Delhi High Court
Atul Goel vs Central Bureau Of Investigatoin on 3 November, 2014
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 04th September, 2014
% Date of Decision:3rdNovember, 2014
+ CRL. M.C. 1518/2014
ATUL GOEL ..... Petitioner
Through: Mr. R.K. Handoo, Advocate.
versus
CENTRAL BUREAU OF INVESTIGATION .....Respondent
Through: Mr. Narender Mann, Spl. P.P. for CBI.
CORAM:
HON'BLE MR. JUSTICE VED PRAKASH VAISH
JUDGMENT
1. The petitioner has preferred the present petition under Section
482 of Code of Criminal Procedure, 1973 (hereinafter referred to as
‗Cr.P.C.') against order dated 27.01.2014 passed by learned Special
Judge-IV, CBI (PC Act), Tis Hazari Courts, Delhi whereby order on
charge was passed and, accordingly, charges for the offence under
Sections 120B/109 IPC read with Section 13(1)(e) and 13(2) of
Prevention of Corruption Act (hereinafter referred to as ‗PC Act') were
framed.
2. Brief facts of this case as borne out from the charge sheet are
that accused Ashok Kumar, the then Deputy Commissioner, MCD,
Sadar Paharganj Zone, New Delhi during the course of his service had
amassed assets disproportionate to his known sources of income. The
accused had done so in conspiracy with other co-accused persons who
had also abetted commission of the said offence. During the check
period of 06.07.1979 till 20.09.2000, accused Ashok Kumar had
amassed disproportionate assets to the tune of Rs.2,86,99,670.60
(Rupees Two crores eighty six lakhs ninety nine thousand six hundred
seventy and sixty paise) and the percentage of disproportionate assets
was 1831.4%. The accused had purchased two flats in Delhi in the
name of his wife Smt. Maya at a cost of Rs.40,00,000/- (Rupees Forty
lakhs) as per sale deed which was grossly undervalued. As per Land &
Development Office notified rates of circular dated 16.04.1999, the
price of the aforesaid property should have been Rs.55,00,000/-
(Rupees fifty five lakhs) approximately and that Shri Ashok Kumar
had further spent Rs.10,00,000/- (Rupees Ten lakhs) on renovation.
Besides the above, the accused and his family members were alleged to
be in possession of heavy bank balances and other expensive movable
properties.
3. Subsequently FIR No.RC-52(A)-2000/ACB/D1 dated
20.07.2000 under Section 13(2) read with Section 13(1)(e) of PC Act
was registered. During investigation it was revealed that the main
accused (Ashok Kumar) has not made declaration of any movable or
immovable assets acquired by him to the departments before the check
period or at any time of joining service in MCD as AO. Hence, the
assets before the check period were taken as nil. The main accused
acquired these disproportionate assets after entering into a criminal
conspiracy with his wife Maya Devi, Ajay Gupta, Director of M/s.
Sybron Leasing, Atul Goyal partner at M/s. Pace Financial Services
Ltd. and Subhash Gupta, who helped him by giving him unsecured
loans and also creating false income from investments in share
business in the name of his wife and children. It was revealed that the
main accused had a total income of Rs.10,31,771/- (Rupees Ten lakhs
thirty one thousand seven hundred seventy one) for the check period
under consideration in view of the services rendered by him in the
capacity of a public servant while serving in MCD. The chain of
events leading upto the aforementioned FIR commenced with the wife
of the main accused Smt. Maya Devi purchasing a property bearing
No.E4/10, Model Town measuring 257 sq. yds. on 16.01.1987 for
Rs.4,80,000/- (Rupees Four lakhs eighty thousand) on which stamp
duty of Rs.38,400/- (Rupees Thirty eight thousand four hundred) was
paid. This was sold to Ms. Amarjeet Kaur through a property dealer
Rajeev Verma for Rs.9,45,000/- (Nine lakhs forty five thousand) vide
three sale deeds dated 09.03.2000. Smt. Maya Devi gained a profit of
Rs.4,26,000/- (Rupees Four lakhs twenty six thousand) in the whole
transaction. Further investigation revealed that Ashok Kumar obtained
a loan of Rs.52,800/- (Rupees Fifty two thousand eight hundred) from
his Department MCD for purchase of a second hand Fiat Car, which
was included in his loan income. The actual cost of the car as revealed
during investigation was Rs.55,000/- (Rupees Fifty five thousand) and
was included in the assets of the accused.
