9911796707
TMI Blog2014 (12) TMI 1307X X X X Extracts X X X X X X X X Extracts X X X X ..... abad. The Directorate of Enforcement, Government of India, registered ECIR/01/HZO/2009 on 23.01.2009 and took up investigation. Consequent to the said investigation, Directorate of Enforcement filed complaint bearing SC No. 1/2014 before the XXI Additional Metropolitan Magistrate-cum-Special Sessions Judge at Hyderabad. The Court has taken cognizance of the same by order, dated 25.2.2014. 2. The gravamen of allegations is that the then Management inflated the share price of SCSL. Sri B.Ramalinga Raju and his associates started the company by name M/s.SRSR Holdings Private Limited. All the share held by them in SCSL were sold at inflated price. SR holdings borrowed from NBFC to fund such purchase. The said loans were cleared by Sri B.Ramalinga Raju and his associates. The share proceeds were transferred to front companies, in which the family members and close associates were the Directors. An amount of Rs. 1425 crores were transferred to SCSL through front companies floated by them to SCSL between 17.11.2006 to 30.10.2008. However, Rs. 194.60 crores was returned to some of the front companies and balance of Rs. 1230.40 crores continued to subsist with SCSL. Out of this, it is alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the charge sheet filed by the CBI, it specifically alleged that on account of the illegalities committed by the then Directors of the company, company became the victim. This is also the stand of the Central Government in affidavits filed before various forums and before the CLB. Learned senior counsel further contended that the present petitioner is inducted as a consequence to steps taken by the Central Government to revive the company and on one hand the Central Government takes the stand that because of the illegalities committed by the previous management, the company suffered and in order to infuse fresh life into the company, Central Government took initiative, a wing of the Central Government prosecute the petitioner company for the illegalities committed by the previous management. Learned senior counsel therefore contended that proceedings against the company under Act, 2002 is wholly illegal and it amounts to unnecessary harassment of the company. 7. Learned senior counsel further contended that it is the consistent stand of all the Central investigating agencies that the petitioner was 'victim of crime' perpetrated by the former management, as evident from: a) Serio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on lack of knowledge. It is thus contended that the petitioner company had no knowledge of alleged transactions. 12. Alternatively it is contended by senior counsel that even assuming that petitioner company is responsible for all the illegalities committed by the management of SCSL, those alleged illegalities were committed prior to 2009. Allegation of offence of money laundering is only with respect to scheduled offence as seen from section 3 r/w Section 2(u) and (y) of ACT, 2002. Petitioner company has not committed any forgery and, therefore, said provision is not attracted insofar as the petitioner is concerned. In the charge sheet now filed the provisions which are introduced into schedule by virtue of Amendment Act 2009 are invoked and thereby the petitioner is alleged to have violated the provisions of Sections 120-B, 419, 420, 467 and 471 IPC. Section 120-B of IPC deals with criminal conspiracy, 419 deals with punishment by cheating by impersonation, 420 deals with cheating and dishonestly inducing delivery of the properties, 467 deals with forgery of valuable security/will etc and 471 deals with using as genuine a forgery document or electronic record. Except 467 IPC th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011, dated 01.04.2011 15. Sri Suresh Kumar contended that writ petition under Article 226 of the Constitution of India praying to quash proceedings pending before XXI Additional Chief Metropolitan Magistrate Court is not maintainable. Constitutional Court cannot interject conducting trial in a crime, even before trial is concluded. He further contended that petitioner has an effective and efficacious remedy under Section 482 Cr.P.C. 16. Sri Suresh Kumar further contended that, the present company is a successor company of Satyam Computer Services Limited and as a successor company, for the illegalities committed by the previous company, it is liable. The Company Court has passed orders of amalgamation on 11.06.2013 in Company Petition No.123 of 2012 and batch. While approving the scheme of amalgamation and arrangement with effect from 01.04.2011, the Court has enforced certain conditions. One of the conditions imposed is debts, liabilities, contingent liabilities, duties and obligations, which relate to the period or upto the appointed date, stands transferred and vested in Tech Mahidra Limited and all those liabilities would become the liabilities and obligations of Tech Mahind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untainted property. Hence, it cannot be contended that the petitioner no.1 is not having the knowledge about the offence of money laundering. As per the scheme of Act, 2002, a person who is not an accused for schedule offence can also be made as accused in the offence of Money Laundering. 21. He contended that as per the scheme of the Act, 2002, once a prima facie case is made, there is a presumption of guilt and it is on the accused to rebut the presumption. 