Telangana High Court
Sukesh Gupta vs State Through Cbi on 13 August, 2024
THE HONOURABLE SMT. JUSTICE K. SUJANA
CRIMINAL PETITION No.4396 of 2023
ORDER:
This Criminal Petition is filed by the petitioner/accused No.1 (A.1) under Section 482 of the Code of Criminal Procedure, 1973 (for short 'Cr.P.C.') to quash the proceedings against him in C.C.No.7 of 2015 on the file of Principal Special Judge for CBI Cases, Hyderabad. The offences alleged against the petitioner are under Sections 120-B, 409, 420, 465, 471, 477-A of Indian Penal Code (for short 'IPC') and under Section 13 (2) r/w.13 (1) & (d) of the Prevention of Corruption Act, 1988.
2. The facts of the case are that the General Manager of the 2nd respondent-M/s.Mineral and Metal Trading Corporation (MMTC) who is the defacto complainant gave complaint alleging certain irregularities with regard to the gold transactions committed by the officials of MMTC in connivance with private persons causing wrongful loss to a tune of Rs.194.4 Crores to MMTC and alleged the following irregularities :
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"(i) That the exposure started from September 2011.
However, GM, MMTC Hyderabad, vide his message dt. 14.12.2011 informed for the first time a figure of Rs.43.44 crore as exposure on account of MBS Group. The actual position was concealed in his message since the exposure stood at Rs.72.68 crore on that date itself.
(ii) MMTC, Hyderabad did not collect the mandatory 5% extra additional security for keeping the forex open.
iii) MMTC Hyderabad continued to supply gold to M/s MBS Group against BGs and FDRs without covering the exposure by taking additional securities.
iv) Debit/credit notes of huge amounts were passed without any narration.
v) Vendor account and foreign currency loan account were falsely prepared/fudged to conceal the out standings pertaining to MBS.
vi) Laid down office procedure before issue of gold on loan, was not adhered to in majority of the cases.
vii) Bank statements giving details of buyer's credit liability and forward cover certificates from the banks were manipulated/fudged to conceal the actual liability against MBS and to get the accounts cleared by the statutory auditors on 31.03.2012.
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vill) that officials of MMTC Hyderabad were communicating in parallel with MBS for recovery of outstanding dues. A mail dated 02.02.2012 sent to MBS Jewellers enclosing there with a statement showing Rs.181.39 crore as recoverable from the party is indicative of the fact that RO Hyderabad deliberately concealed this exposure from the CO. GM, Hyderabad, and DGM (Fin.) vide their letter dt. 23.02.2012, confirmed to Corporate Office that all loan transactions are fully covered and overall exposure is to the tune of Rs.43.44 crore, thereby again concealing the actual liability.
ix) A quantity of 500 kg gold was taken from Standard Chartered Bank, London as Supplier's Credit for 90 days and it was issued to MBS Group in Jan. 2012 and was duly priced/fixed upto 31.03.2012 with value/payment dates in April 2012. This position of outstanding liability was not revealed in the books of accounts as on 31.03.2012. To offset the liability against this transaction, MMTC Hyderabad made outright gold sales to other parties and the money so collected was utilized to repay the earlier outstanding loans of MBS. For which outright gold sales, buyer's credit was taken in MMTC'S account, thereby deferring the payment obligation.
x) MMTC's own funds amounting to Rs.37 crore was utilized, source of which could not be traced. 4
xi) In April 2012, it was agreed by Corporate Office to re-commence business with M/s MBS subject to their depositing Rs. 10 crore by 24.05.2012 and Rs.5 Crore by 31.05.2012 (total cash deposit of Rs.15 crore) besides MBS depositing jewellery to cover the outstanding dues of Rs.43.44 crore. Business was to commence with infusion of fresh funds by M/s MBS Group after the deposit of Rs 10 crore which was to be adjusted against the dues. Despite these clear instructions dt 24.05.2012 of Corporate Office, MMTC Hyderabad issued 35 Kgs gold adjusting Rs.10 crore deposited towards outstanding to MBS Group on 28th and 29th May, 2012 ignoring the CO Instructions. While reporting the position as on 15.06.2012, GM Hyderabad, informed that Rs.10 crore was adjusted and the dues of MBS was reduced to Rs.33 crore. The material fact of dishonor of these cheques valuing Rs 10 crore was never reported to Corporate Office."
