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TMI Blog2013 (6) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... 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alleging that ORE invested only Rs. 75 crores and for not bringing Rs. 300 crores in Joint Venture Company which was withdrawn by HC - second complaint before the Judicial Magistrate, Perundurai which was dismissed after examining respondent No.1 and his two witnesses - another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 mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreover, 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. - Civil Appeal Nos. 4540, 4537 & 4538 of 2013,Criminal Appeal Nos. 731-733, 734-735 & 736-737 of 2013 - - - Dated:- 9-5-2013 - For the Appellant : E.C. Agrawala. For the Respondent : Subramonium Prasad, M. Yogesh Kanna, A. Santha Kumaran, Ms. Sasi Kala and Senthil Jagadessan. JUDGMENT:- M.Y. Eqbal, J. - Leave granted. 2. Since common questions of law are involved, these appeals have been heard together and are being disposed of by this common judgment. However, for the sake of convenience, the factual ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under Sections 397 398 read with Section 402 and with a view to bringing to an end the grievances of CG Holdings, KCP, ORE and Athappan, the following order is passed: CEPL shall return a sum of Rs. 75 crores and Rs. 4 crores invested by ORE and Athappan respectively, together with simple interest at the rate of 8% per annum from the date of investment till the date of repayment within a period of 12 months in one or more instalments, commencing from 01.11.2008. While making the payment CEPL, CG Holdings and KCP shall ensure that at least 25% of the amount due is paid in every quarter. CEPL CG Holdings and KCP are at liberty to make use of the fixed deposit held by CEPL with the SBI, Erode Main Branch, free of any liens or encumbrances towards refund of the investments of ORE and Athappan. VML shall not alienate or sell any of its immoveable properties till full payment is made to ORE, in terms of this order. In the event of any failure to make the repayment within the specified time, CEPL CG Holdings, KCP and VML will duly convey the immovable properties of VML, namely, 17.15 acres of land in favour of ORE and 7.80 acres of land in favour of Athappan by executing and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance of the appellants/father of KCP/respondents. Both parties have made serious allegations of cheating, forgery, falsification of records, etc., against one another. Even before the arbitral Tribunal, the same allegations are made. The Honourable Supreme Court and the Madras High Court have held that the arbitration is not the appropriate forum if allegations of fraud, misappropriation and complicated facts are involved. ** ** ** 84. By a careful reading of the order of Company Law Board in C.P. Nos.65 and 76 of 2005, it is clear that the alleged breach of Clause 9.2 has been elaborately dealt with. Company Law Board dealt with not only the issues pertaining to the oppression and mismanagement of CEPL and also the larger issues arising between the parties. Only to ensure smooth exit of ORE and Athappan, the order dated 13.8.2008 came to be passed by the Company Law Board. It is pertinent to note that KCP had not challenged the said order of Company Law Board. ** ** ** 112. As pointed out earlier, several criminal cases have been filed and number of quash petitions also came to be filed. Of cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VMC situated in Coimbatore is to be transferred to ORE and Athappan in the proportion of 17.15 acres and 7.80 acres respectively. Until then VML was refrained from dealing with the property. On receipt of money, ORE and Athappan were to surrender their shares in CEPL and CEPL shall accordingly be permitted to reduce its share capital. The parties were given liberty to approach Company Law Board for limited purpose of overcoming difficulties in implementation of the said order. ** ** ** 145. As per Order of Company Law Board amount invested by ORE has to be refunded which of course, must be in accordance with applicable laws: be it compliance with FEMA or other Regulations, ORE, being a foreign investor-an entity of foreign origin, as per FEMA, cannot own immovable property in India. Compliance of FEMA or other applicable regulations cannot be bypassed. By the order dated 3.8.2009, Company Law Board modified its earlier order directing VML to execute the sale deed conveying immovable properties of 17.15 acres to the nominee of ORE and thereby modified its earlier order. The Order of the Company Law Board modifying its earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the JV company. In confirmation of the said fact the Accused No. 2, 3 and 4 and 8 while signing the JV agreement, cleverly included in the same, a