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High Court Of Calcutta
GORACHAND DE
KANWAR DEEP SINGH ETC. - Appellant
Versus
STATE OF WEST BENGAL - Respondent
C. R. R. 2085 Of 2002
Decided On : 10/08/2002
COMPANIES ACT, 1956 - SECTIONS 56(3), 63, 68, 624 - CRIMINAL PROCEDURE CODE, 1973 - SECTION 482 - INDIAN PENAL CODE - SECTIONS 420, 406, 468, 471, 421, 120B - FIRs QUASHED - INVESTIGATION STOPPED - SPECIAL OFFICER APPOINTED TO PROTECT INTEREST OF SUBSCRIBERS.
Fact of the Case:
Petitioner, Managing Director of a Public Limited Company, filed separate applications under Section 482 of the CrPC praying for quashing of FIRs and investigation proceedings in six cases alleging cheating, breach of trust, etc. The FIRs were registered on the basis of private complaints and one suo motu case alleging that the petitioner's company manufactured false and misleading documents, allured investors to invest money, and defrauded them. The petitioner contended that no case was made out, the allegations were baseless, and a separate complaint had been filed by SEBI under the Companies Act, which was pending before the Chief Judicial Magistrate. The State opposed the petition, arguing that a prima facie case under various sections of the IPC had been established and that the extraordinary power under Section 482 should not be exercised at this initial stage of investigation.
Finding of the Court:
The Court found that the FIRs did not disclose any cognizable offense and that the investigation proceedings were initiated with mala fide intention at the instance of a rival business house and due to media hype. The Court held that the allegations made in the FIRs were almost similar to those made in the SEBI complaint, and that allowing the investigation to continue would lead to double jeopardy for the petitioner. The Court also found that the freezing of the petitioner's accounts had made it impossible for the company to disburse payments to the investors, and that the non-payment was not intentional or fraudulent, but due to impossibility of performance.
Issues: 1. Whether the FIRs disclosed any cognizable offense? 2. Whether the investigation proceedings were initiated with mala fide intention? 3. Whether allowing the investigation to continue would lead to double jeopardy for the petitioner? 4. Whether the non-payment to investors was intentional or fraudulent?
Ratio Decidendi: 1. The FIRs did not disclose any cognizable offense as the allegations were based on violations of the Companies Act, which are non-cognizable offenses under Section 624 of the Companies Act. 2. The investigation proceedings were initiated with mala fide intention as they were started despite the express bar provided under Section 624 of the Companies Act, and at the instance of a rival business house and due to media hype. 3. Allowing the investigation to continue would lead to double jeopardy for the petitioner as the allegations made in the FIRs were almost similar to those made in the SEBI complaint, which was pending before the Chief Judicial Magistrate. 4. The non-payment to investors was not intentional or fraudulent, but due to impossibility of performance as the freezing of the petitioner's accounts had made it impossible for the company to disburse payments.
Final Decision: The Court quashed the FIRs and the investigation proceedings in all six cases. It also appointed a Special Officer to protect the interest of the subscribers and debenture holders of the petitioner's company.
( 1 ) KANWAR Deep Singh, Managing Director of a Company named and styled as M/s. Tubrao Infotech and Industries Ltd. , a Public Limited Company under the Companies Act, 1956, filed separate applications under Section 482 of the Code of Criminal Procedure, 1973 praying for quashing of the F. I. R as well as investigational proceedings in all these six cases, five of which were started on the basis of private complaints and one was started by the Police suo motu, mainly on the ground that no case was made out in the F. I. R. and the allegation of cheating, breach of trust, etc. are without any basis and that there is no reason to investigate the case inasmuch as a separate complaint has been filed by the Security Exchange Board of India (hereinafter referred to as SEBI for brevity) under Section 56 (3), 63 and 68 of the Companies Act, 1956 and it is still pending before the Court of the learned Chief Judicial Magistrate, Calcutta. In all these cases, the opposite party/state appeared and made their respective submissions alleging that a prima facie case under Sections 420/406/468/471/421/120b of the Indian Penal Code having been established, the extraordinary power under Section 482 of the Code should not be exercised at this initial stage of investigation.
( 2 ) BEFORE entering into the details of the arguments, I deem it proper to point out how these cases were registered.
( 3 ) FIRST case was started on the basis of a complaint lodged by one Gobindalal Bhattachrya of 180/1, Pasupati Bhattacharjee Road, P. S. Behala, Calcutta-700 041 with the Inspector-in-Charge of Behala P. S. alleging that his relative Soumen Bhattacharya along with Johnny Sadhukhan and Pradip Pal being the authorised agents of the Company of the present petitioner came to the residence of the complainant in the month of August, 2000 and showed prospectus of the Company and allured him to invest a sum of Rs. 5,000/- which was collected on the basis of A/c. Payee Cheque after issuing Kutcha receipt. Again on 9th March, 2001, those persons came to the complainant and allured him to invest a further sum of Rs. 1,00,000/ -. All those amounts were invested for a period of four years. The certificate relating to the secured redeemable debentures along with post dated cheques was handed over to the complainant. On scrutiny of the documents issued by the said Company, it was detected that the following false and misleading statements were made: (i) It was falsely written that the returns on the debentures were tax free, though it was not. (ii) It was falsely stated that the secured debentures issued by the Company were assigned credit rating by its banker, but it was not so. (iii) The debentures were issued without obtaining necessary permission from SEBI which is mandatory. (iv) Those debentures were described to be issued for private placement, but those were issued publicly by engaging commission agent with high rate of commission. So, it was submitted that the Company and others manufactured documents containing false and misleading statements and thereby allured the investors, and by such inducements they defrauded the investors of their investments for the wrongful gain of the Company. So the complainant claimed that he was cheated in respect of cash amount of Rs. 1,05,000/ -. On the basis of the said complaint, Behala P. S. Case No. 222 dated 13-5-2001 was started.
( 4 ) THEREAFTER, a suo motu case was started by Kotwali (Cooch Behar) P. S. Case No. 192 dated 14-2-2001 on the allegation that in course of mobile duty on 14-6-2001, Police Officer had been to Rupnarayan Road, Cooch Behar and noticed a mob demonstrating at the office of the Company. On enquiry, it was ascertained from the mob that the persons assembled were certificate holders of the Company and they came to know from the newspapers and from other sources that the Company was a cheating organisation and the depositors would be cheated. The mob also demanded return of the dep
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