4. The main accused had also taken loans from his relatives
including his mother, brother-in-law and brother worth Rs.3,50,000/-
(Rupees Three lakhs fifty thousand). These people were financially
incapable to forward such huge personal loans and therefore this
amount was held as disputed. In addition to this accused also claimed
loans of Rs.43,00,000/- (Rupees Forty three lakhs) from other persons
namely Subhash Gupta and Ajay Gupta. Out of this Subhash Gupta
paid Rs.10,00,000/- (Rupees Ten lakhs) whose total salary from all
sources worked out to be Rs.40,000/- (Rupees Forty thousand). Even
though no agreement regarding grant of loan existed between Smt.
Maya Devi and Subhash Gupta, it was revealed that on 05.07.1999
cash was credited into his account in two instalments of Rs.5,00,000/-
(Rupees Five lakhs) each, i.e. immediately prior to issue of cheque to
Maya Devi regarding grant of loan for Rs.10,00,000/- (Rupees Ten
lakhs) on 07.07.1999. The other loan paid by Ajay Gupta was for
Rs.33,00,000/- (Rupees Thirty three lakhs) who was the Director of
Sybron Leasing Pvt. Ltd. Company. During investigation, it was
revealed that whenever they forwarded the loan to her (i.e. through six
cheques) immediately prior to that cash was also deposited in the
current account of M/s. Sybron Leasing Company with State Bank of
Patiala, Model Basti, New Delhi, in Account No.3543. No terms and
conditions and no guarantee was taken from the accused and his family
for these loans as well. No interest was also paid on the said amount
and even the principal amount was not returned.
5. CBI could not confirm the claim of Ashok Kumar regarding
tuition income of Rs.64,000/- (Rupees Sixty four thousand) for the
assessment year 1999-2000 and hence the benefit has not been given to
the accused.
6. In addition to the above, Smt. Maya Devi, Abhishek and
Sanajana have claimed income of Rs.38,58,760.70 paise (Rupees
Thirty eight lakhs fifty eight thousand seven hundred sixty and seventy
paise) from share business. The aforesaid three persons invested a total
amount of Rs.1,00,000/- (Rupees One lakh) (Rs.40,000/- + Rs.30,000/-
+ Rs.30,000/-) on 08.01.1999, 22.01.1999 and 22.01.1999 respectively
in share business through the concern of the petitioner and earned
profits of Rs.37,58,760/- (Rupees Thirty seven lakhs fifty eight
thousand seven hundred sixty) within a period of two and a half years.
The present petitioner as proprietor of M/s Pace Financial Services
Ltd., in the business of sale and purchase of shares, was buying and
selling shares for these three persons on the instructions of one Ashok
Kumar, an employee of Shri Dinesh Garg, who was their chartered
accountant and that the proceeds of the share transactions conducted in
a period of two and a half years were paid to the these investors in the
form of 13 cheques drawn on Citibank. These share transactions were
verified with National Stock Exchange which has revealed that these
transactions had taken place in the client code of CVS 01 owned by
Mr. Vijay Sachdeva. Purchase of shares of the value of Rs.6,00,000/-
(Rupees Six lakhs) to Rs.8,00,000/- (Rupees Eight lakhs) was made by
M/s. PFS on behalf of these three persons when there was no amount
due in their account. The present petitioner was making investment on
behalf of the investors, which was not permitted as per SEBI rules. No
contract was executed between M/s PFS and these three persons.
Furthermore, many of the scripts held by the aforementioned persons
were on D-mat and no D-mat account in respect of any of these three
persons was ever opened.
7. Thereafter, property bearing no. 5/12 Roop Nagar, Delhi worth
Rs.2,34,66,100/- (Rupees Two crores thirty four lakhs sixty six
thousand one hundred) was purchased by Smt. Maya Devi on
20.04.2000 for Rs.40,00,000/- (Rupees Forty lakhs). Again, properties
No.106, 107 Aurobindo Place, Hauz Khas, New Delhi were purchased
for Rs.32,00,000/- (Rupees Thirty two lakhs) by Smt. Maya Devi
which was of the value of more than Rs.1,00,00,000/- (Rupees One
crore). The main accused (Ashok Kumar) also purchased property
bearing Plot No.175, Pocket-17, Block-4, Sector-8, Rohini, Delhi
measuring 60 square yards for Rs.12,200/- (Rupees Twelve thousand
two hundred) in his own name from DDA for which he paid a sum of
Rs.76,271/- (Rupees Seventy six thousand two hundred seventy one)
till 20.09.2000 towards this plot including penalty and ground rent
totalling to Rs.88,471/- (Rupees Eighty eight thousand four hundred
seventy one) to DDA. Even though the plot was sold by the main
accused on 10.04.2000 to one Mr. Sanjeev Verma the payment for the
same i.e. cheque for Rs.2,50,000/- (Rupees Two lakhs fifty thousand)
was deposited by him in his bank account in October 2000 i.e. after the
check period and hence the profit obtained on the benefit of sale is not
given to the main accused. Therefore, the main accused had total assets
of Rs.2,77,52,480/- (Rupees Two crores seventy seven lakhs fifty two
thousand four hundred eighty). Investigation has further revealed that
he had incurred an expenditure of Rs.25,14,194.05 paise (Rupees
Twenty five lakhs fourteen thousand one hundred ninety four and five
paise) under various heads including educational expenses (towards his
five children), electricity and water bill, telephone bill, commissions to
property dealers, stamp duty in respect of 5/12, Roop Nagar, Delhi,
regularization charges of E-4/10 Model Town, property tax, income
tax, charges paid to jeweller for getting evaluation report in 1986, LIC
premium, Non-verifiable expenditure and charges paid to jeweller for
getting evaluation report in 1986. Thus, the accused was in possession
of disproportionate assets worth Rs.2,86,99,670.60 paise (Rupees Two
crores eighty six lakhs ninety nine thousand six hundred seventy and
sixty paise). After completion of investigation charge-sheet was filed.
