document NO.33. We further reiterated our request by way of an e-mail dated 21-01-2021, a true copy of which is also produced as Document No.34.
38. Thereafter, on 29-01-2021,we received yet another e- mail addressed by NSDL to reiterating that the participantship of the accused No.1 company has been terminated and accordingly advised us to ensure that the company's holdings are transferred to a different DEMAT account by 28-02-2021.We accordingly forwarded the same to the accused No.1 and the accused No.3 for their action, on 3-02-2021. True copies of the aforesaid e-mails dated 29-01-2021 and 03-02-2021 are produced herewith as Document No.35 collectively.
... ... ...
41. Thus, after having received a copy of the statements from NSDL, it was clear that the accused had orchestrated a scheme to dupe innocent investors such as the Company and the undersigned, by luring them to deposit money into the accused No.1 company and thereafter, directed their officials and executives including the accused No.3 to transfer the funds and securities belonging to the company, to the accused No.1 company's pool account in order to enable the accused Nos. 2, 4, 5, 6, 7, 8 and 9 to use the shares as well as money, that did not belong to them to fund their business operations in the name of the sister concerns of the accused No1. It is also clear that the accused No.3 on the instructions of the accused Nos. 2, 4, 5, 6, 7, 8 and 9 have breached their duties and responsibilities and have criminally misappro-priated moneys and securities belonging to the company."13
10. Since complaint itself makes copious reference to the proceedings taken up by SEBI, it is necessary to notice what SEBI has done in the issue. Proceedings were taken up by SEBI under Section 11(1), 11(4) and 11B of the SEBI Act. The observations of SEBI concerning the petitioner assume enormous significance with regard to the activity of the petitioner - Company. Excerpts of the order passed by SEBI read as follows:
"2(iii) The securities lying in the aforesaid DP account of KSBL, actually belong to the clients which are the legitimate owners of the pledged securities. Therefore, KSBL did not have any legal right to create a pledge on these securities and generate funds. Even if the client securities were pledged, it should be only for meeting the obligation of the respective clients only, which was not observed in this case.
... ... ... ...
2(v) KSBL has transferred securities worth Rs.27.8 Crore, off-market, from the beneficial owner accounts (BO accounts) of 156 clients who have not executed a single trade with them. Further, securities worth Rs.116.3 crore were observed to have been transferred from 291 clients who have not traded with KSBL since June 01, 2019.
2(vi) Prima facie a net amount of Rs.1096 crores has been transferred by KSBL to its group company i.e., Karvy Realty Private Limited between from 1st April 2016 to 19th October, 2019.
2(vii) Further KSBL, has sold excess securities (securities not available in DP account) to the tune of Rs.485/- crores through 9 related clients till May 31, 2019. Further, Karvy has also transferred excess securities to 6 out of these 9 related clients to the tune of Rs.162 14 crores till May 31, 2019. On subsequent verification, it is observed that securities worth Rs.257.08 crores pledged on behalf of 4 clients out of the aforesaid 9 clients, were unpledged during June 1, 2019 to August 22, 2019 and securities worth of Rs.217.85 crore were recovered by KSBL from 4 out of the said 9 client accounts. KSBL have also purchased securities in 5 out of the respective 9 client accounts amounting to Rs.228.07 crores during the period from June 1, 2019 to September 8, 2019. The details of 9 clients are as under.
... ... ... ...
5. Also, SEBI Circular No.MIRD/DOP/SE/Cir-11/2008 dated April 17, 2008 inter alia provides that brokers should have adequate systems and procedures in place to ensure that client collateral is not used for any purposes other than meeting the respective client's margin requirements/pay-ins. Brokers should also maintain records to ensure proper audit trial of use of client collateral.
... ... ... ...
17. Thus, the facts of this case need to be looked at in the light of aforesaid legal position regarding the handling of clients' securities by the stock broker. In the present case, the report of NSE observes that KSBL has misused power of attorney given by its clients. KSBL has sold client securities in the market in disguised manner through own controlled entities and have used the funds for its own purposes. KSBL in order to hide its misdeed has not even reported this DP account No.11458979, named KARVY STOCK BROKING LTD. (BSE) in the submissions made by it to NSE from January 2019 to August 2019. It is only during inspection by NSE this account came to notice. NSE report finds that there are numerous transactions in DP account No.11458979, named KARVY STOCK BROKING LIMITED (BSE) whereby securities of the clients have been moved. Securities of clients received in pay out are transferred from the pool account to this account and also securities lying in the demat account of the client(s) are also transferred into and from this account misusing power of attorney given by the client."
(Emphasis applied) 15 The order of SEBI in the nature of interim order is a product of examination of contents. The SEBI records that the securities lying in the account of the Company actually belong to investors who are the legitimate owners of the pledged securities. It holds that even if clients' securities are pledged it should be only for meeting the obligations of the respective clients which are not done by the Company. The Company has transferred securities worth Rs.27.8 crores off-market from the beneficial owner accounts of 156 clients who had not executed a single trade with them. Further securities worth 116.03 crores were transferred from 291 clients who have not traded with the Company. Prima facie, SEBI found a net amount of Rs.1096 crores being transferred by Karvy Stock Broking Limited to another Company viz., Karvy Realty Private Limited.
11. It is the further observation of SEBI that the Company sold excess securities which was not available in the DP account again resulting in transfer of hundreds of crores of money belonging to investors. In all, the SEBI holds that the Power of Attorney given by the clients or the investors while investing their respective amounts have been misused for their personal gains. It is on the 16 strength of this finding of SEBI the complaint is registered against the Company. Therefore, it is a case where SEBI even on a preliminary examination of the entire allegation has clearly held that there is misuse of funds by the Company of the investors, one of whom is the complainant. It is also a matter of record that plethora of crimes are registered against the petitioner, few of them are appended to the Interlocutory Application in Crime No. 56 of 2021 registered by one Upendra N.Shanbhag, an investor; Crime No.722 of 2021 registered by one Arti Hegde; Crime No.90 of 2019 registered by one Smt. Ketki Shah Talati, in all of which accused is the petitioner herein among others.