model draft of the Irrevocable Corporate Guarantee Agreement to be furnished by the 7th accused in favour of the lender and even signed the said draft so as to make believe the complainant in no uncertain terms about their intention to honour their commitments. Thus, the joint venture business could commence only upon the 1st accused arranging for the syndicated credit facility of US$ 65 million, on the strength of the Corporate Guarantee to be given by the 7th accused. ** ** ** .. On the one hand the accused had miserably failed to organize the funds even after the complainant had parted with the ownership rights over valuable properties held by him through VML and CPL and on the other hand they defrauded and cheated the complainant by not organizing the promised funds, upon the receipt of which alone, the complainant would be able to commence the projects worth thousand of crores. . From the above, it is therefore evident that the consideration of entering into the JV agreement was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vable to state that the respondents have cheated and committed breach of trust, the complainant who is a former member of the Legislative assembly, a former member of the parliament and running business houses which have properties worth of the more than 100 crores of Rupees. Because, no documents were filed to show that the shares of Rs. 10/- face value of the Cheran Properties were sold in the market for Rs.60/- and the shares of Rs.10/- face value of the Vasanthi Mills were sold at Rs.105/-. It is not believable that the shares of Rs. 10/- face value was transferred to the same value of Nandakumar and paid about Rs. 22 crores as commission, as the complainant himself has admitted in the complaint that some of the respondents and the complainant have started a Joint Venture Company. The memorandum of understanding/Joint venture agreement is not submitted for the perusal of the court. In the memorandum of understanding the details to the investment of each of the parties, the shares allotted to each of them, the relief to the parties when the conditions are violated, and the court which has jurisdiction to entertain such matter. The failure to file the memorandum of understanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Contract Act or Company Law. Instead the filing of this case terming the respondents as accused the court considers that it cannot be accepted. 13. On world level, the foreign investments made in each country enhance the economy and it is a day to day commercial activities. The petitioner and the respondents and some others, with an intention to establish a joint venture company having done so, have to take steps for the developmental activities, and one party should not, with intention to wreak vengeance against the other should not, term them as accused and approach the court, and this court cannot accept it. Because, the petitioner has not handed over any property to the respondents under section 406 IPC. Hence there is no ingredient for breach of trust. In the circumstances that the respondents have arranged for 17 million American Dollars, that Chandran Ratnaswamy himself has agreed to the Rs.78 crores case in the Hon'ble High Court, Delhi that the petitioner has not mentioned in the complaint that date, time and place where he was cheated, that like wise, the Respondent cheated the petitioner and thereby he sustained loss, and that there are no ingredients for secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be pending on the file of the Judicial Magistrate, Kangayem. It is alleged that no protest petition was pending on that day. 10. Though in different context, respondent No.1, K.C. Palanisamy, filed three writ petitions against the State of Tamil Nadu, Superintendent of Police, Economic Offences Wing, Chennai, Director General of Police, State of Tamil Nadu, Union of India, Central Bureau of Investigation and Reserve Bank of India, in which respondent No.1 prayed for issuance of writ of mandamus directing the respondents in writ petitions for investigation as also for transfer of investigation and FIR making allegations against another Company, DAIL. In the said writ petitions, the contention of the writ petitioner was that he was the resident of Coimbatore and former Member of Legislative Assembly of the State of Tamil Nadu and Managing Director of the Company viz. CEPL. The said Company was formed for the purpose of sharing a Joint Venture between the CG Holdings Private Limited, ORE Holdings Limited, Mauritius and one N. Athappan. As part of the Joint Venture business CEPL looked for acquiring a Telecom Company called DAIL which was a Delhi based Company involved in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r directing the company to retransfer the money siphoned off from DAIL. ** ** ** 31. In the present case, the petitioner has filed series of Crl.Ops