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2020 Supreme(Telangana) 741
IN THE HIGH COURT OF FOR THE STATE OF TELANGANA
Kunuru Lakshman, J.
Ishoo Narang and Ors. – Appellants
Versus
The State of Telangana and Ors. – Respondents
Criminal Petition Nos. 3966, 3982 and 4272 of 2020
Decided On : 22-12-2020
Advocate Appeared:
For the Appellant : Vedula Venkata Ramana, Senior Counsel
For the Respondent: B. Narasimha Sharma, Standing Counsel and K. Surender, Special P.P.
In economic offences, the High Court should not exercise its inherent powers under Section 482 of the Cr.P.C. to quash FIRs/charge sheets as it would stall the investigation/enquiry initiated by the Authorized Officer under the provisions of PMLA.
Headnote:
CRIMINAL PETITIONS - QUASHING OF FIR - COMPLAINT - INVESTIGATION - ECONOMIC OFFENCE - LOAN FRAUD - OTS - PMLA - SUMMONS - INHERENT POWERS - SECTION 482 CR.P.C. - [FACTS OF THE CASE] - [FINDING OF THE COURT] - [ISSUES] - [RATIO DECIDENDI] - [FINAL DECISION] - [MAIN LEGAL POINT] - [CATEGORY] - [SUB-CATEGORY]
Fact of the Case:
Petitioners, Managing Director and Directors of a company, availed credit facilities from different banks and defaulted in payment of loans. The accounts were declared NPA and fraud. Forensic audit revealed lapses and diversion of funds. Petitioners availed OTS facility by submitting proposals accepted by banks with conditions that OTS will not absolve criminal liability. CBI and Enforcement Directorate registered FIRs and initiated investigation/enquiry under PMLA. Petitioners challenged the proceedings seeking to quash FIRs and summons issued by Enforcement Directorate.
Finding of the Court:
The Court held that the petitioners committed loan fraud causing a massive loss to banks and the public. OTS acceptance by banks with conditions that criminal liability is not absolved, does not exonerate the petitioners. Economic offences have implications beyond mere disputes between parties and quashing of proceedings is not justified. The Court also held that ECIR under PMLA is not equivalent to FIR and summons issued thereunder do not make the petitioners accused. The Court found no merit in the petitions and dismissed them.
Issues: 1. Whether the petitioners committed loan fraud causing a massive loss to banks and the public? 2. Whether the acceptance of OTS proposals by banks with conditions that criminal liability is not absolved, exonerates the petitioners? 3. Whether economic offences have implications beyond mere disputes between parties and quashing of proceedings is justified? 4. Whether ECIR under PMLA is equivalent to FIR and summons issued thereunder make the petitioners accused?
Ratio Decidendi: 1. The Court relied on various judgments of the Apex Court to hold that economic offences involving the financial and economic well-being of the State have implications which lie beyond the domain of mere dispute between private disputants. The High Court would be justified in declining to quash where the offender is involved in an activity akin to a financial or economic fraud or misdemeanor. The consequences of the act complained of upon the financial or economic system will weigh in the balance. 2. The Court held that the OTS merely deals with the civil liability that too by making of payment of a small fraction of the outstanding liability. The amount which has been settled in OTS scheme cannot be legally sufficient to wipe out the criminal liability of the accused persons. The OTS could wipe off only the civil liability, but not the criminal one. 3. The Court held that in economic offences, it is not proper for the High Court to exercise its inherent powers under Section 482 of the Cr.P.C. to quash the FIRs/charge sheets. It is nothing but stalling investigation/enquiry initiated by the Authorized Officer under the provisions of PMLA. 4. The Court held that ECIR registered by the Enforcement Directorate cannot be equated to an FIR under Section 154 Cr.P.C. The persons whom summons were issued under Section 50 of the PMLA cannot be treated as they are accused at present.
Final Decision: The Court dismissed all the Criminal Petitions filed by the petitioners.