22. He submits that Division Bench of this High Court upheld validity of various provisions of the act in the case of B.Rama Raju. 23. It is further contended that investigation made so far revealed huge financial illegalities committed by the then Directors of Satyam Computer Services Limited, and huge unaccounted money was brought into the company. The actions of then Directors of the company and the company attract offence of Money Laundering. For the illegalities committed by the then Directors of the company, the company is equally liable under the provision of Act, 2002 and as the successor company, in accordance with the orders passed by the Company Court, the E.D. is competent to proceed against the petitioner compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso does not dispense with the requirement of knowledge on the part of the accused. Neither the ED complaint nor the voluminous materials filed by the ED demonstrate that the petitioner had any knowledge of the alleged offence of money laundering which is an essential ingredient of Section 3 of ACT, 2002. 27. Merely because the petitioner company was used as a vehicle for committing fraud, the petitioner company cannot be arrayed as an accused in the absence of any knowledge on the part of the accused. CBI did not make the petitioner as an accused since neither the Board of Directors nor the investors were aware of the alleged fraud or the infusion of Rs. 1230 crores. The CBI also said that there were no documents or records which show that the company was aware of the infusion of Rs. 1230 crores. CBI report also accuses the former management of 'deceiving' the petitioner company. Therefore, the question of petitioner being involved in the offence does not arise. Even the SFIO report said that the petitioner company did not have any knowledge of inflow of proceeds of crime. 28. Under section 70 of Act, 2002, if the person committing an offence is a company, the company as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. Unlike other accused (like A2, A3 and A4), the ED has not accused the petitioner company of being involved in any forgery. 33. The points that arise for consideration are: I. Whether petitioner Company as a successor to SCSL is liable to be proceeded against for the alleged crimes committed by the then management of SCSL? II. Whether amended provisions of the Act, 2002 can be invoked to prosecute Petitioner Company? 34. Before discussing the points for consideration, it is necessary to deal with the objection raised by learned counsel Sri P.S.P.Suresh Kumar forcibly on maintainability of the Writ Petition on the ground that the special court is in session and petitioner has effective remedy under Cr.P.C. 35. In Rajasthan State Industrial Development and Investment Corporation and another vs. Diamond & Gem Development Corporation Limited and another [(2013) 5 SCC 470], in matters concerning the contract, Supreme Court held as under: "21. It is evident from the above that generally the Court should not exercise its writ jurisdiction to enforce the contractual obligation. The primary purpose of a writ of mandamus is to protect and establish rights and to impose a corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Registrar of Trade Marks ((1998) 8 SCC 1) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction." 37. As held by the Apex Court in R.P.Kapur v. State of Punjab [AIR 1960 SC 866] this Court can entertain Writ Petition where it is alleged that there is a legal bar against the institution or continuance of criminal proceedings. In the case on hand it is contended that the provisions of IPC invoked in the charge sheet were subsequently brought into the statute book and therefore they were not the crimes made applicable to a company under the Act,2002 when the alleged crime was committed and the company cannot be alleged to have committed offence of money laundering when the essential ingredients of Section 3 are not attracted. Thus, it cannot be said that the Writ Petition is not maintainable. Hench said objection is rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total value involved in such offences is thirty lakh rupees or more, or iii) the offences specified under Part C of the Schedule; Section 3 : Offence of money-laundering:- Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilt of offence of moneylaundering. Section 4 : Punishment for money-laundering:- whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees; Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as it for the words "which may extend to seven years", the words "which may extend to ten years" had been substituted. Section 70: Offence by companies: (1) Where a person committing a contravention of any of the provisions of this Act or of any rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the Act. 43. It is not the case of Enforcement Directorate that petitioner company had knowledge of the alleged money laundering, was indulging/involved in the offence. Petitioner company cannot be held liable for the alleged illegalities committed by persons who were at the helm of affairs of the company at the relevant time. 44. In Reliance Natural Resources Limited, Supreme Court held that personality of the company must be construed separate from the persons. The doctrine of identification of Chairman and Managing Director with the company may be applicable only in respect of small undertakings , but in case where company has a large shareholders base, one cannot make the companies' personality the same as that of the persons involved. 45. In Delhi Development Authority, even if there is any collusion between the officials of the DDA and an authority (in this case DDA), where the acts and deeds of the officials are not only beyond their authority, but are done with a mala fide intent, it may not be just and fair to bind DDA with such mala fide acts and deeds. 