8. Vide order dated 27.01.2014 learned Special Judge-IV, CBI (PC
Act), Tis Hazari Courts, Delhi framed charges for the offence under
Sections 120B/109 IPC read with Section 13(1)(e) and 13(2) of
Prevention of Corruption Act. Feeling aggrieved by the said order the
petitioner has filed the present petition.
9. Learned counsel for the petitioner submitted that during
investigation CBI has verified and confirmed the purchase and sale of
all the shares in the name of these persons from National Stock
Exchange which affirmed transactions in the name of Smt. Maya, Ms.
Sanjana and Mr. Abhishek. He further submitted that the transactions
had taken place on the NSE, and there was no doubt about the quantity
and the rate of the transactions. He also submitted that it is not in
doubt that the transactions that had taken place would not culminate
into a profit of Rs.37,58,760/- (Rupees Thirty seven lakhs fifty eight
thousand seven hundred sixty).
10. Mr. Narender Mann, learned special public prosecutor for CBI
vehemently argued that the present petitioner has intentionally aided in
accumulation of disproportionate assets of accused No.1, Ashok
Kumar & in the name of his family members i.e. Smt. Maya Devi
(wife), Ms. Sanjana (daughter) and Mr. Abhishek (son) and has helped
the said accused in accumulating assets which were disproportionate to
his known source of income. In order to highlight the said contention,
he referred to the relevant document showing income accrued in the
name of aforesaid persons, namely, Smt. Maya Devi, Ms. Sanjana and
Mr. Abhishek from investment in share transaction carried out in their
name by the present petitioner who was working as a share broker
under the name and style of M/s. Pace Financial Services. He pointed
out that Smt. Maya Devi gave a sum of Rs.30,000/- (Rupees Thirty
thousand) to M/s. Pace Financial Services on 22.01.1999 against which
she was repaid a sum of Rs.1,99,160/- (Rupees One lakh ninety nine
thousand one hundred sixty) and Rs.2,23,505/- (Rupees Two lakhs
twenty three thousand five hundred five) as profits. Likewise, Ms.
Sanjana gave a sum of Rs.40,000/- (Rupees Forty thousand) to M/s.
Pace Financial Services on 08.01.1999 and was repaid a sum of
Rs.34,511.66 paise (Rupees Thirty four thousand five hundred eleven
and sixty six paise) and Mr. Abhishek who paid a sum of Rs.30,000/-
(Rupees Thirty thousand) to M/s. Pace Financial Services on
02.01.1999 was repaid a sum of Rs.1,72,125.79 paise (Rupees One
lakh seventy two thousand one hundred twenty five and seventy nine
paise) (by way of cheque dated 20.03.1999) as profit of alleged share
transactions. It was also pointed out on behalf of respondent/ CBI that
investigation revealed that the aforesaid three close relatives of public
servant i.e. accused No.1 Ashok Kumar had generated income of
Rs.37,58,760.70 paise from the share business during the time span of
two years five months with initial investment of Rs.1,00,000/- (Rupees
One lakh).
11. Learned special public prosecutor for CBI further submitted that
all the share transactions were verified with National Stock Exchange
which revealed that those transactions had taken place in the client
code of CVS01 which belongs to one Vijay Sachdeva whose statement
under Section 161 Cr.P.C. was recorded as PW-68. He also referred to
the relevant portion of said statement of Mr. Vijay Sachdeva (PW-68)
wherein he claimed that he was not aware that his broker was utilizing
his client code for Smt. Maya, Ms. Sanjana and Mr. Abhishek. On the
basis of these facts, it has been contended on behalf of respondent/ CBI
that the said share transactions are not genuine on behalf of these three
persons and the same have been generated by the petitioner in order to
aid accused Mr. Ashok Kumar in accumulating disproportionate assets.