including the prayer which has been made in the writ petitions and they were negatived by this Court more than once. All that this Court held was that investigation should be conducted by the State Police and a report should be filed expeditiously and that has been done in this case as noted in the counter affidavit filed by the second respondent. ** ** ** 34. Therefore, in the light of the above, there is no case made out to grant any direction sought for by the petitioner either in the first writ petition or to call for a report from RBI as demanded in the second writ petition or for any direction to the Central Government to take steps to retransfer the funds siphoned off from this country. The petitioner has not made out any prima facie case for grant of any such direction and he has suppressed the information relating to winding up proceedings before the Delhi High Court. The petitioner himself is not a person above board and faced with several cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f posted the matter on 29th January, 2013. On 29th January, 2013, the High Court directed the appellant to surrender before the trial court and pray for recall of NBWs vide order passed in Criminal O.P. No. 2283 of 2013 filed by him for quashing the chargesheet i.e. CC 162 of 2012. Crl.M.P. No. 3 of 2013 was also filed in Criminal O.P. No. 2283 of 2013 alleging fraud committed by the opposite party. On the same day, Crl.M.Ps. No. 3 in Criminal O.P. No. 2166 of 2013 filed by Ramasamy Athappan N. Athappan and Criminal O.P. No.2282 of 2013 filed by Paul Rivett also came up before the High Court and they were also directed to surrender before the Judicial Magistrate No. III, Erode. Finally on 1st February, 2013 the High Court directed in respect of the appellant (petitioner in Criminal O.P. No. 2283 of 2013), Ramasamy Athappan N. Athappan (petitioners in Criminal O.P. No. 2166 of 2013) and Paul Rivett (petitioner in Criminal O.P. No. 2282 of 2013) as under: "5. Considering the submissions made by all the parties and also considering the facts and circumstances of the case, the order dated 29.01.2013 is modified as follows: "The petitioners are directed to appear befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a period of two weeks from today to comply with the following: (i) he must file an affidavit of undertaking before the court that he would not evade the due process of law and ensure his appearance as and when required; (ii) he should execute his own bond for a sum of Rs.5,00,000/- (Rupees Five Lakhs only) and two cash sureties of Rs.5,00,000/- (Rupees Five Lakhs only) each to the satisfaction of the learned Judicial Magistrate-III, Erode on the same day. ** ** ** 13. In this case, non-bailable warrant has been recalled on 04.02.2013 on the accused surrendering before the learned Magistrate. For non-compliance of the orders passed by this Court, I am inclined to pass the above order directing them to appear before the Court for the purpose of filing an affidavit and furnishing surety." 17. On 11th March, 2013, this Court granted stay of chargesheet i.e. CC 162 of 2012 by an order passed in SLP(Crl.) Nos. 1947-1948 of 2013 which have been filed by Paul Rivett, an other accused in the chargesheet CC 162 of 2012, challenging the orders dated 29th January and 1st February, 2013 respectively in Criminal O.P. No. 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this Court dated 29.01.2013 and 01.02.2013 in Crl. O.P. 2282 of 2013 and granted stay of the proceedings in CC 162 of 2013 pending on the file of Judicial Magistrate Court No.III, Erode, pending further orders. The prayer for dispensing with his appearance was not granted. The appellant thereafter filed Crl. M.P. Nos.5810 to 5812 of 2013 in SLP (Crl.) No.1924-1926 of 2013 and prayed for restraining the first respondent from leaving India, pending SLP direct the first respondent to surrender his passport before the Judicial Magistrate Court No.III, Erode No order was passed in the said petition and the matter is adjourned to 3.4.2013 before the Supreme Court for further hearing. 15. The first respondent thereafter moved this High Court to pass orders in M.P. No.2 of 2013 which was allowed by the leaned single Judge holding that since CC No.162 of 2012 is stayed by the Hon'ble Supreme Court and the NBW having been recalled, the basis of the Lookout Notice has gone." ** ** ** 18. On a perusal of the prayer made in the writ petition, it is evident that the first respondent has challenged the Look-out Notice issued on 9.1.2013 and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals arising out of S.L.P.(C) Nos. 11342-11343 of 2013 (D.No.7366/2013) have been filed challenging the order dated 26th February, 2013 in Writ Petition Nos. 2739 and 2740 of 2013. In these matters, the appellant - K.C. Palanisamy has challenged the said High Court's order by which the accused have been exempted from filing proper bail application under the Criminal Procedure Code. 22. Contempt Petition (C) No. 166 of 2013 in S.L.P.