46. In Mr. Radha Mohan Lakhotia, the Division Bench of Bombay High Court held that, in a given case a person ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge was wrong in dismissing the action on that ground. " 48. In Sitaram Motilal Kalal vs. Santanuprasad Jaishankar Bhatt AIR 1966 SC 1697, Supreme Court held as under: "33. The law with regard to agents is the same. As was observed by Lord Atkinson in Samson v. Aitchison, 1912 AC 844 it is a matter of indifference whether a person be styled a servant or agent since it is the retention of control which makes the owner or the principal responsible. Just as the tort must be committed by a servant either under the actual control of his master or while acting in the course of his employment, the act of the agent will only make the principal liable if it is done within the scope of his authority. By a process of ratiocination, the courts have made a slight distinction by attempting to find a 'right of control' as the basis of the master's liability and have distinguished it from ' a right to control' in cases of simple agency to bring the two cases together. We find it simpler to state the law than an agent will make the principal responsible so long as the agent does the act within the scope of his authority or does so under the actual control of the principal. We do not subscribe to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original cargo. In an action for damages by the owners of the damaged cargo, the ship-owners contended that they were excepted from liability by Art. IV R. 2(q) of th e Hague Rules, because the cause of the damage arose without their actual fault or privity and 'without the fault or neglect of the agents or servants' of the shipowners. 24. Salmon L. J., speaking in a similar strain (at page 599) emphasized that the fact that the thief's employment on board presented him with the opportunity to steal does not suffice to make the shipowners liable. The conclusion drawn was: "For an employer to be liable, however, it is not enough that the employment merely afforded the servant or agent an opportunity of committing the crime. " It must be shown that the damage complained of was caused by any wrongful act of his servant or agent done within the scope or course of the servant's or agent's employment, even if the wrongful act amounted to a crime. For this proposition, Salmon, L.J. referred to Lloyd v. Grace, Smit & Co. (1912 AC 716). 25. In United Africa Company Ltd. v. Saka Owoade (1955( AC 130), the Privy Council laid down that a master is liable for his servant's fraud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Salmond's Law th of Torts, 16 Ed. Pp.474, 475. " 51. In M/s. Jiwan Dass Roshan Lal v. Karnail Singh and others [AIR 1980 P & H 167], it is held as under: "9. The solitary question that thus remains is whether Karnail Singh driver can be deemed to be acting in the course of the employment of the owners in un-authorisedly carrying the deceased Pritam Singh herein ? Acting in direct contravention of a statutory provision which is made an offence by an employee cannot be easily conceived as in the normal course of employment. No employer can be deemed or assumed to authorize the contravention of law or the commission of an offence. Assuming so entirely for the argument sake that in such a remote contingency it could only be so by an established express command by the employer and here as already noticed, there is not the least evidence to this effect. On plain principle therefore, the only answer to the question seems to be that Karnail Singh, driver, in this situation cannot even remotely be said to be acting in the course of his employment in order to make the appellant-owners vicariously liable therefore. " 52. In Maimuna Begum and others vs. Taju and others [1988 ACJ 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid judgment of this Court, the conclusion reached by the High Court that the respondent could not have the necessary mens rea is clearly erroneous. " 55. Guided by the principles in the above precedents, I consider the issue of liability of petitioner company. 56. Soon after noticing the grave illegalities in the functioning of SCSL, Government of India stepped in, took active role in inducting new Board of Directors and new investor, who brought in fresh funds for reviving and effective running of the company. All these measures were taken to bring the confidence back to the employees and shareholders of the company and to protect their interests and to ensure the confidence of investors in Indian companies. 57. Tech Mahindra is brought in as part of the scheme of amalgamation and arrangement. The scheme of amalgamation was approved by the Company Court in Company Petition Nos.123 and 192 of 2012. Tech Mahindra Limited has become the successor company to SCSL. 58. In W.P.No.37487 of 2012 while considering the validity of attachment of properties of petitioner company, in exercise of power under Section 5(1) of the Act, this Court extensively considered various aspects on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India and its specialized agencies, such as, CBI and SFIO have constantly opined that SCSL was victim of fraud played by persons in the helm of affairs and their associates and family members. In the charge sheet filed by CBI, CBI alleged that petitioner company was the victim of fraud played by the persons in the helm of affairs. This Court in C.P.No.123 of 2013, Company Appeal Nos. 4 and 5 of 2014 and W.P.No.37487 of 2012 observed that SCSL was victim of fraud played on it. Company Law Board also held that SCSL suffered huge damages due to acts of omissions and commissions by persons in the helm of affairs. 