12. Learned special public prosecutor of CBI had also highlighted
the following facts in order to contend that share transactions carried
out in the names of Smt. Maya, Ms. Sanjana and Mr. Abhishek were
not genuine and thus, acts of the petitioner attract offence of abetment
against him. Those facts are summarized as under: -
(i) No independent client code was allotted to aforesaid three
close relatives of the main accused and all share
transactions were made under the client code CVS 01
owned by Mr. Vijay Sachdeva (PW-68);
(ii) All the share transactions were being made in the name of
M/s. Pace Financial Services belonging to the present
petitioner and no share was held by any of the said three
persons in their names;
(iii) None of the aforesaid three persons were ever paid any
dividend during the relevant period;
(iv) There has been purchase of shares amounting to
Rs.6,00,000/- (Rupees Six lakhs) to Rs.8,00,000/- (Rupees
Eight lakhs) by the petitioner on behalf of aforesaid three
persons at the time when there was no amount in their
account and the broker was making investment on their
behalf which was not permissible as per Security
Exchange Board of India Rules (SEBI Rules);
(v) No written instruction was received regarding the sale and
purchase of shares and all the share transactions were
carried out on oral instructions of an employee of
chartered accountant namely, Mr. Dinesh Garg;
(vi) No written contract was executed between M/s. Pace
Financial Services belonging to the petitioner and those
three persons namely Smt. Maya Devi, Ms. Sanjana and
Mr. Abhishek;
(vii) Despite the fact that many of the shares held by said three relatives
of the main accused were in Demat Form, no demat account in the
name of any of them was opened and all transactions were being
made in demat account of M/s. Pace Financial Services at Global
Trust Bank, Connaught Place, New Delhi; and
(viii) As per verification carried out by National Stock
Exchange the client code given to said close relatives of
the main accused by M/s. Pace Financial Services
belonging to the present petitioner, did not exist in the
system of National Stock Exchange.
13. I have given my anxious thought to the submissions made by
counsel for the petitioner and Ld.Spl.PP for CBI. I have also gone
through the material on record.
14. The Apex Court in 'State of Haryana & Ors. Vs. Bhajan Lal',
1992 Supp. (1) SCC 335, examined the scope of inherent powers of
this Court in interference of its office by the appeals in the backdrop of
interpretation of various relevant provisions of Cr.P.C. under Chapter
XIV and all the principles of law enunciated by the Apex Court in a
series of decisions relating to exercise of extraordinary power under
Article 226 of Constitution of India or inherent powers under Section
482 of Cr.P.C. which enumerate the following categories of cases by
way of illustration wherein such power could be exercised either to
prevent abuse of the process of Court or otherwise to secure the ends
of justice. The Apex Court made it clear that it may not be possible to
lay down any precise, clearly defined and sufficiently channelized
inflexible guidelines or rigid formulae in order to give an exhaustive
list of myriad kinds of cases wherein such power should be exercised: -
(i) Where the allegations made in the first information report
or 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 a case against the accused.
(ii) Where the allegations in the first information report and
other materials, if any, accompanying the FIR do not
disclose a cognizable offence, justifying an investigation
by police officers under Section 156(1) of the Code
except under an order of a Magistrate within the purview
of Section 155(2) of the Code.
(iii) Where the uncontroverted allegations made in the FIR or
complaint and the evidence collected in support of the
same do not disclose the commission of any offence and
make out a case against the accused.
(iv) Where, 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.
(v) 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.
(vi) 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
continuance 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.
(vii) Where a criminal proceeding is manifestly attended with
malafide 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.
15. There are a catena of judgments of the Hon'ble Supreme Court.
However, specific reference can be made to ‗State of U.P. vs.
Golconda Linga Swamy & Anr.', (2004) 6 SCC 522, wherein it was
held that while exercising the powers under Section 482 of Cr.P.C., the
Court does not function as a Court of appeal or revision and that such a
power though very wide, has to be exercised sparingly, carefully and
with caution and only when such exercise is justified by tests laid
down in the section itself. Section 482 of Cr.P.C. envisages three
circumstances under which inherent jurisdiction may be exercised
namely (i) to give effect to an order under Cr.P.C., (ii) to prevent abuse
of process of the Court, and (iii) to otherwise secure ends of justice.