(Crl.) No. 9853 of 2010 has been filed by the applicant - Chandran Ratnaswami for wilful and deliberate violation and disobedience of order dated 22nd November, 2010 by re-opening the closed FIR No. 7 of 2007. In this contempt petition, notice has not been issued and it is a fresh one. 23. Mr. K.K. Venugopal, learned senior counsel appearing in SLP(C) No.13120 of 2013 assailed the impugned order passed by the Division Bench and also the orders passed in criminal proceedings as being illegal and wholly without jurisdiction. Learned counsel drew our attention to the entire facts of the case discussed hereinabove and submitted that respondent No.1 filed a series of complaints which have either been dismissed or quashed or stayed by the High Court or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed or quashed or stayed by the High Court and that respondent No.1 has the propensity to abuse the legal process and utilize it as a tool to wreak vengeance against others involved with the CEPL so that the appellants' Company does not pursue the Company Law Board proceedings. Learned counsel submitted that it has been the modus operandi of respondent No.1 to file false and bogus complaints and utilize the same to harass and coerce the appellant. Lastly, learned counsel submitted that the dispute raised by the respondent is purely a civil dispute but it has been given the colour of criminal act with the sole objective to implicate and detain these two appellants, who are foreigners, in criminal cases and not to allow them to travel outside India. 25. Mr. C.A. Sundaram, learned senior counsel appearing for one of the appellants contended that it is a matter of record that every single complaint filed by respondent No. 1 has been either dismissed or quashed or stayed by the High Court or this Court and respondent No. 1 has the propensity to abuse the legal process and utilize it as a tool to wreak vengeance against others involved with CEPL so that the appellant's company does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, AIR 1980 SC 326. Lastly, learned counsel submitted that when the charge-sheet makes out a case then civil liberty is not the appropriate remedy for the aggrieved person. 27. In the light of factual situation and having gone through the entire facts and the sequence of events in the criminal proceedings before the criminal courts and the orders passed time to time by such courts, the question that falls for consideration is as to whether continuance of such criminal proceedings is an abuse of the process of the Court. 28. Before we embark upon dealing with the issue posed before us, we would like to discuss the principles laid down by various courts as to when continuance of criminal proceeding will amount to abuse of process of the Court. 29. The doctrine of abuse of process of court and the remedy of refusal to allow the trial to proceed is well-established and recognized doctrine both by the English courts and courts in India. There are some established principles of law which bar the trial when there appears to be abuse of process of court. Lord Morris in the case of Connelly v. Director of Public Prosecutions, [1964] 2 All ER 401 (HL) observed: "There can be no doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the defendant cannot receive a fair trial; (b) cases where the court concludes that it would be unfair for the defendant to be tried." What is unfair and wrong will be for the court to determine on the individual facts of each case. 34. This Court in State of Karnataka v. L. Muniswamy and Others, [1977] 2 SCC 699 observed that the wholesome power under Section 482 Cr.P.C. entitles the High Court to quash a proceeding when it comes to the conclusion that allowing the proceeding to continue would be an abuse of the process of the Court or that the ends of justice require that the proceeding ought to be quashed. The High Courts have been invested with inherent powers, both in civil and criminal matters, to achieve a salutary public purpose. A court proceeding ought not to be permitted to degenerate into a weapon of harassment or persecution. The Court observed in this case that ends of justice are higher than the ends of mere law though justice must be administered according to laws made by the legislature. It was held in this case (at p.703 of SCC): "7.** ** ** In the exercise of this wholesome power, the High Court is entitled to quash a proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eance on the accused and with a view to spite him due to private and personal grudge." 