Karnataka High Court
M/S Rajesh Exports Limited vs Pramerica Aspf Ii Cyprus Holding Ltd on 14 December, 2023
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 14TH DAY OF DECEMBER, 2023
BEFORE
THE HON'BLE MR. JUSTICE R.NATARAJ
CRIMINAL PETITION NO.8070 OF 2013
c/w
WRIT PETITION NO.54186 OF 2017 (GM-RES),
WRIT PETITION NO.54221 OF 2017 (GM-RES)
IN CRL.P.NO.8070/2013:
BETWEEN:
1. M/S RAJESH EXPORTS LIMITED
HAVING ITS REGISTERED OFFICE AT
NO.4, BATAVIA CHAMBERS,
KUMARA KRUPA ROAD,
BANGALORE-560 001.
THROUGH ITS AUTHORISED SIGNATORY
MR. MALLIKARJUN
2. MR. PRASHANT MEHTA
MANAGING DIRECTOR,
M/S RAJESH EXPORTS LTD.
HAVING ITS REGISTERED OFFICE AT
NO.4, BATAVIA CHAMBERS,
KUMARA KRUPA ROAD,
BANGALORE-560 001.
3. MR. RAJESH MEHTA
WHOLE-TIME DIRECTOR,
M/S RAJESH EXPORTS LTD.
HAVING ITS REGISTERED OFFICE AT
NO.4, BATAVIA CHAMBERS,
KUMARA KRUPA ROAD,
BANGALORE-560 001.
...PETITIONERS
(BY SRI. KIRAN S. JAVALI, SENIOR COUNSEL FOR SRI. RAGHU
HULIKAL, ADVOCATE)
2
AND:
PRAMERICA ASPF II CYPRUS HOLDING LTD.,
HAVING ITS REGISTERED OFFICE AT
11, FLORINIS STREET, CITY FORUM,
7TH FLOOR, 1065, NICOSIA, CYPRUS,
AND ITS CORPORATED OFFICE AT
KRONOS BUILDING, FLAT NO.501, 66,
ARCHIBISHOP MAKIROS AVENUR III,
NICOSIA, PC 1077, CYPRUS
THROUGH ITS AUTHORISED SIGNATORY
MR.RAJIV DUDEJA.
...RESPONDENT
(BY SRI. DHYAN CHINNAPPA, SENIOR COUNSEL FOR
SRI. ARUN SRI KUMAR, ADVOCATE)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482
OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO
QUASH THE ENTIRE PROCEEDINGS IN C.C.NO.15955/2013 FOR
THE OFFENCES PUNISHABLE UNDER SECTION 406, 420 AND
120B OF IPC WHICH IS PENDING ON THE FILE OF THE IV
A.C.M.M., BANGALORE CITY, IN SO FAR AS THE PETITIONERS
ARE CONCERNED.
IN W.P.NO.54186/2017:
BETWEEN:
SRI. DEEPAK KRISHNAPPA
AGED ABOUT 51 YEARS,
RESIDING AT PEBBLEBAY APARTMENTS,
TOWER 3, APARTMENT 82, 1ST MAIN,
R.M.V. 2ND STAGE, 2ND BLOCK,
DOLLARS COLONY, BANGALORE-560094
...PETITIONER
(BY SRI. D.R.RAVISHANKAR, SENIOR ADVOCATE FOR
SRI. SARAVANA S., ADVOCATE)
3
AND:
1. THE STATE OF KARNATAKA
J.C. NAGAR POLICE STATION,
J.C. NAGAR, BANGALORE-560006.
REPT. BY SPP.
2. PRAMERICA ASPF-II CYRUS HOLDING LIMITED
HAVING ITS REGISTERED OFFICE AT
II FLOOR, FLORINIS STREET,
CITY FORUM, 7TH FLOOR,
1065, NICOSIA, CYPRUS
CORPORATE ADDRESS AT:
KRONOS BUILDING, FLAT NO.501, 66
ARCHBISHOP MAKIROS AVENUE III,
NICOSIA, PC1077, CYPRUS
REPRESENTED BY MR. RAJIV DUDEJA
...RESPONDENTS
(BY SRI. VENKAT SATYANARAYAN A., HIGH COURT
GOVERNMENT PLEADER FOR RESPONDENT NO.1;
SRI. DHYAN CHINNAPPA, SENIOR ADVOCATE FOR SRI.