16. In Golconda Linga Swamy's case (supra) it was also held that
it is neither possible nor desirable to lay down any inflexible rule
which would govern the exercise of inherent jurisdiction in the
enactment dealing with the procedure and provide with all cases that
possibly arise. When the complaint is sought to be quashed it is
permissible to look into material to assess what the complainant has
alleged and whether any offence is made out even if the allegation are
accepted in toto. Similarly, in the case of ‗Devendra & Ors. Vs. State
of Uttar Pradesh & Anr.', (2009) 7 SCC 495, Hon'ble Supreme
Court observed that ―when the allegations made in the first information
report or the evidences collected during investigation do not satisfy the
ingredients of an offence, the superior Court would not encourage
harassment of a person in a Criminal Court for nothing‖.
17. In view of the settled proposition of law as noted above, there
does not remain any doubt that this Court has inherent power under
Section 482 Cr.P.C. and also extraordinary power under Article 226 of
the Constitution of India to entertain the present petition. Since power
is to be exercised sparingly due care and caution will be required to
examine the allegations as set out in the FIR and also brought up from
the evidence gathered during investigation.
18. In the instant case, learned Special Judge-IV, CBI (PC Act), Tis
Hazari Courts, Delhi formed an opinion that prima facie case in respect
of offence under Section 109 IPC read with Section 13(1)(e)
punishable under Section 13(2) of the PC Act is made out who is
accused No.5 before the trial court. Learned Special Judge, however,
rejected the contention raised on behalf of CBI that prima facie case in
respect of offence of criminal conspiracy punishable under Section
120B IPC was also made by observing that even as per allegations of
prosecution, the acts of accused No.3, 4 and 5 (petitioner herein) were
independent acts and also that there was no allegation contained in the
charge-sheet that the accused persons had conspired together with
accused No.1 or accused No.2 to facilitate the commission of offence
under Section 13(1)(e) punishable under Section 13(2) of Prevention of
Corruption Act by accused No.1.
19. Learned trial court relied upon judgments reported in ‗Kanti
Bhushan Bhadra Shah vs. State of West Bengal', (2000) 1 SCC 722;
‗Lalu Prasad vs. State of Bihar', (2007) 1 SCC 49 and ‗Sudhir
Kumar Jain & Ors. vs. State', (1994) (2) Crimes 954, to observe that
no reasons are required to be recorded at the time of framing the
charges against an accused. However, the order under challenge is
completely silent about any incriminating evidence or document
available before the trial court which raises grave suspicion against
accused No.5 who is the petitioner herein in respect of even the
offence of abetment as charged against him.
20. On the other hand, learned counsel for the petitioner urged that
even as per the admitted case of CBI initial payment of Rs.1,00,000/-
(Rupees One lakh) was made by aforesaid three persons by way of
three cheques and the amount of Rs.37,58,760.70 paise (Rupees Thirty
seven lakhs fifty eight thousand seven hundred sixty and seventy paise)
was made by the petitioner through 13 account payee cheques. He
highlighted the fact that there is no allegation of cash transaction. He
also submitted that all the share transactions have been verified by CBI
during the course of investigation and the profit of Rs.37,58,760.70
paise (Rupees Thirty seven lakhs fifty eight thousand seven hundred
sixty and seventy paise) has been generated during the time span of
two years and five months and at the time when there was boom in the
stock market. In this regard, learned counsel for the petitioner has
referred to the document filed by CBI as document - D-211 along with
charge-sheet. He also pointed out that aforesaid three close relatives of
the main accused have also suffered loss of about Rs.11,70,000/-
(Rupees Eleven lakhs seventy thousand) during the financial year
2000-2001 when the market prices of shares had fallen down steeply.
Thus, the petitioner has provided his services as a share broker to the
aforesaid three persons and has done nothing beyond that.
21. No doubt, the share transactions entered in the name of Smt.
Maya Devi, Ms. Sanjana and Mr. Abhishek by the petitioner herein
were executed in the client code CVS 01 belonging to Mr. Vijay
Sachdeva (PW-68). However, merely because the close relatives of
the main accused Ashok Kumar, had engaged services of the petitioner
for making investment in the share market through him, it does not
lead to any inference that the petitioner had aided or abeted in the
commission of offence of accumulation of disproportionate assets by
the main accused.
22. A perusal of trial court record would reveal that as per
investigation carried out by CBI, Smt. Maya Devi, Ms. Sanjana and
Mr. Abhishek were introduced by Mr. Vijay Sachdeva (PW-68) to the
petitioner herein. In this backdrop, the submission made on behalf of
petitioner that client code of said Mr. Vijay Sachdeva was used in the
record of petitioners for identification, as surety and security in case of
default, appeals to reasoning as in case of default of dues by those
persons, the client code would indicate the name of the concerned
person who had introduced the defaulters to share broker so as to claim
reimbursement for such liability from introducer or to enforce the
liability from defaulters through introducer.
