Karnataka High Court
Shri. Shrikant Sharma vs The State Of Karnataka on 23 July, 2025
-1-
NC: 2025:KHC:28893
WP No. 40308 of 2018
C/W CRL.P No. 5157 of 2018
CRL.P No. 5159 of 2018
HC-KAR AND 5 OTHERS
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 23RD DAY OF JULY, 2025
BEFORE
THE HON'BLE MRS. JUSTICE M G UMA
WRIT PETITION NO. 40308 OF 2018 (GM-RES)
C/W
CRIMINAL PETITION NO. 5157 OF 2018
CRIMINAL PETITION NO. 5159 OF 2018
CRIMINAL PETITION NO. 6885 OF 2018
WRIT PETITION NO. 35925 OF 2018 (GM-RES)
WRIT PETITION NO. 7492 OF 2019 (GM-RES)
WRIT PETITION NO. 7493 OF 2019 (GM-RES)
WRIT PETITION NO. 7494 OF 2019 (GM-RES)
IN W.P.NO.40308/2018
BETWEEN:
SHRI AVINASH KATWARE
S/O SHARADRAO,
AGED ABOUT 59 YEARS,
Digitally signed
by RAMESH R/AT FLAT NO.101, BAJIRAO SADAN,
MATHAPATI PLOT NO.322, LAXMI NAGAR,
NAGPUR - 440 022.
Location: HIGH
COURT OF ... PETITIONER
KARNATAKA
(BY SRI. M.S. SHYAM SUNDAR, SR. ADVOCATE FOR
SRI. PRASANNA KUMAR S. ADVOCATE)
AND:
1. THE STATE OF KARNATAKA BY
SUBRAMANYAPURAM POLIE STATION
SUBRAMANYAPURA, BANGALORE - 62
REPRESENTED BY THE SHO AND THE
STATE PROSECUTOR.
2. SHRI. PRASHANTH HEGDE,
AGED MAJOR, MANAGING
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DIRECTOR, M/S METAL CLOSURE,
12TH MAIN, KANAKAPURA MAIN
ROAD, BANGALORE - 560 032.
(AMENDMENT AS PER THE ORDER
DATED 19.09.2023)
... RESPONDENTS
(BY SRI. RAJATH SUBRAMANYA, HCGP FOR R1
SRI. ANANTH MANDAGI, SR. ADVOCATE FOR
SRI. H.N. VASUDEVAN, ADVOCATE FOR R2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF INDIAN CONSTITUTION READ WITH SECTION 482 OF CRIMINAL
PROCEDURE CODE PRAYING TO QUASH THE FINAL REPORT/CHARGE
SHEET FILED IN CRIME NO.580/2016 OF RESPONDENT POLICE
STATION (VIDE ANNEXURE-B WHICH IS RECEIVED BY THE LEARNED
MAGISTRATE ON 23.09.2016 IMPUTING THE PETITIONER HEREIN
FOR THE OFFENCE PUNISHABLE UNDER SECTION 120(B), 403, 408,
447, 381, 420 READ WITH SECTION 37 OF IPC AND ETC.,
IN CRL.P.NO.5157/2018
BETWEEN:
V. V. KRISHNAMURTHY,
S/O. M. VEDAGIRI,
AGED ABOUT 57 YEARS,
RESIDING AT NO.197,
SAI KRUPA, 6TH 'A' MAIN,
J.P. NAGAR, 4TH PHASE,
BENGALURU - 560 078
... PETITIONER
(BY SRI. S.S. NAGANANDA, SR. ADVOCATE FOR
SRI. SRIRANGA .S. ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRESENTED BY DY.
SUPERINTENDENT OF POLICE,
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HC-KAR AND 5 OTHERS
ECONOMIC OFFENCES DIVISION,
CARLTON HOUSE, PALACE ROAD,
C.I.D., BENGALURU - 560 001,
REPRESENTED BY SPP,
HIGH COURT BUILDING.
2. MR. B. PRASHANTH HEGDE,
S/O LATE V. RATNAKAR HEGDE,
AGE 67 YEARS, MANAGING DIRECTOR,
METAL CLOSURES PVT. LTD.,
12TH MAIN, KANAKAPURA ROAD,
BENGALURU - 560 062.
RES: #261, DEFENCE COLONY,
INDIRANAGAR, BANGALORE - 560 083.
... RESPONDENTS
(BY SRI. RAJATH SUBRAMANYA, HCGP FOR R1
SRI. DHYAN CHINNAPPA, SR. ADVOCATE FOR
SRI. H.N. VASUDEVAN, ADVOCATE FOR R2)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C. PRAYING TO QUASH THE CHARGE SHEET DATED 05.05.2018
(ANNEXURE-A) IN C.C.NO.11073/2018, ON THE FILE OF THE I ACMM
BANGALORE AND THE ORDER DATED 07.05.2018 (ANNEXURE B)
PASSED BY THE I ACMM, BANGALORE IN C.C.NO.11073/2018,
TAKING COGNIZANCE AS WELL AS ALL PROCEEDINGS AGAINST THE
PETITIONER PURSUANT TO THE COMPLAINT AND FIR DATED
03/23.09.2016 FILED BY M/S METAL CLOSURES PRIVATE LTD.
(ANNEXURE-C).
IN CRL.P.NO.5159/2018
BETWEEN:
RAVA SAHEB HONAKATTI,
S/O. LATE SOMANNA,
AGED ABOUT 61 YEARS,
PRESENTLY RESIDING AT PLOT
NO.74, SHIVAMANJUNATH ANUGRAHA,
SHANTINIKETANA TEACHERS COLONY,
KELAGERI ROAD, DHARWAD - 580 008
PREVIOUSLY AT FLAT B3/429,
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GHATAPRABHA BLOCK, NGV,
KORAMANGALA, BENGALURU - 560047
... PETITIONER
(BY SRI. S.S. NAGANANDA, SR. ADVOCATE FOR
SRI. SRIRANGA S., ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRESENTED BY DY.
SUPERINTENDENT OF POLICE,
ECONOMIC OFFENCES DIVISION,
CARLTON HOUSE, PALACE ROAD,
C.I.D., BENGALURU - 560 001,
REPRESENTED BY SPP,
HIGH COURT BUILDING.
2. MR. B. PRASHANTH HEGDE,
S/O LATE V. RATNAKAR HEGDE,
AGED 67 YEARS,
MANAGING DIRECTOR,
METAL CLOSURES PVT. LTD.,
12TH MAIN, KANAKAPURA ROAD,
BENGALURU - 560 062.
RESIDING AT NO.261, DEFENCE COLONY,
INDIRANAGARA, BENGALURU - 560 038.
... RESPONDENTS
(BY SRI. RAJATH SUBRAMANYA, HCGP FOR R1
SRI. DHYAN CHINNAPPA, SR. ADVOCATE FOR
SRI. H.N. VASUDEVAN, ADVOCATE FOR R2)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C. PRAYING TO QUASH THE CHARGE SHEET DATED 05.05.2018
(ANNEXURE-A) IN C.C.NO.11073/2018, ON THE FILE OF THE I ADDL.
C.M.M., BENGALURU AND THE ORDER DATED 07.05.2018 PASSED
BY THE I ADDL.C.M.M., BENGALURU IN C.C.NO.11073/2018
(ANNEXURE B) TAKING COGNIZANCE AS WELL AS ALL
PROCEEDINGS AGAINST THE PETITIONER PURSUANT TO THE
COMPLAINT AND FIR DATED 03/23.09.2016 FILED BY M/S METAL
CLOSURES PRIVATE LTD. (ANNEXURE-C).
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IN CRL.P.NO.6885/2018
BETWEEN:
S. BHASKARAN,
S/O. LATE R.G. SUBRAMANIAN,
AGED ABOUT 58 YEARS,
PRESENTLY WORKING AS
GENERAL MANAGER,
CREDIT REVIEW DEPARTMENT,
STATE BANK OF INDIA,
5TH FLOOR, MAFATLAL CENTRE,
NARIMAN POINT, MUMBAI - 400 021.
... PETITIONER
(BY SRI. MURTHY D. NAIK, SR. ADVOCATE FOR
SRI. MAHENDRA G., ADVOCATE)
AND:
1. THE STATE OF KARNATAKA,
BY SUBRAMANYAPURA POLICE,
SUBRAMANYAPURA POLICE
STATION,
BANGALORE - 560 061.
2. THE DEPUTY SUPERINTENDENT
OF POLICE AND INVESTIGATION
OFFICER,
ECONOMIC OFFENCES DIVISION,
CARLTON HOUSE, PALACE ROAD,
CID, BENGALURU - 560 001.
... RESPONDENTS
(BY SRI. RAJATH SUBRAMANYA, HCGP FOR R1 & 2
SRI. DHYAN CHINNAPPA, SR. ADVOCATE FOR
SRI. H.N. VASUDEVAN, ADVOCATE FOR R3)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C. PRAYING TO QUASH THE FINAL REPORT/CHARGE SHEET
BEARING FINAL REPORT NO. 'A' NO.4/2018 DATED 05.05.2018
FILED IN CR.NO.580/2016 FOR THE OFFENCES P/U/S 120B, 403,
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408, 409, 447, 381, 420 R/W 37 OF IPC PRODUECED AS ANNEXURE-
A.
IN W.P.NO.35925/2018
BETWEEN:
SHRI D. VASUDEVAN
S/O S. DHARMALINGAM,
AGED ABOUT 58 YEARS,
PUNJAB NATIONAL BANK
HEAD OFFICE, CREDIT DIVISION,
PLOT NO.4, SECTOR 10, DWARKA,
NEW DELHI - 110 054. R/AT FLAT
NO B-3, 2ND FLOOR, PNB SR.
OFFICERS' RESIDENTIAL COMPLEX,
8, UNDERHILL ROAD, CIVIL LINES,
DELHI - 110 054.
... PETITIONER
(BY SRI. M.S. SHYAM SUNDAR, SR. ADVOCATE FOR
SRI. PRASANNA KUMAR S. ADVOCATE)
AND:
THE STATE OF KARNATAKA BY
SUBRAMANYAPURAM POLICE
STATION, SUBRAMANYAPURA,
BANGALORE - 560 062
REPRESENTED BY THE SHO
AND THE STATE PROSECUTOR.
... RESPONDENT
(BY SRI. RAJATH SUBRAMANYA, HCGP)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF
CRIMINAL PROCEDURE CODE PRAYING TO QUASH THE FINAL
REPORT/CHARGE SHEET FILED IN CRIME NO.580/2016 OF
RESPONDENT POLICE STATION (VIDE ANNEXURE-B WHICH IS
RECEIVED BY THE LEARNED MAGISTRATE ON 23.09.2016 IMPUTING
THE PETITIONER HEREIN FOR THE OFFENCE PUNISHABLE UNDER
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HC-KAR AND 5 OTHERS
SECTION 120 (B), 403, 408, 447, 381, 420 READ WITH SECTION 37
OF IPC AND ETC.,
IN W.P.NO.7492/2019
BETWEEN:
SHRI. SHRIYANSH SHARMA,
S/O. SHRI. SHRI KANT SHARMA,
AGED ABOUT 28 YEARS,
OCCUPATION BUSINESS,
R/@ C-128, SOUTH CITY-2
SECTOR 49, GURGAON - 122 018.
... PETITIONER
(BY SRI. M.S. SHYAM SUNDAR, SR. ADVOCATE FOR
SRI. SUBRAMANYA .M., ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
BY ASHOK NAGAR POLICE
STATION, ASHOK NAGAR,
BANGALORE - 560 001,
REPT. BY SPP, HIGH COURT
COMPLEX, BANGALORE - 560 001.
2. THE STATE OF KARNATAKA
BY CID-EOD, CID OFFICE,
CARLTON HOUSE, PALACE ROAD,
REPT. BY SPP, HIGH COURT
COMPLEX, BANGALORE - 560 001.
3. MR. PRASHANTH HEGDE,
S/O LATE V. RATHNAKAR HEGDE,
AGED ABOUT 70 YEARS,
MANAGING DIRECTOR,
M/S METAL CLOSURES
PRIVATE LIMITED,
OFFICE AT NO.4-7, ST.
PATRIX COMPLEX, 15-K,
BRIGADE ROAD, BANGALORE - 560 025
R/@ #261, DEFENCE COLONY,
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INDIRANAGAR, BANGALORE - 560 038
... RESPONDENTS
(BY SRI. RAJATH SUBRAMANYA, HCGP FOR R1 & 2
SRI. ANANTH MANDAGI, SR. ADVOCATE FOR
SRI. H.N. VASUDEVAN, ADVOCATE FOR R3)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF INDIAN CONSTITUTION READ WITH SECTION 482 OF CRIMINAL
PROCEDURE CODE PRAYING TO QUASH THE FINAL REPORT/CHARGE
SHEET FILED IN CRIME NO.486/2015 AND CC NO.32746/2018 OF
RESPONDENT POLICE (VIDE ANNEXURE-C), WHICH IS RECEIVED BY
THE LEARNED MAGISTRATE ON 13.12.2018 IMPUTING THE
PETITIONER HEREIN FOR THE OFFENCE PUNISHABLE UNDER
SECTION 120 (B), 408, 409, 420, 468, 471, 474 36 AND 37 OF IPC
AND ETC.,
IN W.P.NO.7493/2019
BETWEEN:
SHRI. SHRI KANT SHARMA,
S/O SHRI RAM PRAKASH SHARMA,
AGED ABOUT 59 YEARS,
DEPUTY GENERAL MANAGER,
PUNAJB NATIONAL BANK,
HEAD OFFICE, PLOT NO.4,
SECTOR 10, DWARAKA,
NEW DELHI - 110 075
R/@ C-128, SOUTH CITY-2
SECTOR-49, GURGAON - 122 018
... PETITIONER
(BY SRI. M.S. SHYAM SUNDAR, SR. ADVOCATE FOR
SRI. SUBRAMANYA M., ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
BY ASHOK NAGAR POLICE
STATION, ASHOK NAGAR,
BANGALORE, REP BY
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SPP, HIGH COURT COMPLEX
BANGALORE - 560 001
2. THE STATE OF KARNATAKA
BY CID-EOD, CID OFFICE,
CARLTON HOUSE PALACE ROAD,
REPT BY SPP, HIGH COURT
COMPLEX, BANGALORE - 560 001.
3. MR. PRASHANTH HEGDE,
S/O LATE V. RATHNAKAR HEGDE,
AGED ABOUT 70 YEARS,
MANAGING DIRECTOR, M/S METAL
CLOSURES PRIVATE LIMITED, OFFICE
AT NO.4-7, ST. PATRIX COMPLEX,
15-K, BRIGADE ROAD,
BANGALORE - 560 025
R/@ #261, DEFENCE COLONY,
INDIRANAGAR, BANGALORE - 560 038
... RESPONDENTS
(BY SRI. RAJATH SUBRAMANYA, HCGP FOR R1 & 2
SRI. ANANTH MANDAGI, SR. ADVOCATE FOR
SRI. H.N. VASUDEVAN, ADVOCATE FOR R3)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF
CRIMINAL PROCEDURE CODE PRAYING TO QUASH THE FINAL
REPORT/CHARGE SHEET FILED IN CRIME NO.486/2016 OF
RESPONDENT POLICE VIDE ANNEXURE-C, WHICH IS RECEIVED BY
THE LEARNED MAGISTRATE ON 13.12.2018 IMPUTING THE
PETITIONER HEREIN FOR THE OFFENCE PUNISHABLE UNDER
SECTION 120 (B), 408, 409, 420, 471, 474 36 AND 37 OF IPC AND
ETC.,
IN W.P.NO.7494/2019
BETWEEN:
SHRI. AVINASH KATWARE
S/O SHARADRAO,
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AGED ABOUT 59 YEARS,
RETD CHIEF MANAGER,
PUNAJB NATIONAL BANK,
NAGPUR BRANCH R/AT
FLAT NO. 101, BAJIRAO SADAN,
PLOT NO.322, LAXMI NAGAR,
NAGPUR - 440 022.
... PETITIONER
(BY SRI. M.S. SHYAM SUNDAR, SR. ADVOCATE FOR
SRI. SUBRAMANYA M., ADVOCATE)
AND:
1 . THE STATE OF KARNATAKA
BY ASHOK NAGAR POLICE
STATION, ASHOK NAGAR,
BANGALORE, REP BY
SPP, HIGH COURT COMPLEX
BANGALORE - 560 001
2 . THE STATE OF KARNATAKA
BY CID-EOD, CID OFFICE,
CARLTON HOUSE PALACE ROAD,
REPT BY SPP, HIGH COURT
COMPLEX, BANGALORE - 560 001.
3 . MR. PRASHANTH HEGDE,
S/O LATE V. RATHNAKAR HEGDE,
AGED ABOUT 70 YEARS,
MANAGING DIRECTOR,
M/S METAL CLOSURES PRIVATE
LIMITED, OFFICE AT NO.4-7, ST.
PATRIX COMPLEX, 15-K,
BRIGADE ROAD,
BANGALORE - 560 025
R/@ #261, DEFENCE COLONY,
INDIRANAGAR, BANGALORE - 560 038
... RESPONDENTS
(BY SRI. RAJATH SUBRAMANYA, HCGP FOR R1 & 2
SRI. ANANTH MANDAGI, SR. ADVOCATE FOR
SRI. H.N. VASUDEVAN, ADVOCATE FOR R3)
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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF
CRIMINAL PROCEDURE CODE PRAYING TO QUASH THE FINAL
REPORT/CHARGE SHEET FILED IN CRIME NO.486/2015 OF
RESPONDENT POLICE VIDE ANNEXURE-C, WHICH IS RECEIVED BY
THE LEARNED MAGISTRATE ON 13.12.2018 IMPUTING THE
PETITIONER HEREIN FOR THE OFFENCE PUNISHABLE UNDER
SECTION 120 (B), 408, 409, 420, 468, 471, 474, 36 AND 37 OF IPC
AND ETC.,
THESE PETITIONS HAVING BEEN HEARD AND RESERVED ON
12.06.2025 AND COMING ON FOR PRONOUNCEMENT OF JUDGMENT
THIS DAY, THE COURT MADE THE FOLLOWING:
CORAM: HON'BLE MRS JUSTICE M G UMA
COMMON CAV ORDER
The petitioner - accused No.6 in Writ Petition No.40308 of
2018; the petitioner - accused No.7 in Writ Petition No.35925
of 2018; the petitioner - accused No.4 in Criminal Petition
No.5159 of 2018; the petitioner - accused No.8 in Criminal
Petition No.5157 of 2018; and the petitioner - accused No.3 in
Criminal Petition No.6885 of 2018 are seeking to quash the
criminal proceedings initiated against them in Crime No.580 of
2016 of Subramanyapura Police Station, pending in CC
No.11073 of 2018 on the file of the learned I Additional Chief
Metropolitan Magistrate, Bengaluru City, registered for the
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offences punishable under Sections 120-B, 403, 408, 409, 447,
381, 420 read with Section 37 of IPC.
2. The petitioner - accused No.26 in Writ Petition
No.7492 of 2019; the petitioner - accused No.10 in Writ
Petition No.7493 of 2019 and the petitioner - accused No.11 in
Writ Petition No.7494 of 2019 are seeking to quash the criminal
proceedings initiated against them in Crime No.486 of 2015 of
Ashoknagar Police Station, pending in CC No.32746 of 2018 on
the file of the learned I Additional Chief Metropolitan
Magistrate, Bengaluru City, registered for the offences
punishable under Sections 120-B, 408, 409, 420, 468, 471,
474, 36 and 37 of IPC.
3. Brief facts of the case in relation to Crime No.486
of 2015 are that, the respondent - Sri Prashanth Hegde has
filed the first information with Ashoknagar Police Station
against accused Nos.1 to 11 alleging commission of offence
punishable under Sections 408, 468, 471, 381, 420, 506 read
with Section 34 of IPC. It is alleged by the informant that he is
a qualified Chartered Accountant and the Managing Director of
M/s Metal Closures Private Limited, which was set up in the
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year 1977. He had three operational plants across India and
employed more than 650 workmen. It is stated that the
Company had undertaken to manufacture metal packaging
products like ROPP, Caps, Crown Corks, Shoe Polish containers,
battery jackets, lug caps etc., It had high-end multinational
customers like Coco-Cola, Pepsi etc., It was operated with high
speed equipments imported from various countries in the
world.
4. It is stated that during 1992, accused No.1 joined
the Company as an Accounts Assistant. He grew in his
position, and during 2003-04, he was the General Manager
(Finance) and later, the Chief Financial Officer of the Company.