PRADEEP NAYAK, ADVOCATE RESPONDENT NO.2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA READ WITH
SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE, 1973
PRAYING TO QUASH ALL FURTHER PROCEEDINGS IN PCR
NO.6154/2017 IN C.C.NO.15955/2013 ON THE FILE OF THE IV
ADDL. CHIEF METROPOLITAN MAGISTRATE, BANGALORE VIDE
ANNEXURE-A.
IN W.P.NO.54221/2017:
BETWEEN:
SMT. SUSHMA ANANDU
SRI. DEEPAK KRISHNAPPA,
AGED ABOUT 51 YEARS,
RESIDING AT PEBBLEBAY APARTMENTS,
TOWER 3, APARTMENT 82, 1ST MAIN,
4
R.M.V. 2ND STAGE, 2ND BLOCK,
DOLLARS COLONY,
BANGALORE-560 094
...PETITIONER
(BY SRI. D.R.RAVISHANKAR, SENIOR ADVOCATE FOR
SRI. SARAVANA S., ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
J.C.NAGAR POLICE STATION,
J.C.NAGAR,
BANGALORE-560 006
2. PRAMERICA ASPF-II CYRUS HOLDING LIMITED,
HAVING ITS REGISTERED OFFICE AT
II FLOOR, FLORINIS STREET,
CITY FORUM, 7TH FLOOR,
1065, NICOSIA, CYPRUS
CORPORATE ADDRESS AT:
KRONOS BUILDING, FLAT NO.501, 66
ARCHBISHOP MAKIROS AVENUE III,
NICOSIA, PC 1077, CYPRUS
REPRESENTED BY MR. RAJIV DUDEJA
...RESPONDENTS
(BY SRI. VENKAT SATYANARAYAN A., HIGH COURT
GOVERNMENT PLEADER FOR RESPONDENT NO.1;
SRI. DHYAN CHINNAPPA, SENIOR ADVOCATE FOR SRI.
PRADEEP NAYAK, ADVOCATE RESPONDENT NO.2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
ALL FURTHER PROCEEDINGS IN C.C.NO.15955/2013 ON THE
FILE OF THE IV ADDL. CHIEF METROPOLITAN MAGISTRATE,
BENGALURU CITY, ANNEXURE-G TO THE WRIT PETITION.
THESE PETITIONS HAVING BEEN HEARD AND RESERVED
FOR ORDER ON 19.09.2023 AND COMING ON FOR
PRONOUNCEMENT OF ORDER THIS DAY, THE COURT MADE THE
FOLLOWING:-
5
ORDER
CRL.P.No.8070/2013 is filed by the petitioners who
were arraigned as accused Nos.6, 8 and 9 in
C.C.No.15955/2013 pending trial before the IV Additional
Chief Metropolitan Magistrate, Bengaluru City (henceforth
referred to as 'Trial Court') for the offences punishable
under Sections 406, 420 and 120B of IPC to quash of the
proceedings in the aforesaid case.
2. W.P.No.54186/2017 is filed by accused No.2 in
C.C.No.15955/2013 pending trial before the Trial Court for
the offences punishable under Sections 406, 420 and 120B
of IPC to quash of the proceedings in the aforesaid case.
3. W.P.No.54221/2017 is filed by accused No.3 in
C.C.No.15955/2013 pending trial before the Trial Court for
the offences punishable under Sections 406, 420 and 120B
of IPC to quash of the proceedings in the aforesaid case.
4. The petitioners are referred to as they were
arraigned before the Trial Court. The petitioners in
Crl.P.No.8070/2013 were accused Nos.6, 8 and 9,
petitioner in W.P.No.54186/2017 was accused No.2 and
petitioner in W.P.No.54221/2017 was accused No.3. The
respondent in Crl.P.No.8070/2013 and respondent No.2 in
W.P.No.54186/2017 and W.P.No.54221/2017 was the
complainant.