23. It may also be noted here that the respondent CBI has filed a
document i.e. D-227 with the charge-sheet which clearly shows that
besides above said three persons, client code of Mr. Vijay Sachdeva
(PW-68) was not only used for his family members and also for 37
other persons who were introduced by him. The detailed particulars
including addresses of those 37 other persons, have been mentioned
therein. As per the trade contracts, the share transactions executed on
behalf of different persons in the same client code, used to be posted in
the respective ledger accounts of each of the clients on the same day in
order to ensure that each and every client got his separate contract note
and at the same time to show that financial dealings carried out on
behalf of each of them, is separate. Same is also apparent from perusal
of document D-207 which clearly shows that Smt. Maya Devi, Ms.
Sanjana and Mr. Abhishek had separate ledger accounts in which share
transactions were posted on the same day.
24. A perusal of the trial court record would reveal that all the share
transactions carried out in the name of Smt. Maya Devi, Ms. Sanjana
and Mr. Abhishek through M/s. Pace Financial Services belonging to
the petitioner in National Stock Exchange, were duly verified by CBI
and all the said transactions are shown to have been actually carried
out. It is nowhere the case of CBI that any of these share transactions
as mentioned therein, was fake or that any particular transaction was
manipulated.
25. It has been portrayed by CBI that against a total investment of
Rs.1,00,000/- (Rupees One lakh) made by Smt. Maya Devi, Ms.
Sanjana and Mr. Abhishek, they earned a huge profit amounting to
Rs.37,58,760.70 paise (Rupees Thirty seven lakhs fifty eight thousand
seven hundred sixty and seventy paise). It would be relevant to
highlight the fact that the said profit amount had been generated during
the time span of about two and half years i.e. during the period 1999-
2001. It is a matter of common knowledge that there was boom in the
stock market during the period 1999-2000 on account of steep increase
in the prices of some scripts and the share prices had increased even by
1000% during the said period. The relevant statements of accounts of
these persons would show that they actually made a profit of about
Rs.49,20,000/- (Rupees Forty nine lakhs and twenty thousand) during
first two financial years i.e. 1998-1999 and 1999-2000. At the same
time, they also suffered a collective total loss of more than
Rs.11,00,000/- (Rupees Eleven lakhs) during the financial year 2000-
2001. This fact is also established from the statement under Section
161 Cr.P.C. of PW-39 as available in the trial court record. In other
words, the aforesaid three persons initially made profits on account of
boom in the stock market and suffered losses during the third year i.e.
financial year 2000-2001 when the share market came down. Not only
this, it is nowhere the case of CBI that these three persons did not pay
tax on the profits earned by them during first two years or that any cash
transaction took place between firm of the present petitioner and those
three persons. The entire profit amount of Rs.37,58,760.70 paise
(Rupees Thirty seven lakhs fifty eight thousand seven hundred sixty
and seventy paise) is shown to have been paid by the firm of the
present petitioner by way of 13 cheques as also affirmed by the
investigation carried out by CBI.
The persons had no separate demat account:
26. The contention raised on behalf of CBI that the aforesaid three
persons were not having a separate demat account and same is an
incriminating circumstance appearing against the petitioner, does not
carry any force for the simple reason that it is not mandatory for the
client to have a demat account during the relevant period. As a matter
of fact, the shares of the aforesaid three persons were lying in the
demat account of M/s. Pace Financial Services as margin, which is the
usual practice being followed by share brokers in case of almost all
their clients. It is customary for the clients in the stock market to keep
their shares as margin for buying additional shares, in the demat
account of their broker.
There was no intimation to the National Stock Exchange that these
three persons were trading through M/s. Pace Financial Services:
27. Another incriminating circumstance as pointed out on behalf of
CBI was that there was no intimation furnished with National Stock
Exchange that the aforesaid three persons were trading through the
aforesaid firm of the present petitioner. However, there is no
substance in the said submission of learned special public prosecutor
for CBI. It is pertinent to note that these three persons traded with M/s.
Pace Financial Services Ltd. during the period 1998-2000. The
requirement for brokers to intimate the details of the clients to stock
exchange, was notified by SEBI vide circular dated July 18, 2001
[point (7) of the said circular] and was applicable prospectively for the
clients trading after that date. The last transactions of these three
clients happened about one year prior to this circular having come into
existence. National Stock Exchange notified requirement of uploading
client information to the Exchange vide circular dated July 20, 2001
and this circular is part of the document of CBI i.e. D-211.