3. Basing on the above irregularities, the matter was investigated and charge sheet was filed for the offences under Sections under Sections 120-B, 409, 420, 465, 471, 477-A of Indian Penal Code (for short 'IPC') and under Section 13 (2) r/w.13 (1) & (d) of the Prevention of Corruption Act, 1988 and under Section 65 of the I.T.Act. After the investigation, the 1st respondent found that M/s.MBS Impex Pvt. Ltd, represented by its Managing Director Sukesh Gupta i.e., petitioner herein addressed letter dated 23.11.2005 to the General Manager, 5 MMTC, Hyderabad requesting him to register their company with MMTC for starting bullion business on loan basis under Open General Licence (OGL) Scheme.
4. Subsequently, a Memorandum of Understanding (MOU) was entered on 25.11.2005 between MMTC Limited and M/s.MBS Impex Pvt. Ltd., represented by the petitioner. According to the MOU the customer shall always keep minimum of 10% of the notional value of the gold to be lifted as margin money and shall request MMTC for fixation of the material. In view of the volatile nature and fluctuation of international prices on day-to-day basis, the customer shall always keep 110% of the notional value of the gold taken on loan from MMTC and the customer shall make additional security as and when required by MMTC without any protest. That in case customer fails to pay the value of the material lent together with interest on the due date, MMTC will immediately invoke the bank guarantee or encash the FDRs given as security without any recourse, reference or intimation to the customer and realize the proceedings thereon to make payment to the overseas supplier and the excess, if any, shall stand forfeited to MMTC and in such an event the customer will not be eligible for further gold loan from MMTC due to default. In the said MOU there is an arbitration clause 6 wherein arbitrator shall be appointed by the General Manager, Hyderabad. Based on the said MOU business was commenced with the MBS group and the gold was being issued to it against Bank guarantee. The Precious Metal Division (PMD) of MMTC deals with the Bullion Trade and the said division consists of Commodity officers and Finance Officers. During the year 2011-12 and 2012-13, accused Nos.4 to 9 worked in the said PMD division. Accused No.2 is the General Manager of MMTC Ltd., Regional Office, Hyderabad. As per the procedure for issue of gold to the party, based on the requirement of various parties, the Regional office, MMTC Ltd., places consolidated indent through Central Bullion Operation division of Corporate Office of MMTC, which in turn forward the indent to the foreign supplier for sending the material to the location. Based on the said indent of MMTC Ltd., the supplier sends gold to Hyderabad on consignment basis. Then the customer will be intimated about the approval of gold and he is asked to price the gold through CBO at which the payment is to be made by it to MMTC for arranging the delivery. After the pricing is over, the CBO informs the pricing particulars to Regional Officer, Hyderabad. Based on the pricing done, the PMD prepare a process note indicating the amount to be collected and sends to finance for verification. The finance officer of PMD will verify 7 the amount and sends back to PMD for collecting the payment from the customer. After the customer deposits money in the bank account of MMTC, the PMD Officer requests the Associate finance to verify and confirm the payment made by the customer. After confirming of receipt of payment, the note for delivery of gold is submitted to the General Manager, through DGM for approval for delivery of gold. Once approval is given by the General Manager, delivery challan is generated through Bullion Trading System by PMD Officials. After the Delivery Challan (DC) is generated, the same shall be signed by two authorized signatories of PMD and one finance officer, then DC would be sent to the custodian with a copy to the customer for arranging delivery to the authorized representative of the customer directly. On receipt of confirmation of delivery the finance officer of PMD shall prepare the invoice through BTS and send the same to the customer and obtains acknowledgement. In case of loan transactions, the strength of bank guarantee, fixed deposits and availability of securities shall be verified by both the PMD and finance officials.
5. In the present case, according to the 1st respondent, investigation revealed that while placing indent on the Central Bullion Division, New Delhi, a certificate of Bullion indent 8 clearance cum compliance report is required to be given certifying inter alia that there is no exposure on account of any customer for any bullion transaction and there is no foreign exchange exposure on any customer. But the said certificate was issued on the indent placed falsely certifying that there was no exposure on any customer though, there was exposure on account of MBS group companies by the above accused knowing fully well, in order to conceal the exposure deliberately by abusing their official position.