5. The complainant filed a private complaint in
PCR No.6154/2013 alleging that accused No.1 was in need
of Rs.110,00,00,000/- for the development of a residential
project on the land measuring 72 acres 3 guntas situated
in various survey numbers of Kundana Hobli, Devanahalli
Taluk, Bengaluru Rural District. The accused No.2 being
the Director of accused No.1, represented to the
complainant that it could make a Foreign Direct
Investment of Rs.110,00,00,000/- in accused No.1 for
mutual gain. Consequently, several agreements were
entered into between the complainant and accused No.1
on 12.02.2009. Pursuant to the said agreements, the
Articles of Association of accused No.1 were revised on
25.02.2009 so that it was in consonance with the
Shareholders Agreement. It claimed that many clauses of
the Shareholders Agreement were mirrored into the
Articles of Association. Consequent thereto, the
complainant invested Rs.110,00,00,000/- pursuant to the
assurances and commitments made by accused No.2. It
alleged that under the Compulsory Convertible Debenture
Subscription Agreement, the complainant agreed to
subscribe to 2,20,000 Compulsory Convertible Debentures
of accused No.1, which were convertible to equity shares
of Rs.5,000/- each, after the expiry of 30 months from the
date of issuance. The accused No.1 issued the debentures
pursuant to a Board Resolution dated 25.02.2009. The
complainant claimed that at a meeting of the Board of
Directors of accused No.1 held on 17.08.2011, it was
agreed that the Compulsory Convertible Debentures would
be converted to 15,00,000 equity shares of a face value of
Rs.10/- each, at a premium of Rs.723.33 per share. The
complainant therefore, contends that it held 75% of the
entire shareholding of accused No.1 since 17.08.2011.
6. It was alleged that on 07.10.2011, accused
No.3 resigned from the Board of Directors of accused No.1
and accused No.2 disappeared without handing over the
records of accused No.1 to the representatives of the
complainant. Therefore, the complainant claimed that it
could not lay hands on the statutory, non-statutory records
of accused No.1. It however, discovered that a part of the
property of accused No.1, on which the development was
to take place, was mortgaged fraudulently by accused No.2
in favour of accused No.6 by executing 4 Deeds of
Mortgage dated 10.11.2009, 19.11.2009, 02.11.2010 and
02.11.2010. The mortgage money was misappropriated
and diverted to accused No.4 in which, accused Nos.2, 3
and 5 were Directors. The complainant alleged that
accused No.1 neither had the property nor had it
developed any property and therefore, the mortgage deeds
prejudiced the interest of the complainant. The
complainant alleged that all decisions and the affairs of
accused No.1 were taken and carried on by accused Nos.2
and 3. It claimed that upon subscribing to the Fully
Convertible Debentures, the complainant was allowed to
be represented in the Board of accused No.1, by
appointing two Non-Executive Directors, who were
expected to acquiesce to the decisions taken by accused
Nos.2 and 3. The complainant claimed that this was done
to ensure that accused Nos.2 and 3 carried on the business
of accused No.1 diligently and in the best interest of the
complainant and accused No.1 by protecting the property,
funds and assets of accused No.1. The complainant
alleged that from the year 2009, accused Nos.2 and 3
were giving false assurances that the investment made by
the complainant is safe and is properly utilized for the
development of the project. It claimed that on 17.08.2011,
accused Nos.2 and 3 created obstacles in the complainant
taking control of the company as it held 75% equity shares
in the accused No.1. It therefore, alleged that accused
Nos.2 and 3 always had a dishonest intention to cause
wrongful loss to the complainant and unjustly enrich
themselves. It contended that the properties of accused
No.1 were mortgaged to the accused No.6 without
following the procedure provided under the Articles of
Association, which mandated that the prior consent of the
complainant should be obtained. Therefore, it was alleged
that the mortgages in favour of accused No.6 was in
violation of the Articles of Association. It also alleged that
there were no Board Meetings and the ones mentioned in
the mortgage deeds were all fraudulent and tailored by
accused No.2 to cheat the complainant and that these
deeds of mortgage were not within the notice and
knowledge of the complainant. The complainant claimed
that there was a clear understanding between it and
accused Nos.2 and 3 that no third party rights can be
created in respect of the property of accused No.1 without
the prior consent of the complainant. Thus, it alleged that
the mortgages were made in breach of trust that the
complainant reposed in accused Nos.2 and 3. It further
alleged that the mortgage money realized from mortgaging
the assets of accused No.1 were diverted to accused No.4
in which, accused Nos.2, 3 and 5 were Directors. Further
thereto, accused Nos.10 and 11, the owners of the land
had given away the development rights to accused No.1.