Thus, he was in-charge of finance of the Company and was
authorized to deal with financial institutions for normal banking
works like bank limits, submission of stock statements, arriving
at drawing power and also to have routine correspondences
with the Bank. He was also assigned with the work of
importing goods, including signing of Letters of Credit, both
Foreign and Inland, documents/hundies, and liaison with
shipping and handling agents along with accused No.2 who was
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working as Deputy Chief Financial Officer. Every other
employees were working under accused Nos.1 and 2. It was
accused No.2 who was approving authority for payments and
was also in-charge of internal and statutory audit. He was
responsible for attending stock taking by independent Bank,
appointed stock auditors and to accompany them whenever
and wherever they went on stock audit to all the three plants.
5. It is stated that, when accused No.1 was entrusted
to be in-charge of the finance of the Company, accused Nos.2
to 9 were also working under him with various other related
duties as Deputy Chief Financial Officer, Assistant General
Manager - Accounts, Secretary to Managing Director, Executive
Accounts, Senior Manager - Finance, Assistant General Manager
- Finance, Senior Manager - Imports and Logistics and Assistant
General Manager - Materials, respectively. The annual turnover
of the Company was in excess of Rs.200 crores. The
Company's credit requirements were funded by four
nationalized banks in consortium, led by State Bank of India
followed by Punjab National Bank, Corporation Bank and UCO
Bank.
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6. It is contended by the informant that as Managing
Director of the Company, he was alone authorized to sign the
cheques for the four Banks in accordance with the Resolution
that was passed by the Board of Directors dated 14.04.2008.
It is further stated that during 2005 to 2013, the Company
undertook major expansion in Himachal Pradesh and business
of the Company grew considerably. It extended its commercial
activities including imports and vendor payments. However, at
the end of 2013, the Company started experiencing constraints
in working capital. There was default in payment of
installments to the Banks and finally the accounts were
declared as Non Performing Assets (NPA). The informant was
shocked to know the financial status of the Company.
However, he pumped in the funds by mortgaging his houses,
withdrawing his savings etc., Even then he was unable to
revive the Company and finally he was compelled to stop its
operations. The salaries of the employees could not be paid
and they were laid off. The Banks have initiated action under
the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (for short 'the
SARFAESI Act').
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7. The informant stated that, looking at the condition
of the Company, he went into depression and was hospitalized.
Later, he started securing several financial records and
documents including that of banks, loan papers, payment made
to the suppliers, cheques issued by the Company, dishonor of
cheques and also the general appraisal of the financial status.
He discussed with Banks and tried to obtain records wherever
possible. He came to know that accused No.1 being the Chief
Financial Officer with the connivance of accused Nos.2 to 9 had
fraudulently and dishonestly operated finances of the Company
for about 4 years. The modus operandi adopted by the accused
was to get Photostat copies with his specimen signature and to
fix it in different printed block on cheques and other
documents. The informant found cut outs of the signatures of
the informant and his wife. He also found self signed cheques
of Rs.10,00,000/- each in the chamber of accused No.1. Those
cheques were in the handwriting of accused No.3.
8. The informant also found various withdrawals of
around Rs.75,00,000/- made in cash between 25.02.2014 till
16.06.2014 and credited to fictitious account called BP holdings
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(CT), which are proved to be fraudulent withdrawals. Accused
No.4 being the Secretary of the informant managed to draw
Rs.28,19,987/- from the Company's bank account held with
Kotak Mahindra Bank. She also withdrew USD 8264 on
24.02.2012 from Kotak Mahindra bank using the name of the
daughter of the informant and using her passport number
through a demand draft drawn on her personal saving bank
account held with Karnataka Bank. She was also using the
credit card of the informant issued by Citi Bank and Indus Bank
for purchase of goods worth Rs.1 to 2 lakhs.
9. It is stated that till 2008-09, the payments were
generally made through cheques and later, the payment
exceeding Rs.2,00,000/- upto Rs.10,00,000/- were made
through the new system i.e., RTGS/NEFT by submitting the
standard forms prescribed for remittance along with the format
duly filled in and signed by the authorized signatory. A cheque
duly signed by the authorized signatory i.e., the informant was
also insisted to be provided in support of RTGS/NEFT forms.
On verification, the informant came to know from Corporation
Bank, Sarakki Branch that, the Bank used to pass payments
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casually by accepting the signatures of accused No.1, while he
has never authorized to sign the cheques. Thereafter, accused
No.1 managed to concoct the Resolution dated 25.08.2012
authorizing himself to operate the current account, by forging
the signature of the informant. The Banks have allowed such
payments to a tune of around Rs.75 crores in 4½ years with
the fraudulent scheme framed by the accused. These
payments were never towards Company's liability or
obligations. It is suspected by the informant that along with
accused Nos.1 to 9, the bankers and suppliers have also joined
hands in committing fraud.
10. It is further contended that from 2001 till 2012,
Steel was imported from Japan. The accused have diverted
such materials to the open market and a Korean Company was
encouraged by the accused during 2012 with whom they had
special understanding. The informant learnt that accused
Nos.1 and 2 who were handling import of goods and handling
the agents, managed to sell some consignments of Steel
forging the signatures of the informant. The payments towards
such goods were made on behalf of the Company through
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Letter of Credit issued by Company's bankers. The informant
found that some of the documents of shipments extended by
SBI were forged to show it as covered under one Trade
Chartered Bank and some consignments were directed to open
market and to the competitors.
11. Accused Nos.1 and 2 unauthorisedly entered into
some contract with Trade Chartered Bank and managed to get
Letter of Credit and Letter of Undertaking with the guarantee of
accused No.1. Accused No.1 has also made unauthorised
payments to Shenton Consulting for services in connection with
opening of Letter of Credit with Trade Chartered Bank. Within
a period of just 2 months, a sum of Rs.1.15 crores were paid
and was accounted as bank charges without any basis through
RTGS by forging the signatures of the informant on the cheques
claiming to be the payments are against bills, when no such
bills have been submitted to the Company. The signatures of
the informant were also forged for issuing the cheques dated
30.06.2014 on Corporation Bank, totaling to more than Rs.2
crores. Accused No.1 has made various other payments by
forging the signatures of the informant. He has also
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manipulated the books of account of the Company by
conspiring with other persons.
12. Accused No.1 along with other accused stolen
some vital statutory documents while leaving the job. The
informant stated that when the informant started enquiring
about the misdeeds of the accused for last 6 months, accused
Nos.1 and 2 held out threats through anonymous telephone
calls and text messages referring to them as Korean mafia.
Few calls were received by the informant enquiring as to why
he is harassing accused No.1. The informant came to know
that accused No.1 had made heavy investments in real estate
business in benami names and by using such links, he was
threatening the informant. It is stated that accused No.4 had
fled the Country. Accused No.8 after withdrawing foreign
exchange of USD 8264 along with another sum of Rs.28 lakhs
is planning to leave the Country. Therefore, the informant
stated that accused No.1 hatched criminal conspiracy with
accused Nos.2 to 11, forged the signatures of the informant
and cheated the Company fraudulently and dishonestly. They
have misappropriated huge sums of money, which runs into
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couple of crores. Therefore, he requested the police to
investigate into the matter.
13. The first information dated 16.07.2015 was filed
before the police on 22.07.2015, upon which, Crime No.486 of
2015 came to be registered and the investigation was
undertaken. The Investigating Officer filed the chargesheet on
07.12.2018 against accused Nos.1 to 34 for the above said
offences.
14. The petitioners - accused Nos.10, 11 and 26 have
filed these writ petitions invoking Articles 226 and 227 of the
Constitution of India read with Section 482 of Cr.P.C. seeking
to quash the criminal proceedings initiated against them and
also to quash the order taking cognizance of the offence and
registration of CC No.32746 of 2018 pending on the file of the
learned I Additional Chief Metropolitan Magistrate, Bengaluru
city.
15. Brief facts of the case in relation to Crime No.580
of 2016 are that, the respondent - Prashanth Hegde lodged the
first information with Subramanyapura Police Station against
accused Nos.1 to 9 alleging commission of the offences
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punishable under Sections 120-B, 403, 408, 409, 447, 381,
420 read with Section 37 of IPC. It is the allegation made by
the informant that he was running a Company which was
funded by consortium of Banks consisting of State Bank of
India (SBI), Punjab National Bank (PNB), Corporation Bank and
UCO bank, with SBI as the lead Bank. The genesis of the fraud
could be traced around April 2014, when it was found that SBI
was informed about large scale fraud involving the employees
of the informant Company and some executives of the Bank.
Since then, the bankers were bent to close down the business
of the Company by using the draconian law i.e., the SARFAESI
Act.
16. It is alleged by the informant that the SBI being
the lead Bank, on 28.05.2014 declared the account of the
Company as NPA and brought the Company under the
SARFAESI Act. SBI appointed a concurrent Auditor - Mr. V V
Krishnamurthy being the partner of M/s Sankaran and Krishnan
on 01.08.2014. SBI also appointed security agency - M/s Kashi
Security and Consulting Private Limited on 05.08.2014. These
steps taken by the Bank disclose that the physical possession
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and administrative control of the factory was taken over by SBI
and it also took over the affairs of all the three factories
situated at Bengaluru, Kunigal and Kala Amb at Himachal
Pradesh. The concurrent Auditor started exercising his complete
control against the administration and went to the extent of
stopping the salary payable to Mr.Rohan Hegde, the son of the
informant. The Banks have not permitted his presence in any of
the meetings and prevented him from being any hurdle for
their pre-planned acts. Thus, it is contended that the Banks
were in physical possession of all the three plants from
12.08.2014 till 08.06.2016.
17. It is contended that the Company's operations
came to a grinding halt during the last quarter of 2014 due to
the financial constraints to pump in the working capital, which
was due to the fraud by the Banks and theft of materials.
During August 2015, the first information was filed with
Ashoknagar Police Station against eight Company employees
for the fraud committed by them in collusion with the
executives of the Banks, which was now referred to CBI for
further investigation.
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18. It is contended that during May 2016, the
Company's employees staying in the Company's Staff quarters
situated nearby, complained that the Banks' security and other
supporting agencies including the CFO - Mr. Mahesh with the
help of Bank's Executives were moving out goods from the
premises during night hours. The Bank, had in fact, assured
that no employees of the Company were in the premises. In
fact, the Bank had their own security in place and had taken
over the day-to-day administration of the Company. Moving
out of the goods from the factory premises was never
accounted in any books maintained by the Company. When this
fact was brought to the notice of the informant, being the
Managing Director, he confronted with the bank officials and
got an evasive explanation and the informant was compelled to
file a complaint regarding theft of goods. The informant had in
fact written a letter on 16.09.2015 requesting the Bank to file a
police complaint. In spite of that, the Bank had not chosen to
file any complaint, but had given a reply on 21.09.2015 stating
that they are not bound to guard the gates of his factory, only
to cover up the criminal acts of taking away the goods illegally
by the Company employees in collusion with the bank officials.
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The informant contended that the Bank appears to have carried
out the physical verification of stock through concurrent Auditor
as though the same have been conducted in the month of July-
August 2014 and valued the stock as on 31.05.2014 showing
the stock much lower than what was declared by the Company
in the Company's Stock Statement, which was in fact accepted
by the Bank. No periodic stock statements were taken. With all
these frauds and mismanagement, the informant being the
Managing Director had gone into depression and was
hospitalized.
19. It is contended that, taking advantage of the
absence of the informant around the factory, the Banks made
illegal payment of Rs.3,04,47,111.77/- to a Company called
Tinko, in connivance with the Chief Financial Officer of the
Company by name Mahesh Hegde, through Kotak Mahindra
Bank. There was illegal removal of goods from Inland Container
Depot (ICD), Bengaluru and sold as seen in Bill of Entry dated
22.05.2014. The signatures of the informant were fabricated
and forged even when he was taking treatment as an in-patient
at St. John's Hospital. The statement of the security agency
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posted at Kunigal factory shows that the Bank's security was in
complete charge of the Company's Kunigal works ever since the
Bank had taken over possession. It is stated that on
22.05.2016, the security personnel of Bengaluru working along
with the security personnel of neighbouring factory, were found
removing the goods and a complaint in that regard was made
with the jurisdictional police, upon which, the FIR No.0316
came to be registered on 23.05.2016.
20. It is contended that the Company had declared
stock of Rs.71.97 crores in the monthly stock statement on
31.05.2014 and the same was accepted by the Bank on
07.06.2014. Since then, the Bank through its security agency
was in complete charge of the inventory even at the point of
closure of the Unit.
21. The informant contended that, after realizing that
the Bankers were irresponsible and were hostile towards him
and by showing themselves unaccountable, the Company in its
letter dated 25.05.2016 has written to the Bankers suggesting
to carry out a stock verification in the presence of an
independent Valuer and the Chartered Accountant. But the
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Banks did not present themselves for verification. However, the
stock was taken at Bengaluru, Kunigal and Himachal Pradesh
Units on 03.06.2016, 05.06.2016 and 08.06.2016 respectively
and found the value of stock at Rs.1.14 crores. It is stated that,
as on 31.05.2014, the stock was valued at Rs.71.97 crores and
therefore, Rs.70.83 crores was the stock deficit. Thus, it is
contended by the informant that, this stock which was in deficit
was stolen from three factory locations in Bengaluru, Kunigal
and Himachal Pradesh units and also ICD Bengaluru. The
security agency along with concurrent Auditor, the CFO and
Deputy CFO of the informant -Company with the Bank
Executives who are instrumental in appointing the security
agency are all responsible for the conspiracy, cheating and
committing theft of stocks.
22. The informant has named 9 accused persons-
accused No.1 being the Chief Financial Officer; accused No.2
being the Deputy Chief Financial Officer; accused Nos.3 and 4
being the Executives of SBI; accused Nos.5 to 7 being the
Executives of Punjab National Bank; accused No.8 the
Concurrent Auditor; and accused No.9 the Consultant of M/s
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Kashi Security and Consulting Pvt. Limited. Therefore, the
informant requested the police to register the case and to
initiate legal action against all the 9 accused. Accordingly the
FIR in Crime No.580 of 2016 came to be registered. After
investigation, the final report came to be filed.
23. The petitioners being accused Nos.3, 4, 6 to 8
have filed Criminal Petition No.6885 of 2018; Criminal Petition
No.5159 of 2018; Writ Petition No.40308 of 2018; Writ Petition
No.35925 of 2018; Criminal Petition No.5157 of 2018
respectively, invoking Articles 226 and 227 of the Constitution
of India read with Section 482 of Cr.P.C are seeking to quash
the criminal proceedings initiated against them, to quash the
order taking cognizance of the offence and registration of CC
No.11073 of 2018 pending on the file of the learned I
Additional Chief Metropolitan Magistrate, Bengaluru city.
24. Heard Sri M S Shyam Sundar, learned senior
advocate for Sri S Prasanna Kumar, learned counsel for the
petitioners in Writ Petition Nos.40308, 35925 of 2018 and Sri M
S Shyam Sundar, learned senior advocate for Sri M
Subramanya, learned counsel for the petitioners in Writ Petition
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Nos.7492, 7493 and 7494 of 2019, Sri S S Naganand, learned
senior advocate for Sri S Sriranga, learned counsel for the
petitioners in Criminal Petition Nos.5157 and 5159 of 2018, Sri
Murthy D Naik, learned senior advocate for Sri G Mahendra,
learned counsel for the petitioner in Criminal Petition No.6885
of 2018, Sri Rajath Subramanya, learned High Court
Government Pleader for respondent No.1, Sri Dhyan
Chinnappa, learned senior advocate for Sri H N Vasudevan,
learned counsel for the respondent - informant in Criminal
Petition Nos.5157, 5159 and 6885 of 2018 and Sri Anant
Mandagi, learned Senior counsel for Sri H N Vasudevan, learned
counsel for the respondent - informant in Writ Petition
Nos.7492, 7493, 7494 of 2019 and Writ Petition Nos.40308,
35925 of 2018. Perused the materials on record.
25. Sri M S Shyam Sundar, learned senior advocate in
Writ Petition Nos.40308 and 35925 of 2018 has produced the
copy of the order dated 21.03.2024 passed in TSA No.9/2023
by the Debts Recovery Tribunal-I at Chennai (for short 'DRT-I')
and contended that M/s Metal Closures Private Limited,
represented by the informant as its Managing Director along
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with his wife, filed the petition under Section 17(1) of the
SARFAESI Act, seeking to quash the impugned demand and
possession notices issued by the Bank and to set aside the
actions whatsoever, taken by the Banks and also claiming
damages caused due to illegal actions of the Banks. Learned
counsel contended that, several grounds were raised by the
informant in the said petition alleging fraud and forgery. He
also states regarding the criminal complaint filed against his
officials with Ashoknagar Police Station. The possession notice
issued by the Banks was also challenged by the informant on
the ground that reply given by the informant was not taken into
consideration, as the fraud played by the Chief Financial Officer
of the Company in collusion with the officials of the Bank was
alleged in the reply notice. It was also contended that there
was no proper authorization to the transactions held by the
Chief Financial Officer. The informant has also pleaded that
there was theft of stocks which is referred to in the charge
sheet.
26. Learned senior advocate further contended that
the DRT-I had considered all the materials that are placed
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before it and recorded its satisfaction regarding compliance of
mandatory provisions of Section 13(3)(A) of the SARFAESI Act
and held that it cannot be said that there has been violation of
statutory duty on the part of the defendant - Bank. Placing
reliance on this order, learned senior advocate contended that
the contention now taken by the informant regarding the fraud
committed by the Bank Officials in initiating proceeding on the
SARFAESI Act, cannot be accepted as the DRT-I has out-rightly
rejected all such contentions.
27. Learned senior advocate contended that the
prosecution has cited in all 19 witnesses in the chargesheet.
CWs.1 to 11 are the employees of the informant himself.
CWs.12 and 13 are not the material witnesses and the
remaining CWs.14 to 19 are the official witnesses. Therefore,
there are no independent witnesses to speak about commission
of the offences by the accused. He also contended that there
was no proper in-depth investigation, but casually the final
report is filed based on the statement of the interested
witnesses.
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28. Learned senior advocate for the petitioners in Writ
Petition Nos.7492, 7493 and 7494 of 2019 contended that the
grievance of the respondent - informant was only against his
employees. There is no reference of involvement of any of the
petitioners in commission of the offences. There is inordinate
delay in lodging the complaint, but the same is not explained.
In spite of that, FIR came to be registered and the investigation
was undertaken, expanding the scope of such investigation. No
preliminary investigation was held violating the directions
issued by the Hon'ble Apex Court in Lalitha Kumari Vs
Government of Uttar Pradesh and Others1. Learned counsel
submitted that even though the first information runs into
several pages and even though the informant is a qualified
Chartered Accountant, there is absolutely nothing to connect
any of the bank officials or third parties in the commission of
offences. It is hard to believe that the informant a qualified
Chartered Accountant had allowed his employees - accused
Nos.1 to 11 to mismanage the financial affairs of the Company
for about 5 to 6 years without him having even a clue about the
same.
1
(2014) 1 SCC (Cri) 524
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29. Learned senior advocate submitted that the
Investigating Officer has cited as many as 20 witnesses in the
charge sheet to substantiate the contention and to prove the
guilt of the accused. CW1 is the informant himself. CWs.2, 3,
14 and 15 are the mahazar witnesses. CWs.4 and 5 are the
employees of his own Company. CWs.6 to 8 are the officials of
State Bank of India. CWs.9, 10 and 13 are the officials of
Punjab National Bank. CWs.11 and 12 are the officials of UCO
Bank, CW16 is the Technical Expert of Cyber Lab and CWs.17
to 20 are the Investigating Officers. Even though, serious
allegations are made in the first information against these
petitioners, not even a single witness is cited to speak about
any of these allegations.
30. Learned senior advocate contended that,
admittedly the informant who is the Managing Director of the
Company had borrowed huge sums of money from the
consortium of the Banks, of which, State Bank India is the lead
Bank. Since from 2013-14, the Company has become a
defaulter and its accounts were treated as NPA. Frequent
meetings were held by the bank officials with the informant and
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his officials, bringing it to the notice of the informant about the
financial status of the Company and the default that is being
committed in repaying the amount. A forensic audit was
ordered which was undertaken by a prestigious Auditor who
submitted his report. In various meetings held by the Banks
since from 2014 to discuss about the financial status of the
Company, the informant was part of the meeting. As per
Resolution of the meeting, the informant was directed to
furnish audited accounts for the financial years 2013 - 14 on or
before 15.09.2014. He was also asked to produce audited
balance sheet for the years 2011-12 and 2012-13. In spite of
that, the informant had not taken any steps to furnish the
documents as required by the Banks. A decision was taken in
the meeting held on 14.10.2014, which was attended by the
informant to have forensic audit. The report was submitted on
17.03.2016, wherein, it is specifically stated that the informant
had not co-operated in such audit.