6. According to their investigation, they found that in many cases, the required process notes was not initiated and approval was not obtained, whereas delivery was affected without obtaining approval of competent authority adhering to the provisions of bullion drill. Further in the charge sheet it is mentioned that as per procedure the DCs should be signed by three officials i.e., two from PMD and one finance officer. The delivery challans were signed by the officials Sri K.V.Prakash, Sr. Manager, Sri A. Vijay Bhaskar, Deputy Manager, Sri A.Sarvanan, Deputy Manager from PMD and Sri K.Ravi Prasad, Senior Manager and Sri S.Prashanth, Deputy Manager. In some case, Sri Anantha Krishna, DGM Finance and Sri V. Mohan Rao, GM, had also signed the DCs and delivered the gold in violation of bullion drill procedure without 9 collecting the additional margin money as required. Once DC was issued and bullion delivered to the customer, the finance in charge of PMD is required to generate invoice though EPR system, but the same was not done in many of the cases and there was abnormal delay in generation of invoices and it is due to the fact that the forward cover on the Buyers credit availed in respect of delivery to MBS group was not taken in violation of bullion drill. As such, the liability on the bullion delivered to the customer i.e, MBS was not crystalised in the absence of forward cover. Further, the Buyers credit facility is given to the customer by MMTC on the strength of bank guarantee or fixed deposit as security. The credit facility is entered into between the Bank and MMTC at the request of customer which is for a period of 90 days from the date of Airway bill. The foreign exchange exposure in respect of Buyers credit had to be covered through forward cover. However, the customer had an option to keep it open by placing extra margin of 5% with MMTC. The charges/premium paid to the bank for taking a forward cover to hedge the foreign currency was also on account of the customer and had to be debited to their account. In case the customer opted for not covering the foreign currency exposure, through forward cover, the foreign exchange loss, if any, on the due date of the 10 Buyer's credit was to be to the account of customer and required to be debited to their account.
7. In case, FDR duration is more than 90 days i.e., beyond the maturity date of Buyers credit, the customer is required to deposit funds with MMTC, so that same amount be deposited with the bank to discharge the liability on account of Buyers credit and its maturity date.
8. The security is given in the form of BG for 110% value of the metal. On maturity of the Buyers credit, the party would repay the loan with all applicable charges and bank guarantee liabilities are discharged. According to the investigation, the credit facility was extended to MBS group of companies during the year 2011-12 in several loan transactions arranged from various banks in the name of MMTC on behalf of MBS group companies. The request for the said buyers was made in writing by MMTC through authorized signatories to the Bank. The said letters were signed by accused Nos. 2 to 5. The details of working in respect of the said buyers credit transactions of 42 value dates and losses incurred out of those transactions were to the extent of Rs.387 crores as on 31.03.2012 and on due date of maturity the amount was required to be paid by MBS group of companies in 11 order to liquidate the loans taken from the banks. The transactions of Buyer's credit are not secured by taking forward cover to bridge the risk factor against foreign exchange fluctuations. Further, the forex should not be kept open without hedging the same, whereas, the forex position was kept open at the request of accused No.1 and for keeping the forex position open, an additional amount of cash deposit of 5% of the forex rate was required to be collected, but the same was not collected in violation of bullion drill by the accused officials in connivance with accused No.1. As such, the net payable amounts to the banks exceeded compared to the securities held by MMTC against the Buyers credit transactions.
9. The repeated issue of gold without collecting the dues earlier incurred forex losses resulted in accumulation exposure on account of MBS group of companies to a tune of Rs.387.95 Crores as on 31.03.2012, for which there was only security to the extent of Rs.167 Crores in the form of bank guarantees. Thus, there was a shortage of security for the exposure of Rs.220.95 Crores.
10. In the investigation it is also revealed that fictitious entries were made in the MMTC books of account i.e., ledger of 12 MBS group. The said fictitious entries made with regard to the fake receipts from MBS jewelers to the extent of Rs.52,10,30,500/- on 31.12.2012 and another fake receipt from MBS Impex to the extent of Rs.124,98,70,000/- on 31.03.2012 amounting to Rs.177,09,00,500/- which is to be added to the recoverable amount of Rs.210,87,50,987/- from the MBS group as per the reconciliation of accounts all these credits were false credits. If this amount is added the total recoverable amount would be Rs.387.96 Crores.
11. According to the investigation of CBI against exposure on account of MBS group was about Rs.220 Crores as on 31.03.2012 which was brought forward from December, 2011 onwards. This is confirmed from the email sent on 21.12.2011 to MBS group representatives. The corporate office of MMTC was informed the exposure as Rs.43.44 Crores in December 2012. The accused No.5 was communicating periodically with the MBS group of companies informing about the outstanding/ recoverable amounts from them along with relevant calculation sheets pertaining to outstanding dues.