As a result of the mortgage deed executed, the funds were
diverted for the benefit of accused No.4 and not accused
No.1. The complainant alleged that accused No.4 is neither
a party nor a beneficiary under the Development
Agreement but yet, was a recipient of the funds as a result
of a fraudulent mortgage brought about by accused No.1.
Therefore, it alleged that accused Nos.1, 2, 3 and 4 are
guilty of dishonest misappropriation and fraudulent
conversion of money/property, cheating and criminal
breach of trust. It alleged that accused Nos.6, 7, 8 and 9
though had the complete knowledge that the complainant
held Fully Compulsory Convertible Debentures and though
they were aware that the properties of accused No.1
cannot be mortgaged as it was against the Articles of
Association of accused No.1 and though they were aware
that the mortgage money was diverted for the benefit of
accused No.4 yet, created a mortgage of the properties of
accused No.1 at a value far below the value of the
prevalent market price. Therefore, it alleged that they too
had abetted the commission of the offences. The
complainant claimed that it filed a petition for oppression
and mismanagement before the Company Law Board,
Chennai seeking various reliefs namely, to recover the
Books of Account, for smooth functioning of the
management, for breach of the investor agreement and
violation of the Articles of Association and also challenging
the validity of the Deeds of Mortgage. It therefore, alleged
that all the accused had conspired to commit offences
against it and hence, prayed the Court to take cognizance
and to initiate suitable action.
7. The Trial Court perused the records and held
that there was sufficient material to take cognizance and
consequently took cognizance of the offences punishable
under Sections 403, 405, 415, 418, 420 read with Sections
34 and 120B of IPC in terms of the order dated 06.04.2013
and issued process.
8. Being aggrieved by the same, accused Nos.6,
8, 9 have filed Crl.P.No.8070/2013, while accused No.2
has filed W.P.No.54186/2017 and accused No.3 has filed
W.P.No.54221/2017.
9. The learned Senior counsel appearing for
accused Nos.6, 8 and 9 submitted that accused No.6 is a
company registered under the provisions of the Companies
Act, 1956 and is represented by accused Nos.8 and 9. He
contended that accused No.6 is a lender, in whose favour
mortgage deeds were executed and therefore, it is not
concerned with any interse dispute between the
complainant and accused No.1. He contended that accused
No.6 has given an inter-corporate deposit to accused No.4
for which, accused No.1 has mortgaged certain properties
as collateral security. He contended that if the complainant
had any grievance against accused No.1, then it should
proceed against it and it had rightly done so by moving the
Company Law Board. He contended that the complainant
did not take any steps when the Directors of accused
Nos.1 and 4 utilized the amount received from the accused
No.6 and therefore, the private complaint filed was a ruse
to escape from the liability. He contended that the Trial
Court without looking into the allegations made and also
without considering the fact that the private complaint
presented a serious dispute between a debenture holder
and a company, which was purely civil in nature, blindly
entertained the private complaint and took cognizance.
He contended that the mortgages were executed pursuant
to Board Resolutions of accused No.1, which accused No.6
honestly believed. He therefore, contended that there was
no criminality in the accused Nos.6, 8 and 9 in advancing
an inter-corporate deposit to accused No.4 for which,
accused No.1 provided collateral security by way of
mortgage. Thus, he contended that no offences were
made out against the accused Nos.6, 8 and 9.
10. The learned Senior counsel appearing for
accused Nos.2 and 3 submitted that the case against
oppression and mismanagement filed by the complainant
before the Company Law Board, Chennai, was transferred
to National Company Law Tribunal, Bengaluru in
C.P.No.7/2013 and C.P.No.9/2015 and the Tribunal in
terms of its order dated 26.07.2019, framed the following
issues for consideration :
1) Whether the petitioner, who is holding
majority of 75% of shareholding and having
its nominee Director in R-1 Company at the
time of filing of first case (CP No.07 of
2013) can maintain a petition as the second
case (09 of 2015) is continuation of first
case.