31. Learned senior advocate submitted that looking to
the default committed by the Company and its inability to
revive, a decision was taken in the meeting that was held on
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14.09.2015 to initiate proceedings under SARFAESI Act.
Accordingly, the notices were issued, the symbolic possession
of the properties were taken by the Banks. It is only
thereafter, the informant came up with the complaint against
his employees. The Investigating Officer has filed the charge
sheet referring to so many misdeeds by the bank officials
without there being any basis. Even the forensic audit report
which was admittedly submitted by a reputed Auditor was
never taken into consideration by the Investigating Officer.
32. Learned senior advocate submitted that the
Investigating Officer who is not qualified in financial matters
proceeded to refer to the words 'custom scrips' and 'round
tripping'. Learned senior advocate contended that scrip means
an advance payment or it is like value attached ticket. It is not
an offence to get scrip at a reasonable rate and to make use of
the same at a later period to make some profit out of it. But
the Investigating Officer referred to the word 'scrip' which is
out of context. Similarly, round tripping also has no relevance
to the facts of the case as it is not explained as to how these
petitioners have managed round tripping. Moreover, none of
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the chargesheet witnesses have spoken to about any of these
serious allegations. No witness is cited to speak about
formation of Shell Company or a fictitious Company by accused
No.26 or such Company having any dealings with the informant
Company or for having evaded VAT.
33. Learned senior advocate submitted that, even
though there is reference to the word 'round tripping', the
Investigating Officer has not explained as to what it means and
how the same was committed. There is absolutely no
foundation for making any such allegations.
34. Learned senior advocate refers to the memo dated
24.09.2024 and contended that as per the scheme formulated
by Ministry of Commerce and Industry Scrip, which is known as
Merchandise Exports from India Scheme (MEIS) (hereinafter
referred to as the 'scheme'), Duty Credit Scrips will be granted
as rewards which is freely transferable and it can be used for
various purposes as stated in this scheme. It can be used for
payment of basic customs duty, additional customs duty,
central excise duties on domestic procurements of inputs or
goods, etc. When Duty Credit Scrips are freely transferable as
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per the scheme, no offence is made out by transferring the
scrips from one another.
35. Learned senior advocate further submitted that,
the informant initially filed the first complaint on 16.07.2015
after receipt of the notice under Section 13(2) of SARFAESI Act,
which was issued on 12.08.2014 by State Bank of India. At the
beginning, he made allegations only against his employees, but
subsequently, the second complaint came to be filed on
03.09.2016, making allegations against his employees as well
as the officials of the Bank, for which the FIR came to be
registered on 23.09.2016. The Investigating Officer deliberately
filed the charge sheet on 05.05.2018 in the second complaint
that was filed on 03.09.2016. But the charge sheet of the first
complaint dated 16.07.2015 came to be filed much later on
07.12.2018. The present complaint came to be filed by the
informant to somehow or the other escape the liability under
SARFAESI Act. SARFAESI proceedings are still pending, but the
recovery of the same is stayed by this Court at the instance of
the informant in another proceedings.
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36. Learned senior advocate contended that CW1 is
the informant himself. CWs.2, 3, 14 and 15 are the pancha
witnesses. CWs.4 and 5 are the employees of the informant -
Company, CWs.6 to 13 are the officials of the Bank. None of
these witnesses inculpate the accused. They do not speak
about accused No.26, running a Shell Company or receiving
huge amount of over Rs.6 crores and not providing customs
scrips. Under such circumstances, absolutely no offence is
made out against any of these petitioners. It is sheer misuse of
the system by the informant to rope in the petitioners.
37. Learned senior advocate contended that even
though serious allegations are made against accused Nos.10,
11 and 26 in Crime No.486 of 2015 and as accused Nos.6 and 7
are arrayed as accused in Crime No.580 of 2016, there is
absolutely no such allegations, or basis to make allegations and
none of the charge sheet witnesses speak about the same.
Under such circumstances, it is clear that the criminal
proceedings were initiated only to wreck vengeance against the
bank officials and their family members to see that the
SARFAESI proceedings initiated against the informant is stalled.
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He further submitted that the consortium of Banks filed a
complaint with CBI which had undertaken investigation into the
fraud committed by the informant. But the informant
approached this Court and got stayed the CBI investigation.
This is the tactics adopted by the informant to arm twist the
bank officials, which is deprecated by the Hon'ble Ape Court in
a case of similar nature in Priyanka Srivastava and another
Vs State of Uttar Pradesh2. The Hon'ble Apex Court has
came down heavily in entertaining such criminal complaints
without any responsibility, where the bank through its officials
proceeded to invoke the provisions of SARFAESI Act against the
defaulting unscrupulous complaint. Therefore, it is the
contention of the learned senior advocate that the decision in
Priyanka Srivastava (supra) is aptly applicable to the
present case and hence, initiation of criminal proceedings is in
clear abuse of process of law and therefore, the same is to be
quashed.
38. Learned senior advocate further submitted that the
learned Magistrate has never applied his mind to any of these
2
(2015) 6 SCC 287
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facts and circumstances, but proceeded to take cognizance of
the offences mechanically. Therefore, even the order taking
cognizance of the offences is liable to be quashed. Accordingly,
he prays for allowing all the petitions, in the interest of justice.
39. Sri S S Naganand, learned senior advocate for the
petitioners in Criminal Petition Nos.5157 and 5159 of 2018
submits that the petitioner in Criminal Petition No.5157 of 2018
is arrayed as accused No.8. He is the Chartered Accountant by
profession and was appointed as concurrent Auditor. As the
name suggests, his appointment was concurred both by the
informant as well as by the consortium of Banks. He submits
that, there was allegation of theft of materials, conspiracy by
the informant and his officials, which resulted in the Company
becoming NPA, without following the repayment schedule. A
meeting was held by the Banks, which was attended by the
informant where a collective decision was taken for appointing
accused No.8 as a concurrent Auditor. The role of the Auditor
was specified in the letter dated 04.07.2014. He is required to
monitor the transactions carried out by MCPL and is required to
verify the compliances of the same. The Auditor was required
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to physically verify the stocks in MCPL and accordingly, he
verified and submitted the audit report dated 27.08.2014. The
audit report indicates that there was significant variance in the
stock declared by the informant in his routine stock declaration
and the stock that was present in the premises when verified.
The appointment letter dated 01.08.2014 explicitly states the
scope of audit to be done by the petitioner - accused No.8. He
is required to verify the cash flow, inventory of the raw
materials, auditing compliances, verification of statements
monitoring sale of fixed assets etc.,
40. Learned senior advocate contended that even
though the respondent - informant had taken part in the
meeting, where the petitioner was appointed as concurrent
Auditor, he never raised any objection. On the other hand, he
conceded for appointment of the petitioner. The findings
recorded by the petitioner in the stock audit report as well as
concurrent audit was later confirmed by the Forensic Audit
Report dated 17.03.2016, submitted by M/s Risk Richter, which
reveals the fraud perpetuated by the respondent - informant
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41. Learned senior advocate further submitted that the
petitioner was not the servant of the respondent - informant
nor of the Banks. Under such circumstances, Section 381 of IPC
could not have been invoked against the petitioner. Even after
sale of stocks to Zarhak Steels, the petitioner has not received
any money. When the role of the petitioner as concurrent
Auditor was very much explicit and limited, and when he had
no access to the goods nor had the Bank had taken physical
possession of the property, the allegations against the
petitioner are baseless.
42. Learned senior advocate further submitted that the
allegations against the petitioner that, he approved the sale of
machinery worth Rs.72,00,000/- to Aura Polyfex for
Rs.10,00,000/- is also baseless as it is MCPL, which requested
the Bank for approval of the sale for Rs.10,00,000/-. Under
such circumstances, the allegations are not only baseless but
are malafide. Learned senior advocate further submitted that
the petitioner being the Auditor never had any control over
functioning of MCPL. He was not entrusted with any property.
Under such circumstances, Sections 403, 408 and 409 of IPC
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could not have been invoked. Similarly, Section 420 of IPC is
also not applicable to the petitioner as no allegation of
deception or inducement is made against him. The petitioner as
an Auditor, lawfully entered the premises for the purpose of
conducting stock audit and after completion of the mandate, he
ceased to conduct the concurrent audit and under such
circumstances, Section 447 of IPC alleging trespass also could
not have been invoked. Respondent - informant never called
upon the petitioner to withdraw from the alleged unauthorized
deposition as required under amended Section 441, vide
Karnataka Act 21 of 2014, which came into effect on
02.06.2014. Hence, absolutely there is no allegation against
the petitioner for having conspired with anybody to commit an
offence and therefore, initiation of criminal proceedings is in
clear abuse of process of law.
43. Learned senior advocate also contended that there
is inordinate delay of more than two years in filing the
complaint and there is no explanation for the same. Even
though, it is contended that the respondent - informant was
hospitalized and he could not have filed the complaint on time,
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the materials produced before the Court by the respondent -
informant discloses that, he was hospitalized from 05.09.2014
till 21.09.2014 and the same cannot be an explanation for the
inordinate delay of more than 2 years. Moreover, even though
similar explanation was given by the respondent - informant
before the Institute of Chartered Accountants, it has
disbelieved the same as per Order dated 02.11.2022 wherein,
the respondent - informant was held guilty of misconduct and
he was sentenced for the same.
44. Learned senior advocate contended that, if at all
the respondent - informant, who is the borrower is aggrieved
by the actions of the authorities under SARFAESI Act, he should
have recourse as provided under the enactment, but he could
not have invoked the penal provisions to arm twist the
petitioner. In this regard, he placed reliance on the decision of
the Hon'ble Apex Court in Priyanka Srivastava (supra).
45. Learned senior Advocate also contended that, all
the issues now raised by the respondent - informant were
considered by DRT-I, Chennai in TSA No.9 of 2023, which
upheld the actions of the Banks as the same are in accordance
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with SARFAESI Act. Even though the said order was challenged
by MCPL before this Court, the same is now pending
consideration.
46. Learned senior advocate contended that, the
Investigating Officer has filed the charge sheet without there
being any basis, but being the mouthpiece of the respondent -
informant. The statement of objections filed by respondent
No.1 reads as though it is drafted by the respondent -
informant. The Investigating Officer had no occasion to know all
those details which are highlighted in the statement of
objections. Therefore, it is obvious that, no investigation worth
mentioning was undertaken by the Investigating Officer. The
collusion between the Investigating Officer and the respondent
- informant is obvious and the Investigating Officer has
exceeded his limitations in determining the validity of the
SARFAESI recovery proceedings initiated by the consortium of
Banks.
47. Learned senior advocate placed reliance on the
decision of the Hon'ble Apex Court in K Virupaksha Vs State
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of Karnataka3 to contend that the police complaints and
investigations are not to be entertained in cases where
borrowers have grievance, as the same would amount to
reviewing the jurisdiction of DRT and the competent Courts
under the SARFAESI Act. The learned Magistrate has also not
applied his mind while taking cognizance of the offences and
therefore, it is clear that the petitioner is baselessly implicated
in the matter and forced to face the trial. Since initiation of
criminal proceedings and its continuation is in clear abuse of
process of the law, the same is liable to be quashed.
Accordingly, prays for allowing the petition.
48. Similarly, Sri S S Naganand, learned senior
advocate contended that the petitioner in Criminal Petition
No.5159 of 2018 is accused No.4 and he is the Authorized
Officer under SARFAESI Act. The recovery proceedings under
SARFAESI Act was initiated and the notice under Section 13(2)
was issued on 12.08.2014 and the possession notice dated
20.02.2015 was also issued, but however, the same were
withdrawn by the petitioner by giving a public notice dated
3
(2020) 4 SCC 440
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22.06.2015. A fresh notice under Section 13(2) was issued on
15.09.2015 and possession notices on 11.12.2015 and
14.12.2015. The petitioner obtained an order dated 02.08.2016
from the jurisdictional Magistrate in Crl.Misc.No.13066 of 2015
under Section 14 of SARFAESI Act, directing him to take over
physical possession of the premises. But the petitioner had
never taken physical possession of the premises. The DRT in SA
No.152 of 2016 directed the parties to maintain status quo with
regard to the property till 13.09.2016. In the meantime, the
complaint was filed on 03.09.2016. A concurrent Auditor was
appointed in the meeting that was held on 01.08.2014, which
was attended by the respondent - informant. Under such
circumstances, the respondent - informant could not have
taken the contention that the petitioner had taken the physical
possession of the property.
49. Learned senior advocate contended that there is
inordinate delay in making the allegations against the
petitioner, who was discharging his duty as an authorized
officer by following the procedure as contemplated under
SARFAESI Act. For discharging the official duty, the petitioner
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cannot be made liable for the offence under Section 381 of IPC
and by no stretch of imagination, it can be said that he has
committed theft of any materials. The email dated 20.03.2015
produced as per Annexure-BL clearly shows that it was the
respondent - informant, who requested the Bank to remove the
LPG facility. It also shows that it was the respondent -
informant, who was in physical possession of the factory. When
the bank officials were permitted to take out the servers from
EDP room by the respondent - informant, it cannot be said that
they have committed theft of any articles. Sections 403, 408
and 409 of IPC also could not have been invoked against the
petitioner as there is no dishonest misappropriation or
conversion of any property entrusted to him. Additional security
was provided to MCPL in order to protect the assets in the
factory, where the respondent - informant continued to remain
in physical possession, which is evident from the letter dated
19.08.2014 produced as per Annexure-K and the letter dated
20.03.2015 Annexure-BL issued by the respondent - informant
himself. The ingredients of Sections 420, 447, 37 and 120B of
IPC are also not attracted to the facts of the case. The
informant has not raised any grievance alleging that there was
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shifting of NPA date from 28.05.2014 to 31.01.2010. It is for
the first time, such an issue was raised while addressing the
arguments before this Court.
50. Learned senior advocate further contended that as
per letter dated 11.08.2014, the informant acknowledges
appointment of security guards and thank the Bank for the
same. Under such circumstances, he cannot find fault with the
appointment of the security guards. Moreover, as per
Annexure-AC dated 13.11.2015, the informant has written to
the Bank and acknowledges that he was present in the meeting
where concurrent Auditor was appointed.
51. Learned senior advocate placed reliance on the
decision of the Hon'ble Apex Court in K Virupaksha (supra) to
contend that, there is a procedure as contemplated under
SARFAESI Act, which is a complete code in itself which provides
the procedure to be followed by the secured creditor and also
the remedy to the aggrieved parties including the borrower.
Placing reliance on this decision, learned senior advocate
contended that in paragraph 15 of the judgment, the Hon'ble
Apex Court made it clear that, if there is any discrepancy in the
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manner of classifying the account of the appellant as NPA or in
the manner in which the property was valued or was auctioned,
DRT is vested with the power to set aside the said auction at
the stage after the secured creditor invokes the power under
Section 13 of SARFAESI Act.
52. Learned senior advocate submitted that the
Hon'ble Apex Court has re-iterated that DRT is the forum
provided to assail the procedure that was followed under the
special enactment. The Hon'ble Apex Court also referred to the
tendency on the part of the borrowers to invoke the penal
provisions by filing a complaint after failing in their attempt
before DRT or the High Court as the case may be. The Hon'ble
Apex Court has cautioned that, if the grievance as put forth by
the respondent - informant is to be taken note of by invoking
the penal provisions and the respondent - informant is allowed
to agitate through a criminal complaint and the investigation is
allowed to continue, it would amount to permitting the
jurisdictional police to read over the process which would be in
the nature of reviewing the order passed by the High Court or
any other Court competent under SARFAESI Act which is
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neither desirable nor permissible. The Hon'ble Apex Court has
categorically held that by taking such stand, the banking
system cannot be allowed to be held to ransom by such
intimidation. Therefore, it is contended that the proposition of
law on the subject is very well settled. The initiation of criminal
proceedings could not be sustainable when the proceedings
under SARFAESI Act is already initiated. Therefore, registration
of the criminal case, filing of the charge sheet and taking
cognizance cannot be justified on any ground as it is done only
to intimidate the petitioners. Therefore, learned senior
advocate contended that it is a clear abuse of process of law
and hence, the petitions are to be allowed. When no motive is
attributable to the petitioner and no criminal offence is made
out, the criminal proceedings is liable to be quashed and
accordingly, prays for allowing both the petitions.
53. Sri Murthy D Naik, learned senior advocate for the
petitioner in Criminal Petition No.6885 of 2018 contended that
the petitioner is accused No.3. Admittedly, the respondent -
informant borrowed the amount from the consortium of Banks
and he committed default. When the borrower fails to pay the
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installments as scheduled for three consecutive months, such
accounts will be treated as NPA. The respondent - informant
committed default in payment of installment as agreed during
October to December-2009. Therefore, with effect from
31.01.2010, the loan account was treated NPA. Later there was
restructuring of the loan account as provided under the Master
Circular issued by RBI. Learned counsel produced copy of the
Master Circular No.DBOD.No.BP.BC.1/21/01.018/2013-14
dated 01.07.2013 issued by RBI and referred to paragraph
No.4 in part-A i.e., asset classification to highlight different
categories of assets while classifying NPAs such as substandard
assets - that it remained NPA for a period less than or equal to
12 months, doubtful assets - when it remained in substandard
assets for a period of 12 months or more and less assets -
where loss has been identified by the Bank or internal or
external auditors or the RBI inspection, but the amount has not
been written off wholly. He has also drawn the attention of the
Court to paragraph No.5.1.2 relating to Provisioning Norms to
contend that, if the advance as remained in doubtful category
upto one year, the provision i.e., required to be made is 25%
to secure the portion and if it is between 1 to 3 years, it will be
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40% and beyond 3 years it will be 100%. Learned counsel
contended that as per Annexure-AL produced along with the
additional documents dated 12.12.2024, SMCB Branch,
Bengaluru had accorded approval for revising the date of NPA.
The reason for change in date of NPA is also mentioned therein
by the Bank, according to which, the term loan account was
restructured on 17.02.2010 and the repayment was re-
scheduled by 6 months due to delay in completion of the
project. This document makes it clear that as per original
repayment schedule, the term loan was to be repaid
commencing from October-2009 which was postponed to April-
2010. It is stated that the Company's profitability was under
strain for atleast 2 years. However, it is stated that the
performance of the account during specified period was
satisfactory. As the restructured account has become NPA as on
28.05.2014 due to continues irregularities in the account and
since the structure has failed and the account has become NPA,
the date of NPA was reckoned with reference to the pre-
restructuring repayment schedule. Therefore, there was change
in the date of NPA from 28.05.2014 to 31.01.2010.
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54. Learned senior advocate submitted that similar
contentions were taken by the respondent - informant before
National Company Law Appellate Tribunal (for short 'NCLAT'),
Delhi in Company Appeal (AT)(Ins).No.68/2019 and also before
the Debts Recovery Tribunal-I at Chennai (DRT) in TSA No.9 of
2023. In both the proceedings, similar contention taken by the
respondent - informant either as appellant or as applicant were
considered threadbare and the same were rejected by the
appropriate authorities.
55. Learned senior advocate contended that both the
forums have categorically held that shifting the date of NPA
from 28.05.2014 to 31.01.2010 cannot be found fault with and
on that ground, the possession notice cannot be treated as
opposing the provisions of SARFAESI Act and Security Interest
Act (Enforcement) Rules, 2002. Even though such a categorical
finding is given by both the appropriate forums, the respondent
- informant is making similar allegations before this Court with
malafide intention. Hence, such contention is liable to be
rejected.
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56. Learned senior advocate contended that in view of
the facts and circumstances highlighted by the respondent -
informant, he cannot place reliance on APITCO's report filed on
10.05.2014 to contend that even on that day, the account was
still not treated as NPA and that even according to the report,
the Company was having good financial health. This report was
submitted immediately after restructuring of the schedule and
therefore, cannot be the basis to support the contention of the
respondent - informant.
