Telangana High Court
Mr. C.P. Khandelwal vs Serious Fraud Investigation Office on 23 July, 2025
THE HONOURABLE SMT JUSTICE K. SUJANA
CRIMINAL PETITION No.4576 of 2025
ORDER:
This Criminal Petition is filed by the
petitioner/accused No.3 seeking to quash the proceedings
against him in CCSR.No.3165 of 2024 dated 29.08.2024 on
the file of the Special Judge for Economic Offences – cum – VIII
Additional Metropolitan Sessions Judge, Hyderabad.
2. The brief facts of the case are that the petitioner,
accused No.3, Chandra Prakash Khandelwal, served as the
Managing Director of Systematix Corporate Services Limited
(SCSL), which functioned as the merchant banker for the IPOs
of Tele Data Informatics Limited (TDIL) and Softpro Systems
Limited (SSL). Investigations conducted by the Serious Fraud
Investigation Office (SFIO) was initiated following a
whistleblower’s disclosure, which unveiled alleged financial
irregularities involving the manipulation of IPO processes, and
the petitioner was found to have exerted control over multiple
entities, namely, accused Nos. 5, 6, and 7, which engaged in
inflated and deceptive transactions. These transactions were
strategically used to misrepresent financial data in the IPO
prospectus, thereby, misleading investors regarding the
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valuation and prior investment history of SSL. The
investigation further revealed that shares were allotted to these
affiliated entities at prices significantly lower than those
disclosed in the prospectus, enabling unjust financial gains for
the accused and causing losses to public investors. Despite
knowledge of discrepancies, the firm, under leadership of
petitioner, actively participated in the alleged
misrepresentation. The SFIO’s findings indicated that
petitioner played a key role in fraudulent inducements to
investors and was one of the primary beneficiaries of the IPO
process, with SCSL earning substantial fees through its
involvement.
3. The complaint was filed under Sections 63 and 68 of
the Companies Act, 1956, for misstatements in the prospectus,
and Sections 120B, 417, and 420 of the Indian Penal Code,
1860, for criminal conspiracy and cheating. Aggrieved thereby,
the petitioner/accused No.3 preferred this criminal petition.
4. Heard Sri Pavan Kumar Annabatuni, learned counsel
for petitioner, Sri Gadi Praveen Kumar, learned Deputy
Solicitor General of India, appearing for respondent No.1, and
Sri Arun Kumar, learned Additional Public Prosecutor,
appearing for the respondent No.2 – State.
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5. Learned counsel for petitioner submitted that
petitioner has been wrongly implicated in the present
proceedings despite the absence of any direct evidence
establishing his involvement in the alleged offenses. He
contended that the accusations, even if taken at face value, do
not prima facie constitute any offense against the petitioner,
and the criminal proceedings initiated against him are a clear
abuse of the process of law. He further contended that no
specific overt act has been attributed to the petitioner, and the
allegations made against him are vague and omnibus in
nature.
6. He asserted that the petitioner merely acted as a Lead
Manager along with PNB Capital Services Limited in the IPO of
Softpro Systems Limited (SSL), and his role was limited to
verifying transfer deeds, reviewing shareholder registers, and
issuing the due diligence certificate. He emphasized that the
petitioner was not involved in monitoring any share transfers
between the company and purchasers, thereby, negating any
culpability in the alleged fraudulent transactions. Additionally,
he averred that the due diligence certificate for the IPO of SSL
was issued by the petitioner on 03.01.2000, which predates
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the alleged share transactions said to have occurred on
25.02.2000, and that the same would conclusively prove that
the share transactions were executed by the company and its
Directors without the knowledge or involvement of petitioner.
7. Learned counsel for petitioner incessantly contended
that there has been an inordinate delay in filing the complaint,
and that despite the Ministry of Corporate Affairs directing that
investigations be completed within six months, the SFIO took
nearly six years to submit its investigation report on
13.05.2022. Moreover, even after submitting the report, the
authorities took an additional eight years before initiating
criminal proceedings, culminating in a 14-year delay, and that
such prolonged delays, without any application for
condonation, render the complaint entirely time-barred under
Section 469 of the CrPC. He pointed out that the charges
under Sections 63 and 68 of the Companies Act, 1956 are
subject to statutory limitations and should not have been
entertained by the Court at such a late stage. He asserted that
the only charge that survives is Section 420 of the IPC, which
pertains to cheating, but argued that the said provision is not
applicable to the petitioner. Therefore, prayed this Court to
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allow the Criminal Petition by quashing the proceedings
against the petitioner.