2) Whether the Petitioner Company has
discharged its legitimate duties as majority
shareholders.
3) Whether the allegations of acts of
oppression and mismanagement made in
the petition are substantiated so as to pass
appropriate orders to put an end to the
affairs of Company.
4) Whether the petition became infructuous by
virtue of subsequent agreements made
between the parties.
11. It held that the complainant failed to satisfy
the Tribunal that its initial nominee Director had
discharged his statutory duties as per law leading to his
removal from Directorship. It held that there was no
oppression or mismanagement by accused Nos.1 and 2. It
held that the total shareholding of the complainant was
75% of the total equity paid up capital and that being
majority shareholder, it was under fiduciary duty towards
accused No.1 and its shareholders and instead of
managing the affairs of the company by nominating its
Directors as per the Articles of Association had commenced
litigation against accused No.1. It therefore, held that
accused No.1 and its shareholders had to take remedy and
measures to put accused No.1 on track. Therefore, it held
that there was no case for interference in the functioning
of accused No.1.
12. The learned Senior counsel contended that this
judgment of the Tribunal was challenged before the
National Company Law Appellate Tribunal, Chennai, in
T.A.No.71/2021. The Appellate Tribunal noticed that
parties had entered into a settlement namely, a Share
Purchase Agreement, a Memorandum of Understanding, an
Escrow Agreement and amendment agreement to the
Share Purchase Agreement, which provided that
complainant would sell away its shares to a purchaser
through an Escrow Account and that accused No.2 as a
Director of accused No.1 would execute a General Power of
Attorney in favour of the purchaser of plots of land in
Schedules 'B', 'C' and 'D' of Share Purchase Agreement.
The consideration received from the sale of these plots
would be used to fund the purchase of the complainant's
share as provided under the Share Purchase Agreement. It
noticed that the parties had agreed that the plots shall not
be transferred or disposed off in any other manner and
accused No.1 would execute an unregistered General
Power of Attorney for 3 plots of lands in favour of
complainant. It noticed that this Settlement Agreement
was subject to compliance of certain conditions mentioned
in the Share Purchase Agreement.
13. The learned Senior counsel submitted that
during the pendency of the proceedings before the
Company Law Tribunal, a settlement was arrived at on
29.09.2016 in terms of which, all the Compulsory
Convertible Debentures stood converted to 15,00,000 fully
paid up Equity shares of the company being 75% of the
total share capital of accused No.1. The complainant
agreed to sell and transfer, while the
purchaser/Sharadamba Developers Private Limited had
agreed to purchase the shares on 'as is where is basis' on
conditions contained in the Share Purchase Agreement
dated 29.09.2006. He contended that the parties had
agreed that consideration shall be Rs.557,505,000/- for
15,00,000 equity shares, which would be transferred block
wise of 1,000 each. He further submitted that there were
certain conditions precedent and subsequent to the
execution of the Share Purchase Agreement. In order to
generate the consideration for purchase, it was agreed
that the development rights pertaining to the proposed
project would be assigned in favour of Sharadamba
Developers Private Limited by the accused No.4 and the
consideration receivable from the proposed sale of plots
shall be deposited into the current account of Sharadamba
Developers Private Limited and thereafter, transferred to
the escrow account. A Memorandum of Understanding
was entered into for the purpose of enabling the sale of
plots and to secure the interest of the complainant and
utilise the sale consideration for the sale of shares by the
complainant to Sharadamba Developers Private Limited.
Similarly, a irrevocable General Power of Attorney was
executed by accused No.4 in favour of Mr. Rajesh
Bagwanlal Sen and Mr. Sanjay Dagar as the joint Power of
Attorney to do various acts including encumbering the
properties. He therefore, submits that the issue between
the complainant and accused Nos.1 to 4 was settled in the
aforesaid manner and therefore, the complainant could not
have pursued the private complaint. He submitted that
the complainant is always at liberty to execute the Share
Purchase Agreement and other documents. He therefore,
submits that the continuation of the criminal proceedings
against the accused is wholly unwarranted and wasteful
exercise of time, as the parties have moved on from the
earlier position and the complainant is now not a
debenture holder but is a shareholder in the company.