57. Learned senior advocate contended that
admittedly, an ESCROW account was opened to the advantage
of the respondent - informant with an understating that the
inflow of money should first go to the ESCROW account and
later, it will go the loan account without diverting the fund. The
decision was taken to open the ESCROW account in the
consortium meeting held on 19.02.2014. Minutes of consortium
meeting is produced as per Annexure-AP and it is evident that
the respondent - informant being the Managing Director of the
Company was physically present in the meeting. After
deliberations, it was decided mutually that the accounts with
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the consortium banks are to be maintained as regular and the
same sale proceedings are to be routed proportionately. If the
irregularity is persisting, Escrow Mechanism will have to be
implemented. When such irregularity found to be persisting,
the ESCROW account was opened to route the funds. The fact
that irregularity was persisting was never denied by the
respondent - informant. It is also not denied that when a
decision to open ESCROW account was taken in the consortium
meeting held on 19.02.2014, he was very much present and
the respondent - informant cannot turn around to contend any
irregularities committed by him.
58. Learned senior advocate also contended that as
per Annexure-AQ the minutes of consortium meeting held on
07.06.2014, the respondent - informant as Managing Director
of M/s Metal Closures Private Limited had attended the meeting
and there was again discussions regarding opening of ESCROW
account at SBI and it was decided to have such an account
opened at SBI and the Company was advised to route all
credits to ESCROW account only. The Company also advised
their customers to route the payment through ESCROW
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account. When the respondent - informant is a party to the said
decision and subsequently, the ESCROW account was opened
and the same cannot be found fault with by the respondent -
informant, who alleged commission of any offence against the
petitioner.
59. Learned senior advocate submitted that even
though the respondent - informant being the party to the
decision in various consortium meetings, more particularly, in
the meetings held on 19.02.2014 and 07.06.2014 to open the
ESCROW account and to route the funds through the same, he
started crying foul for the first time on 23.09.2016, which
shows the malafide intention on the part of the respondent -
informant in making such allegations.
60. Learned senior advocate submitted that much as
stated against the petitioner and other accused alleging
breaking open the door and the lock during April-2015, the
statement of various witnesses do not disclose involvement of
accused No.3 in any of such acts. Accused No.3 is responsible
employee of Specialized Mid Corporate Brach (SMCB),
Bengaluru. He has drawn the attention of the Court to
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Annexure-AR, which is dated 20.12.2014 to contend that the
migration of the account of M/s Metal Closures Private Limited
to Stressed Assets Management Branch (SAMB) was as on
16.12.2014. Therefore, since from December 2014, the loan
account was being handled by SAMB and not by SMCB to allege
any foul play against the petitioner who was attached to SMCB.
Admittedly, the petitioner - accused No.3 has nothing to do
with SAMB and under such circumstances, the allegations
against the petitioner is to be rejected in toto.
61. Learned senior advocate also drawn the attention
of the Court to Annexure -AS, the certificate issued by SBI
dated 20.06.2016 to contend that this certificate issued by the
Bank at an undisputed point of time discloses that the
petitioner was posted as Deputy General Manager at SMCB,
Bengaluru even during June 2016. The petitioner has never
worked in SAMB at any point of time and hence, the allegations
made against him are baseless.
62. Learned senior advocate contended that Section 32
of SARFAESI Act gives protection to the officials of the Bank
who act in good faith under the provisions of the Act. The
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respondent - informant had never alleged that the petitioner
had ever transgressed his authority as an employee of the
Bank. Learned counsel has also drawn the attention of the
Court to the statement of objections filed by the respondent -
informant to contend that through out the allegation is that, the
SBI through this petitioner committed the offences in question.
The allegations made against the Bank and against the
petitioner are one and the same. The petitioner acted in good
faith and discharged his duties in accordance with law by
following the due process of law. He is the representative of the
Bank. Therefore, the petitioner has not acted individually.
Under such circumstances, no malafide can be attributed to his
action.
63. Learned senior advocate for the petitioner has
placed reliance on the decision of the Hon'ble Apex Court in K
Virupaksha (supra) to contend that when prima facie the
action taken by the Banks under SARFAESI Act is neither
unquestionable nor treated as sacrosanct, but it is always open
to be assailed it in the forum provided and the respondent -
informant has availed such forums by approaching NCLT and
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DRT and was unsuccessful before both the forums. He cannot
be permitted to file the complaint making baseless allegations
of committing criminal offences which is apparently to
intimidate the bank officials. Since there is delay in raising such
plea, it was an after thought, which is an abuse of process of
law.
64. Learned senior advocate has highlighted the
observations made by the Hon'ble Apex Court in paragraph 16
of the judgment to highlight that, if such allegations are
allowed to be agitated by filing criminal complaint and an
investigation is allowed to continue, it amounts to permitting
the jurisdictional police to redo the process which would be in
the nature of reviewing the order passed by the competent
authority under the SARFAESI Act, which is neither desirable
nor permissible.
65. Learned senior advocate contended that the
Hon'ble Apex Court made it very clear that if such things are
permitted, the banking system will be allowed to be held to
ransom by such intimidation. Under such circumstances, the
Hon'ble Apex Court exercise its extraordinary power to quash
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the criminal proceedings. Thus, he contends that it is yet
another classic example for misuse of process of law only to
intimidate the bank officials and to get the relief which the
respondent - informant could not get either before NCLAT or
before DRT on the basis of similar allegations.
66. Learned senior advocate has also placed reliance
on the decision of the Hon'ble Apex Court in HDFC Bank Ltd
Vs State of Bihar and Others4 in support of his contention
that, SBI is a juristic person and no mens rea could be
attributed against the juristic person, when prima facie nothing
is placed on record to show that either bank or its staff have
committed dishonestly and that the mens rea required to
invoke penal provisions were existing while discharging their
duty. They cannot be made liable to face the investigation and
trial in criminal proceedings.
67. Learned senior advocate also placed reliance on
the decision of the Hon'ble Apex Court in Mukesh & Others Vs
State of Uttar Pradesh5 in support of his contention that,
4
(2024) SCC Online SC 2995
5
Slp No.12354/2020 DD:29.11.2024
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while seeking quashing of the criminal proceedings, the
petitioner can rely on the documents which are not part of the
charge sheet, unlike the accused is barred from relying on such
documents while seeking discharge. The documents that are
relied on by the petitioner in the present case are all admitted
documents and under such circumstances, filing of the charge
sheet without referring to those documents will have to be
taken into consideration while gathering malafides on the part
of the respondent - informant.
68. Learned senior advocate contended that even
though reckless allegations are made regarding the action
taken by the petitioner under SARFAESI Act during 2014, the
FIR came to be registered during 2016, that too, after the
complaint was filed by SBI with CBI and criminal proceedings
were initiated against him. Therefore, the malafides are prima
facie evident for the respondent - informant to file the criminal
complaint by invoking penal provisions.
69. Learned senior advocate placed reliance on the
decision of the Hon'ble Apex Court in Manoj Kumar Sharma
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and Others Vs State of Chhattisgarh & Another6 in support
of his contention that delay in lodging FIR often results in
embellishment which is a creature of an after thought. Such
delay in lodging the first information lacks spontaneity, but
there is always a danger of introduction of a coloured version
or an exaggerated version. Under such circumstances, the
Hon'ble Apex Court categorically held that registration of FIR
with extraordinary delay is an abuse of process of law and
therefore, the same is to be quashed.
70. Learned senior advocate also placed reliance on
the decision of the Hon'ble Apex Court in Dinesh Kumar
Mathur Vs State of MP and Another7 in support of his
contention that, mere alleging and making bald allegations of
criminal conspiracy and without placing any materials to
probabalize the same even after investigation and by filing the
charge sheet cannot bind each and every accused, including the
petitioner who is the public servant working as a responsible
officer with SBI and discharged his duties in accordance with
law by following the due process of law. Relying on these
6
(2016) 9 SCC 1
7
SLP(Crl.)No.5248/2017 DD 02.01.2025
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decisions, learned senior advocate contended that unless the
informant makes specific allegations against the petitioner for
having conspired with the other accused or for having
committed cheating etc., he is not bound to face the trial on
such bald allegations.
71. Learned senior advocate also referred to the
decision of Priyanka Srivastava (supra) to contend that
registration of the FIR is out of vengeance and therefore, the
criminal proceedings is liable to be quashed.
72. Learned senior advocate also placed reliance on
the decision of the Hon'ble Apex Court in Salib Alias Shalu
Alias Salim Vs State of UP and Others8 in support of his
contention that when frivolous or vexatious proceedings are
initiated, the Court has a duty to consider the materials that
are placed before the Court very carefully even by reading it
between lines.
73. Learned senior advocate also placed reliance on
the decision of the Hon'ble Apex Court in Mary Angel and
8
2023 SCC Online SC 947
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Others v/s State of Tamil Nadu9 in support of his contention
that it is a fit case for imposition of cost against the respondent
- informant for abuse of process of law.
74. Learned senior advocate contended that, all of a
sudden the account of a borrower will not be treated as NPA,
the standard accounts classified as NPA could be restructured
by the Banks to upgrade them when all the outstanding loan
facilities in the account perform satisfactorily during the
specified period. Only if such a pre-restructuring facilities were
classified as substandard and doubtful, then its assets
classification will be recalled from the date when it became NPA
on the first occasion. The general principles and procedural
norms pertaining to advances issued by Reserve Bank of India
pursuant to the Master Circular makes this position very clear
by holding that advances restructured on second or more
occasion may be allowed to be upgraded to standard category
after the specified period in terms of the concurrent
restructuring package subject to satisfactory performance.
Therefore, it is contended by learned senior advocate that the
contention taken by the respondent - informant that the date of
9
(1999) 5 SCC 209
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the account becoming NPA was preponed from 2014 to 2010
cannot be accepted even for a moment. Moreover, such
contentions were never entertained by DRT and under such
circumstances, the criminal proceedings against the petitioners
will have to be quashed.
75. Learned senior advocate further contended that
admittedly, the respondent - informant availed financial help
from consortium of Banks with State Bank of India, being the
lead bank. It is also not in dispute that the respondent -
informant committed default in repayment of the amount. The
account was treated as NPA. The consortium of Banks with
consent of the respondent - informant appointed the concurrent
Auditor to monitor the cash flow and to audit the accounts of
the defaulting Company and security agency to secure the
Company and its assets. A stock Auditor was appointed to
verify the stocks and receivables. The stock audit report was
submitted by the Auditor on 27.08.2014 highlighting several
irregularities like huge depletion in stock over statement of
debtors, diversion of funds, operating current account outside
the consortium on the part of the Company. After receipt of
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such report, clarification was sought by the respondent -
informant. In spite of that, the Company never came up with
any clarification nor submitted any plan for Resolution.
Therefore, the account was transferred to Stressed Asset
Management Branch(SAMB) for initiating recovery action in
December 2014.
76. Learned senior advocate submitted that during
February 2015, SAMB took symbolic possession of the assets
for issuing the notice under Section 13(4) of SARFAESI Act. A
decision was taken in the joint meeting to have forensic audit
to be done by RISK RICHTER. In spite of that, the respondent
- informant had not co-operated with forensic Auditors.
Accordingly, a report was submitted by the forensic Auditors to
the consortium on 17.03.2016. As per the opinion of the
Auditor, there were serious irregularities and fraudulent actions
that were taken place in the Company of the respondent -
informant. In the meantime, the consortium initiated action
under SARFAESI Act and also launched proceedings before
Debt Recovery Tribunal-I, Bengaluru.
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77. Learned senior advocate submitted that based on
the forensic audit report, the consortium decided to treat the
account of the Metal Closures Company as a fraudulent one and
accordingly, a complaint was filed with CBI as per the
guidelines of Reserve Bank of India. Such complaint was filed
by SAMB with CBI. The RBI vide its letter dated 07.09.2016
advised SBI to lodge complaint with CBI. It is submitted that at
the relevant point of time, the petitioner was working as
Deputy General Manager and in his official capacity, he lodged
the complaint with CBI. CBI sought clarifications from the
consortium represented by the petitioner. Accordingly, he filed
a revised written information dated 27.09.2016 and further
information was provided on 06.10.2016. However, CBI again
requested SBI to file more elaborate complaint and accordingly,
a revised complaint was filed on 18.04.2017. Further
information was also furnished to CBI on 16.10.2017.
Accordingly, an FIR came to be registered in Crime No. 11 of
2017 against the respondent - informant and 4 others for the
offence under Sections 120B, 406, 420, 468 and 471 of IPC
and under Sections 13(2) read with Section 13(1)(d) of
Prevention of Corruption Act, 1988. The respondent -
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informant, in the meantime, filed the first information with
respondent No.1 alleging commission of the offence against his
own employees. The FIR in Crime No.580 of 2016 of
Subramanyapura Police Station was registered and the
investigation was undertaken by CID. The charge sheet came
to be filed against accused Nos. 1 to 7 including the petitioner
who is arrayed as accused No.3.
78. Learned senior advocate submitted that initiation
of criminal proceedings at the instance of the respondent -
informant against officials of consortium Bank is to spite
vengeance against them. It is only with an intention to stall
SARFAESI proceedings pending before DRT and the complaint
registered with CBI.
79. Learned senior advocate placed reliance on the
decision of the Hon'ble Apex Court in State of Haryana and
Others Vs Bhajan Lal and Others10 to contend that as per
the directions issued by the Hon'ble Apex Court, it is a fit case
for quashing the criminal proceedings. Learned senior advocate
submitted that the allegations made in the complaint are so
10
1992 Supp(1) SCC 335
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absurd and not fit to go for trial. The role of the petitioner is
limited to the official action of initiating proceedings under
SARFAESI Act for which, the petitioner is made as a scapegoat.
Since false and frivolous allegations are made against this
petitioner without there being any basis, the criminal
proceedings is liable to be quashed.
80. Placing reliance on these decisions, learned senior
advocate for the petitioner - accused No.3 contended that
registration of FIR and initiation of criminal proceedings against
the petitioner belatedly i.e., after long lapse of 4 years, that
too, after bank registering FIR and initiating criminal
proceeding through CBI against the respondent - informant is
apparently an abuse of process of law to wreck vengeance
against the officials to pressurize them to dance to his tunes.
The act on the part of the respondent - informant is nothing but
arm twisting tactics adopted by him without any basis.
Therefore, he prays for allowing the petition to prevent abuse
of process of law.
81. Learned High Court Government Pleader for
respondent No.1 - State opposing the petitions submitted that
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specific allegations were made by the informant while filing the
first information. The Investigating Officer has thoroughly
investigated the matter, collected sufficient materials to
constitute the offences in question. When there are sufficient
prima facie materials to constitute the offences, the petitioners
are not entitled for quashing the criminal proceedings initiated
against them. Therefore, he prays for dismissal of the
petitions.
82. Sri Dhyan Chinnappa, learned senior advocate for
the informant - Prashant Hegde in Criminal Petition Nos.5157,
5159 and 6885 of 2018 opposing the petitions submitted that it
is a peculiar case which forced the informant to initiate criminal
action against the accused, who initiated SARFAESI
proceedings only for the purpose of covering their illegal acts in
collusion with Chief Finance Officer and other officials of the
Company. He further contended that the informant - Prashant
Hegde being the founder of the Company was the leader in the
market. He availed financial assistance from four different
nationalised Banks, which formed consortium of Banks. He
further submitted that the Company was doing well till the mid
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of 2014. The letter dated 10.05.2014 issued by State Bank of
India offering fresh enhancement of credit facilities upto 10
crores towards working capital. In fact, the Bank was intending
to enhance the working capital limits by 10 crores. But the said
offer was not accepted by the Company as per letter dated
16.05.2014. But strangely, in the first possession notice issued
by the Bank, the Company became NPA with effect from
28.05.2014.
83. Learned senior advocate has also drawn the
attention of the Court that, at the instance of Bank, a viability
study was undertaken and as per the viability report, the
Company was performing extremely well. Its performance was
estimated at 17%, while the general industry standard was
only 12%. It is only on the basis of this viability study,
declaring that the respondent - informant is doing extremely
good and is the leader in the market, SBI proposed to enhance
the working capital limits by 10 crores on 10.05.2014. But
within 18 days from there, the Company was declared as NPA,
which is unbelievable. No reasons whatsoever is assigned for
the same.
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84. Learned senior advocate contended that even
though the first notice was issued declaring that the Company
has become NPA on 28.05.2014, subsequently, the legal
opinion was sought on 15.06.2015. On the basis of legal
opinion, the notice issued for initiation of action was withdrawn
and thereby the stand of the Bank that the Company has
become NPA was withdrawn. The paper publication to that
effect is published categorically stating that the possession
notice issued earlier was withdrawn. It is thereafter, the second
notice for possession under Section 13(2) of SARFAESI Act was
issued on 15.09.2015 as per Annexure-AB. In this notice, SBI
strangely declared that the Company became NPA from
31.01.2010 that was about five years earlier to the notice.
Admittedly, first such notice was issued on 12.08.2014,
according to which, Company became NPA on 28.05.2014.
After withdrawal of the said notice as per the advice given to
the Bank vide Annexure-B, the second notice under Section
13(2) was issued by anti-dating the date of NPA. There is
absolutely no reason assigned for the same. It cannot even be
imagined that within 15 days, a Company which was the leader
in the market and its performance was extremely good,
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became NPA. There must be some reason for the same, which
is not forthcoming.
85. Learned senior advocate contended that, if in-fact,
the Company had became NPA with effect from 31.01.2010,
that should have been reflected in the viability report that was
obtained by the Bank voluntarily from the independent agency.
But contrary to that, the viability report states that the
Company was performing extremely good. If the Company was
NPA with effect from 31.01.2010, the Bank would have taken
necessary action initiating the proceedings under SARFAESI Act
within no time. Why the Bank has kept quite for five long years
is also a question remains unanswered. If the Company was a
NPA with effect from 31.01.2010, why the Bank has offered
enhancement of working capital limits by 10 crores on
10.05.2014 is also a mystery. As per the account statement,
the Company had repaid not less than 107 crores during 2013-
14. Under such circumstances, what was the yardstick used by
the Bank to declare the Company as NPA is not forthcoming.
86. Learned senior advocate submitted that on
01.08.2014, SBI took forcible physical possession of the
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Company by appointing accused No.8 - V V Krishnamoorthy,
Chartered Accountant as the concurrent Auditor. It also
appointed M/s Kashi Security by replacing the Company's
security i.e., Eagle Eye Security, which had served the
Company for over a decade. This shows the fact that the Bank
has actually taken physical control of the Company in true
terms.
87. Learned senior advocate has drawn the attention
of the Court that appointment of the concurrent Auditor and
appointing the security agency replacing the earlier one, was
the unilateral decision of the Bank. In none of the meetings,
the respondent - informant was invited or he was taken part.
Some documents were concocted to show that the respondent -
informant took part in the meeting. But the letters written by
the Bank at an undisputed point of time discloses that it was
the unilateral decision of the consortium Banks and the
respondent - informant had no voice in it. The word 'concurrent
Auditor' does not mean that his appointment was with the
concurrence of the informant. But one more Auditor was
appointed by the Bank, when there was already an Auditor for
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the Company. Therefore, the Company has not played any role
either in appointing concurrent Auditor or in appointing a new
security agency replacing the earlier one.
88. Learned senior advocate has drawn the attention
to various correspondences, which are part of the charge sheet
to disclose that for each and every petty payments, such as,
BESCOM bills, LIC premium payment, the Company was
required to write to the concurrent Auditor and get his
approval. Only after getting the approval from the concurrent
Auditor, the Bank was releasing the amount for payment from
the ESCROW account. This shows the fact that the Bank had
virtually taken over the physical possession of not only the
property, but also the actual running of the business. Even the
routine payments were not permitted to be made by the
Company, but it was through concurrent Auditor and the
ESCROW account by the Bank.
89. Learned senior advocate drawn my attention to the
letter dated 05.08.2014 to contend that accused No.8 was
appointed as concurrent Auditor with effect from 01.08.2014 to
verify the cash flows and a specific restriction was levied on the
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Company stating that no payments are to be made to non-
banking finance Companies, unsecured creditors, unsecured
loans and on account of capital goods, the concurrent Auditor
was authorized to monitor the payments to the managerial
officials to ensure that they are in tune with Past Salary and
Remuneration paid.
90. Learned senior advocate has drawn the attention
of the Court to document No.18 in the compilation to support
his contention that even for payment of BESCOM dues, long
procedure of writing to the concurrent Auditor seeking
permission and getting his approval in writing was insisted.