36. This Court in Zandu Pharmaceutical Works Ltd. and Others v. Mohd. Sharaful Haque and Another, [2005] 1 SCC 122 observed thus: (SCC p. 128, para 8) "8. It would be an abuse of process of the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of the powers, court would be justified to quash any proceeding if it finds that initiation/continuance of it amounts to abuse of the process of court or quashing of these proceedings would otherwise serve the ends of justice. When no offence is disclosed by the complaint, the court may examine the question of fact. When a complaint is sought to be quashed, it is permissible to look into the materials to assess what the complainant has alleged and whether any offence is made out even if the allegations are accepted in toto." 37. In Indian Oil Corpn. v. NEPC India Ltd. and Others, [2006] 6 SCC 736 this Court again cautioned about a growing tendency in business circles to convert purely civil disputes into criminal cases. The Court noticed the prevalent impression that civil law remedies are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an individual for a certain period, only then the non-bailable warrants should be issued." 39. In G. Sagar Suri and Another v. State of U.P. and Others, [2000] 2 SCC 636, this Court observed that it is the duty and obligation of the criminal court to exercise a great deal of caution in issuing the process, particularly when matters are essentially of civil nature. 40. In the case of S.N. Sharma v. Bipen Kumar Tiwari and Others, AIR 1970 SC 786 (at p.789), this Court has stated thus: "7. .. It appears to us that, though the Code of Criminal Procedure gives to the police unfettered power to investigate all cases where they suspect that a cognizable offence has been committed, in appropriate cases an aggrieved person can always seek a remedy by invoking the power of the High Court under Article 226 of the Constitution under which, if the High Court could be convinced that the power of investigation has been exercised by a police officer mala fide, the High Court can always issue a writ of mandamus restraining the police officer from misusing his legal powers. The fact that the Code does not contain any other provision giving power to a Magistrate to stop investigation by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... civil dispute between the parties for which remedy lies before a civil court by filing a properly constituted suit. In our opinion, in view of these facts allowing the police investigation to continue would amount to an abuse of the process of court and to prevent the same it was just and expedient for the High Court to quash the same by exercising the powers under Section 482 CrPC which it has erroneously refused." 43. Coming back to the instant case from the affidavits filed by the parties, the facts which come into light are that the appellant-Chandran Ratnaswami settled in Canada since 1974. He is holding executive posts in various companies based in Canada and has made investment in India worth more than 1 billion USD. He is also a Director on the Board of various renowned companies including ORE Holdings Limited based in Mauritius. The said company ORE 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 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a second complaint before the Judicial Magistrate, Perundurai which was dismissed after examining respondent No.1 and his two witnesses. The respondent then filed another complaint before the Judicial Magistrate, Kangeyam without disclosing the dismissal of the earlier complaint filed before the Judicial Magistrate, Perundurai. The said complaint 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. The court further passed a stringent remark against the conduct of respondent No.1 for filing cases on the same issue. 48. Respondent No.1 then moved this Court by filing SLP(Crl.) No.9853 of 2010 alleging the pendency of the protest petition and non-closure of the criminal case. This 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. 49. Curiously enough, on the report of Supe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istrate, the respondent tried again by filing a complaint before the Judicial Magistrate, Kangayam for initiating criminal action against the appellants for the breach of contract and conspiracy. Although the FIR was registered, but a closure report as a mistake of fact was prepared. The High Court while passing the order observed that the Court would frown upon the conduct of the complainant in indulging in repeated harassment of the petitioners-appellants. 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. As noticed above, in the three writ petitions filed by respondent No.1, though not against the appellant but against the C.B.I. in respect of different transactions, the High Court dismissing all those writ petitions observed that the modus operandi of the writ petitioner (respondent No.1) was to defraud the person or entity and thereafter approac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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