14. Per contra, the learned Senior counsel for the
complainant submitted that the complainant was made to
believe that accused No.1 was in need of funds to develop
a residential project and consequently, invested a sum of
Rs.110,00,00,000/- into accused No.1 against issuance of
Compulsory Convertible Debentures. He submits that the
Articles of Association of accused No.1 contemplated that
there shall not be any alienation of assets or interest of
accused No.1 without the express consent of the
complainant. Nonetheless, he contends that accused Nos.2
and 3 had mortgaged their interest with accused No.6 and
had diverted the mortgage money to accused No.4. He
therefore, contends that this itself was a clear case of
cheating the complainant. He submits that though the
National Company Law Tribunal, Bengaluru, rejected the
petition filed by the complainant for oppression and
mismanagement, a settlement was entered into in terms
of which, accused Nos.1 to 4 had agreed to ensure the
conversion of Compulsory Convertible Debentures to
equity shares and realize the property interest of accused
Nos.1 and 4 to enable the sale of equity shares allotted to
the complainant. However, he contends that after Share
Purchase Agreement, Memorandum of Understanding and
the General Power of Attorney was executed, accused
Nos.1 to 4 have illegally transferred the plots to various
persons without the notice and knowledge of the
complainant. He therefore, contends that accused Nos.1
to 4 have consistently mislead the complainant and have
misappropriated the sum of Rs.110,00,00,000/- invested
by the complainant. He contends that having regard to
the conduct of accused Nos.1 to 4, they deserve to be tried
for the offences of which cognizance is taken by the Trial
Court.
15. The learned Senior counsel for the complainant
has placed on record certain additional documents to
indicate that notwithstanding the Share Purchase
Agreement, accused No.4 has entered into various
transactions with various persons regarding the plots,
which were reserved to be sold to enable the purchase of
the shares of the complainant and contends that accused
Nos.1 to 4 have a continuing intention to cheat the
complainant and therefore, the accused deserve to be tried
for the offences of which cognizance is taken by the Trial
Court. He contended that the judgments of the National
Company Law Tribunal, Bengaluru and National Company
Law Appellate Tribunal, Chennai are now challenged before
the Hon'ble Apex Court in Civil Appeal Nos.5867-
5868/2023, where the Hon'ble Apex Court has granted an
interim order that the order passed by the Company Law
Board, Chennai Bench, dated 26.03.2013 shall operate till
the next of hearing. He submits that the Hon'ble Apex
Court had also directed that any transaction for sale
brought about by the accused shall be placed on record by
way of documents along with an affidavit. He therefore,
contends that until the Hon'ble Apex Court decides the
issue of oppression and mismanagement, the impugned
prosecution cannot be stopped.
16. The learned Senior counsel for the complainant
relied upon the judgment of the Hon'ble Apex Court in the
case of Central Bureau of Investigation vs. Hari Singh
Ranka and others [2017 SCC Online SC 1837] and
contended that in cases where there are serious
allegations against the accused, a settlement merely deals
with the civil liability but cannot wipe out a criminal liability
of the accused. He therefore, contends that in the
present case, the settlement arrived at between the
parties is not effectuated but on the contrary is flouted
with impunity and the settlement is just a ruse to avoid
being prosecuted.
17. In order to verify the allegations made by the
learned Senior counsel for the complainant, this Court
appointed an Advocate to visit the project area developed
by accused No.4 and submit a report. Accordingly, the
Advocate Commissioner has visited the project area and in
his report, he has stated that the plots mentioned in
Schedule 'B' of the Share Purchase Agreement were
identified and that there were no construction on the said
sites.
18. I have considered the submissions made by
the learned Senior counsel for accused Nos.6, 8 and 9 as
well as the learned Senior counsel for accused Nos.2 and 3
and the learned Senior counsel for the complainant.
19. It is relevant to note that the private complaint
lodged by the complainant was on 14.03.2013 by which
time, the Companies Act, 1956 was still in force. The Trial
Court took cognizance of the offences punishable under
Section 403, 405, 415, 418, 420 read with Sections 34 and
120B of IPC.