ORDER :
Kunuru Lakshman, J.
1. All these Criminal Petitions, though relating to different crimes but concerning the same petitioners/accused and relating to similar nature of offences, have been considered together and are being taken up for disposal by way of a common order.
2. Crl. P. No. 3966 of 2020 is filed to quash FIR No. 11 of 2018 on the file of CBI, BS & FC, Bangalore. The petitioners are accused Nos. 1 to 4 in the said crime. The offences alleged against them are under Sections - 409, 420, 467, 468 and 471 read with 120-B of IPC and also under Section - 13 (1) (d) read with 13 (2) of the Prevention of Corruption Act, 1988 (for short 'Act, 1988').
3. The very same petitioners have filed Crl. P. No. 3982 of 2020 to quash FIR No. RC0352020A0002 on the file of CBI ACB, Hyderabad. The petitioners are accused Nos. 1 to 4 in the said crime. The offences alleged against them are under Section - 420 read with 120-B of IPC and under Section - 13 (1) (d) read with 13 (2) of the Act, 1988.
4. The very same petitioners have filed Crl. P. No. 4272 of 2020 to quash the complaint and investigation in ECIR/HYZO/03/2019/2420, 2421 and 2422 on the file of Assistant Director, Enforcement Directorate, Ministry of Finance, Government of India, Basheerbagh, Hyderabad. The petitioners are accused Nos. 1 to 4 in the said ECIR.
5. Heard Sri Vedula Venkata Ramana, learned Senior Counsel representing Sri D.B. Chaitanya, learned counsel for the petitioners, Sri B. Narasimha Sharma, learned Standing Counsel for Enforcement Directorate and Sri K. Surender, learned Special Public Prosecutor for Central Bureau of Investigation.
6. The allegations against the petitioners in FIR No. 11/2018 on the file of CBI, BS & FC, Bangalore:
i) The Central Bank of India is de facto complainant in the said complaint, dated 30.06.2018,
(ii) Petitioner No. 4 was incorporated on 14.09.2007 and was engaged in procuring coal from Indonesia for selling the same in domestic market and iron ore in Chinese market. Petitioner No. 1 -accused No. 1 along with others has floated petitioner No. 4. Petitioner No. 1 is the Managing Director of petitioner No. 4. It also owned M/s. Jumbo Mining Limited, a Hyderabad based Mining and Ceramic Raw Material Export Company.
(iii) Petitioner No. 4 was recognized by the Government of India as a Star Export House and it became second largest Exporter from India for Ceramic Raw Material. The said M/s. Jumbo Mining Limited was sold to IMERYS, a Euro 6 Billion Company in the year 2007. Petitioner No. 3 - accused No. 3 is a promoter of RHI Clasil Limited, a Joint Venture Refractory Unit and part of Euro 1.9 Billion RHI AG Group, Germany. He was proposed to be responsible for planning the long term strategy of petitioner No. 4.
(iv) Petitioner No. 2 - accused No. 2 has more than 2½ decades of experience in cement industry. He is also the promoter of M/s. CH Patel Agency, Hyderabad, which is engaged in high value cement trading business in India. Petitioner No. 2's contacts in the trade have helped petitioner No. 4 to establish many customers engaged in cement manufacturing.
(v) Petitioner No. 4 availed credit facilities from different banks including the Central Bank of India, the State Bank of India, the Bank of Baroda, ICICI Bank and the Bank of Maharashtra under multiple banking arrangements for the purpose of doing the business of trading of coal.
(vi) The Central Bank of India alleged that petitioner No. 4 viz., M/s. Kyori Oremin Limited along with its Directors, the other accused, have committed fraud and cheated the Bank and on account of their deliberate act and omission, caused wrongful loss to a tune of Rs. 60.00 Crores approximately to the bank.
(vii) In the year 2012, petitioner No. 4 represented by petitioner Nos. 1 to 3 have approached the Central Bank of India, the de facto complainant, for financial assistance and working capital requirem