8. In support of the contentions made, learned counsel
for petitioner filed written submissions, whereunder, reliance
was placed on the judgments rendered in the cases of
Hasmukhlal D.Vora and Another vs. State of Tamil Nadu 1
and Serious Fraud Investigation Office, Vs. Shonkh
Technologies Limited and Others 2.
9. On the other hand, the learned counsel for respondent
No.1, and the learned Additional Public Prosecutor,
respectively, opposed the submissions made by learned
counsel for petitioner, and contended that there are clear set of
allegations leveled against the petitioner, and that though the
learned counsel for petitioner contended that limitation aspect
comes into picture, it is to be noted that the specific allegations
against the petitioner are under Section 420 of IPC, and not
under Section 68 of the Companies Act, 1956, due to which
the limitation ground cannot be considered to quash the
proceedings against the petitioner. It is specifically averred that
the petitioner controlled all the companies which are related to
1
2022 (15) SCC 164
2
2023 SCC OnLine Del 277
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each other and a total of Rs.37,50,000/- shares were sold to
these entities. It is lamented that the petitioner played a key
role in all these transactions and that he was controlling A5 to
A6 entities. It was asserted that A5 to A7 had originally
purchased the shares and thereby induced the investors to
invest funds amounting to Rs.12.75 crores through IPO.
Therefore, while advocating that petitioner is not entitled for
quashing of proceedings at this stage, they prayed this Court
to dismiss the Criminal Petition.
10. Having regard to the rival submissions made, and on
going through the material placed on record, it is noted that
the contention of learned counsel for petitioner is that
petitioner is innocent of the offences as alleged, and mainly
focused on the aspect of limitation stating that respondent
No.1 had carried out the investigation in the year 2000 for
which a letter of whistle blower was received in the month of
September 2015 stating that some transactions were not
covered by SFIO that were undertaken by the Ketan Parekh
Group in association with petitioner, as such, it obtained
permission on 01.11.2016, and basing on the order of the
NCLT, the Director SFIO, who constituted investigation in the
year 2016, was reconstituted only in the year 2021 for several
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times, and thereafter, report was submitted on 13.05.2022
which was after lapse of six years and that the investigation
ought to have completed in six months. In support of the said
submission, reliance was placed upon the judgment rendered
by the Hon’ble Supreme Court in the case of Hasmukhlal
(supra), whereunder, in paragraph Nos.23 to 25, it was held as
under:
“23. In the present case, the respondent has
provided no explanation for the extraordinary
delay of more than four years between the
initial site inspection, the show-cause notice,
and the complaint. In fact, the absence of such
an explanation only prompts the Court to infer
some sinister motive behind initiating the
criminal proceedings.
24. While inordinate delay in itself may not be
ground for quashing of a criminal complaint,
in such cases, unexplained inordinate delay of
such length must be taken into consideration
as a very crucial factor as grounds for
quashing a criminal complaint.
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25. While this Court does not expect a full-
blown investigation at the stage of a criminal
complaint, however, in such cases where the
accused has been subjected to the anxiety of a
potential initiation of criminal proceedings for
such a length of time, it is only reasonable for
the court to expect bare-minimum evidence
from the investigating authorities.”
11. On perusing the material on record, it is seen that the
averments made on behalf of petitioner are basing on Sections
63 and 68 of the Companies Act, 1956, whereas, it is pertinent
to mention that petitioner is prosecuted mainly for the offences
punishable under Sections 120B, 417, and 420 of IPC. That
being so, as the offence under Section 420 of IPC is punishable
upto 7 years, the Section 468 of Cr.P.C., is not applicable as it
can only come in aid when the punishment does not exceed 3
years. In view of the above, this Court is of the opinion that the
aspect of delay cannot be ground to quash the proceedings
initiated against the petitioner.
12. The other contention of learned counsel for petitioner
is that petitioner is no way connected with alleged offences,
whereas, it is imperative to note that the report filed by SFIO
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would show that petitioner is main culprit as he was managing
A5 to A7, and there are serious allegations of fraud and
cheating by companies that were controlled by the petitioner.
Therefore, this Court is of the firm view that the proceedings
initiated against the petitioner cannot be quashed at this
stage. There are no merits in this Criminal Petition, and the
same is liable to be dismissed.
13. Accordingly, this Criminal Petition is dismissed.
Miscellaneous applications, if any pending, shall also
stand closed.
_______________
K. SUJANA, J
Date: 23.07.2025
PT