Even after approval from the concurrent Auditor, the same was
to be communicated to the Bank, which in turn, was to make
payment through ESCROW account. So virtually, the Company
was at the mercy of the concurrent Auditor and the Bank. If at
all, the Bank had not taken actual possession of the Company
and it was only with the symbolic possession, there was
absolutely no reason for taking all these harsh steps against
the Company, that too, when the Company was doing well in
its business. As per the viability report itself, the Bank had
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came forward to enhance the working capital capacity by 10
crores. Within six months from the date of the viability report,
which highlighted that the Company's growth is about 17%
much more than the usual growth, the Company was declared
as closed down. The Chief Financial Officer i.e., accused No.1 in
collusion with the other employees and the bank officials along
with the concurrent Auditor managed to strangulate the neck of
the Company systematically under the guise of taking action
under SARFAESI Act. The intention on the part of all the
accused was very clear. It was only to close down the business
by making wrongful gain for themselves.
91. Learned senior advocate has also drawn the
attention of the Court to Annexure - AR produced by the
petitioners i.e., the complaint filed by SBI with CBI against the
Company alleging fraud, has specifically stated that the account
of the Company initially became NPA, but it was restructured
on 17.02.2010. Later, even though the account was irregular
and it was classified as substandard on 25.11.2013 by the
Bank, the account was upgraded as a standard asset on
28.01.2014 by recovery of over dues fully. The complaint also
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highlights that similar situation prevailed with the other Banks
also. Therefore, even according to SBI, all the dues were paid
to all the Banks and the account was upgraded as a standard
asset on 28.01.2014. Under such circumstances, the contention
of the Bank that it has become NPA either on 28.05.2014 or on
31.01.2010 cannot be believed even for a moment.
92. Learned senior advocate referring to the charge
sheet filed by the Investigating Officer contends that specific
overt act of each of the accused is explained in-detail. The
criminal acts narrated by the Investigating Officer on the basis
of materials collected by him during investigation discloses
that, it was with the malafide intention to close down the
business the accused have committed fraud and cheating.
Specific allegations are made against each of the accused
regarding commission of the offences. CW6 - an employee of
the Company has given statement before the Investigating
Officer about breaking open the lock of EDP room and taking
away the servers in the car by Vinod Kumar, who is accused
No.5. CW7 is also another witness who gave statement along
similar lines. CW11 is the Assistant Manager in the Company,
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who also states that the servers and the software in EDP room
was removed by the bank officials and to enable these high-
handed criminal acts of committing theft. The security agency
that was working in the Company for decades together was
removed and they were replaced by their own security agency.
Payment for the security agency was being made by the Bank.
When the informant complained of theft of the materials,
servers and softwares, the Bank washed its hands by saying
that it is the headache of the Company and Bank is no way
concerned.
93. Learned senior advocate further submitted that
under SARFAESI Act, there is no dichotomy between symbolic
and physical possession. Section 13(4)(a) of the SARFAESI Act
refers the word 'possession simplicitor'. Generally, the Banks
will refer to the word 'symbolic possession', if they take only
the symbolic possession. In the present case, the Banks have
never referred to the word 'symbolic possession' in any of its
correspondence.
94. Learned senior advocate referred to the photos
produced along with the compilation to contend that the bank
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officials have physically came to the spot, displayed a board
declaring that the property has been taken possession under
the SARFAESI Act on 20.12.2015. The very fact that the
concurrent Auditor was appointed to deal with each and every
dealings of the Company, requiring his consent in writing for
payment of petty amounts, change of the security agency of
their choice, disclose that the Bank was in physical possession
of the Company, which led to its close down within four
months. The concurrent Auditor and the security agency were
appointed by the Bank on 01.08.2014, but it is stated that the
Company had come to be a grinding halt and virtually closed
down its activity during December 2014. Accordingly, the
possession of the Company was taken over by the Bank on
20.02.2015. Nothing was left in the hands of the Company to
manage or to run the business and under such circumstances,
the contention of the petitioners that they have taken only the
physical possession of the property, cannot be accepted. All
these illegal acts which forced the Company to come to a
grinding halt was committed only from 01.08.2014, and within
four months they managed to close down the Company by
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committing various criminal acts including theft, fraud, cheating
etc.
95. Learned senior advocate placed reliance on the
decision of the Hon'ble Apex Court in M/s.Transcore Vs.
Union of India and another11 in support of his contention
that, drawing of dichotomy between symbolic and actual
possession does not find a place in the scheme of NPA read
with 2002 Rules.
96. Learned senior advocate referred to Section 32 of
SARFAESI Act to contend that such a protection under this
provision of law will be available to the officials of the Bank,
only if they discharge their duty in good faith. The acts
complained of against the accused glaringly lacks any good
faith or bonafides. On the other hand, the intention on the part
of the accused was very obvious in causing loss by committing
theft and preventing the respondent - informant from saving
his Company.
97. Learned senior advocate contended that even
though concurrent Auditor was appointed on 01.08.2014,
11
2008 1 SCC 125
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similarly, the security agency was replaced on the same day,
but it was informed to the Company only on 05.08.2014. Within
four months, according to the Bank, the Company closed down
its activities. During April 2015, the servers and the softwares
were stolen. It was obviously after taking possession of the
property on 20.02.2015, when the first possession notice was
withdrawn by the Bank during June 2015 by publishing a paper
publication and the second possession notice was issued only
during December 2015, the Bank could not have removed the
servers and the software from the Company premises. Even
according to the Bank, when it withdrew taking possession of
the Company on 20.02.2015, the possession was restored to
the respondent - informant. Under such circumstances, how the
Bank entered the Company premises to remove the software in
the servers remains unexplained. Therefore, the act committed
by the accused i.e., the officials of the Company as well as the
officials of the Bank is prima facie illegal and with ulterior
motive. No bonafides can be attached to it.
98. Learned senior advocate contended that while
exercising the inherent powers of this Court under Section 482
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of Cr.P.C., this Court cannot venture to appreciate the evidence
that are collected by the Investigating Officer and evaluate the
materials to find out as to whether the trial will end in
conviction or acquittal of the accused. Such evaluation of the
material documents could be done only for the satisfaction of
the Court to find out as to whether there are prima facie
materials or not. In support of his contention, the learned
senior advocate placed reliance on the decision of the Hon'ble
Apex Court in Umesh Kumar v. State of AP.12 .
99. Learned senior advocate also placed reliance on
the decision of the Hon'ble Apex Court in Saranya Vs. Bharati
and another13 to support his contention, that this is not the
stage to hold a mini trial to appreciate the evidence on record
and to consider the allegations on merits to form an opinion as
to whether the accused is likely to be convicted or not. This
Court acting under Section 482 of Cr.P.C. cannot exercise the
jurisdiction as an Appellate Court.
100. Learned senior advocate contended that the
materials on record disclose that there are strong prima facie
12
2013 part 10 SCC 591
12 2021 8 SCC 583
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materials against the accused to proceed against the
petitioners. He further submitted that the Bank has declared
that the informant is a willful defaulter and the same was
challenged by the respondent - informant before this Court by
filing Writ Petition No.28058 of 2018. The said petition came to
be allowed vide order dated 16.03.2023. Therefore, the
contention of the Bank that the Company is a willful defaulter
was turned down by this Court. The cumulative effect of all
these facts and circumstances discloses that there is something
more than what meets the eye. The Investigating Officer cited
as many as 19 witnesses and collected voluminous documents.
The witnesses are required to appear before the Court and give
their statement. At this stage, this Court cannot refer to the
defence taken by the accused by placing reliance on the
documents that are produced by the petitioners to form an
opinion that they have a good defence, and therefore the
criminal proceedings is to be quashed.
101. Learned senior advocate also contended that none
of the additional documents produced by the petitioners were
brought to the notice of the Investigating Officer during
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investigation nor they were produced along with the petitions to
contend that those documents were produced before the
Investigating Officer, but he has not taken into consideration
the same. Additional documents are being produced as and
when the arguments advanced and reply arguments on behalf
of the respondent - informant was addressed.
102. Learned senior advocate contended that even
though heavy reliance is placed on the minutes of meeting to
contend that the informant was present in the meeting where a
decision to appoint the concurrent Auditor was taken, he
seriously disputes such contention. On the other hand, it is
contended that the signatures of the petitioners found on such
proceedings of the meeting were forged to give an impression
that the informant was present in the meeting and he
concurred or consented for appointment for such an Auditor.
The word 'concurrent Auditor' was in fact used by the Bank as
he was appointed concurrently or in addition to the Auditor who
was regularly auditing the accounts. When the petitioners are
placing reliance on the forged documents which were never
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produced before the Investigating Officer for his consideration,
the same cannot be considered by this Court.
103. Learned senior advocate referring to the Master
Circular produced by the learned counsel for accused No.3,
contended that this Circular speaks about the norms on income
recognition, asset classification, definition of non performing
assets, standard accounts classification, definition of the word
'specified period' etc., Referring to this Circular, learned senior
advocate contended that as per the definition of the word 'non
performing assets', as per Clause - 2.1.2, if the interest and/or
installments of principal remain overdue for a period of more
than 90 days in respect of the term loan, it could be classified
as NPA. According to the Bank, the term loan obtained by the
respondent - informant, Company was classified as NPA during
January 2010. However, there was a re-structuring/re-
scheduling of the loan account on 17.02.2010. Once such re-
structuring/re-scheduling of the loan account was done,
account would be considered as standard assets as per clause -
4.1.1 as the NPA remained for a period less than or equal to 12
months.
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104. Learned senior advocate drawn the attention of the
Court to Clause 12.2 of the Master Circular to highlight the
norms or classification of the assets while restructuring the
advances and contended that as per clause 12.2.3, the
standard accounts classified as NPA and NPA accounts retained
in the same category in re-structuring by the Bank is to be
upgraded only when all the outstanding loan facilities in the
account perform satisfactorily during the specified period i.e.,
both principal and interest on all facilities in the account are
serviced as per terms of payment during that period. Referring
to the very same clause 12.2.3, the attention of the Court was
drawn to Annexure- 5, where the word 'specified period' is
defined to mean a period of one year from the commencement
of the first payment of interest or principal whichever is later on
the credit facility. Therefore, it is contended that when
admittedly the respondent - informant had not committed
default in following the repayment schedule from 2010 till
2014, such loan account could not have been treated as NPA by
dating it back to 2010. The Master Circular relied on by the
respondent - informant do not permit such an exercise.
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105. Learned senior advocate also referred to
Annexure-AL produced by accused No.3 which is the letter sent
by SBI, SMCB, Bengaluru dated 08.07.2014 signed by accused
No.3 as Deputy General Manager who accorded approval for
change of NPA from 28.05.2014 to 31.01.2010. Learned senior
advocate highlighted the reasons mentioned by accused No.3
for change to contend that even according to accused No.3, the
performance of the account during the specified period was
satisfactory and the re-structured account has become NPA
only as on 28.05.2014. He would further contend that without
admitting that the respondent - informant Company became
NPA as on 28.05.2014, even if considered for the sake of
arguments, accused No.3 could not have treated the account as
NPA by changing the date from 28.05.2014 to 31.01.2010 as
the same is not permissible even as per the Master Circular of
the Bank. He further contended that when the performance of
the account of the Company during the specified period was
satisfactory after re-structuring the account from 31.01.2010
till 28.05.2014, there was absolutely no reason to treat the
account as NPA. When the Bank itself offered to lend additional
loan of Rs.10 crores as per its letter dated 10.05.2014 being
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satisfied with the financial viability of the respondent -
informant Company, how the Company would slip into NPA
within 15 days is not explained. All these facts and
circumstances goes to show the malafide on the part of the
bank officials who are arrayed as accused in collusion with co-
accused to throttle the healthy Company into a NPA.
106. Learned senior advocate contended that even
according to the Bank, the revised repayment schedule is to
commence from April 2010 and it will end on March 2015.
When admittedly the Company has not committed fault in
following the repayment schedule from April 2010 till May
2014, there is absolutely no justification for treating the
account as NPA. Even according to the Bank, the Company
which was financially viable till 10.05.2014 suddenly slipped
into NPA as on 28.05.2014 and as per the letter dated
15.12.2014, the Bank has written to the concurrent Auditor
that his services are no more required as there was no
activities in the Company. Therefore, the Company was brought
to a grinding halt within a period of 6 months. The reason for
such stoppage of activity in the Company is to be explained by
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the accused. The respondent - informant has made it clear
that introducing the concurrent Auditor on 01.08.2014,
appointing the security guards on 05.08.2014, resulted in
permanent closure of the Company which was hale and healthy
just about 2 months before. Therefore, it is clear that a
systematic efforts was made by the accused collectively to see
that the Company is closed permanently by branding it as NPA
within 15 days after declaring the Company as financially viable
and offering the additional loan of Rs.10 crores. All efforts are
made by the accused collectively to cover up their illegal
actions. As a part of it, the Bank had withdrawn the notices
issued to the Company at the first instance under Sections
13(2) and 13(4) of SARFAESI Act after the informant
approached DRT and challenged the said notices. It is only
thereafter, the accused have manipulated the records to treat
the account as NPA since from January 2010. Once the
activities of the Company was brought to a grinding halt, the
Bank became very active in issuing the notices by invoking the
provisions under SARFAESI Act and to contend that such action
were the bonafide acts of the accused. The facts and
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circumstances of the case disclose that there were no bonafides
in any of the action of the accused.
107. Learned senior advocate submitted that even
though it is contended that the scope of concurrent Auditor was
only to audit the account, the materials on record disclose that
even for payment of petty electricity bills, the permission from
concurrent Auditor as well as by the Bank was required to be
obtained. Under such circumstances, there was threat of
disconnection of electricity and finally the accused have
achieved their object and the electricity supply was
disconnected.
108. Learned senior advocate referring to the letter
dated 27.02.2014 produced as document No.25 contended that
according to accused No.3 there was no activity in the
Company w.e.f. 16.12.2014 and therefore, he informed the
concurrent Auditor that his services are no more required. He
further contended that when the Bank takes up a stand that it
was never in physical possession of Company premises, there
was no occasion for the bank officials to open the gates and
doors of the Company entering the premises, removing the
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computers and the servers to take it outside for the purpose of
retrieving the data. If at all, they were not in physical
possession of the premises, the Bank or the concurrent Auditor
would have asked the respondent - informant for permission to
access the computers and servers and to retrieve the data.
When admittedly the Bank has not asked any permission and
directly entering the premises, removing the computers and
servers, evidences the fact that the Bank was in actual
possession of the premises.
109. Learned senior advocate also contended that the
Bank has invoked Section 14 of SARFAESI Act and approached
the learned Magistrate for passing necessary orders. The Bank
was successful in getting the order on 12.12.2016, but
thereafter never implemented the order, for the simple reason
that the Company was already in physical possession of the
Bank and by calculated efforts of the accused, it was shut down
during December 2014. Under such circumstances, there was
absolutely no reason for the Bank to get the order under
Section 14 of SARFAESI Act.
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110. Learned senior advocate contended that for all the
highhanded acts committed by the accused, it is only the
respondent - informant and the employees of the Company are
the witnesses. There cannot be any other person who will
come to know about the action initiated by the Bank which
resulted in closure of the Company. Therefore, the
Investigating Officer has cited the respondent - informant and
the employees of the Company as witnesses. The same cannot
be found fault with.
111. Learned senior advocate placed reliance on the
decision of the Hon'ble Apex Court in Kishan Singh (dead)
Through LRS vs. Gurpal Singh and Others14 in support of
his contention that the findings of the fact recorded by the Civil
Court do not have any bearing so far as criminal case is
concerned and vice versa, since the standard of proof is
different in civil and criminal case. Therefore, it is contended
that the order passed by DRT cannot have any bearing on the
merits of these petitions. Even otherwise, the order of DRT is
stayed by this Court and the same is pending consideration.
14
2010 (8) SCC 775
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Under such circumstances, the petitioners cannot take
advantage of the findings recorded by the DRT for any reasons.
112. Learned senior advocate further contended that
the arguments addressed by the learned senior advocate or
advocate for the petitioners are to be addressed before the
Trial Court and not before this Court. When prima facie
sufficient materials are placed before the Court, which are
sufficient to proceed with the trial, the criminal proceedings
cannot be quashed. Simply because the steps were taken under
the SARFAESI Act, the bar under Section 32 of the Act cannot
be used as a shield unless the petitioners show good faith in
their actions. Having good faith in each of their action is sine
qua non to seek protection under Section 32 of the SARFAESI
Act, which is conspicuously lacking in the present case.
113. Learned senior advocate again referring to the
order of DRT referred to above made by the informant
regarding commission of the offences, contended that, it is
categorically held by DRT that the proceedings under SARFAESI
Act is entirely different from the proceedings under criminal
law, which can run side by side. It is also held that the two
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remedies differ in their content and consequences. However, an
opinion is formed that mere launching of criminal prosecution
or filing of the charge sheet making allegations against its own
employees and the bank officials cannot prevent recovery of
the public money. He would further contend that this order of
DRT is challenged before this Court by the informant by filing
the writ petition and the same is pending consideration.
114. Learned senior advocate submitted that even
though the Bank had approached the learned CJM, Bengaluru
on 29.12.2015 under Section 14 of the SARFAESI Act, the
informant had filed the objections at the earliest possible time
contending that taking second possession is not permissible
under law. However the learned CJM has passed an order
permitting the Bank to take physical possession of the
property. Thereafter, admittedly the Bank has not initiated any
action for taking physical possession of the property as it was
already in physical possession of the property. Therefore, what
was taken after publishing the possession notice is the actual
possession and not the symbolic possession of the property.
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115. Learned senior advocate contended that as per
Annexure-AB, a notice dated 15.09.2015 was issued by the
State Bank of India under Section 13(2) of the SARFAESI Act,
according to which, State Bank of India treated the account as
NPA about 5 years back i.e., on 31.01.2010, the Punjab
National Bank had treated the account as NPA on 31.01.2010,
the Corporation Bank on 30.06.2014 and UCO Bank on
31.12.2014. Therefore, the Banks themselves are not certain
as to when the account of the Company became NPA, whether
it was on 31.01.2010 as mentioned in the second notice, or on
28.05.2014 as mentioned in the earlier possession notice or as
treated by Corporation - Bank or by UCO Bank.
116. Learned senior advocate would further contend
that as per the materials that are placed before the Court, the
Bank had once again issued the possession notice on
11.12.2015 when according to the informant, the physical
possession was already taken during February 2015. In spite
of request for joint meeting, the Bank was not ready to arrange
for the same. The stock audit discloses that there was drastic
reduce in the stock without any reasonable cause. The first
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audit report dated 31.05.2014 disclose that there was stock of
Rs.71.97 crores. The stock audit taken during May 2016
discloses that stock were only worth Rs.1.14 crores. The only
reasonable explanation for drastic reduction in stock given by
the informant is that, the stock was stolen from all the 3
factories by the officials of the Company in active collusion with
the bank officials.
117. Learned senior advocate contended that inspite of
repeated requests, the Bank had never co-operated in taking
the stock of the informant -Company. Even the concurrent
Auditor was not bothered to take stock of the ICD, only with an
intention to show the value of the stock much below the value
which was shown by the informant which was admitted and
accepted by the Bank.
118. Learned senior advocate for the respondent -
informant referring to the specific averments made against
accused Nos.3, 4, 6 and 8, who are the petitioners in these
petitions contended that the Investigating Officer has taken
pains in collecting voluminous records to make specific
allegations against each of the petitioners. When the
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allegations against the petitioners are supported by the
materials that are placed on record, it is not proper to quash
the criminal proceedings at the initial stage. The only course
open is to go for trial before the Trial Court. Thus, in conclusion
the learned senior advocate contended that it is not a fit case
for quashing the criminal proceedings. But there are sufficient
materials to proceed against the accused for trial.
119. Sri. Ananth Mandagi, learned senior advocate for
the respondent - informant in Writ Petition Nos.40308 and
35925 of 2018 and Writ Petition Nos.7492, 7493 and 7494 of
2019 opposing the petitions submitted that the informant,
lodged the first information only against accused Nos.1 to 11,
who are the employees of his Company. The FIR was registered
against the employees arraying them as accused Nos. 1 to 11.
The informant in his complaint specifically stated the modus
operandi adopted by accused Nos.1 to 11 in committing the
offences. The informant even though a qualified Chartered
Accountant is an aged man, who was managing the affairs
throughout India. It is specifically stated that a Unit was started
in Himachal Pradesh between 2005-2013 by expanding its
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activities. The informant was busy in the affairs of the Company
at Himachal Pradesh including imports and vendor payments.
