2021 (12) TMI 1465 - HC - Indian Laws

Fraud/cheating - Impleadment as a party - Generation of funds through forgery and criminal offences - Locus standi to be heard - HELD THAT - The applicants who have moved applications for impleadment were heard. However, it is a settled law that such persons cannot be made a party in misc. petition where the complainant seeks invoking of inherent powers of this court for directing firm investigation and for seeking supervision of a proper investigation in a case relating to fraud and cheating. The applicants although may not be necessary party but they have a right to be heard and recognizing their locus standi the counsels have been heard. In the case of MADHU LIMAYE VERSUS STATE OF MAHARASHTRA 1977 (10) TMI 111 - SUPREME COURT and in the case of SIMRANJIT SINGH MANN VERSUS UNION OF INDIA (UOI) AND ORS. 1992 (9) TMI 381 - SUPREME COURT , the principle has been recognized that even if a person may not be directly connected in a criminal case and any order passed in a criminal case affects his rights, he has a liberty to move appropriate applications for questioning the legality and validity or correctness of the order which has affected his rights. Keeping the said principle in mind, this court finds that essentially all the applicants who have been named above are those who have purchased share/shares from BSE and NSE relating to the companies which have been mentioned by the complainant in his complaint to the Investigating Officer. The shares were purchased earlier they are liable to be unfreezed. However, if the same were purchased in between and if it is found that such shares were originally purchased by way of proceeds of crime, they would be liable to be confiscated. The petitioner as well as the applicants before this court can always submit their stand before the concerned SFIO who shall look into the entire case and reach to its own independent conclusion. If it is found that the shares as purchased by the applicants are in no manner connected, the SFIO shall be free to unfreeze the shares - petition disposed off.

Summary

Issues:
- Disposal of applications under Section 482 Cr.P.C.
- Freezing and unfreezing of shares in connection with a criminal complaint.
- Request for transfer of investigation to a specialized agency.
- Jurisdiction and role of Serious Fraud Investigation Office (SFIO).
- Rights of applicants who purchased shares during the investigation.
- Consideration of evidence and involvement in proceeds of crime.
- Decision to transfer investigation to SFIO and cooperation of parties.
- Continuation of interim order until final decision by SFIO.

Analysis:
1. The judgment addressed the disposal of multiple applications under Section 482 Cr.P.C. related to a criminal complaint involving the freezing and subsequent unfreezing of shares by the Investigating Officer. The petitioner raised concerns about the accused potentially selling off shares, prompting the court to intervene.

2. The petitioner requested the transfer of the investigation to a specialized agency due to allegations of fraud and illegal activities in the share market. The court considered the involvement of specific individuals in fraudulent activities and the need for a thorough investigation by a specialized agency like SFIO.

3. The jurisdiction and role of SFIO under the Companies Act, 2013 were discussed, emphasizing its responsibility to investigate complex white-collar crimes and frauds. The court highlighted the importance of SFIO's involvement in cases involving public interest and substantial financial implications.

4. Concerns were raised regarding the rights of applicants who purchased shares during the investigation. The court recognized their right to be heard but clarified that they could not be made parties to the petition seeking supervision of the investigation.

5. The judgment emphasized the need for a detailed investigation into the alleged fraudulent activities, especially regarding the purchase of shares using proceeds of crime. The court stressed the significance of preventing any further sale of shares until a thorough investigation is completed.

6. Ultimately, the court decided to transfer the investigation to SFIO for a comprehensive examination of the case. The parties involved were directed to cooperate with SFIO, provide necessary details, and assist in the investigation process. The interim order freezing the shares was to remain in effect until SFIO made a final decision.

7. The judgment concluded by disposing of the criminal misc. petition and all pending applications, ensuring that the investigation would proceed expeditiously under the supervision of SFIO. The SFIO was granted the authority to take possession of shares if they were found to be connected to proceeds of crime.