62. Ordinarily, Government of India does not interfere in matters concerning a private company. After revelation by the then Chairman of SCSL about the financial irregularities of the company and the consequent outburst of anger by investors and employees, Government of India felt that it is necessary in the larger public interest to directly involve in the affairs of SCSL. The induction of Tech Mahindra is as a result of concerted effort made by various agencies/institutions under the watchful eyes of the Government of India. It was an extraordinary situation requiring spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to SCSL. The Enforcement Directorate narrates in the complaint that the receipts into the SCSL were in the form of loans from the front companies. Thus, in the facts of this case, it cannot be ascribed to SCSL as a company about the nature of funds infused into the company. SCSL and petitioner company as successor company cannot be fastened with criminal liability for the illegalities committed by the persons who were at the helm of affairs of SCSL at the relevant time. It cannot be said that the company had knowledge of source of funds and projected the said funds as untainted. 64. The allegations would go to show that Sri B.Ramalinga Raju, B.Rama Raju and their spouses transferred 2.78 crores to M/s. SRSR Holding Private Limited. Immediately thereafter bonus shares were issued in the ratio of 1:1, thereby the share holding of M/s.SRSR Holding Private Limited was doubled to 5.56 crores. These inflated shares of SCSL were pledged with various NBFCs for loans and an amount of Rs. 2171.45 crores were raised which were given to several front companies floated by B.Ramalinga Raju and others. Rs. 1425 crores was transferred by these front companies to SCSL. However, out of this, Rs. 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in not exercising the power under Section 482 Cr.P.C. It further held that principle-1 in Bajan Lal case is attracted since on the date of offence the mobile phone was not listed as one of the prohibited articles under the Pubjab Prison Manual and, therefore, no offence was made out under Section 42 of the Act, as appellant was not a prisoner and the prison offence as defined under Section 45 of the Act was not attracted. 68. The principle of non-applicability of Penal provision from retrospective date is further extended to punishments that can be imposed by an employer of an employee in the decision of Supreme Court in State of Andhra Pradesh and others vs. Ch.Gandhi [(2013 ) 5 SCC 111] . On an extensive review of various principles laid down, the Supreme Court held that even if an amendment is made by way of substitution that substitution has no retrospective effect, even though employer has got power to amend retrospectively. 69. I n Tej Prakash Pathak and others vs. Rajasthan High Court and others [(2013) 4 SCC 540] , Supreme Court held that "Under the scheme of our Constitution an absolute and non-negotiable prohibition against retrospective law-making is made only with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the code. (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuation of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge. 75. In all the subsequent decisions, the principles laid down in Bhajan Lal were religiously fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y view is that entertaining the writ petitions against charge-sheet and considering the matter on merit in the guise of prima facie evidence to stand an accused for trial amounts to pre-trial of a criminal trial under Article 226 or 227 even before the competent Magistrate or the Sessions Court takes cognizance of the offence. Once the proceedings are entertained the further proceedings get stayed. Expeditious trial of a criminal case is the cardinal rule. ..... ..... The Commission of offence cannot be decided on affidavit evidence. The High Court has taken short course "in annihilating the still born prosecution" by going into the merits on the plea of proof of prima facie case and adverted to those facts and gave findings on merits. Grossest error of law has been committed by the High Court in making pre-trial of a criminal case in exercising its extraordinary jurisdiction under Article 226. 79. In Awadh Kishore Gupta, Supreme Court held as under: "8. .... In exercise of the powers, court would be justified to quash any proceedings if it finds that initiation/continuance of it amounts to abuse of the process of court or quashing of these proceedings would otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... listed as offences under the Act admittedly when the alleged incidents have taken place. The only provision that is invoked which was in the schedule to the Act is Section 467. The illegal activities committed by the persons in the helm of affairs cannot be attributed to petitioner company, more particularly the allegation of forgery as all those illegalities were committed by them behind the back and without the involvement of the petitioner company. Thus, if the allegations made are taken at their face value and accepted in their entirety, they do not prima facie constitute any offence or make out a case against the petitioner company. In accordance with the principles laid down by the Supreme Court in Bajan Lal, the petitioner company cannot be proceeded against under Section 3 of Act 2002. Thus, filing of complaint and taking cognizance thereof is unsustainable. 82. In view of the above findings, the writ petition is allowed. There shall be no order as to costs. 83. It is made clear the observations made and findings recorded in this writ petition are for the purpose of considering the maintainability of complaint filed by the Enforcement Directorate and taking cognizance of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
