2013 (6) TMI 147 - SC - Companies Law

Joint Venture Agreement - Appellant Chandran Ratnaswami, a Director of ORE Holdings Limited based in Mauritius entered into a Joint Venture Agreement (JVA) with C.G. Holdings Private Limited (respondent No.1 - K.C. Palanisamy's Company) and N. Athappan for constructing and developing a hotel property, shopping complex etc. owned by Cherraan Properties Limited (CPL) and Vasantha Mills Limited (VML) - ORE invested Rs.75 crores and got 45% in Cheran Enterprises Private Limited (CEPL). N. Athappan invested Rs. 4 crores and got 10%. Disputes arose between the parties when respondent No.1 alleged to have transferred shares of CPL and VML to CEPL instead of bringing money and got 45% shareholdings in CEPL. Respondent No.1 allegedly swindled the said 75 crores deposited by the appellant Company ORE and transferred the immovable assets of CPL and VML, subsidiaries of CEPL. Consequently, ORE filed Company Petition before the Company Law Board on account of alleged acts of oppression and mismanagement indulged by respondent No.1. Company Law Board by order dated 13th August, 2008 directed respondent No.1, CG Holdings and CEPL to return the investment of appellant Company ORE and Athappan with 8% interest directed that respondent K.C. Palanisamy will take control of CEPL and its subsidiaries. CLB order was also confirmed by Madras High Court on 5th August, 2011 held that both parties cannot jointly run the business and, therefore, to ensure smooth exit of ORE and Athappan, the Company Law Board passed the order - Instead of complying with the order of the CLB and Madras High Court respondent No.1 started filing several criminal complaints against the appellant, first being filed before the Economic Offences Wing (EOW), Chennai, alleging that ORE invested only Rs. 75 crores and for not bringing Rs. 300 crores in Joint Venture Company which was withdrawn by HC - second complaint before the Judicial Magistrate, Perundurai which was dismissed after examining respondent No.1 and his two witnesses - another complaint before the Judicial Magistrate, Kangeyam without disclosing the dismissal of the earlier complaint filed before the Judicial Magistrate, Perundurai which finally came to be registered as FIR No.7 of 2007 - The appellant moved the High Court for quashing the said FIR. In the said petition, the High Court, after noticing the similar complaint filed earlier by respondent No.1 in the court of Judicial Magistrate, Perundurai, finally observed that the second criminal proceeding initiated by respondent No.1 has no merit passing a stringent remark against the conduct of respondent No.1 for filing cases on the same issue. Respondent No.1 then moved the Supreme Court alleging the pendency of the protest petition and non-closure of the criminal case. The Court refused to interfere with the order but observed that if any protest petition is pending the same shall be disposed of in accordance with law - as on the report of Superintendent of Police, Tiruppur, the criminal case in FIR No.7 of 2007 was directed to be reopened for re-investigation - On this FIR, the Magistrate before whom the criminal case was pending passed various orders which were time to time challenged by the aggrieved party before the High Court and before the Supreme Court. Simultaneously, the appellant also filed counter criminal cases against the respondent which were also proceeded and are pending in those criminal courts. Held that - The dispute arising out of Joint Venture Agreement has been fully and finally settled by the Company Law Board and also the High Court and several directions were issued for compliance including the return of the amount by respondent No.1 to the appellant and to become the sole owner of those companies. Irrespective of the dispute with regard to the closure of the case, a fresh life was given to the criminal case at the instance of Superintendent of Police, who directed re-investigation and in course of the said criminal proceeding irrespective of FIR No.7/2007 the appellants were harassed and on technicalities various orders for surrender, arrest and their detention had been passed. Neither the High Court nor the Magisterial Court have ever applied their mind and considered the conduct of the respondent and continuance of criminal proceedings in respect of the disputes, which are civil in nature and finally adjudicated by the competent authority i.e. the Company Law Board and the High Court in appeal. The complainant has manipulated and misused the process of Court so as to deprive the appellants from their basic right to move free anywhere inside or outside the country.Moreover, it would be unfair if the appellants are to be tried in such criminal proceedings arising out of alleged breach of a Joint Venture Agreement specially when such disputes have been finally resolved by the Court of competent jurisdiction. Thus allowing the criminal proceedings arising out of FIR No.7 of 2007 to continue would be an abuse of the process of the Court and, therefore, for the ends of justice such proceedings ought to be quashed. Since the High Court failed to look into this aspect of the matter while passing the impugned order, the same could not be sustained in law. SLPs filed by appellant allowed and those filed by respondent dismissed.

Summary

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Orders of the Company Law Board (CLB) and subsequent appeals.
3. Multiple criminal complaints and FIRs filed by the respondent.
4. Re-investigation ordered by the Superintendent of Police.
5. Abuse of process of court and misuse of legal proceedings.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The appellant, settled in Canada, is an officer of Hamblin Watsa Investment Counsel and a Director on the Boards of various companies, including ORE Holdings Limited. A Joint Venture Agreement (JVA) was entered into by ORE, CG Holdings Private Limited, and N. Athappan for developing properties owned by Cherraan Properties Limited (CPL) and Vasantha Mills Limited (VML). ORE invested Rs. 75 crores for a 45% share in Cheran Enterprises Private Limited (CEPL), while N. Athappan invested Rs. 4 crores for a 10% share. Allegedly, CG Holdings misappropriated the Rs. 75 crores and transferred immovable assets of CPL and VML.

2. Orders of the Company Law Board (CLB) and Subsequent Appeals:
ORE filed Company Petition No. 76 of 2005 before the CLB for acts of oppression and mismanagement by CG Holdings. The CLB directed CG Holdings and CEPL to return the investments with 8% interest within a year, failing which the land of VML was to be transferred to ORE and Athappan. The High Court confirmed this order, noting that the parties could not continue the joint venture and needed a smooth exit.

3. Multiple Criminal Complaints and FIRs Filed by the Respondent:
Respondent No. 1 filed several criminal complaints and FIRs against the appellant and others, alleging fraud, cheating, and criminal conspiracy. The Economic Offences Wing (EOW) and various courts dismissed or quashed these complaints, observing that they were attempts to harass the appellant. The High Court noted that the respondent's conduct amounted to repeated harassment.

4. Re-investigation Ordered by the Superintendent of Police:
Despite the closure of the initial FIR, the Superintendent of Police, Tiruppur, ordered a re-investigation, leading to the filing of a charge-sheet and issuance of Non-Bailable Warrants (NBWs) and Look-Out Circulars against the appellant. The High Court directed the appellant to surrender and post bail, but the Supreme Court stayed the charge-sheet.

5. Abuse of Process of Court and Misuse of Legal Proceedings:
The Supreme Court noted that the respondent manipulated and misused the legal process to harass the appellant. The Court emphasized that the disputes arising from the JVA were civil in nature and had been resolved by the CLB and the High Court. The continuation of criminal proceedings was deemed an abuse of the process of the Court, and the Supreme Court quashed the proceedings arising from FIR No. 7 of 2007.

Conclusion:
The Supreme Court allowed the appeals by the appellant, quashing the criminal proceedings and emphasizing that the respondent's actions constituted an abuse of the legal process. The Court dismissed the respondent's appeals and disposed of the contempt petition without further action against the Superintendent of Police.