Amit Pareek vs The State Of Assam And Anr
2021 Latest Caselaw 97 Gua

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GAHC010162562020




                              THE GAUHATI HIGH COURT
   (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

                               Case No. : Crl.Pet./566/2020

            AMIT PAREEK
            S/O LATE NIRMAL KUMAR PAREEK, HAVING ITS OFFICE AT 4TH FLOOR,
            K.C. CHOUDHARY ROAD, RAM PRASAD COMPLEX, CHATRIBARI,
            GUWAHATI-781001, DIST-KAMRUP(M), ASSAM



            VERSUS

            THE STATE OF ASSAM AND ANR.
            REPRESENTED BY THE PUBLIC PROSECUTOR, ASSAM

            2:YASH HARLALKA
             DIRECTOR OF M/S MEGHALAYA INFRASTRUCTURE LTD.
             R/O FLAT NO. 102
             SWEDA TOWER
             CHATRIBARI BILPAR
             REHABARI
             GUWAHATI-781008
             DIST-KAMRUP(M)
            ASSA

Advocate for the Petitioner   : MR. N SHARMA

Advocate for the Respondent : PP, ASSAM

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BEFORE HONOURABLE MR. JUSTICE MIR ALFAZ ALI

JUDGMENT & ORDER (CAV) Date : 12-01-2021

Mr. D. Das, learned senior counsel for the petitioner and Mr. D. Baruah, learned counsel for the respondent No. 2 were heard.

2. This petition u/s 482 CrPC has been filed praying for quashing the FIR dated 27-10- 2020 and the criminal proceeding in Paltan Bazar P.S. Case No. 825/2020 registered u/s 406/420 IPC.

3. The factual background of the FIR and the criminal proceeding sought to be quashed are that Corporate Insolvency Resolution Process (CIRP) was initiated against the Meghalaya Infratech Ltd. under the provisions of the Insolvency and Bankruptcy Code, 2016 (for short 'Insolvency Code'). The petitioner was appointed as resolution professional under the provisions of the Insolvency Code in the matter of Meghalaya Infratech Ltd. by the learned National Company Law Tribunal (NCLT), Guwahati Bench by its order dated 28-08-2019.

4. A meeting of the Committee of Creditors (COC) was scheduled to be held on 11-02- 2020. All the resolution applicants including the Panna Pragati Infrastructure Pvt. Ltd. (in short "PPIPL") were advised by the notice dated 06-02-2020 about the agenda of the COC meeting to be held on 11-02-2020. Since the agenda item could not be completed, the COC decided to adjourn the meeting to next day and accordingly, it was decided that the meeting would be held on the next day, i.e., 12-02-20 at 10.30 am at the same place. The resolution applicant Mr. N. Dhar increased his bid amount from Rs. 54 crores to Rs. 54.3 crores + CIRP cost on 12-02-2020 and its plan was approved by 100% voting in the COC meeting on 12-02- 2020. Despite being aware that the resolution plan had to be finalized and negotiations were to be carried out, the PPIPL remained absent on the meeting held on 12.02.2020. The PPIPL allegedly failed to meet the time line and also failed to submit final revised plan removing the defects therein and only submitted a revised offer and not a revised resolution plan on 14-02- 2020 with a marginal increase in its bid. However, the meeting of the COC supported the plan submitted by Mr. N. Dhar and all the creditors were aware about the revised offer submitted Page No.# 3/10

by PPIPL. The members of the COC were fully aware about the revised offer submitted by PPIPL on 14-02-2020, inasmuch as, copies of the same were sent through e-mail to all the members. It has been stated that being fully aware and with full knowledge of the revised offer of the PPIPL, the COC meeting approved the plan submitted by Mr. N. Dhar. The PPIPL filed an application against the resolution plan approved by the meeting of the COC praying for a direction to the CIRP to take on record and to consider the revised offer submitted by it through e-mail on 14-02-2020, which was rejected by the learned NCLT, Guwahati Bench by its order dated 18-03-2020. The NCLT by its order dated 18-05-2020 approved the resolution plan of Mr. N. Dhar (H1 bidder), which was approved by the meeting of the COC.