Profit entries have been lifted from the account of Mr. Vijay
Sachdeva and posted in the accounts of these three persons: -
28. It was vehemently argued on behalf of CBI that the profit entries
had been lifted from the account of Mr. Vijay Sachdeva (PW-68) and
same were posted in the accounts of these three persons which is
another incriminating circumstance appearing against the petitioner.
The said argument appears to be impressive at the first instance but
same is not tenable in the eyes of law and deserves to be rejected.
29. During the course of investigation, CBI had found that in the
sale and purchase of shares, there were losses also. The gains initially
were on account of boom in the stock market and when the market fell,
there were losses also. As per PW-39, Ms. Sanjana suffered a loss of
about Rs.7,70,000/- (Rupees Seven lakhs seventy thousand) during the
financial year 2000-2001. Mr. Abhishek also suffered a loss of about
Rs.4,00,000/- (Rupees Four lakhs) in the financial year 2000-2001.
Therefore, in the first two financial years, all the three persons made
profits of Rs.49,20,000/- (Rupees Forty nine lakhs twenty thousand)
approximately but during third financial year i.e. 2000-2001 when the
stock market fell they suffered losses of Rs.11,70,000/- (Rupees
Eleven lakhs seventy thousand) approximately. Therefore, as much as
24% of the profits made over a period of first two financial years, were
wiped out in just a few months when the share market had fallen down.
Moreover, the said three persons had paid full taxes on the profits of
the first two years and the losses in the third year could not have been
set off against the profits of the earlier years, thus, substantially raising
their effective tax rates further by 24%. If the allegation of
manipulating the accounts to generate profits were true, then there
would not have been a net loss of about Rs.11,70,000/- (Rupees Eleven
lakhs seventy thousand) in the financial year 2000-2001.
Dividend is paid by the Companies to the shareholders and not by
brokers to their clients: -
30. The argument raised on behalf of CBI that no dividend was
received by any of these persons clearly shows the involvement of
present petitioner, is totally misconceived and is liable to be rejected.
It is a matter of common knowledge that in case the shares are lying
with broker as margin then the dividend is received by the broker from
the companies and then the said broker credits the dividend amount in
the accounts of its clients. This is the normal business practice which
is generally followed by stock brokers dealing in the share market.
The transactions are void as per Section 14(1) and Section 15 of
the Securities Contracts (Regulations) Act, 1956: -
31. Learned special public prosecutor for CBI heavily relied upon
provisions contained in Section 14(1) and 15 of the Securities
Contracts (Regulations) Act, 1956 (hereinafter referred to as ‗SCR
Act'), in support of his contention that share transactions carried out in
the name of aforesaid three persons namely Smt. Maya Devi, Ms.
Sanjana and Mr. Abhishek were in violation of law.
32. In order to appreciate the rival submissions made on behalf of
both the sides, it would be appropriate to refer to relevant provisions
contained in Securities Contracts (Regulations) Act, 1956: -
―9. Power of recognised stock exchanges to make
bye-laws.
(3) The bye-laws made under this section may--
(a) specify the bye-laws the contravention of
which shall make a contract entered into
otherwise than in accordance with the bye-
laws void under sub-section (1) of section
14;
(b) provide that the contravention of any of the
bye-laws shall render the member concerned
liable to one or more of the following
punishments, namely:--
(i) fine;
(ii) expulsion from membership;
(iii) suspension from membership for a
specified period;
(iv) any other penalty of a like nature not
involving the payment of money
13. Contracts in notified areas illegal in certain
circumstances.- If the Central Government is satisfied,
having regard to the nature or the volume of
transactions in securities in any [State or States or
area], that it is necessary so to do, it may, by
notification in the Official Gazette, declared this section
to apply to such [State or States or area], and
thereupon every contract in such [State or States or
area], which is entered into after the date of the
notification otherwise than [between the members of a
recognised stock exchange or recognised stock
exchanges] in such [State or States or area] or through
or with such member shall be illegal:
14. Contracts in notified areas to be void in certain
circumstances- (1) Any contract entered into in any
State or area specified in the notification under section
13 which is in contravention of any of the bye-laws
specified in that behalf under clause (a) of sub-section
(3) of section 9 shall be void:
(i) as respects the rights of any member of the
recognised stock exchange who has entered
into such contract in contravention of any
such bye-law, and also
(ii) as respects the rights of any other person
who has knowingly participated in the
transaction entailing such contravention.
