Illegal Transfer to Evade Police Seizure: Court Denies Restitution Based on 'In Pari Delicto' Principle - 2025-04-09

High Court Denies Recovery of Funds Transferred to Evade Police Seizure, Citing 'In Pari Delicto'

Shimla, Himachal Pradesh – April 8, 2025 – The High Court of Himachal Pradesh has upheld an order denying the release of ₹14,50,000 to petitioners who sought to reclaim funds they had transferred to another individual to prevent police seizure. Justice Rakesh Kainthla, presiding over the case, dismissed two criminal revision petitions, reinforcing the principle that courts will not assist parties seeking to benefit from illegal acts.

The case originated from an FIR registered against Vinoj Kumar Sharma under the Prevention of Corruption Act. During the investigation, it was revealed that Sharma had issued a cheque to Atin Bansal, who then transferred the funds to Ashutosh Gupta's account. Although the police eventually filed a cancellation report finding no cognizable offense, the deposited amount of ₹14,50,000 remained frozen.

Competing Claims for the Disputed Funds

Both Ashutosh Gupta and Vinoj Kumar Sharma filed separate applications before the Special Judge, Sirmour at Nahan, claiming the funds. Gupta argued that the money belonged to him and was frozen due to the police investigation, while Sharma contended that the money was his and his wife's, entrusted to Gupta as a custodian. The Trial Court ordered the release of the funds to Ashutosh Gupta, subject to furnishing indemnity and surety bonds, dismissing Sharma's application. This led to two revision petitions before the High Court: one by Sharma and his wife challenging the release to Gupta, and another by Gupta contesting the conditions imposed on the release.

Arguments and Court's Reasoning

Representing Vinoj Kumar Sharma and Vijay Laxmi, Senior Advocate N.S. Chandel argued that the money belonged to them and was merely held in trust by Ashutosh Gupta. Advocate Nitin Thakur, appearing for Ashutosh Gupta, contended that while the release to Gupta was correct, the condition of bonds was unwarranted as the police had declared the money untainted. The State, represented by Deputy Advocate General Ajit Sharma, supported the release of funds to Ashutosh Gupta.

Justice Kainthla, in his judgment, underscored the limited scope of revisional jurisdiction, referencing the Supreme Court's rulings in Malkeet Singh Gill v. State of Chhattisgarh and State of Gujarat v. Dilipsinh Kishorsinh Rao , which stipulate that revision is not an appellate exercise but aims to rectify patent errors of jurisdiction or law.

The High Court highlighted a crucial finding: the police status report indicated that the money was transferred to Ashutosh Gupta "to prevent it from being seized by the police." Citing the Supreme Court's judgment in Loop Telecom & Trading Ltd. v. Union of India , the court invoked the principle of in pari delicto potior est conditio possidentis (in equal fault, the position of the possessor is stronger). This legal maxim dictates that when both parties are equally at fault in an illegal transaction, the court will not assist either party, and the possession remains with the current holder.

The judgment quoted extensively from Loop Telecom and G.T. Girish v. Y. Subba Raju , emphasizing that restitution is not available when the party seeking it is equally or more responsible for the illegality. The court reasoned that Vinoj Kumar Sharma and Vijay Laxmi knowingly participated in an illegal act – transferring funds to evade potential legal seizure – and therefore, cannot claim restitution.

Further, the court addressed the petitioners' claim of a trust, noting that it constituted a Benami transaction, prohibited under the Benami Transaction Prohibition Act 1988. Section 4 of this Act bars the right to recover property held Benami through court intervention, providing an additional ground for rejecting the petitioners' claim.

Final Verdict and Implications

Dismissing both revision petitions, the High Court upheld the Trial Court’s order to release the funds to Ashutosh Gupta, albeit maintaining the condition of indemnity and surety bonds given the pending civil dispute at the time of the Trial Court’s order. The court clarified that even the subsequent withdrawal of the civil suit does not alter the legal position as rights are determined at the commencement of legal proceedings.

This judgment serves as a significant reminder that the judiciary will not facilitate the recovery of assets intentionally moved to circumvent legal processes. The 'in pari delicto' principle remains a potent bar against those seeking judicial assistance after engaging in unlawful transactions, especially when aimed at obstructing law enforcement. The case underscores the risks associated with attempting to hide assets from legal scrutiny and reinforces the court's stance against aiding and abetting such actions.