5. The orders dated 18-03-2020 and 18-05-2020 passed by the NCLT, Guwahati Bench was challenged before the NCLT, New Delhi and the NCLT, New Delhi by order dated 19-10- 2020 set aside both the orders passed by the NCLT, Guwahati Bench and remanded the matter with direction to the CIRP to resume from the stage of consideration of the resolution plan. It was also directed that the resolution professional would place the resolution plan of H1 and H2 bidders, besides the revised resolution plan of the appellant (PPIPL) before the committee of the creditors for consideration. After the judgment of the NCLT, Delhi, the respondent No. 2, who was a suspended director of M/S Meghalaya Infrastructure Pvt. Ltd. lodged the FIR with the Paltan Bazar Police Station on 27-10-2020, on the basis of which, police registered Paltan Bazar P.S. Case No. 825/2020 u/s 406/420 IPC.

6. It was alleged in the FIR that the bid offered by PPIPL was the highest. However, on the pretext of minor deviation on the part of the highest bidder, the petitioner illegally finalized the resolution plan/bid forwarded by other bidders at a lower price. It was also alleged that though the PPIPL requested to extend the time for submission of the resolution plan/bid for two days, which was within the time limit of 180 days of the ordinary time line of

CIRP and resolution plan was submitted on the 2 nd day, the petitioner instead of placing the resolution plan before the committee of the creditors for their approval colluded with the other bidders to illegally finalized the resolution plan/bid forwarded by other bidders at a lower price. It was also alleged that the informant came to know that the petitioner has been paid by the other bidders in order to get their bids finalized and approved. It was alleged in the FIR that action of the petitioner amounted to dishonest misappropriation and conversion Page No.# 4/10

of the assets and properties of M/S Meghalaya Infratech Pvt. Ltd. for its own purpose in violation of the provision of law, and as such, the act of the petitioner amounted to criminal breach of trust and cheating.

7. Learned counsel for the petitioner Mr. D. Das referring to various provisions, viz., Section 217, 233, 236 of the Insolvency and Bankruptcy Code, 2016 as well as Section 3 of the Insolvency and Bankruptcy Board of India (Grievance and complaint handling proceeding) Regulation, 2017, submits, that the prosecution against the petitioner was not maintainable, and as such, the FIR and the criminal proceeding deserves to be quashed. Mr. Das further submits that the FIR did not make out any offence u/s 420 or 406 IPC.

8. Per contra, Mr. D. Baruah, learned counsel for the respondent submits that the provision of Section 217, 233 and 236 of the Insolvency Code as well as the procedure provided in Regulation 2017 are not applicable in the instant case, inasmuch as, the said procedures relates to any offence committed under the Insolvency Code, whereas the offences in the instant case are under the provision of the Indian Penal Code.

9. Section 217 of the Insolvency Code, 2016 provides that any person aggrieved by the functioning of an insolvency agency or insolvency professional or insolvency utility may file an application before the board within a specific time and in such manner as may be specified.

10. Section 233 of the Insolvency Code provides that "no suit prosecution or other legal proceeding shall lie against the Govt. or any officer of the Govt., or Chairman, member, officer or other employee of the board or an insolvency professional or liquidator, for which, anything is done or intended to be done on good faith under this Code or the rules or regulations therein.

11. Section 236 (1) of the Insolvency Code provides that notwithstanding anything in the Code of Criminal Procedure, 73 (2) of 1974 offences under this code shall be tried by the Special Court under Chapter XXVIII of the Companies Act, 2013 (18 of 2013).

12. Sub-section (2) of Section 236 of the Insolvency Cod provides that "no court shall take cognizance of any offence punishable under this Code save and except on a complaint made by the board or a Central Govt. or any person authorized by the Central Govt. in this behalf."

13. Section 238 of the Insolvency code provides that "the provision of this Code shall have Page No.# 5/10

effect, notwithstanding, anything inconsistent therewith contained in any other law for the time being in force or any instrument having affect by virtue of any such law."

14. Mr. Baruah placing reliance on a decision of the Honourable Supreme Court in General Officer Commanding Rashtriya Rifles and Ors. Vs. CBI, (2012) 6 SCC 228 submits that registration of an FIR is not a prosecution, inasmuch as, "prosecution" means a criminal action before the court of law for the purpose of determining "guilt" or "innocence" of the person charged with a crime. The Apex Court defines the prosecution as under :

"28. "Prosecution" means a criminal action to be court of law for the purpose of determining "guilt" or "innocence" of the person charged with a crime. "Civil suit" refers to a civil action instituted before a court of law for realization of a right vested in a party by law.