Taking undue advantage of the absence of the informant,
accused Nos. 1 and 2 in collusion with other accused managed
to forge the signatures of the informant, concocted several
documents including the Resolution to authorise accused No.1
to be the authorized signatory to the cheques for drawing huge
sums of money. The informant started realizing about the
mismanagement in the Company only during 2013-14, when
the Company started defaulting in payment of the installments
and when the Company started experiencing the working
capital constraints. Thereafter, the informant considered the
financial health of the Company and he was shocked to see
that, it was in very bad condition. The account was declared as
NPA. The informant was forced to mortgage his residential
houses to arrange money for the revival of the Company. In
spite of that, the workers were laid off and the Company was
forced to close down.
120. Learned senior advocate submitted that the
informant specifically stated that due to shock, he went into
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depression and was hospitalized. After discharge from hospital,
the informant started verifying as to what went wrong and
where. It is at that time he started collecting various
documents relating to the financial transactions of the Company
and came to know the misdeeds of accused Nos. 1 to 11 in
collusion with one another. The informant has stated about the
offence committed by his employees in detail in the first
information. If the informant had any intention to involve the
petitioners and other bank officials, simply on the ground that
they have invoked the provisions of SARFAESI Act, he would
have included their names in the first information itself. But the
informant had not done so, but specifically stated about the
involvement of his employees in commission of the offences
and requested the police to investigate to unearth the truth.
121. Learned senior advocate further submitted that
accused No.10 was the Deputy General Manager(DGM) and
accused No.11 was the Chief Manager in Punjab National Bank,
the banker with whom the informant and its Company was
having dealings. Accused No.26 is the son of accused No.10.
During investigation, it was found that accused No.10 using his
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authority as DGM transferred huge sums of money to the
account of his son accused No.26 as he started a Shell
Company or a fictitious Company. There is absolutely no reason
for accused No.10 to transfer such amount to the account of
the fictitious Company of his son who is arrayed as accused
No.26. The Investigating Officer has collected sufficient
materials in this regard. Moreover, accused Nos. 10 and 11
have also played major role in permitting accused Nos. 1 and 2
in forging the signatures of the informant and concocting the
documents. When the officials of the Bank were knowing very
well that it was the informant alone who was authorized to sign
the cheques, his signatures were forged by accused Nos.1 to 11
to submit the cheques and RTGS forms to the Bank, which were
deliberately accepted by the bank officials, without any
objections. Even the Photostat signatures of the informant were
accepted by the bank officials, which clearly discloses the
conspiracy between the employees of the informant - Company
and bank officials.
122. Learned senior advocate submitted that the Shell
Company started by accused No.26 with the help of his father
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accused No.10 managed to get huge sums of money to its
account under the guise of custom scrips, when the Company
had never received any such scrips from accused No.26. He
further submitted that the accused have managed round
tripping to give an impression that the Company that was
floated by accused No.26 could get various financial benefits
with the help of sham and fictitious transaction. Admittedly
accused No.26 had never made payment towards VAT
realizations and ultimately the Shell Company was closed down.
123. Learned senior advocate submitted that custom
scrip is the tailor made scrip issued by the Department of
Customs for the exporters to avail the benefit of the same while
making payment of customs duty. It is available for purchase in
the open market, therefore it is duty credit scrips. Accused
No.26, who is none other than the son of accused No.10, who
is the DGM of Punjab National Bank, floated few firms only to
defraud the informant. He was having the backing of his father,
who was working as DGM and transferred more than Rs.6
crores to the Shell Company run by his son - accused No.26.
The other accused who are the employees of the informant -
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Company transferred this amount to accused No.26 at the
instance of accused No.10. It is stated that it is for purchase of
custom scrips, but the respondent is the importer of the raw
materials for manufacturing of caps but he was not an
exporter. Under such circumstances, payment of customs duty
for export does not arise and the Company was not required to
pay customs duty or purchase customs scrips. Specific
allegations are made by the Investigating Officer regarding
floating of firms by accused No.26, which are all Shell
Companies and received more than Rs.6 crores from the
Company belonging to the informant for the purpose of
providing custom scrips which was never given. Therefore,
prima facie it is a fraudulent transfer of the amount by the
employees of the informant - Company to accused No.26 at the
instance of accused No.10. He further submitted that after
achieving the object of siphoning of more than Rs.6 crores,
accused No.26 calmly closed down his firms. He was not having
any dealings whatsoever for floating the firms.
124. Learned senior advocate further submitted that
specific allegations are made against accused Nos.10 and 11,
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who are the petitioners herein. They are the responsible officers
of the Bank and permitted payment based on the fax copy and
xerox copies of the documents. When serious allegations are
made against the petitioners, the Investigating Officer has gone
deep into the matter and investigated for about three years for
filing the final report. The allegations are supported by
documents and the version of the witnesses. Hence, it is not a
case for quashing the criminal proceedings.
125. Learned senior advocate further submitted that the
Trial Court is required to hold full-fledged trial, consider the oral
and documentary evidence that will be placed before it, and
then only it can form an opinion as to the whether a case
against the accused is made out or not. This Court while
exercising the power under Articles 226 and 227 is not either a
revisional Court or an Appellate Court and it cannot hold an
enquiry regarding the averments made in the final report. He
further contended that even though the Banks were also
arrayed as accused, none of the Banks have approached this
Court seeking quashing of the criminal proceedings. But
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accused Nos.10 and 11, being the officers of the Bank are
seeking to quash the criminal proceedings.
126. Learned senior advocate further submitted that it
is a white collar crime committed by the accused, which
appears to be tip of the iceberg. The informant suspects larger
financial fraud committed by the accused. The role played by
the petitioners was unearthed only during investigation which
went upto 3 years. The charge sheet runs into 2000 pages. The
Investigating Officer has taken care of collecting each and
every details regarding the role of each of the accused.
127. Learned senior advocate further submitted that the
documents that were submitted by accused Nos.1 and 2 and
other accused to various Banks with the so-called signature of
the informant were sent for FSL examination. The questioned
signatures were subjected to verification by the handwriting
experts and a report to state that the questioned signatures are
product of imitation, forgery produced in order to match the
pictorial appearance of standard signatures is received. The
FSL report issued by State Forensic Science Laboratory,
Madiwala dated 10.08.2018 discloses that various signatures
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produced as that of the informant were forged. Now the
question arises, who forged the signature and for what
purpose. It is pertinent to note that the bank officials including
the petitioners - accused Nos.10 and 11 have accepted such
forged documents to transfer huge sums of money to cause
wrongful loss to the informant. The witnesses cited in the
charge sheet depose about the involvement of various accused
in commission of the offences. The learned Magistrate after
taking into consideration the contention taken by the informant
and the charge sheet filed by the Investigating Officer rightly
took cognizance of the offences.
128. Learned senior advocate further submitted that it
is the settled position of law that the learned Magistrate need
not have to give a detailed reason for taking cognizance of
offences, when there are sufficient grounds for proceeding with
the matter. Such order taking cognizance cannot be found
fault with by this Court, when there are prime facie materials
including the FSL report issued by the Lab. When such strong
prima facie materials are before the Court, it is a fit case to go
for trial.
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129. Learned senior advocate placed reliance on the
decision of the Hon'ble Apex Court in Kaptan Singh Vs The
State of Uttar Pradesh and Ors15 in support of his contention
that, while exercising the powers either under Articles 226 and
227 of the Constitution of India or under Section 482 of Cr.P.C.,
the Court is not required to hold a mini trial to form an opinion
as to whether the accused are liable for conviction or not. If a
petition under Section 482 of Cr.PC is filed, immediately after
filing of the first information and registration of the FIR, the
Court is required to consider the allegations made in the first
information to form an opinion as to whether a cognizable
offence is made out from out of the allegations or not. If on the
other hand, if such petition under Section 482 of Cr.P.C. is filed
after filing of the charge sheet, the Court is required to consider
the materials collected during investigation. However, this
Court is not required to go into the merits of the allegations to
act as if it is considering the materials as an appellate Court or
it is conducting a trial. If on the materials that are placed
before the Court, a prima facie case is made out to proceed
with the matter, the learned Magistrate will be justified in
15
AIR 2021 SC 931
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taking cognizance and such criminal proceedings are not liable
for quashing.
130. Learned senior advocate further submitted that,
even if the petition is filed under Articles 226 and 227 of
Constitution of India, it will not give any special right to the
Court in quashing the criminal proceedings when prima facie
materials are placed on record. After detailed investigation,
there is absolutely no reason to ignore such clinching materials
including the FSL report, which discloses that there is forgery in
the documents that are submitted to the Banks, which were
blindly accepted by the bank officials for the reasons best
known to them. Under such circumstances, the real intention
on the part of the accused could be known only after full-
fledged -trial. It is premature to form an opinion that the
accused are innocent and they have not committed any
offences.
131. Learned senior advocate submitted that, even
though heavy reliance is placed on the decision of the Hon'ble
Apex Court in Priyanka Srivastava (supra), the facts and
circumstances in the said case was entirely different. Even if
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there is slight difference in the facts of the case, the case law
cannot be considered as a precedent by this Court. The
directions issued by the Hon'ble Apex Court in Priyanka
Srivastava (supra) is to be considered under the peculiar
facts and circumstances of the present case.
132. Learned senior advocate further submitted that the
question which is pending before the DRT-I, Chennai, is entirely
different. It was not an appeal that was pending before DRT-I,
but it was the original application, which was filed at Chennai
since the valuation exceeded Rs.100 crores. The DRT-I is not
authorized to consider the forgery, cheating, misappropriation
or criminal conspiracy by the accused. It is only the criminal
Courts are authorized to try such offences. The informant is
contesting the matter before DRT-I, Chennai on its merits. But
simply because the matter is pending before DRT-I for
consideration, cannot be the ground to quash the criminal
proceedings, ignoring the voluminous documents that are
collected by the Investigating Officer and placed on record in
the form of final report and when the learned Magistrate after
convincing about the sufficient grounds for proceeding with the
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matter took cognizance of the offences. Therefore, he prays for
dismissal of the petitions.
133. In view of the rival contentions urged by learned
counsel for both the parties, the point that would arise for my
consideration is:
"Whether the petitioners have made out any
grounds to quash the criminal proceedings
initiated against them?"
My answer to the above point is in the 'Negative' for the
following:
REASONS
134. The respondent - informant had filed the first
information with Ashoknagar Police Station against accused
Nos.1 to 11 alleging commission of offences punishable under
Sections 408, 468, 471, 381, 420, 506 read with Section 34 of
IPC. The same was registered in Crime No.486 of 2015. After
investigation, the final report came to be filed. Now accused
Nos.10, 11 and 26 are before this Court seeking to quash the
criminal proceedings initiated against them.
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135. Let me consider the specific allegations made
against accused Nos.10, 11 and 26 in the final report filed by
the Investigating Officer in Crime No.486 of 2015.
136. Accused No.10 was working as Deputy General
Manager and accused No.11 as Chief Manager in Punjab
National Bank, which is a part of consortium of banks which
lent the loan to the informant - Company. It is alleged that
accused Nos.10 and 11 using their authority as DGM and Chief
Manager transferred huge sums of money to the account of his
son i.e., accused No.26, who started a Shell Companies or a
fictitious Companies. Even though accused No.10 had no
reasons to transfer any amount to the account of his son -
accused No.26, he in collusion with accused Nos.1, 2 and 11
forged the signatures of the informant, concocted documents
even though they were knowing that it was only the informant
who was the authorized signatory to the cheques issued on
behalf of the Company, his signatures were forged and the
cheques so presented with forged signatures were accepted by
accused Nos.10 and 11. They have also accepted RTGS forms
signed by accused Nos.1 and 2 without any objections, even
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though they were not authorized to sign the same. Even the
photostat signatures of the informant were accepted by the
Bank which clearly discloses conspiracy between the accused
interse. Accused Nos.10 and 11 said to have permitted
unauthorized foreign letters of credit and handed over the title
of goods in bill of lading to accused Nos.1 and 2, resulting in
diversion of imported materials. The accused have even
permitted drawing of supporting Bill of Lading in the name of
Trade Chartered Bank, a Shell Company of Romania. It is
further alleged that accused No.10 introduced his son - accused
No.26, for business with the informant - Company in custom
scrip with an understanding with accused No.1. Accused No.26
has received around Rs.6.26 crores in respect of custom scrips
which were never supplied or used. Thus, it is contended that
accused No.10 being DGM in collusion with accused Nos.1, 2,
11 and 26 committed fraud by increasing the drawing powers
and inflating the debtor and also by reducing the liability and
Letter of Credit.
137. Learned senior advocate submitted that as per the
charge sheet, it is alleged that accused No.11 is the Chief
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Manager of Punjab National Bank between 2011-13, he
colluded with accused No.10 to cheat the Company by
accepting Photostat signatures of the informant on RTGS forms,
accepting the signatures of accused Nos.1 and 2, who were
never authorized to sign the cheques etc., and also in the
matter of permitting unauthorized Foreign Letter of Credits and
deliberately not disclosing declaration letters, outstanding letter
of credits liability in the monthly stock and other current asset
declaration. He also deliberately refused to act on the complaint
that was filed by the informant alleging fraud committed by
accused Nos.1 and 2 much before filing the first information.
138. It is alleged that accused No.26 is the son of
accused No.10 and he found the Shell Companies viz., Shreeji
Overseas, Shreeji Enterprises and AMS Enterprises along with
his brother. These firms were established only for the purpose
of trading in scrips with the informant - Company, but later
closed down keeping the VAT collections unpaid after achieving
his objects and usurping and misappropriating the amount
belonging to the Company. It is the contention of the
prosecution that accused Nos.10 and 11 being the responsible
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officers of the Punjab National Bank permitted payments, based
on fax copy and xerox copy of the documents and thereby
transferred crores of rupees from the account of the Company,
including transfer of morethan 6 crores to the account of his
son - accused No.26.
139. It is stated that the payments made to these Shell
Companies found by accused No.26 were said to be for supply
of custom scrips, which were never used by the Company. It is
alleged that the informant is the importer of raw materials for
the manufacturing of caps, but he was never an exporter. But
accused No.26 is alleged to have managed round tripping for
the purpose of granting various financial benefits with the help
of sham and fictitious transactions. Thus, it is the allegation
made by the informant that accused No.1 being the Chief
Financial Officer, accused No.2 being the Deputy Chief Financial
Officer along with other employees who are arrayed as accused
joined hands with accused Nos.10, 11 and 26 in commission of
the offences.
140. The informant filed another complaint which was
registered in Crime No.580 of 2016 with Subramanyapura
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Police Station against accused Nos.1 to 9 alleging commission
of offences punishable under Sections 120B, 403, 408, 409,
447, 381, 420 read with Section 37 of IPC. It is stated that,
SBI being the lead bank, Punjab National Bank and Corporation
Bank and UCO Bank being part of the consortium of Banks,
involved in large scale fraud in collusion with employees of
informant Company and executives of the Bank. The genesis of
fraud was traced around April, 2014 which resulted in closing
down the business of the Company and initiation of the
proceedings under SARFAESI Act to cover up their guilt. On
the basis of first information, investigation was undertaken and
after investigation, the charge sheet came to be filed against
accused Nos.1 to 9. Now accused Nos.3, 4, 6, 7 and 8 have
approached this Court seeking quashing of the criminal
proceedings initiated against them.
141. It is stated that accused No.3 was working as
Deputy General Manager in SBI, Kumarapark who took over the
charge of the loan account pertaining to M/s Metal Closures
Private Limited i.e., informant Company during 2012 and was
supervising the said account, being the head of consortium of
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Banks. It was this accused who cleared RTGS and cheque
payments at the instance of accused Nos.1 and 2 based on
forged and photocopies of the documents to help them even
though they had no authority to deal with the financial matter
and it was only the informant who was authorized as per the
minutes of meeting of Board of Directors. It is stated that
accused No.3 was in favour of enhancement of loan at the
instance of accused Nos.1 and 2 and he played key-role in
closing down the Company by invoking SARFAESI Act, so that
the fraud committed by the Banks and others does not get
disclosed. He declared the account of the Company as NPA
against the norms set out by the Reserve Bank of India (RBI).
Accused No.3 conspired with other accused to take over illegal
physical possession of all the three factories of the informant by
invoking Section 13 (2) of SARFAESI Act and by appointing
accused No.8 as concurrent Auditor gave him the
responsibilities to cover-up the misappropriation committed in
the Bank transactions. Accused No.3 never informed the
informant - Company that its account has become NPA and that
the proceedings under SARFAESI Act is being initiated.
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142. It is stated that accused No.3 never carried out
panchanama nor took inventory of the stock even after taking
keys of the factory premises, for the purpose of taking physical
possession of the assets of the Company under Section
13(4)(a) of SARFAESI Act, which resulted in misappropriation
and criminal breach of trust. Accused No.3 helped accused No.8
to remove the Company security i.e., M/s Eagle Security and
Services by non-payment of their dues. Accused No.3 stopped
payment of salary to the son of the informant who was
introduced into the Company as per succession plan proposed
by SBI. He permitted accused Nos.1, 2 and 8 to sell stocks
worth USD 7,33,181.25/- during September 2014 to Zarhak
Steels, Mumbai and thus caused loss of over 4.50 crores to the
informant Company by misappropriation. He has also sold
machinery worth Rs.76,00,000/- for a paltry sum of
Rs.10,00,000/- to Aura Polyfex and committed
misappropriation. Accused No.3 asked accused No.8 to
undervalue the stocks in three factories while submitting his
report and managed to get such report on 27.08.2014. Accused
No.3 opened EDP room with the help of accused Nos.1, 2 and 4
and taken away the server containing valuable information and
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software only to make sure that the Company does not start its
operation once again. This was done to cover-up the fraud
committed by him. Accused No.3 with the help of accused No.8
withheld the salary of the workers in Himachal Pradesh Unit
without any authority and made the workers agitate during the
visit of strategic investor. He also refused to release payment
of Provident Fund (PF) and Employees Stage Insurance (ESI)
deducted the salary of the employees which brought criminal
action against the informant. Accused No.3 manipulated the
notice issued under Section 13(3) of SARFAESI Act, by
inserting the word 'without the Banks written consent'.
Thereby, not permitting even the regular/routine transactions
by the Company without the intervention of the concurrent
Auditor and brought closure of the Company with malafide
intention. He issued notice dated 20.02.2015 under Section
13(4) of SARFAESI Act for possession, even though the Bank
had already in physical possession on 01.08.2014 and
05.08.2014, even though no procedure was adopted for taking
such possession as prescribed under the SARFAESI Act.
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143. It is stated that with malafide intention, accused
No.3 started contending that possession taken by the Bank was
only symbolic and not physical. He managed to issue second
demand notice dated 15.09.2015 to contend that the NPA of
the account was not on 28.05.2014 as contended earlier, but it
was on 31.01.2010. Between 2010 to 2014, the Bank had paid
more than Rs.101 crores to the Banks, including interest and
instalments and inspite of that the second demand notice was
issued with malafide intention. Accused No.3 with the help of
accused Nos.1, 2 and 7 made payment of Rs.8.89 crores to
Corporation Bank, Saraki Branch, even though specific
instructions were issued to operate only through ESCROW
account and also it is the fact that Corporation Bank, Saraki
was not the member of consortium.
144. It is also contended that accused No.3 had not
given any reply to the objections raised by the informant to the
second demand notice but gone ahead to take physical
possession once again on 11.12.2015 by publishing the public
notice on the same day. Accused No.3 was not ready to have
the joint stock verification on 03.06.2016, 06.06.2016 or on
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08.06.2016 inspite of request made by the informant to confirm
the exact stocks. Accused No.3 along with accused No.4
removed the Bank security vide his letter dated 08.05.2017,
which confirms that the Bank had taken physical possession
and misappropriated the available stock by selling the
Company's machineries. This letter came after 2 years 10
months of taking physical possession as they paid security
agency charges by debiting the companies ESCROW account,
which proves Banks possession of the Units. Accused No.3
committed criminal trespass, criminal breach of trust, fraud,
theft and misappropriation of stocks, machineries and other
assets worth Rs.78.50 crores.