(2) Nothing in sub-section (1) shall be construed to
affect the right of any person other than a member of
the recognised stock exchange to enforce any such
contract or to recover any sum under or in respect of
such contract if such person had no knowledge that the
transaction was in contravention of any of the bye-laws
specified in clause (a) of sub-section (3) of section 9.
15. Members may not act as principals in certain
circumstances - No member of a recognised stock
exchange shall in respect of any securities enter into
any contract as a principal with any person other than a
member of a recognised stock exchange, unless he has
secured the consent or authority of such person and
discloses in the note, memorandum or agreement of
sale or purchase that he is acting as a principal:
Provided that where the member has secured the
consent or authority of such person otherwise than in
writing he shall secure written confirmation by such
person or such consent or authority within three days
from the date of the contract:
Provided further that no such written consent or
authority of such person shall be necessary for closing
out any outstanding contract entered into by such
person in accordance with the bye-laws, if the member
discloses in the note, memorandum or agreement of
sale or purchase in respect of such closing out that he is
acting as a principal.‖
33. A bare perusal of the aforesaid provisions would clearly show
that Section 14 of the SCR Act is applicable only to the transactions
done in any state or area specified in the notification issued under
Section 13 by the Central Government. However, in the present case,
all the share transactions were done on the trading platform of the
National Stock Exchange and not in area which may be notified by
Central Government under Section 13 of SCR Act. Moreover, no bye-
laws made under Section 9(3)(a) of SCR Act are claimed to have been
framed or brought to the notice of this Court, which make the
transactions of these three persons void. In any case, there is no such
allegation in this regard appearing in the charge-sheet filed by CBI
before the trial court.
34. It may also be relevant to point out that Section 15 of SCR Act
is applicable for transactions which are not conducted on Stock
Exchanges. The said provision clearly provides that only in respect of
transactions carried out by any member of recognized stock exchange,
there is requirement to obtain written consent of the client on whose
behalf, any member is entering into any contract as a principal member
with any person other than a member of recognized stock exchange.
However, this section is not applicable to the transactions of these
three persons as all their transactions had taken place on National
Stock Exchange. In fact, this fact has been mentioned by CBI in the
charge-sheet itself that all those transactions were verified by it from
National Stock Exchange.
As per regulations 3.1.8 of the National Stock Exchange of India
limited regulations (capital market segment), 1994, it was
mandatory to enter the unique client code of client at the time of
entering the order in the stock exchange: -
35. The reliance placed by learned special public prosecutor for CBI
on the aforesaid regulation is again without any substance. No doubt,
the said regulations of National Stock Exchange were originally
framed in the year 1994 but it may be noted here that clause 3.1.8 was
inserted in the regulations only on January 28, 2004. Same is quite
apparent from the bare perusal of the relevant National Stock
Exchange circular notifying this amendment. The said circular has
been enclosed as Annexure-A with the petition filed before this Court.
36. In view of the discussion made hereinabove, this Court is not
able to lay its hand on any incriminating material which may raise
grave suspicion against the present petitioner in respect of the offence
of abetment as punishable under Sections 109 IPC.
37. In the case of ‗Kanshi Ram vs. State', 2001 (1) JCC 320 Delhi,
it has been held by this Court that Court cannot act as a mouth piece of
prosecution, but has to consider broad probabilities of the case, the
total effect of the documents produced before the Court, any basic
infirmities appearing in the case and so on.
38. Further in ‗Bhim Singh vs. State', 48 (1992) DLT 402, it has
been observed by this Court as under: -
―the stage of framing of charges is an important stage in
the criminal appeal and the Judge concerned has to
carefully evaluate and consider the entire material
available on record and he must judiciously apply his
mind. Framing of charges erroneously would mean
vital crossing for several areas the responsibility of
Judge concerned is particularly fair, greater in our
country because of long delay in criminal trial and final
disposal of criminal cases. Long prosecution invariably
leads to tremendous harassment, mental agony and
immense distress.‖
39. In the light of the aforesaid discussion, the petition is allowed.
The impugned order dated 27.01.2014 passed by learned Special
Judge-IV, CBI (PC Act), Tis Hazari Courts, Delhi is set aside qua the
petitioner and the FIR No.RC-52(A)-2000/ACB/D1 dated 20.07.2000
under Section 13(1)(e) of Prevention of Corruption Act registered
against the petitioner and the proceedings pursuant thereto are hereby
quashed qua the petitioner.
40. Trial court record be sent back forthwith.
Crl. M.A. No.5163/2014
The application is dismissed as infructuous.
(VED PRAKASH VAISH)
JUDGE
NOVEMBER 03rd , 2014
hs