29. The phrase "legal proceeding" connotes a term which means the proceedings in a court of justice to get a remedy which the law permits to the person aggrieved. It includes any formal steps or measures employed therein."

15. Further contention of Mr. Baruah is that "good faith" is a question of fact, which is to be decided on the basis of the facts and circumstances case during the trial and the FIR or the criminal proceeding cannot be quashed at the initial stage on the ground, that the accused has done the act in "good faith".

16. Placing reliance on the decision of the Apex Court in Municipal Corporation of Greater Mumbai Vs. Abhilash Lal and Ors., reported in MANU/SC/1580/2019 and Macquarie Bank Ltd. Vs. Shilpi Cable Technologies Ltd, (2018) 2 SCC 674, Mr. D. Baruah, learned counsel for the respondent submits that the overriding effect of Section 238 of the Insolvency Code shall be applicable in a case of inconsistency. If the contention of the Insolvency Code and the other statute can be given effect simultaneously, overriding effect of Section 238 of the Insolvency Code shall not apply.

17. The Insolvency Code and Bankruptcy Grievance and Handling Procedure Regulation, 2017, lays down the procedure for lodging complaint and disposal of complaint under the Insolvency Code. Chapter VII of the Insolvency Code lays down the offence and penalties under the Code.

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18. From a plain reading of Section 236 of the Insolvency Code, it appears that the restriction of Section 236 is applicable only in case of offence punishable under the Insolvency Code. However, the provision of Section 233 of the Insolvency Code, which provides immunity from any suit, prosecution or other legal proceeding for anything done under the Insolvency Code or the rules or regulations made thereunder cannot be said to be restricted only to the offence committed under the Insolvency Code.

19. As per the allegations made in the FIR, the act attributed to the petitioner for the offence was invariably done by the petitioner under this Code, and as such, the immunity may not be available when the act under this Code constituting any offence is not done in "good faith". If the act is done in good faith than the petitioner or any other official envisaged by the provisions of Section 238 of the Insolvency Code shall be immune from criminal or civil proceeding for any act done under the Code. There is no doubt that "good faith" or "bad faith" is certainly a question of fact and is subject to proof.

When a person is immune from prosecution in respect of any act done in good faith, and such immunity is sought to be taken away by way of filing a proceeding or suit, the person bringing the proceeding needs to allege the relevant facts in the FIR or complaint, which can be attributed to motive or absence of good faith of any person, inasmuch, as the immunity under the statute provided in order to protect the certain class of person from prosecution in respect of their official act done under the Insolvency Code cannot be taken away in a light manner.

20. In General Officer Commanding Rashtriya Rifles and Ors. Vs. CBI, the Apex Court observed "that there has to be material to attribute or impute an unreasonable motive behind an act to take away the immunity clause. It is for this reason that when the authority empowered to grant sanction is proceeding to exercise its discretion, it has to take into account the material facts of the incident complained of before passing an order of granting sanction or else official duty would always be in peril even if performed bona fide and genuinely."

21. The law with regard to quashing of a criminal proceeding at the initial state is by now well settled by long line of decisions including the lead case in State of Haryana Vs. Bhajanlal, (1992) 1 Suppl. 1 SCC 335, wherein the Apex Court dealing with the principles and guidelines Page No.# 7/10

for quashing the criminal proceeding at the initial stage held in paragraph 102 as under : -

"102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and 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 F.I.R. 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 institu- tion 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 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."

22. In the present case, accusation against the petitioner in the FIR is u/s 406/420 IPC. To constitute an offence u/s 406 IPC following essential ingredients are necessary : -

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(i) Entrusting any person with the property or with dominion over it ;

                     (ii)           The person so entrusted :-

                                      (a) dishonestly misappropriated or converted it to his own
                                         use ;

(b) dishonestly used or disposed of the property or willfully induced any other person to do so in violation of the Code

(iii) Any direction of law prescribing the mode in which the trust is to be discharged.

(iv) by any legal contract made touching the discharge of such trust.