12. The process of concealing the actual exposure and limiting it to the under reported amount of Rs.43.44 Crores, the Buyers Credit outstanding statement issued by the State 13 Bank of India, CAG Branch, Hyderabad on 31.03.2012 was manipulated by accused No.5 by removing the figure of USD 4156448.45 for the BC due date 18.04.2012 and total figure of USD 61875153 from the original statement of SBI and the said figure was replaced with the figures of USD 2764568.45 for the due date 18.04.2012 and total figure with USD 60483273.60.
13. For the purpose of resumption of business in view of huge outstanding liability of MBS group the corporate office of MMTC has instructed the Regional office of MMTC to stop business with the MBS group and based on the proposal of MBS group for resumption of business, has put some conditions to MBS group for resumption of business. To fulfill the conditions, the MBS group of companies gave cheques, but the said cheques were returned upaid and the said fact was not brought to the notice of CO, MMTC and instead, the mail dated 28.05.2012 was sent confirming the receipt of funds though the cheques were returned unpaid on 26.05.2012. Further, an amount of Rs.10.30 Crores was received from MBS on 28.05.2012 and the same was deposited in Axis Bank and a quantity of 35 Kg gold was issued to MBS Jewellers on 28.05.2012 and 29.05.2012 vide Dcs No.32 for 10 kg, 33 for 10 kg, 35 for 5 kg and 36 for 10 kg instead of adjusting the said amount against the earlier dues in violation of the 14 corporate office, MMTC instructions and misguiding it. Though the outstanding amount was under reported as 43.44 Crores the actual exposure having known to the officials of MMTC, they have not obtained additional securities from Sukesh Gupta-accused No.1 of MBS group of Company in the form of equitable mortgage of landed property situated in Sy.No.172 of Hydernagar. The said mortgage deed clearly indicates mortgage for repayment severally of advances already made in by MBS group of companies in respect of outstanding amounts. Though the deposit of title deeds is the main issue in the mortgage of property involved, the original title deeds were not obtained from accused No.1 by the officials in furtherance of conspiracy who were signatories for mortgage deed as executant and witness respectively. The MMTC is now in possession of colour photocopy of original title deed and it is in the name of MMTC, registered in Sub-Registrar Office, Kukatpalli as revealed during the course of investigation. Further, accused No.1 was sanctioned loan under BG facility for Rs.50 Crores from Andhra Bank, Somajiguda, for which he has given Ac.5.00 situated in Hydernagar as security which was mortgaged on 26.09.2011 and the original title deeds were deposited with the said Bank. However, subsequent to the mortgage, the loan of bank guarantee was cancelled and not 15 released as the earlier consortium loan account of MBS Jewellers was found to be unsatisfactory. But, the original title deeds were not released to Sukesh Gupta, in view of the earlier outstanding of loans under consortium arrangement with a view to cover the security to the said outstanding as there is a condition memorandum of understanding that the property offered as security can be used for any credit facility of the company to the bank other than the purpose for which the security is offered. But this fact was concealed with the MMTC and mortgaged the same property and registered to MMTC.
14. The investigation further revealed that the MD of MBS group could not pay the outstanding dues payable by him to the MMTC and also in view of the findings of the three member committee inspection report in September, 2012 and the Directors inspection findings that huge amounts to the extent of Rs.181.39 Crores were outstanding than the reported exposure amount of Rs.43.44 Crores, the management of the MMTC took steps for recovery of the dues from MBS group and persuaded the MD of MBS group for making payment of the dues payable to MMTC by MBS group. As a result, memorandum of understanding was executed on 05.10.2012, which indicates that on 03.10.2012 on the invitation of MMTC the MBS group participated in the good faith negotiations in 16 which the MMTC acknowledged that the MBS group has shown its bonafide by taking on the liability of Rs.181.39 Crores, apart from interest as intimated by MMTC without prejudice which indicates that the liability was accepted by accused No.1.