145. It is alleged that accused No.4 being the Chief
Manager and Authorised officer under SARFAESI Act in Stressed
Assets Management Branch, St. Marks Road, Bangalore, took
over the charge of Metal Closures account on 03.12.2014 and
he was hand in glove with accused No.3 and he never carried
out the procedure for drawing panchanama and taking
inventory for physical possession of the Units under Section 13
(4)(a) of SARFAESI Act and committed criminal breach of trust
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and permitted misappropriation of movable assets of the
Company. Accused No.4 in collusion with accused Nos.1 to 3
illegally trespassed over EDP room, took over the server with
tally software for manipulation of the accounts to make sure
that the Company do not restart its operation. Accused No.4
had never taken physical possession of the Unit on 20.02.2015
as provided under Section 13(4) of SARFAESI Act, as it was
already in physical possession of the Unit on 01.08.2014 and
05.08.2014. Accused Nos.3 and 4 have refused to lodge police
complaint inspite of the request made by the informant
regarding theft of movables and machineries and also the
stock. Accused No.4 tried to sell the Company's machineries to
M/s Shetron Metals and M/s Messelly. Accused No.4 withdrawn
the physical possession that was taken by the Bank on
20.02.2015 by issuing public notice on 07.07.2015 without
assigning any reason. This act of accused No.4 is irresponsible
and illegal. Inspite of withdrawal of taking possession, he had
not restored the Company with its physical possession by
conducting a mahazar. Accused No.4 in collusion with accused
No.3 and other accused is guilty of malafide actions. Accused
No.4 joined hands with accused No.3 in issuing second demand
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notice to mislead the Company and to make unauthorised
payments of over 101.14 crores to other Banks.
146. It is stated that no joint verification was held
inspite of repeated demands made by the informant. Accused
No.4 in collusion with accused No.3 removed the bank security,
taken physical possession and misappropriated the stocks and
the machineries. Accused Nos.3 and 4 gave the letter for
having taken possession during the first week of August 2014
i.e., about 2 years 10 months after taking physical possession.
Accused No.4 paid security agency charges by debiting
companies ESCROW account, which proves its possession.
Accused No.4 is responsible for criminal trespass, criminal
breach of trust, theft, fraud, misappropriation of stocks and
other assets worth Rs.78.50 crores.
147. It is stated that accused No.6 was the Chief
Manager in Punjab National Bank, MG Road Branch, who took
over the charge of Metal Closures Account and was supervising
the accounts through accused Nos.3, 4 and 7. He cleared RTGS
and cheque payment based on photocopies to help accused
Nos.1 and 2. Accused No.6 also helped accused Nos.3 and 4 in
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taking physical possession of the factory. Accused No.6 along
with accused No.7 tried to sell Company's machinery by
publishing e-sale notification, which proves Bank's physical
possession of the Units. Thus, he is responsible for criminal
trespass, criminal breach of trust, theft fraud and
misappropriation of stock and other assets worth Rs.78.50
crores.
148. It is stated that accused No.7 being the Deputy
General Manager (DGM) of Punjab National Bank, MG Road
Bank, took over the charge of Metal Closures Account during
May 2014. He was supervising the accounts of the Company
alongwith accused Nos.3 and 6. He cleared RTGS and cheque
payments based on the photocopies to help accused Nos.1 and
2. He helped accused Nos.3 and 4 in taking physical possession
of the factory along with accused No.6. Accused No.7 tried to
sell Company's machineries by publishing e-sale notification
which proves the physical possession of the Bank over the
factory. Thus, this petitioner has also committed criminal
trespass, criminal breach of trust, theft, fraud, misappropriation
of stock and other materials worth Rs.78.50 crores.
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149. It is stated that accused No.8 being the Chartered
accountant was the partner in M/s Shankaran and Krishnan,
Chartered Accountants, who was appointed as Stock and
Concurrent Auditor for Metal Closures Company by SBI. He had
undertaken the administrative job of the Company as per the
instructions of the Bank. On 01.08.2014, knowing fully well
that the management of the Company was not taken-over by
the Bank under Section 13(4) of SARFAESI Act, he helped other
accused with criminal conspiracy to take over the physical
possession and administrative charges of factory illegally and
with malafide intention. On 01.08.2014, as they managed to
appoint concurrent Auditor with special responsibilities, he
looted an amount of Rs.8.89 crores through Corporation Bank,
Saraki Branch, with the help of accused Nos.1 to 3. Even
though there was instruction to operate only through ESCROW
account, and even though the Corporation Bank, Saraki Branch
was not the member of Consortium, accused No.8 along with
other accused sold the stock worth USD 7,33,181.25/-
equivalent to 4.50 crores to Zarhac Steels, Mumbai from
Chennai port by photocopying the signatures of the informant
in the letters issued to the customs authorities and shipping
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line for giving no objection for transfer the title of goods, when
the informant was in the intensive care at St.John's Hospital,
and the Company had not received any money on the said
transaction. Thus, Company has suffered loss of about 4.50
crores. Accused No.8 approved the sale of machinery worth
Rs.76,00,000/- to Aura Polyfex for just Rs.10,00,000/- and
thereby committed misappropriation. Accused No.8 as Stock
Auditor along with other accused undervalued the value of the
stock as on 31.05.2014 and the report was submitted on
27.08.2014. He had not carried out the physical verification of
the stocks as required. Accused No.8 helped accused No.3 to
withhold the salaries of the workers in Himachal Pradesh Unit
without any administrative authority only to make the
employees refuse to work during the visit of strategic investor.
He also refused to release the payment of PF and ESI deducted
from out of their salary. Accused No.8 helped accused No.3 to
remove Bank's security agencies i.e., M/s Eagle Security and
Services by non-payment of their service charges, so that the
obstacles for selling the Company goods is removed. Therefore,
accused No.8 is responsible for criminal trespass, criminal
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breach of trust, theft and misappropriation of stock and other
assets worth Rs.78.50 crores and for cheating.
150. The Investigating Officer who investigated both the
criminal complaints filed the charge sheet first in Crime No.580
of 2016 on 05.05.2018 against accused Nos.1 to 9. Similarly,
he filed the final report in Crime No.486 of 2015 against
accused Nos.1 to 34 on 07.12.2018. It is pertinent to note that
in Crime No.486 of 2015, the State Bank of India is arrayed as
accused No.6, Punjab National Bank as accused No.9,
Corporation Bank as accused No.12, UCO Bank as accused
No.17 and Kotak as accused No.20. None of these Banks either
nationalized or private have approached this Court seeking
quashing of the criminal proceedings against them. It is also
pertinent to note that the accused in Crime No.486 of 2015 i.e.,
the Chief Finance Officer, Deputy Chief Financial officer and
other employees of the informant - Company have also not
approached the Court seeking quashing of the criminal
proceedings. But it is only the Deputy General Manager, Chief
Manager of SBI, Deputy General Manager and Chief Managers
of Punjab National Bank, the concurrent Auditor and proprietor
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of Shreeji Overseas i.e., the son of accused No.10 have
approached this Court seeking to quash the criminal
proceedings.
151. I have extracted the contentions raised by the
learned senior advocates representing each of the accused who
are seeking to quash the criminal proceedings, in detail.
Similarly, I have highlighted the contentions taken by the
learned senior advocates representing the informant and the
learned High Court Government Pleader representing the State,
in detail. On consideration of the first information filed by the
informant both in Crime No.486 of 2015 of Ashoknagar Police
Station and Crime No.580 of 2016 of Subramanyapura Police
Station in light of the final report submitted by the
Investigating Officer and the submissions made at the Bar, I
proceed to consider the merits of the petitions.
152. Admittedly, the informant was the Managing
Director of M/s Metal Closures Private Limited. He availed
various loans from State Bank of India as lead Bank, Punjab
National Bank, Corporation Bank and UCO Bank as the Banks
constituting the consortium. It is the specific contention of the
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prosecution that SARFAESI proceedings was initiated by the
Banks only for the purpose of covering their illegal acts in
collusion with one another and in active connivance of the
employees of the Company including the Chief Financial Officer.
The materials on record prima facie disclose that the Company
owned by the informant was the leader in the market at one
point of time i.e., till middle of 2014. The letter dated
10.05.2014 issued by the State Bank of India discloses that an
enhanced credit facility of Rs.10 crores towards working capital
was offered in favour of the informant. But the informant by
his letter dated 16.04.2014 had refused to take additional
credit facility. If at all, the informant had any evil idea of
misappropriating the public money, definitely he would have
accepted the offer for additional credit facility offered by State
Bank of India. Therefore, till the mid 2014, the Company of
the informant was doing good in the market.
153. It is pertinent to note that a viability study was
undertaken at the instance of Banks to know the financial
status of the Company. As per such viability study conducted
during 2013-14, the Company was performing extremely well
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and its performance was estimated at 17%, when the general
standard in the market was only 12%. It is obvious that only
after receipt of viability study report, the State Bank of India
had offered enhanced working capital of Rs.10 crores by its
letter dated 10.05.2014, which was refused by the informant.
But the very same State Bank of India issued its first
possession notice proclaiming that the loan account of the
Company has become NPA w.e.f. 28.05.2014 i.e., within 18
days from the date of its offering enhanced working capital.
154. It is strange to note that after issuing the
possession notice to treat the account of the Company as NPA
w.e.f. 28.05.2014, the legal opinion appears to have taken by
the Bank on 15.06.2015. On the basis of such legal opinion,
the action initiated treating the account of the Company as NPA
was withdrawn. Meaning thereby, the assertion of State Bank
of India that the account of the Company became NPA w.e.f.
28.05.2014 was unconditionally withdrawn based on the legal
opinion that was obtained by the Bank. Thereafter, the second
notice for possession under Section 13(2) of SARFAESI Act was
issued on 15.09.2015 declaring that the account of the
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Company became NPA wayback on 31.01.2010 i.e., about 5
years earlier to the notice. No convincing reasons are assigned
for anti-dating the date of NPA to 2010, when the materials
prima facie disclose that the Company was having sound
financial status till the mid of 2014. There is also no reason as
to why no action whatsoever was initiated by any of the Banks
to treat the account of the Company as NPA during 2010 or
2011. There is also no explanation as to why the State Bank of
India offered enhanced working capital of Rs.10 crores on
10.05.2014 when the account of the Company has already
become NPA. The account statement of the Company produced
before the Court discloses that during 2013- 14, the Company
had repaid over 100 crores to the Banks. These facts do not
reconcile with the contention taken by the Banks with regard to
the financial status of the Company to treat its account as NPA.
155. A contention was raised that there was re-
structuring of loan granted in favour of the Company. But at
the same time, it is the contention taken by the Bank that after
such re-structuring, the performance of the Company was good
which remained a leader in the market till mid of 2014.
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However, with all these facts and circumstances, the account of
the Company was treated as NPA by issuing the second notice
for possession under Section 13(2) of SARFAESI Act on
15.02.2015, anti-dating the date of NPA w.e.f. 31.01.2010.
156. It is the contention of the informant that the Banks
have taken physical possession of the Company and its
administration, while it is the contention of the Bank that it has
taken only the symbolic possession and the actual possession
remained with the informant. The materials on record disclose
that the Banks have appointed accused No.8 as the concurrent
Auditor and also appointed a security agency replacing the
Company security which was serving for morethan a decade. If
at all the Bank had taken the symbolic possession, there was
no need for the officials of the State Bank of India to hold a
banner in front of the Company office to declare that they have
taken over the possession and to take a photo of the same,
which is produced before the Court. There was also no
necessity for the Banks to appoint accused No.8 as concurrent
Auditor and to have its own security agency replacing the
Company security.
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157. A contention was taken that appointment of
accused No.8 as concurrent Auditor was with the concurrence
of the informant. At the same time, it is the contention raised
on behalf of the informant that such an Auditor was appointed
in addition to regular Auditor auditing the accounts of the
Company. Learned counsel for both the parties addressed their
arguments at length in this regard. But the fact remains that
accused No.8 was appointed as concurrent Auditor to examine
the real time financial transactions, which acts as internal
control mechanism to detect any errors or irregularities.
Accused No.8 was appointed as concurrent Auditor on
01.07.2014 who submitted his reports for the months of August
to November 2014 noting significant decline in the stocks. The
materials on record also disclose that an ESCROW account was
opened for the purpose of routing the financial transaction of
the Company. In the meantime, a forensic Auditor was also
appointed. It is strange to note that the Company was made to
seek the approval of concurrent Auditor even for payment of
petty amounts towards BESCOM bills, LIC premium etc., In
turn, the concurrent Auditor would endorse his approval for
such routine payments and such approval is required to be
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placed before the Bank for payment of the amount through
ESCROW account. It is stated that in view of these strange
system in place, even the BESCOM bills could not be paid in
time, which resulted in disconnection of electricity. I do not
find any logic in exercise of such powers by the concurrent
Auditor and prima facie it supports the contention of the
informant that the Bank has taken over the physical possession
of the Company into its fold and virtually the informant was at
the mercy of the concurrent Auditor and the Bank for making
any payments including the salaries to its employees.
158. It is also pertinent to note that the statement of
the stock for the month of May 2014 showed the value as
71.97 crores. Even though this value was declared by the
Company, the same was accepted by the Bank. However, the
report of the concurrent Auditor disclose drastic decline in the
stock for the months of August to November 2014 and during
November 2014, it was only 1.07 crores. In the meantime,
during December 2014 the Company came to a grinding halt as
it stopped its functioning. It was only thereafter, a decision
was taken during September 2015 to initiate the proceedings
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under SARFAESI Act. During 2016, it was projected as if the
informant committed fraud and even a report was submitted to
RBI on 30.05.2016. On the basis of this report, a complaint
was filed on behalf of the consortium with CBI on 16.10.2017,
but it is to be noticed that the informant had lodged his first
complaint with Ashoknagar Police Station against his employees
and the Banks making specific allegations of commission of
various offences, which was registered in Crime No.486 of 2015
on 22.07.2015.
159. It is also pertinent to note that the second
complaint came to be registered against the officials of the
Banks including the high level executives of State Bank of India
and Punjab National Bank, making specific allegations which
came to be registered with Subramanyapura Police Station in
Crime No.580 of 2016 on 23.09.2016. It is for the first time in
the complaint that was filed with CBI, the Banks asserted that
the Company became NPA in the year 2010, the loan was re-
structured on 17.02.2010, even then the loan account was
irregular and it was classified as sub-standard on 25.11.2013
by the Banks, later it was upgraded on 28.01.2014 by
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recovering the overdues fully and treating the account as
standard assets. In this background, the Bank is required to
explain the reasons for treating the Company as NPA either on
28.05.2014 or on 31.01.2010.
160. A specific contention is taken by the informant that
the concurrent Auditor was appointed on 01.08.2014 and the
security agency of the Bank had taken charge on the same day,
which led to the closure of the Company within 3 - 4 months.
It is also the specific contention taken by the informant that
during April 2015, the servers and softwares were removed
from the Company premises unauthorisedly by the Banks and
virtually the movables were stolen. It is pertinent to note here
that initially the first possession notice was issued on
20.02.2015, but the same came to be withdrawn during June
2015. This fact was published in the newspaper and the
second possession notice was issued only during December
2015. Under such circumstances, moving out of servers and
softwares from the Company premises during April 2015
assumes importance. The charge sheet witnesses depose
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about such moving out of the movables which cannot be
ignored at this stage.
161. Learned senior advocate for the informant
referring to various clauses in Master Circular contended that
the contention taken by the petitioners to treat the account of
the Company as NPA is not justified in any manner when it is
their own contention that the account of the Company was re-
structured, treated as standard asset after the Company made
the full payment of the dues. The materials on record discloses
that more than 100 crores were paid by the Company towards
the loan amount during 2013-14. As per the revised schedule,
repayment is to be commenced from April 2010 and it should
complete by the end of March 2015. It is not the contention of
the petitioners that the Company has committed default in
following the repayment schedule from April 2010 till May
2014. The viability report makes it clear that the Company was
financially viable till 10.05.2014. But suddenly it slipped into
NPA as on 28.05.2014 and as per the letter dated 15.12.2014,
the Bank has written to the concurrent Auditor that his services
are no more required as there is no activity in the Company.
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Thus, the Company was brought to a halt within a period of six
months. On consideration of these facts and circumstances,
serious doubt arises about the conduct of the bank officials in
treating the loan account NPA w.e.f. 31.01.2010 and initiating
SARFAESI proceedings five years thereafter, which is to be
considered by the Trial Court during full fledged trial.
162. Admittedly, the informant has challenged the
proceedings initiated under SARFAESI Act by approaching DRT-
I, Chennai. Even though similar contentions were raised by the
informant, the same was rejected by DRT-I justifying initiation
of SARFAESI proceedings. The DRT-I after considering all the
materials on record, referred to the minutes of meeting of
forum of joint lenders held on 22.07.2014 which was attended
by the informant as the Managing Director of the Company and
it was held that the Bank cannot be prevented from recovering
the public money as the Bank is different from its officials. It is
also observed that the management of the borrower i.e., the
informant had not kept proper vigil nor monitored the day-to-
day affairs of its finances and allowed the Chief Finance Officer
of its own Company to meddle with the funds to the detriment
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of the Company. The DRT-I also specifically noted that the role
of the lending Bank in the management of the borrower
Company is unknown in practice and the Banks have no role to
oversee the administration, management and day-to-day
affairs of its borrowers. It is held that simply because a
contention was taken that its Financial Officer resorted to
malpractices and embezzlement of funds of borrower, it will not
give rise to the informant to plead that onus to repay the debt
ceases. Such contention raised by the informant was rejected
by DRT-I. The contention of the learned senior advocate for
accused Nos.6 and 7 that since DRT-I has already considered
the contentions of the informant against the accused and has
rejected such contentions, the criminal proceedings is to be
quashed, cannot be accepted as the scope of the consideration
of the materials before the DRT-I is entirely different from the
scope of criminal proceedings, which are to be considered by
the Trial Court by conducting full-fledged trial. The DRT-I will
not go into the allegations of criminal conspiracy, fraud,
forgery, theft, cheating, misappropriation etc., But the Trial
Court is required to consider the materials on record to give a
finding in that regard.
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163. It is quite natural for the DRT-I to consider the
contentions of the informant and the Banks from the
prospective of the Bank as lenders and the informant as the
borrower who committed the default. What was paramount in
such proceedings is the interest of the Banks which deals with
public money. DRT-I is not supposed to consider the
contentions of the informant regarding commission of criminal
offences of fraud, forgery, criminal breach of trust, theft of the
movables etc., It is pertinent to note that the SARFAESI
proceedings initiated by the Banks is challenged by the
informant before this Court and got it stayed. But there is
absolutely no explanation as to why the Banks have kept quite
without seeking vacating of such stay. Similarly, it is stated
that the CBI has initiated enquiry against the informant as per
the directions of RBI and it is also stayed by this Court.
However, no steps whatsoever appears to have taken to vacate
such stay orders. If the Banks are really interested in
safeguarding its interest, definitely some measures would have
been taken to expedite the matter or alteast to vacate such
stay.
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164. The contention of learned counsel for accused
Nos.6 and 7 that the Investigating Officer has cited only the
employees of the informant - Company as witnesses to prove
the allegations also cannot be a ground to quash the criminal
proceedings, as the allegations made by the informant is of
such nature that it could only be deposed either by the
employees of informant - Company or anybody who is closely
associated with the affairs of the Company. No independent
witness or outsiders could speak about those facts. Therefore,
it is premature to form an opinion that those witnesses cited in
the chargesheet are interested witnesses.
165. Learned senior advocate for the petitioners
contended that the additional documents that are produced by
the petitioners before this Court were produced before the
Investigating Officer at the time of investigation. But none of
those documents were taken into consideration while filing the
final report. It is the partisan attitude of the Investigating
Officer which makes it clear that he was biased and filed the
final report as a spokesperson for the informant. If the
additional documents now produced before this Court are taken
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into consideration, the charge sheet could not have been filed
by the Investigating Officer. Thus, the first information and
the final report filed by the informant was in abuse of process
of law and without any basis. Prima facie, the petitioners have
discharged their duties as the responsible officers of the
Nationalized Bank. Therefore, no malafides could be attributed
to them to any extent.
166. I have carefully considered these contentions in
the light of materials that are placed before the Court. Nothing
has been placed before the Court in support of their
contentions that they have produced the documents before the
Investigating Officer for his consideration to contend that he
deliberately ignored consideration of the same. Simply because
the Investigating Officer filed the charge sheet against the
accused, he cannot be dubbed as the mouthpiece of the
informant when such final report is supported by the
statements of the witnesses as well as the documents that are
collected by the Investigating Officer. It is only after full-
fledged trial, the Trial Court will be in a position to give a
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finding as to whether the prosecution is successful in proving
the guilt of the accused or otherwise.