23. As already indicated above, admittedly the petitioner was appointed as resolution professional under the provision of Insolvency Code and he was discharging his duty under the provision of the said Code. The allegation against the petitioner was that the revised offer of resolution applicant, viz., the PPIPL was not considered or placed before the committee of the creditors and the committee of creditors approved the plan/bid of another resolution applicant, who was found to be the highest bidder. Admittedly the request of the respondent No. 2 for extension of time and the revised offer was rejected by the committee of creditors and the petition filed by the PPIPL to direct the petitioner to consider the revised offer of the respondent was also turned down by the learned NCLT, Guwahati Bench. 25. The resolution adopted by the committee of creditors accepting the plan of the resolution applicant N. Dhar was also approved by the NCLT, Guwahati Bench, by its order dated 18-05-2020 and the NCLT observed as under :-

"The COC has very well deliberated with the two plans and decided the viability, feasibility and financial matrix of each plans and approved one with 100% vote share of the members of the COC. Accordingly, I hereby approve the resolution plan of Mr. Ngaitlang Dghar (H-1 bidder) upon the following directions."

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24. However, the NCLT, Delhi set aside the order of Guwahati Bench and remanded the matter for resuming the CIRP from the stage of consideration of the resolution plan. From all these facts and circumstances, it is apparent that the petitioner was acting as resolution professional as per direction of the NCLT and the decision to finalizing the resolution plan was taken by the committee of the creditors, which was subsequently approved by the NCLT, Guwahati Bench. The NCLT, Delhi, set aside the earlier proceeding and the petitioner was asked to place the earlier two plans/bids along with revised plan of the respondent No. 2 before the committee of creditors for a fresh decision. Therefore, the essential ingredients of entrustment as well as misappropriation or conversion of entrusted property for its own use is totally absent in the instant case, and as such, the allegations made in the FIR, in my considered view, even prima facie failed to disclose the ingredients to constitute an offence u/s 406 IPC.

25. In the instant case from the admitted facts as revealed from the order of NCLT, it is apparent that the NCLT directed the petitioner to resume the CIRP for taking a fresh decision by the committee of creditors regarding the resolution plan, and as such, there was no delivery of property. It is also evident from the record that on 14-02-2020 the e-mail was addressed by the PPIPL to all the members of the committee of the creditors regarding his revised offers and as such, there was also no question of deception by the petitioner. From the materials, it is apparent that though the revised offer of the PPIPL was not placed before the committee of the creditors, members of the committee of creditors were aware about the said offer, and as such, there was no question of deception or fraud practiced by the petitioner. The Hon'ble NCLT observed that the revised offer ought to have been placed before the committee. Such observation, per-se, can by no stretch of imagination be construed as motive or practicing fraud or deception on the part of the petitioner. Therefore, the ingredients to constitute an offence u/s 420 IPC is also absent in the FIR.

26. In V.Y. Jose and Anr. Vs. State of Gujarat and Anr. (2009) 3 SCC 78 held that an offence of cheating cannot be said to have been made out unless the following ingredients are satisfied :

"i) deception of a person either by making a false or misleading representation or by other action or omission;

(ii) fraudulently or dishonestly inducing any person to deliver any property; or Page No.# 10/10

(iii) To consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit."

27. Evidently the petitioner was discharging his official duty as per the direction of the NCLT under the provision of the Insolvency Code and the respondent No. 2 after exhausting all other forums to ventilate his grievance lodged the FIR only when a favorable order was passed by the NCLT. Therefore, the lodging of the FIR after exploring all the avenues and the facts and circumstances of the present case, as discussed hereinbefore, the FIR or the criminal proceeding appears to be attended mainly with the ulterior motive of wrecking vengeance on the accused petitioner, and the present case is covered by clauses (i) (ii) (iii) and (vii) of Bhajan Lal's case.

28. Thus, having regard to the facts and circumstances of the present case and also the scope of interference with the criminal proceeding at the threshold in exercise of inherent power, this court is of the considered view, that the FIR dated 27-10-2020 and the proceeding in Paltan Bazar P.S. Case No. 825/2020 registered u/d 406/420 IPC arising out of the said FIR deserves to be quashed to secure the ends of justice. Accordingly, the FIR dated 27-10-2020 and the consequential proceeding in Paltan Bazar P.S. Case No. 825/2020 registered u/d 406/420 IPC arising out of the said FIR and hereby quashed.

JUDGE

Comparing Assistant