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High Court of Delhi
SUNIL GAUR, J.
Morgan Securities & Credits P. & Others
Versus
State of Delhi & Another
CRL.M.C. Nos. 4603, 5004 of 2005, 279 to 281 of 2011, 1974 – 75, 2059 of 2007 & Crl. M.As. Nos. 10022 of 2005, 10025, 13116, 6975-76, 6979 of 2007, 2094 of 2008, 2299, 2300, 12884 of 2010, 2660, 1103, 1105, 1101 of 2011, 617 & 620 of 2012
Decided On : 23-09-2013
Quashing of FIR - Criminal Breach of Trust, Misappropriation, Forgery - Section 406/409/465/468/471/120B of IPC - [Depositories Act, 1996, Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996] - The court found that the sale of pledged shares was with prior notice to the complainant and in consonance with the Pledge Agreements, Memorandum of Settlement, and Consent Award. The court concluded that the ingredients of the alleged criminal offences were lacking, and the dispute was of a purely civil nature. The court held that the initiation of criminal proceedings was an abuse of the process of the law and quashed the FIRs and related proceedings.
Fact of the Case:
The petitions sought quashing of FIRs for criminal breach of trust, misappropriation, and forgery, alleging that the disputes were of a civil nature and the ingredients of the alleged offences were lacking. The court heard the parties and perused the material on record, including the status report and relevant decisions.
Finding of the Court:
The court found that the sale of pledged shares was with prior notice to the complainant and in consonance with the Pledge Agreements, Memorandum of Settlement, and Consent Award. The court concluded that the ingredients of the alleged criminal offences were lacking, and the dispute was of a purely civil nature. The court held that the initiation of criminal proceedings was an abuse of the process of the law and quashed the FIRs and related proceedings.
Issues: The issues revolved around whether the sale of pledged shares constituted criminal breach of trust, misappropriation, or forgery, and whether the dispute was of a civil or criminal nature.
Ratio Decidendi: The court's decision was based on the finding that the sale of pledged shares was with prior notice to the complainant and in consonance with the relevant agreements and regulations. The court concluded that the ingredients of the alleged criminal offences were lacking, and the dispute was of a purely civil nature.
Final Decision: The court quashed the FIRs and related proceedings, finding the initiation of criminal proceedings to be an abuse of the process of the law.
Key Points: - The dispute is of a purely civil nature (!) (!) (!) . - The sale of pledged shares was conducted in accordance with the Pledge Agreements, Memorandum of Settlement, and Consent Award (!) (!) (!) (!) . - The borrower had defaulted on payments, triggering the event of default under the Memorandum of Settlement (!) (!) (!) . - The pledgee had given prior notice to the complainant before selling the pledged shares (!) (!) (!) (!) (!) (!) . - The ingredients of the alleged criminal offences were lacking, and FIRs were quashed as an abuse of process of law (!) (!) (!) . - Civil and criminal proceedings cannot proceed simultaneously where the dispute is purely civil (!) (!) (!) . - The sale of pledged shares was with prior notice and not in collusion or at an undervalued price (!) (!) (!) (!) . - The courts below erred in not quashing the FIRs, which has been corrected by this judgment (!) (!) (!) . - The Securities Appellate Tribunal found the transaction valid, supporting the pledgee’s actions (!) (!) . - The orders of quashing are passed without prejudice to the merits of the civil disputes (!) (!) .
1. In the above-captioned eight petitions, quashing of FIR No.505/2005 registered at P.S. Defence Colony, Delhi for the offences of criminal breach of trust, criminal misappropriation, forgery, etc. and FIR No.511/2005 registered at P.S. Connaught Place, Delhi for the aforesaid offences, is sought by petitioners-Morgan Securities & Indo Rama Synthetics on the ground that the dispute raised in these two FIRs is essentially of civil nature and the ingredients of the offence alleged are lacking and that the proceeding arising out of these FIRs is the abuse of process of law.
2. In Crl. M.C.2059/2005, petitioner-Morgan Securities and Credits Pvt. Ltd. seeks quashing of FIR No.108/2005 registered in the State of Himachal Pradesh at the instance of M/s. Morepen Laboratories Ltd. for the aforesaid offences on identical grounds as taken in Crl.M.C.4603/2005. Under the orders of the Apex Court, aforesaid petition was transferred to this High Court for being heard along-with Crl.M.C.4603/2005 etc. In Crl. M.Cs.279/2011, 280/2011 and 281/2011, trial court's order of 14th January, 2011 is assailed on the ground that since the pledged shares have been sold in open market to bonafide purchasers, therefore, superdari of the pledged shares in question to the complainant/first informant is unwarranted as subject matter of these FIRs is already under active consideration in the civil proceedings between the parties. Thus, quashing of order of 14th January, 2011 is sought in the above referred three petitions.
3. With the consent of learned counsel for the parties, above titled eight petitions were heard together as the quashing of the proceedings arising out of the three FIRs in question is sought on identical grounds and so, by this common judgment, these eight petitions are being disposed of.
4. The relevant factual background of these matters can be conveniently picked up from the status report filed by respondent-State in February, 2008 in Crl. M.C. 5004/2005, which is as under: -
"The brief facts of the case FIR No.511 dt.07.09.05 under Section 406/409/465/468/471/120B of IPC PS Con. Place, New Delhi are that the complainant M/s. Petunia Financial Services P. Ltd. (PFSPL) reported that their company was the pledger towards Inter Corporate Deposit (ICD) of Rs.5 crores taken by M/s. Morepen Laboratories Ltd. (MLL) from petitioner M/s. Morgan Securities and Credits Pvt. Ltd. (MSCPL). The complainant company pledged 2,70,000 equity shares of M/s. Blue Coast Hotels & Resorts Ltd. (BCHRL) for securing the said ICD. The borrower M/s. MLL repaid the principal amount and have some dispute over payment of interest and negotiations were going on between the parties for reconciliation of the interest. During that period, they were shocked to learn that the lender M/s. MSCPL has disposed off the pledged shares by transferring them to their sister concerns/concerns of their relatives without their knowledge or consent. These transfers were done with malafide intention and in collusion with co-accused knowing that such transfers were fraudulently done on a price far below the actual price value of the shares in question. No credit was given to borrower for such transfers/sales. These transactions were sham and were made on the basis of false documents in conspiracy with relative/associate companies of the petitioner in order to cause wrongful gain to them and wrongful loss to the complainant.
That on the basis of the complaint, above case was registered on 07.09.05 at PS Connaught Place and investigation was taken up by local police.
That subsequently, the investigation of the case was transferred to Economic Offences Wing vide order No.53095-105/C&T (AC-III) dt. 21.10.05 by the PHQ.
That the investigation revealed that M/s. MLL obtained an ICD of Rs.5 crores and Rs.2 crores from the lender M/s. MSCPL in accordance with agreement dt. 19.09.02 and 30.10.02, without security for a period of 120 days. The witnesses belonging to borrower and gua
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