20. It is not in dispute that accused No.1 was
incorporated inter alia to purchase or otherwise take on
lease and deal in real and personal property of all kinds
and in particular, land, building, equipment etc., Accused
No.1 was in need of Rs.110,00,00,000/- for development
of a residential project on the land measuring 72 acres of 3
guntas at Kundana Hobli, Devanahalli Taluk, Bengaluru
Rural District. It is also not in dispute that on the strength
of representations made by accused No.2, the complainant
agreed to make a Foreign Direct Investment of
Rs.110,00,00,000/- in accused No.1. Thus, in order to
effectuate the investment, a Compulsory Convertible
Debenture Subscription Agreement dated 12.02.2009,
Shareholders Agreement dated 12.02.2009, Put and Call
Option Agreement dated 12.02.2009 and Cash
Management Agreement dated 12.02.2009 were executed.
As a result, the Articles of Association of accused No.1
dated 23.10.2008 were revised on 25.02.2009 so that it
was in sync with the Shareholders Agreement dated
12.02.2009. Consequent thereto, the complainant
invested a sum of Rs.110,00,00,000/- and it agreed to
subscribe to 2,20,000 Compulsory Convertible Debentures
of a face value of Rs.5,000/- per debenture. It is also not
in dispute that these Compulsory Convertible Debentures
were to be issued for an aggregate consideration of
Rs.110,00,00,000/- and were to be converted to equity
shares after the expiry of 30 months from the date of
issuance. It is also not in dispute that Compulsory
Convertible Debentures were allotted to the complainant
pursuant to a Board Resolution dated 25.02.2009. It was
further agreed that the Compulsory Convertible
Debentures would be converted to equity shares of face
value of Rs.10/- each and thus were converted 15,00,000
equity shares of Rs.10/- each, which were issued at a
premium of Rs.723.33 per share. It is also not in dispute
that accused No.3 resigned from the Board of Directors of
accused No.1 on 07.10.2011 and the same is evident from
Form No.32 filed before the Registrar of Companies. It is
not in dispute that the Articles of Association of accused
No.1 provided that the accused and the complainant shall
not directly or indirectly take any steps of any nature to
authorise or permit accused No.1 to become bound or
committed to any such resolution or transaction unless
such resolution or transaction was approved at a meeting
of the Board by the Directors constituting a majority of the
entire Board, which was to include at least one Promoter
Director and at least one Investor Director or at a
shareholders' meeting by the Investor and either of the
Promoters, unless such resolution or transaction was
specifically approved by the Investor in writing within a
period of 7 days from the date on which, accused No.1
issued a notice to the Investor requiring it to consent or
reject any "consensus matter", provided however that if
the Investor failed to consent to such consensus matter
within the aforesaid 7 days period then the Investor shall
be deemed to have rejected such "consensus matter".
The areas that required consensus between the Director
and the Investor was the acquisition or disposal by the
company of any material, land or other immovable
property, assets of business or the encumbering in any
manner of any material asset of the company whether by
mortgage, pledge, hypothecation or otherwise. It is not in
dispute that accused No.1 represented by accused Nos.2
and 3 executed four mortgage deeds dated 10.11.2009,
19.11.2009, 02.11.2010 and 02.11.2010 respectively
mortgaging the development rights that it had in the
project for bringing about an inter-corporate deposit in
favour of accused No.4 of which, accused No.2 was a
Director. The mortgage deeds disclosed that such
encumbering development rights was based on certain
resolutions brought about by accused Nos.2 and 3 to which
the complainant was not a party and no consensus was
arrived between them. The development rights that
accused No.1 had therefore, stood vested in favour of
accused No.6, while the mortgage money was transferred
to accused No.4 without the express notice, knowledge
and consent of the complainant. This therefore, had all
the features of an offence of cheating punishable under
Section 420 of IPC.