15. Pursuant to the said MOU accused No.1 submitted certain original title deeds of immovable properties at Hyderabad which are in the names of his family members, post dated cheques for Rs.130 Crores, jewellery claimed to be of Rs.41.32 Crores, personal and corporate guarantees in addition to Rs.50 Lakhs amount paid by way of cheques. On 15.09.2011, Sri Suresh of MBS group has given a letter requesting to keep the forex open and the same may be finalized on the value dates. He further stated that the eventual difference shall be arranged by them on the due date at the time of repayment and requested not to adjust the differential amount from the repayment and allow the reissue of metal as usual and amounts pertaining to forex dues would be paid separately. On 14.02.2012, the accused No.1 confirmed the dues payable to MMTC arising out of the dollar rupee exchange difference and the same would be paid by them separately. The GM has addressed various letters to the MD of MBS group informing that security is falling short and 17 to provide the security to take care of volatility of dollar-rupee exchange rate. Further, there were several audits conducted during the period 2011-12 by Professional Internal Auditors, Concurrent Auditors, Statutory Auditors, but none of them ever pointed out about the actual exposure, except exposure reported by the RO, MMTC in December 2011 i.e., 43.44 Crores. It is the primary duty of any auditor to report the shortcomings and irregularities, whereas none of the said agencies have gone into the entire gamet of transactions to verify the reported exposure by RO was in order and there is more to it. They have not gone into verification of DC wise transaction and exposure relating to internal audit party has also in its quarterly audit reports state that everything is in order and no deviation was found. Similarly the statutory auditors have also not pointed out anything adverse except the already reported exposure.
16. According to respondent No.1, the role of this petitioner is that the MBS Group of Companies is consisting of MBS Jewellers Pvt. Ltd., and MBS Impex Pvt. Ltd., represented by Sri Sukesh Gupta, Managing Director has received gold from MMTC on Buyers Credit loan basis by keeping the forex position open without taking additional 5% margin money because of which MMTC suffered exposure to a tune of Rs.220 18 Crores. He has also given a letter to MMTC asking them to keep the forex open and received the gold knowingly though the outstanding dues were there in connivance with the public servants. He also gave a cheque for Rs.10 Crores for resumption of business knowingly well that there was no balance in his bank account for receiving gold. The company dues were paid by the public servants using the MMTC funds, FDRs without approval of the Corporate Office of MMTC, New Delhi.
17. The CBI also collected hard disk of the computers used by the accused were sent to CFSL for furnishing the data and reply sent along with the data submitted a CD confirmed the buyers credit outstanding and amount recoverable from MBS Group in respect of 42 value dates mentioned earlier along with summery sheet pertaining to all DCs for a total quantity of 16155 kg gold and showing the total recoverable exposure amount of Rs.215.49 Crores. Hence, filed the charge sheet showing the role of each accused.
18. The petitioner filed this petition for quashing of the proceedings against him on the ground that MMTC already filed suit for recovery of the amount alleged to be due from the petitioner. In such circumstances, it is apparent that the 19 criminal proceedings are initiated simply to short cut to other available remedies. The MMTC initiated criminal proceedings to circumvent the breach of terms of MOU from its end, upon which second arbitration notice was issued by the petitioner. The MMTC did not accept the request of petitioner for reconciliation of accounts. The reconciliation of account would bare the exact amount of losses, if any. The petitioner in the absence of reconciliation accepted to take on the alleged forex loss liability of Rs.181.39 Crores in good faith with an understanding to resume the business. The losses alleged to have been caused to MMTC was solely attributable to the officials of MMTC. The suspension of the officials of MMTC will confirm the negligence on the part of MMTC, is fastened on the petitioner. The alleged losses were caused to MMTC on account of non-monitoring of the exchange rate and non- taking of the forex cover, it is on account of negligence of MMTC in monitoring its officials, therefore, petitioner/s company suffered heavy loss. The alleged losses suffered under the Contract would trigger a commercial or civil dispute but not the criminal proceedings. There is no intention to cheat or dishonestly induce MMTC or its officials from the inception of contract.
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19. On the contrary, the buyer gave large business to MMTC resulting in huge profits, that registration of FIR itself is illegal and it is nothing but conversion of civil remedy into a criminal offence. MMTC merely to cover its lapses even post execution of MOU upon breach of terms lodged a complaint against the petitioner ignoring the MOU dated 25.11.2005 and 05.10.2012. It is settled law that a purely civil dispute arising out of contractual relationship between the parties cannot be converted into criminal offence in order to get favourable result and relied on the judgment of the Hon'ble Supreme Court in Indian Oil Corporation Vs NEPC India Limited & Others 1, wherein, the Hon'ble Supreme Court observed that any effort to settle civil disputes and claims, which do not involved any criminal offence by applying pressure through criminal prosecution should be deprecated and discouraged. The dispute between the petitioner and MMTC is purely commercial transaction to be conducted as per the terms of MOU. The liability on the part of petitioner arose only due to derivative losses resulting from the USD-Rupee exchange rate fluctuation, that too due to bullion drill. The MMTC cannot foist any provisions pertaining to fabrication of documents, manipulation of accounts and records of MMTC, on the 1 (2006) 6 SCC 736 21 contrary the officials of MMTC failed to maintain and follow the bullion drill. Further it is submitted that it is settled law that invoking provisions of criminal law to recover the amounts which a party is unable to recover by civil mode is an abuse of process of law and relied on the judgment in State of Haryana Vs Bhajan Lal2.