167. The other contention taken by the learned senior
advocate that none of the charge sheet witnesses have spoken
about custom scrips or round tripping and the same are not
having any relevance to the facts of the case could be
considered by the Trial Court after full-fledged trial. The
capacity of the Investigating Officer to understand such
practices in the business and to investigate into the same for
the purpose of filing the final report against the accused cannot
be questioned at this stage. The Investigating Officer is
required to enter the witness box to depose about the
contentions taken by the prosecution. It is at that stage, the
capacity of the Investigating Officer could be gauged by the
Trial Court.
168. It is the contention taken by the learned senior
advocate for accused Nos.10, 11 and 26 that there is absolutely
no basis for making such serious allegations against them,
when none of the charge sheet witnesses speak about the
same. The prosecution is placing reliance not only on the
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statements of the witnesses cited in the charge sheet, but also
on voluminous documents that are produced by the
Investigating Officer. The prosecution is entitled to prove its
contentions against each of the accused by examining the
witnesses who can depose about the documents on which it is
relying on. Therefore, this Court cannot jump to the conclusion
at this stage that none of the witnesses speak about the actual
acts committed by accused Nos.10, 11 and 26 and therefore,
the criminal proceedings against them is to be quashed.
169. Learned senior advocate for accused No.8
contended that Sections 381, 403, 408, 409 and 420 of IPC
could not have been invoked against accused No.8 since he is
the concurrent Auditor who was not in physical possession of
the property nor he was having access to the goods. This
contention raised by the learned senior advocate could have
been accepted under an ideal situation, when an Auditor is
appointed to audit the accounts of the Company. But the
materials placed before the Court disclose that accused No.8
who was appointed as concurrent Auditor was having control
over the entire administration of the Company. Without his
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approval, the informant being the Managing Director was not in
a position to make routine payments i.e., Electricity charges,
Insurance premiums, salary to the employees etc., Specific
instances are highlighted by the prosecution to contend that
accused No.8 being the concurrent Auditor has exceeded his
limits. The allegations against accused No.8 assumes
importance in the light of the materials that are placed before
the Court.
170. The contention taken by the learned senior
advocate for accused No.3 that when the borrower fails to pay
the installments as scheduled on three consecutive months,
such account will be treated as NPA, if accepted, it is the duty
of Banks or accused No.3 to substantiate their contentions that
the informant has committed such default in payment of
installments. The discussions held above disclose that even
when the Company was held to be highly viable and had repaid
morethan 100 crores during the financial year 2013-14 and
when the SBI offered enhanced working capital of Rs.10 crores
and the same was rejected by the informant, the account was
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treated as NPA within 18 days. The accused are required to
explain these circumstances during trial.
171. While exercising the authority either under Articles
226 and 227 of Constitution of India, or under Section 482 of
Cr.P.C., this Court cannot give a finding as to whether the
Banks have taken the physical possession of the Company or it
was only a symbolic possession as tried to be contended. Such
an opinion could be formed by the Trial Court after full-fledged
trial on the basis of oral and documentary evidence relied on by
the prosecution.
172. It is the contention of the learned senior advocate
for the accused that Section 32 of SARFAESI Act, gives
protection to the officials of the Bank, while they discharge
their duties under the provisions of the Act. Ofcourse Section
32 of SARFAESI Act extends such protection to the officials of
the Bank for anything done or omitted to be done in good faith
under the Act. The allegations made by the informant and the
materials collected by the Investigating Officer prima facie
question such good faith on the part of the accused, who are
the petitioners herein. Such prima facie materials are sufficient
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to go for a full fledged trial by the Trial Court. There cannot be
any justification for this Court to quash the criminal
proceedings ignoring such voluminous materials and serious
allegations, without affording even an opportunity to the
prosecution to put forth its contentions. When specific
allegations are made against the bank officials who are the
petitioners herein that they have accepted the forged or
photocopied signatures of the informant to transfer huge sums
of money from the account of the Company and that they have
accepted the signatures of accused Nos.1 and 2 while issuing
the cheques for transacting in crores of rupees, even though
they were not authorized in that regard, assumes importance
and the same is a matter for trial. At this stage, it cannot be
forgotten that it is the specific contention of the informant that
he is the only authorized person to sign the cheques to be
presented to the Banks for payment. It is also his contention
that accused Nos.1 and 2 in Crime No.486 of 2015 being the
Chief Financial Officer and Deputy Chief Financial Officer of the
Company managed to pass a Resolution authorizing them to
issue the cheque behind the back of the informant. Such
Resolution was said to have been accepted by the accused as
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officers of the Bank to enable accused Nos.1 and 2 to issue the
cheques for the purpose of making various payments. It is also
the contention of the informant that even though he was only
the authorized person to draw the cheques, the photocopies of
his signatures were made use by the employees of his
Company to issue the cheques, which was strangely accepted
by the Banks to clear the cheques. The signatures of the
informant which were disputed by him were referred to the
State Forensic Science Laboratory for comparison with admitted
signatures. The report of the hand writing expert is also part of
the charge sheet, according to which, the expert has given his
opinion stating that 'the person who wrote the standard
signatures did not write the questioned signatures. In view of
all these facts and circumstances, clean chit cannot be given to
the petitioners at this stage ignoring the nature of allegations
and the documents that are placed before the Court.
173. Learned senior advocate for the informant placed
reliance on the decision in M/s Transcore (supra), wherein,
the Hon'ble Apex Court held that the word possession is a
relative concept, but not an absolute concept. The dichotomy
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between symbolic and physical possession does not find place
in SARFAESI Act. Under such circumstances, the rival
contentions taken by the parties as to whether the possession
of the properties taken by the Bank was either physical or
symbolic cannot be answered at this stage. A clear opinion
could be formed in that regard on facts and circumstances of
the case after full-fledged trial.
174. Learned senior advocate for the informant placed
reliance on the decision in Umesh Kumar (supra), wherein,
the Hon'ble Apex Court held that since there were ample
materials to show case prima facie case against the accused,
the High Court has committed grave error in quashing the
entire criminal proceedings, that too, at the preliminary stage
of framing charges. Thus, it was held that the High Court
should not have appreciated the materials on record to go into
the merits of the accusations and ascertain the guilt or
innocence of the accused. But the Court is required to evaluate
the materials on record to ascertain as to whether it discloses
prima facie existence of the ingredients to constitute the
offence as alleged.
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175. Similarly, learned senior advocate for the
informant placed reliance in Saranya (supra), wherein, the
Hon'ble Apex Court deprecated the practice of holding mini trial
to appreciate the evidence on record and to the consider the
allegations on merits for the purpose of forming an opinion as
to whether the accused is likely to be convicted or not. The
settled position of law is highlighted by the Hon'ble Apex Court
that acting under Section 482 of Cr.P.C., this Court cannot
exercise the jurisdiction of an Appellate Court for the purpose
of quashing the criminal proceedings.
176. Learned senior advocate for the informant also
placed reliance on the decision in Kaptan Singh (supra),
wherein, the Hon'ble Apex Court re-iterated the settled position
of law that while exercising the power either under Articles 226
and 227 of Constitution of India or under Section 482 of Cr.P.C.
it is not required to hold a mini trial to form an opinion about
the guilt or otherwise of the accused. The Court has also made
it clear that when such a petition is filed seeking quashing of
the proceedings after filing the charge sheet, the Court is
required to consider the materials that are collected by the
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Investigating Officer during investigation. But at the same
time, it cannot exercise the power of an Appellate Court in
scrutinizing the materials. The Court has also made it clear that
if such materials produced by the Investigating Officer prima
facie disclose the commission of offences, the Magistrate will be
justified in taking cognizance and such criminal proceedings is
not liable to be quashed.
177. Learned senior advocate for the petitioners
referred to the decision of the Apex Court in Lalitha Kumari
(supra) to contend that the Investigating Officer has not carried
out any preliminary enquiry before registering the FIR. In
Lalitha Kumari (supra), the Hon'ble Apex Court has mandated
registration of FIR under Section 154 of the Code, if the
information discloses commission of cognizable offence. No
preliminary enquiry is advised when the first information
discloses the commission of such cognizable offence. It is also
held that depending upon the facts and circumstances of each
case, the Investigating Officer has to take a decision as to
whether the preliminary enquiry is to be conducted or not. The
informant has filed the first information making specific
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allegations regarding commission of cognizable offence by the
accused. Initially Crime No.486 of 2015 of Ashoknagar Police
Station was registered against the employees of the Company
as well as the Banks. The investigation in the said case was
also taken up by the Investigating Officer after finding that the
commission of cognizable offence is made out. The same
cannot be questioned at this stage when such voluminous
documents are placed by the Investigating Officer after having
full-fledged investigation.
178. Learned senior advocate for the petitioners place
reliance on the decision in Bhajan Lal (supra) in support of
their contentions, which is the off-quoted decision on the
subject relating to the exercise of extraordinary power under
Article 226 of Constitution of India and the inherent powers
under Section 482 of Cr.P.C. The Hon'ble Apex Court has
given few categories of cases by way of illustrations, where
such powers could be exercised either to prevent abuse of
process of any Court or otherwise to secure the ends of justice.
It has also held that it is not possible to lay down any precise or
clearly defined or sufficiently challenised and flexible guidelines
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or rigid formula and to give an exhaustive list of myriad kind of
cases, wherein such power could be exercised. It has held that
when the allegations made in the first information report even
if taken at its face value and accepted in its entirety, do not
prima facie constitute any offence against the accused, in such
cases, the criminal case is to be quashed. It is also held that
the un-controverted allegations made in the FIR and the
evidence collected in support of the same, do not disclose the
commission of any offence and make out a case against the
accused, it will be a fit case for quashing the proceedings. If
the allegations made in the FIR are so absurd and inherently
improbable on the basis of which no prudent man can ever
reach a just conclusion, it is held that it will be a fit case for
quashing. The Court has also held that, if it is manifestly
disclosed that with malafide or malicious intention or with
ulterior motive to wreck vengeance on the accused or to spite
personal grudge, a criminal proceedings is initiated, the same
can be a ground for quashing the proceedings.
179. Learned senior advocate appearing for the
petitioners placed heavy reliance on Priyanka Srivastava
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(supra) to contend that the Hon'ble Apex Court has came down
heavily for entertaining such criminal complaints against the
Bank and its officers for having invoked the provisions of
SARFAESI Act against the defaulters, which would amount to
arm twisting tactics, that is being adopted by unscrupulous
borrowers. In the said case, the Hon'ble Apex Court noticed
that the complainant had borrowed the amount from PNB
Housing Finance Limited. The loan was classified as non
performing asset, the Bank has initiated proceedings under
SARFAESI Act. Thereafter, the borrower filed the private
complaint alleging commission of the offences under Sections
163(1) and 506 of IPC. The learned Magistrate dismissed the
private complaint. When the said order was challenged before
the First Appellate Court, the matter was remanded back to the
learned Magistrate for reconsideration. Pursuant to the same,
summons was issued to the accused and in the meantime, the
criminal proceedings was quashed by the High Court, acting
under Section 482 of Cr.P.C. When the same was challenged
before the Hon'ble Apex Court, it has formed an opinion that
unscrupulous complainants are filing complaints without any
accountability, since no affidavits were being sworn supporting
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the allegations made in the private complaint. To curb such
practices, filing of the affidavit by the complainant was
mandated which will check casual filing of the complaints or
swearing false affidavits as the same would result in initiation
of criminal prosecution. The Hon'ble Apex Court has also
observed that the respondent therein had mastered how to
create the sense of fear in the mind of the officials compelling
them to face criminal cases. In the said case, even after the
High Court quashing the earlier proceedings, again another
application came to be filed under Section 163 of Cr.P.C.
alleging criminal conspiracy, forgery etc., which resulted in
registration of the FIR for the offences under Sections 465,
467, 468, 471, 386, 506, 120B read with Section 34 of IPC.
Not being satisfied with the same, yet another complaint came
to be filed under Section 156(3) of Cr.P.C. alleging that there
was undervaluation of the property and the third FIR came to
be registered in that regard. By registering such multiple
complaints, the complainant therein compelled the officials to
enter into a one time settlement. Under these circumstances,
the Hon'ble Apex Court observed that if the borrower is allowed
to take recourse to criminal law in the manner it has been
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taken in the said case, it would effect the marrows of economic
health of the nation. It was noticed that the statutory remedies
have cleverly been bypassed and prosecution route has been
undertaken for instilling fear amongst the individual authorities
compelling them to concede to the request for such one time
settlement, which the financial institution would not have
acceded otherwise. It was also noticed that despite agreeing
for withdrawal of the complaints, no steps were taken in that
regard. On the other hand, complaints were being prosecuted
with sadistic attitude. Under these circumstances, the Hon'ble
Apex Court held that whenever such a complaint is filed, only
with an intention to intimidate the bank officials from initiating
action under SARFAESI Act, such attitude is to be nipped in the
bud. The facts and circumstances of the present case are
entirely different as discussed above. Prima facie, I do not find
any reason to form an opinion that the informant has filed the
complaint with such malafide intention. On the other hand, the
discussions held above disclose that there are prima facie
materials to constitute the offence, which is sufficient to go for
trial.
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180. Learned counsel for the petitioners placed reliance
ion the decision in K Virupaksha (supra) to contend that
registration of criminal complaint and continuation of criminal
proceedings against the petitioners would amount to reviewing
the jurisdiction of DRT and competent Courts under SARFAESI
Act. I have considered the decision of the Hon'ble Apex Court in
light of the facts and circumstances of the present case. In the
case before the Hon'ble Apex Court, the borrower against
whom SARFAESI proceedings were initiated filed the criminal
complaint alleging cheating, fraud, conspiracy, criminal breach
of trust etc., against the officials of the Bank. It was found that
the Bank auctioned the secured assets under SARFAESI Act.
The same was challenged by the borrower both before DRT as
well as by preferring writ petitions. After he was unsuccessful
in both the forums, he filed the criminal complaint alleging
undervaluation of his properties in collusion with one another.
Under such circumstances, the Hon'ble Apex court held that
SARFAESI Act is a complete code in itself. The remedies are
made available under it and no criminality could be attributable
to the officials of the Bank in initiating the proceedings under
SARFAESI Act, in accordance with law. The facts in the present
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case are entirely different. The informant has not raised any
objection regarding initiation of proceedings under SARFAESI
Act in the criminal proceedings, but his grievance is with regard
to commission of criminal acts of fraud, forgery, concoction of
documents, acceptance of his Photostat signatures on the
cheques to enable accused Nos.1 and 2 to transfer crores of
rupees, taking control over the affairs of the Company under
the guise of appointing concurrent Auditor and separate
security agency to enable the bank officials and the employees
of the Company in committing theft of servers, computers etc.,
Neither the DRT nor this Court under SARFAESI Act can
consider such allegations which are basically criminal in nature.
When prima facie materials are placed to accept the contention
taken by the complainant, the decision in K Virupaksha
(supra) cannot be made applicable to the present case.
181. Learned counsel for the petitioners placed reliance
on the decision in HDFC Bank Ltd., (supra) to contend that
the SBI is a juristic person and no mensrea could be attributed
against it. The Hon'ble Apex Court found that reading of FIR
and the complaint at its face value did not make out any prima
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facie case to constitute an offence to show that the Bank or its
officials had any dishonest intention to induce or deceive the
complainant or any other person to deliver the property or to
show that there was mensrea existing at the time of such
delivery of property. When no prima facie materials were
placed to attract the ingredients of Section 420 of IPC, the
Court held that the criminal proceedings is an abuse of process
of Court. When on the basis of the first information, a detailed
investigation was undertaken, final report was filed making
specific allegation against each of the petitioners which are
supported by prima facie materials, it cannot be said that
initiation of criminal proceedings is an abuse of process of
Court.
182. Learned counsel for the petitioners placed reliance
of Manoj Kumar Sharma (supra) to contend that there is
delay in lodging the FIR which result in embellishment which is
a feature of an after thought. It lacks spontaneity and there is
danger of introduction of colored or exaggerated version. The
Hon'ble Apex Court on considering the materials on record
found that an FIR came to be registered in the year 2005 for
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the offence punishable under Sections 304B, 498A read with 34
of IPC after long lapse of five years, when the deceased wife
had committed suicide in the year 1999. On facts and
circumstances of the case, the Court held that the complainant
tried to rope in the accused in the criminal proceedings by
making wreckless and baseless allegations. The facts and
circumstances of the present case is entirely different. The
informant has explained the delay in filing the complaints
against his employees and the Banks. Initially he filed the
complaint registered in Crime No.486 of 2015 against his
employees and the Banks. In the said complaint, he expressed
his doubt that the officials of the Bank might have hand in
glove with the employees of the Company. Subsequently, he
filed the complaint against the high level officials of the Bank
who are the petitioners herein which was registered in Crime
No.580 of 2016 of Surbamanyapura Police Station. The
allegations are not vague or bald. But it is clear and specific.
Moreover, the investigation is completed and the voluminous
materials are available to crosscheck such allegations, which
constitute prima facie case, which are sufficient to go for trial.
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183. Learned counsel for the petitioners has relied on
the decision in Mukesh (supra) to contend that the petitioners
can rely on the documents which are not part of the charge
sheet, unlike the accused is barred on relying on such
documents while seeking discharge. The Hon'ble Apex Court
has re-iterated the position of law that the proceedings either
under Section 482 of Cr.P.C or under Article 226 of Constitution
of India are wider in its scope as the challenge will be on the
ground of abuse of process of law, unlike, the proceedings
before the Sessions Courts seeking discharge. There cannot be
any quarrel with regard to this settled position of law. But the
question here is whether the petitioners who place reliance on
various documents in support of their contentions could
convince the Court to arrive at a conclusion that no prima facie
case is made out to go for a trial or to form an opinion that all
such exercises made by the informant and the Investigating
Officer is only a arm twisting efforts to make the bank officials
to agree for the terms. On consideration of the voluminous
documents that are produced by each of the petitioners at
different stages, till conclusion of the arguments, it cannot be
held that the allegations made by the informant are either
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baseless or without merits and therefore, initiation of the
criminal proceedings is an abuse of process of Court.
184. Learned counsel for the petitioners placed reliance
of Dinesh Kumar Mathur (supra) to contend that bald
allegations of criminal conspiracy without placing any materials
to probabalise the same even after investigation and filing of
the charge sheet cannot be a basis to proceed with the criminal
proceedings. This position of law is also very well settled. But
on the facts of the present case, it is to be re-iterated that
when the facts and circumstances of the case and the conduct
of the petitioners are sufficient to draw a prima facie inference
of commission of criminal offence including the conspiracy
amongst themselves, the decision cited is not applicable to the
case in hand.
185. Learned counsel for the petitioners placed reliance
on Salib Alias Shalu Alias Salim (supra) and Mary Angel
(supra) to contend that when frivolous and vexatious
proceedings are initiated, the Court is duty bound to consider
the materials that are placed before it carefully even by reading
in between lines and to quash the criminal proceedings to
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prevent abuse of process of law and that on being satisfied that
the criminal proceedings were initiated in abuse of process of
law, to impose a reasonable cost on the informant to make him
accountable for the baseless allegations made. The position of
law on the point is well settled and the same cannot be
disputed. But the discussions held above do not attract any of
these decisions to make it applicable in the present case.
186. The informant has filed the complaints making
specific allegations against each of the accused on the basis of
FIRs registered, the Investigating Officer has investigated both
the criminal cases in detail and filed the final report citing
several witnesses and producing voluminous documents. I do
not find any justification to hold a mini trial at this stage to
consider each and every contentions raised by the learned
senior advocates representing the petitioners and to form an
opinion to reject the contentions taken by the prosecution. It is
a matter for trial where both the parties will have opportunity
to put forth their rival contentions. The petitioners will have an
opportunity to cross examine the informant and other charge
sheet witnesses. They will also have an opportunity to produce
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the materials and to lead their evidence in support of their
defence. But it is premature to form an opinion to reject the
contentions of the prosecution out rightly. Suffice at this stage
for the Court to conclude that since there are prima facie
materials supporting the allegations made against each of the
petitioners, it is not a fit case for quashing the criminal
proceedings. Hence, I answer the above point in the negative
and proceed to pass the following:
ORDER
Writ Petition Nos.40308 and 35925 of 2018, Writ Petition
Nos.7492, 7493 and 7494 of 2019 and Criminal Petition
Nos.5157, 5159 and 6885 of 2018 are dismissed.
Sd/-
(M G UMA)
JUDGE
BGN/SPV/BH/MKM
List No.: 1 Sl No.: 24