21. It is also not in dispute that the complainant
alleging oppression and mismanagement in the affairs of
accused No.1 had initiated proceedings before the
Company Law Board, Chennai, which had passed an order
dated 26.3.2013. It is undisputed that the said case stood
transferred to National Company Law Tribunal, Bengaluru,
which passed an order dismissing the petition filed by the
complainant. An appeal filed by the complainant before the
National Company Law Tribunal, Chennai, also was
dismissed. It is not in dispute that an appeal in Civil Appeal
Nos.5867-5868/2023 is now pending before the Hon'ble
Apex Court, where the Apex Court has passed an order
dated 18.09.2023 that the interim order passed by the
Company Law Board, Chennai, dated 26.03.2013 shall
operate till the next date of hearing. This Civil Appeal
Nos.5867-5868/2023 is still pending consideration before
the Hon'ble Apex Court.
22. It is relevant to note that in an effort to settle
the dispute between the accused and the complainant, a
settlement was arrived at in terms of which, accused Nos.1
and 2 entered into a Share Purchase Agreement involving
Sharadamba Developers Private Limited, who agreed to
purchase 15,00,000 equity shares of the complainant. An
Escrow Agreement was entered into between the seller,
purchaser and the Escrow Bank to comply the terms of the
sale and purchase of the shares held by the complainant.
As per this arrangement, the complainant had agreed to
sell and deliver the relevant tranche of shares to the
purchaser (Sharadamba Developers Private Limited) on 'as
is where is basis' free from all encumbrances. The
consideration for the purchase of shares was agreed at a
sum of Rs.557,505,000/- for 15,00,000 shares. The
transfer of these shares would take place only after
commensurate saleable block price was available in the
Escrow Account. The conditions precedent to execute this
Share Purchase Agreement was that accused No.1 and
Sharadamba Developers Private Limited had to obtain
permission from the Bangalore International Airport Area
Planning Authority, nil encumbrance certificates, consent,
approval, sanctions from the Government, payment of
provident funds dues and split the share certificates in
distinct share certificates of blocks of 1000 shares each.
The conditions subsequent to the execution of the Share
Purchase Agreement were that within a period of 10 days
from the compliance of the conditions precedent, a General
Power of Attorney had to be executed in favour of Mr.
Rajesh Sen and Mr. Sanjay Dagar with respect to
development and sale of 25 plots as described in Schedule
'B'. Likewise, a General Power of Attorney had to be
executed in favour of Mr. Rajesh Bagwanlal Sen and Mr.
Sanjay Dagar and a Special Power of Attorney had to be
executed in favour Mr. Sanjeev Khatri with respect to
development and sale of 3 plots as described in Schedule
'C'. Though the said documents were executed but the
documents produced by the complainant disclosed that
accused Nos.1 and 2 had brought about various
agreements to sell the plots that were the subject matter
of the Share Purchase Agreement. Therefore, the conduct
of accused Nos.1 and 2 in not trying to resolve the issue
but trying to further complicate the case, indicates a
further attempt to cheat the complainant. As rightly
contended by the learned Senior counsel for the
complainant, the Share Purchase Agreement and the
consequent documents tried to put at rest the civil liability
of accused Nos.1 to 4 but it did not efface the criminal
liability arising out of their attempt to cheat the
complainant. Therefore, accused Nos.1 to 4 are bound to
stand trial for the offences of which cognizance is taken by
the Trial Court.
had held meetings of the Board of Directors whereat, it
was decided to furnish the development rights of accused
No.1 as collateral security for an inter-corporate deposit
for accused No.4 and whether the Board Resolution leading
up to the execution of the mortgage deeds are genuine or
not and also whether accused Nos.6, 8 and 9 had
conspired with accused Nos.1 to 3 in bringing about
mortgage deeds despite knowing the fact that they could
not have been brought about without the consensus of the
complainant, are all matters of fact, which had to be
established at the trial and cannot be wished away on the
ground that they presented a civil dispute between the
parties. If the allegations contained in the private
complaint lodged by the complainant are taken at its face
value then too, they constituted an offence punishable
under Section 420 of IPC.
24. In that view of the matter, these petitions do
not merit consideration and the same are dismissed.
25. However, the prosecution that may be initiated
by the Trial Court shall be subject to the outcome of the
proceedings pending before the Hon'ble Apex Court in Civil
Appeal Nos.5867-5868/2023.
Sd/-
JUDGE
PMR