20. A bare perusal of the charge sheet and the charges framed against the petitioner for the offences under Section 120-B, 409, 420, 471 and 477-A of IPC have not been made out. On the contrary, these offences are foisted against the petitioner simply because he is the representative of MBS Group and relied on the judgment of the Hon'ble Supreme Court in Omkar Nath Mishra and others Vs State (NCT of Delhi) and another 3, wherein it is observed that what needs to be considered is whether there is a ground for presuming that the offence has been committed and not a ground for convicting the accused has been made out. At that stage even strong suspicion founded on material which leads the Court to form a presumptive opinion as to the existence of the factual ingredients constituting the offence alleged would justify the framing of charge against the accused in respect of the 2 AIR 1992 SC 605 3 (2008) 2 SCC 561 22 commission of that offence. Hence, prayed the Court to quash the proceedings against the petitioner in C.C.7 of 2015.
21. Heard Sri Abhinav Mukherjee, learned Senior counsel appearing for Sri Rajesh Kumar Heroor, learned counsel for the petitioner on record, Sri T.Srujan Kumar Reddy, learned Standing Counsel appearing for CBI-1st respondent and Sri Manu, learned counsel appearing for the 2nd respondent.
22. Learned counsel for the petitioner filed written arguments. Learned Standing counsel for the 1st respondent filed written arguments and also filed counter and learned counsel for the 2nd respondent also filed counter.
23. Learned counsel for petitioner in his written submissions stated that the case is of civil nature and the facts disclose no criminal offence as there is MOU between the parties and as there is also an arbitration clause in the said MOU, the matter was referred to arbitrator. The Memorandum of deposit of title deeds was executed by the petitioner in favour of 1st respondent as the original documents were to be released by Andhra Bank. There was no loan availed against these title deeds which is part and parcel of the charge sheet. Further, as the documents were not released, there was no credit facility or credit of whatsoever nature was 23 availed by the petitioner's companies against these documents. The issues in this case was also being monitored by the corporate office of the 2nd respondent, as the 2nd respondent continued to make illegal demands, they were compelled to invoke the arbitration in terms of Clause 12 of the first MOU. Further with a view to avoid arbitration to cover up their lapses, the 2nd respondent approached the purchaser companies and made a representation that it would recommence business with them, if they accept the forex loss liability of the 2nd respondent and withdraw its arbitration invocation notice. It is further stated that in the light of the good faith negotiations, the parties executed another MOU on 05.10.2012 (second MOU). The second MOU recognizes that parties had carried out business successfully for almost eight years prior to the incident without any hitch. As per the second MOU, petitioner also provided additional securities in compliance of the MOU dated 05.10.2012 of approximately Rs.600 Crores, which shows the bonafides of the purchaser companies and maintained good business relations being conscious of the reputation in society. It is further stated that in addition to additional securities the 2nd respondent was holding jewellery which they have taken from the petitioner's companies for exhibition-cum- sale basis as the 2nd respondent 24 used to conduct exhibition for sale of Jewellery in various places India. The value of the jewellery is Rs.528 Crores. As the liability is a contractual liability, therefore, no case is maintainable. As the companies are not made as accused, no vicarious liability can be fastened against the petitioner merely because he is a Director.
24. Learned counsel for the petitioner relied on the judgment of the Hon'ble Supreme Court in Sushil Sethi Vs State of Arunachal Pradesh 4, wherein it is observed that Sections 409 and 420 of I.P.C cannot be made out together as ingredients of both are different. He also relied on the judgment of Hon'ble Supreme Court in Mahindra & Mahindra Financial Services Vs Delta Classic Pvt. Ltd 5. Hence, prayed the Court to quash the proceedings against the petitioner.