12. The submission of the learned senior counsel for the petitioner that the complainant has executed a Power of Attorney which clearly permits handling of the account in the manner that the Company feels is, on the face of it, unacceptable. The reliance placed by the learned senior counsel to clause (e) of the Power of Attorney that money can be dealt with in the manner that they want is too farfetched to be accepted, particularly, in the light of the findings of SEBI albeit, interim, that the Power of Attorney 17 given by the investors had been misused to the tune of Rs.1096 crores as funds had been transferred from Karvy Stock Broking Limited to Karvy Realty Private Limited and utilized for their personal gains. In the teeth of the afore-narrated facts, the complaint and the findings of SEBI, the investigation is yet to conclude. This Court entertaining the petition interjecting the investigation has resulted in stalling of further investigation. Therefore, examination by this Court is only limited to what is afore-noticed.
13. The main contention of the learned senior counsel for the petitioner, apart from what is answered supra, is reckless registration of crime, inclusion of offences that are definitions or ingredients defined for offences. This submission though sounds acceptance, will not take away the effect of the complaint or registration of crime. It is only for the purpose of investigation. A FIR need not necessarily be an encyclopedia of everything. Though the 1st respondent/Police ought to have exercised caution in reckless noting of crimes which are not even crimes under the IPC while registering the FIR, the same would not be a sufficient ground 18 for quashing the FIR, as the investigation conducted and further proceedings against the petitioner would only be after filing of the charge sheet. It would have been an altogether different circumstance, if those offences were indicated in the charge sheet. Mere offences as falling under the definition indicated in the FIR would not vitiate the substance of the crime, though would be a reckless act on the part of the Police. Therefore, the Police shall exercise caution while registering crimes and not indicate offences that are definitions.
14. Insofar as judgments, relied on by the learned senior counsel for the petitioner, are concerned, they would all be inapplicable to the facts of the case. In the case of RAVINDRANATHA BAJPE v. MANGALORE SPECIAL ECONOMIC ZONE LIMITED - 2021 SCC Online SC 806, though the Apex Court holds that issuing summons to an accused is a very serious matter and the Court ought to exercise caution while issuing summons, that stage has not yet arrived in the case at hand. The same goes with the judgment in the case of SHARAT BABU DIGUMARTI v. GOVERNMENT (NCT OF DELHI) - (2017) 2 19 SCC 18. Therefore, the matter being at the stage of investigation, the authorities so relied on for the said point would not come to the rescue of the learned senior counsel for the petitioner.
15. Insofar as judgments relied on in the case of VIJAY KUMAR GHAI AND OTHERS v. STATE OF WEST BENGAL AND OTHERS - 2022 SCC Online SC 344; ANANDA KUMAR MOHATTA AND ANOTHER v. STATE (NCT OF DELHI) DEPARTMENT OF HOME AND ANOTHER - (2019) 11 SCC 706 and SARDAR ALI KHAN v. STATE OF UTTAR PRADESH -
(2020) 12 SCC 51 were all rendered in the peculiar facts of those cases where there was a breach of memorandum of understanding between the parties therein and charge sheets had been filed in those cases. The findings of the Apex Court in those cases were that criminal breach of trust under Section 406 and cheating under Section 420 of the IPC did not come about even to their remotest sense. It is in those circumstances, the Apex Court has quashed the proceedings. In the case at hand, there is a clear finding by SEBI that the Power of Attorney given by the complainant or the investors had been misused. Therefore, entrustment of property 20 that is investment was with the Company and the Company has misused the said investment albeit, prima facie, which would be a clear case of breach of trust or criminal breach of trust.
16. Insofar as the offence of cheating is concerned, the same would also become applicable on a bare look at the complaint and the findings of SEBI, as the Company did solicit investments showing certain returns, but the Company has invested elsewhere which has resulted in huge losses to the investors, like the complainant. Unless investigation is complete and final report is filed, the element of cheating, prima facie, is met in the case at hand.
17. Insofar as the submission with regard to delay in registering the crime, no doubt, the agreement was executed in the year 2015. The investments are a continuous process. Dividends come into the account of the investors intermittently. Therefore, it is a continued action and the complainant gets to know only after the SEBI initiates several proceedings against the Company and has immediately registers the complaint. Therefore, in the case at 21 hand, there is absolutely no delay as is alleged by the learned senior counsel for the petitioner. Delay in all cases cannot be vital, except in peculiar facts obtaining in certain cases. The case at hand is not the one that can be considered that delay has resulted in embellishment and such embellishment would necessarily mean that the crime should be quashed. There are seriously disputed questions of fact in the case at hand, which will have to be investigated and unearthed, as the investment of the complainant like all other investors has been at stake presently, purely on the activity of the Company through its office bearers. Therefore, none of the submissions or any of the armory from the arsenal of the learned senior counsel for the petitioner would render any assistance to obliterate very registration of crime against the petitioner.
18. Finding no merit in the petition, it necessarily meets its dismissal and is accordingly dismissed.
It is made clear that the observations made in the course of the order are only for the purpose of consideration of the case of 22 petitioner under Section 482 of Cr.P.C. and the same shall not bind or influence the proceedings against any other accused. The first respondent shall conclude investigation without any loss of time as the crime is registered in 2021 and a final report shall be filed as expeditiously as possible by the Investigating Officer before the concerned court.
Consequently, I.A.No.2/2022 also stands disposed.
Sd/-
JUDGE bkp CT:MJ