25. The 1st respondent filed written submissions stating that petitioner played key role in misappropriation and the officials of MMTC criminally conspired and colluded with petitioner and other Directors of MBS for extending wrongful gains to M/s.MBS, by acting dishonestly or fraudulently, the officials have caused wrongful losses to MMTC, with criminal 4 (2020) 3 SCC 240 5 (2011) 6 Gauhati Law Reports 604 25 intent. Further, there are certain fictitious entries made in MMTC books of account i.e., ledger of MBS group. The said entries are made with regard to fake receipts of jewellery to the extent of Rs.52,10,30,500/- and another fake receipt from MBS Impex to the extent of Rs.124,98,70,000/- totaling to Rs.177,09,00,500/- to be added to the recoverable amount of Rs.210,87,50,987/-. Further, the petitioner herein admitted the said amount and the MBS Group of Companies consisting of MBS Jewellers Pvt. Ltd., and MBS Impex Pvt. Ltd., represented by the Sukesh Gupta, Managing Director, has received gold from MMTC on Buyers Credit Loan basis by keeping the forex position open without paying the additional 5% margin money because of which MMTC suffered exposure to a tune of Rs.220 Crores. He himself gave a letter to the MMTC asking them to keep the forex open and received the gold knowingly though the outstanding dues were there in connivance with the public servants. He also gave cheques for Rs.10 Crores knowing fully well that there is no bank balance and his company dues were paid by the public servants using the MMTC funds, FDRs without the approval of corporate office of MMTC, New Delhi. Though the counsel for petitioner contended that the matter is of civil nature, there exists multiple commercial transactions and the charge sheet clearly 26 establishes violations with criminal intent. The inherent power of the High Court should be used sparingly. The Court can only come to conclusion when there is manifest injustice or there would be abuse of process of Court or law, if such power is not exercised, the Court may quash the proceedings. However, in the economic offences, the Court must not only keep in view that money has been paid to the Bank, which has been defrauded, but also the Society at large. As such, prayed the Court to dismiss this criminal petition.
26. The 2nd respondent-MMTC has also filed written submissions stating that there is sufficient evidence against the accused which will establish the charges. There is prima- facie evidence disclosing commission of offence. The aspect of sufficient evidence against the petitioner has been taken into consideration by this Court in Crl.R.C.No.544 of 2018. The said Crl.R.C.No.544 of 2018 was filed by the petitioner with the same grounds for discharge and the same was dismissed by this Court. This Court has already taken into consideration the correctness and legality of the proceedings initiated by the CBI. He also relied on the judgment of the Hon'ble Supreme Court in Central Bureau of Investigation Vs Aryan Singh Etc., 6 wherein it is observed that the charges are required to be 6 AIR 2023 Supreme Court 1987 27 proved during the trial on the basis of evidence lead. The Court further observed that whether the criminal proceedings are malicious or not, is required to be considered at the conclusion of trial. At this stage, what is required to be considered is prima-facie case and the material collected during the course of investigation, which warrants the accused to be tried. He also relied on another judgment in M/s.Medchal Chemicals and Pharma Pvt. Ltd., Vs M/s.Biological E.Ltd., and others 7, wherein it is observed that complaint cannot be quashed merely on the ground that civil remedy is available and further relied on the judgment in Sesami Chemicals Pvt. Ltd., Vs State of Meghalaya 8. In similar circumstances, when the High Court quashed the FIR, the Apex Court observed that High Court erred in quashing the FIR and set-aside the orders of the High Court, when the facts are seriously in dispute, truth or otherwise of such facts can only be established by evidence at trial. In CBI Vs Ravi Shankar Srivastava IAS and another 9, it is observed that when information is lodged at the police station and an offence is registered, then the malafides of the informant would be of secondary importance. It is the material collected during the 7 AIR 2000 Supreme Court 1869 8 (2015) 3 SCC (Cri) 585 9 AIR 2006 SC 2872 28 investigation and the evidence led in Court, which decides the fate of the accused person. The allegations of malafides against the informant have no consequence and it is not a ground for quashing the proceedings. The allegations leveled against the petitioner herein constitute the offences. As such, he prayed the Court to dismiss this petition.
27. Having regard to the submissions made by the respective counsel, the allegations leveled against the petitioner is that he is the Managing Director of MBS Group and he in collusion with the officials of 2nd respondent indulged in fraud. According to the investigation made by the 1st respondent, the first allegation is that petitioner knowing fully well, mortgaged the document which is the colour photo copy of the original document. Basing on the said document, he already obtained loan in Andhra Bank and again gave such document to MMTC as security. Further, with the help of officials of MMTC without giving sufficient security he took gold from the 2nd respondent. It is the contention of respondents that petitioner is an instrumental for the alleged offences, he has also given letter to the MMTC asking them to keep forex open and the outstanding dues were paid in connivance with the public servant. Further, he also gave cheque for Rs.10 Crores knowing fully well that there is no balance in his bank 29 account. Further his company dues are paid by the public servant using MMTC funds and due to the acts of the petitioner, the 2nd respondent suffered exposure to a tune of Rs.220 Crores.
28. The contention of learned counsel for the petitioner is that the matter is civil in nature and there is MOU between the petitioner and MMTC, wherein the arbitration clause No.12 is that when disputes arose, the matter to be referred to the arbitrator, whereas, to settle the civil dispute, the 2nd respondent filed criminal case to expedite the payment from the petitioner.
29. The contention of learned counsel for the 1st and 2nd respondents is that merely there is a civil remedy the criminal case cannot be quashed as there are irregularities on the part of the petitioner and he is the instrumental for the loss caused to MMTC. While quashing the case, the Court has to see whether the averments in the charge sheet constitute offence otherwise, or whether there is any manifest irregularity. At the stage of quashing the proceedings while exercising power under Section 482 of Cr.P.C, the Court is not required to interfere with the jurisdiction of the trial court. The prosecution is required to prove charges during trial, basing on 30 the evidence lead by the investigating agency. At the stage of quashing the proceedings, this Court has very limited jurisdiction and is required to consider whether sufficient material is available to proceed further against the accused for which accused is required to be tried or not. In the present case, the charge sheet clearly shows that there are fictitious entries made in MMTC books of accounts, ledgers of MBS group and petitioner gave a cheque for Rs.10 Crores knowing fully well that there is no balance in his account and availed gold from the 2nd respondent. Further he gave letter to the MMTC to keep forex open without paying margin money of 5% which caused loss to the MMTC, shows that there are averments to constitute criminal offences.
30. It is the specific contention of learned counsel for the petitioner that the matter has to be decided by the civil Court as it is a contractual liability. In Indian Oil Corporation (referred supra), the Hon'ble Supreme Court made pertinent observations concerning the application of jurisdiction under Section 482 Cr.P.C. The principles relating to exercise of jurisdiction under Section 482 of Cr.P.C., to quash complaints and criminal proceedings have been stated and reiterated by the Hon'ble Supreme Court in several decisions. The relevant principles reads as under :
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"(i) A complaint can be quashed where the allegations made in the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out the case alleged against the accused.
For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint.
(ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable.
(iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution.
(iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence.
(v) A given set of facts may make out: (a) purely a civil wrong; or
(b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not."
31. In the above said judgment it is also observed by the Hon'ble Supreme Court that the defences that may be available to the accused have to be put forth and to be considered during the trial but not at the threshold. The relevant portion reads as under :
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"Defences that may be available, or facts/aspects when established during the trial, may lead to acquittal, are not grounds for quashing the complaint at the threshold. At this stage, we are only concerned with the question whether the averments in the complaint spell out the ingredients of a criminal offence or not.
32. Reverting to the facts of the case on hand, when there are serious allegations against the petitioner, this Court cannot go into the evidence and the possibility of proving the case in the trial Court. Further as seen from the record, petitioner filed revision against dismissal of discharge petition vide Crl.R.C.No. 544 of 2018 which was dismissed by this Court observing that the issues involved are triable issues. Further learned counsel for the petitioner relied on the judgment in International Advanced Research Centre for Powder Mettallurgy and New Materials (ARCI) and others Vs Nimra Cerglass Technics (P) Ltd. And others 10, wherein the Apex Court allowed the quash petition stating that there is no averment to show that petitioner has acted with dishonest intention to cheat the respondent, whereas in the present case, the under value bank guarantee itself shows dishonest intention of the petitioner. The judgment relied on by the 10 Criminal Appeal No.2128 of 2011 decided on 22.09.2015 33 petitioner in Vijay Kumar Ghai Vs State of West Bengal 11, is not applicable to the present case.
33. In the instant case, there are serious allegations against the petitioner as he is the instrumental for the loss caused to the 2nd respondent. The role of the petitioner is also specifically mentioned in the charge sheet and on the same grounds this Court dismissed CRL.R.C.No. 544 of 2018 filed for discharge of the petitioner, there are no grounds to quash the proceedings against the petitioner as the allegations leveled against him require trial. Hence, this Court is not inclined to quash the proceedings against the petitioner in C.C.No.7 of 2015 on the file of Principal Special Judge for CBI Cases, Hyderabad and the same is liable to be dismissed.
34. Accordingly, the Criminal Petition is dismissed. Miscellaneous applications, if any pending, shall also stand closed.
_______________ K. SUJANA, J Date:13.08.2024 Rds 11 Criminal Appeal No.463 of 2022