Telangana High Court

Sukesh Gupta vs State Through Cbi on 13 August, 2024

        THE HONOURABLE SMT. JUSTICE K. SUJANA



             CRIMINAL PETITION No.4396 of 2023

ORDER:

This Criminal Petition is filed by the

petitioner/accused No.1 (A.1) under Section 482 of the Code

of Criminal Procedure, 1973 (for short 'Cr.P.C.') to quash the

proceedings against him in C.C.No.7 of 2015 on the file of

Principal Special Judge for CBI Cases, Hyderabad. The

offences alleged against the petitioner are under Sections

120-B, 409, 420, 465, 471, 477-A of Indian Penal Code (for

short 'IPC') and under Section 13 (2) r/w.13 (1) & (d) of the

Prevention of Corruption Act, 1988.

2. The facts of the case are that the General Manager of

the 2nd respondent-M/s.Mineral and Metal Trading

Corporation (MMTC) who is the defacto complainant gave

complaint alleging certain irregularities with regard to the gold

transactions committed by the officials of MMTC in connivance

with private persons causing wrongful loss to a tune of

Rs.194.4 Crores to MMTC and alleged the following

irregularities :

"(i) That the exposure started from September 2011.

However, GM, MMTC Hyderabad, vide his message dt. 14.12.2011 informed for the first time a figure of Rs.43.44 crore as exposure on account of MBS Group. The actual position was concealed in his message since the exposure stood at Rs.72.68 crore on that date itself.

(ii) MMTC, Hyderabad did not collect the mandatory 5% extra additional security for keeping the forex open.

iii) MMTC Hyderabad continued to supply gold to M/s MBS Group against BGs and FDRs without covering the exposure by taking additional securities.

iv) Debit/credit notes of huge amounts were passed without any narration.

v) Vendor account and foreign currency loan account were falsely prepared/fudged to conceal the out standings pertaining to MBS.

vi) Laid down office procedure before issue of gold on loan, was not adhered to in majority of the cases.

vii) Bank statements giving details of buyer's credit liability and forward cover certificates from the banks were manipulated/fudged to conceal the actual liability against MBS and to get the accounts cleared by the statutory auditors on 31.03.2012.

vill) that officials of MMTC Hyderabad were communicating in parallel with MBS for recovery of outstanding dues. A mail dated 02.02.2012 sent to MBS Jewellers enclosing there with a statement showing Rs.181.39 crore as recoverable from the party is indicative of the fact that RO Hyderabad deliberately concealed this exposure from the CO. GM, Hyderabad, and DGM (Fin.) vide their letter dt. 23.02.2012, confirmed to Corporate Office that all loan transactions are fully covered and overall exposure is to the tune of Rs.43.44 crore, thereby again concealing the actual liability.

ix) A quantity of 500 kg gold was taken from Standard Chartered Bank, London as Supplier's Credit for 90 days and it was issued to MBS Group in Jan. 2012 and was duly priced/fixed upto 31.03.2012 with value/payment dates in April 2012. This position of outstanding liability was not revealed in the books of accounts as on 31.03.2012. To offset the liability against this transaction, MMTC Hyderabad made outright gold sales to other parties and the money so collected was utilized to repay the earlier outstanding loans of MBS. For which outright gold sales, buyer's credit was taken in MMTC'S account, thereby deferring the payment obligation.

x) MMTC's own funds amounting to Rs.37 crore was utilized, source of which could not be traced.

xi) In April 2012, it was agreed by Corporate Office to re-commence business with M/s MBS subject to their depositing Rs. 10 crore by 24.05.2012 and Rs.5 Crore by 31.05.2012 (total cash deposit of Rs.15 crore) besides MBS depositing jewellery to cover the outstanding dues of Rs.43.44 crore. Business was to commence with infusion of fresh funds by M/s MBS Group after the deposit of Rs 10 crore which was to be adjusted against the dues. Despite these clear instructions dt 24.05.2012 of Corporate Office, MMTC Hyderabad issued 35 Kgs gold adjusting Rs.10 crore deposited towards outstanding to MBS Group on 28th and 29th May, 2012 ignoring the CO Instructions. While reporting the position as on 15.06.2012, GM Hyderabad, informed that Rs.10 crore was adjusted and the dues of MBS was reduced to Rs.33 crore. The material fact of dishonor of these cheques valuing Rs 10 crore was never reported to Corporate Office."

3. Basing on the above irregularities, the matter was

investigated and charge sheet was filed for the offences under

Sections under Sections 120-B, 409, 420, 465, 471, 477-A of

Indian Penal Code (for short 'IPC') and under Section 13 (2)

r/w.13 (1) & (d) of the Prevention of Corruption Act, 1988 and

under Section 65 of the I.T.Act. After the investigation, the 1st

respondent found that M/s.MBS Impex Pvt. Ltd, represented

by its Managing Director Sukesh Gupta i.e., petitioner herein

addressed letter dated 23.11.2005 to the General Manager,

MMTC, Hyderabad requesting him to register their company

with MMTC for starting bullion business on loan basis under

Open General Licence (OGL) Scheme.

4. Subsequently, a Memorandum of Understanding

(MOU) was entered on 25.11.2005 between MMTC Limited and

M/s.MBS Impex Pvt. Ltd., represented by the petitioner.

According to the MOU the customer shall always keep

minimum of 10% of the notional value of the gold to be lifted

as margin money and shall request MMTC for fixation of the

material. In view of the volatile nature and fluctuation of

international prices on day-to-day basis, the customer shall

always keep 110% of the notional value of the gold taken on

loan from MMTC and the customer shall make additional

security as and when required by MMTC without any protest.

That in case customer fails to pay the value of the material lent

together with interest on the due date, MMTC will immediately

invoke the bank guarantee or encash the FDRs given as

security without any recourse, reference or intimation to the

customer and realize the proceedings thereon to make

payment to the overseas supplier and the excess, if any, shall

stand forfeited to MMTC and in such an event the customer

will not be eligible for further gold loan from MMTC due to

default. In the said MOU there is an arbitration clause

wherein arbitrator shall be appointed by the General Manager,

Hyderabad. Based on the said MOU business was commenced

with the MBS group and the gold was being issued to it against

Bank guarantee. The Precious Metal Division (PMD) of MMTC

deals with the Bullion Trade and the said division consists of

Commodity officers and Finance Officers. During the year

2011-12 and 2012-13, accused Nos.4 to 9 worked in the said

PMD division. Accused No.2 is the General Manager of MMTC

Ltd., Regional Office, Hyderabad. As per the procedure for

issue of gold to the party, based on the requirement of various

parties, the Regional office, MMTC Ltd., places consolidated

indent through Central Bullion Operation division of Corporate

Office of MMTC, which in turn forward the indent to the foreign

supplier for sending the material to the location. Based on the

said indent of MMTC Ltd., the supplier sends gold to

Hyderabad on consignment basis. Then the customer will be

intimated about the approval of gold and he is asked to price

the gold through CBO at which the payment is to be made by it

to MMTC for arranging the delivery. After the pricing is over,

the CBO informs the pricing particulars to Regional Officer,

Hyderabad. Based on the pricing done, the PMD prepare a

process note indicating the amount to be collected and sends

to finance for verification. The finance officer of PMD will verify

the amount and sends back to PMD for collecting the payment

from the customer. After the customer deposits money in the

bank account of MMTC, the PMD Officer requests the

Associate finance to verify and confirm the payment made by

the customer. After confirming of receipt of payment, the note

for delivery of gold is submitted to the General Manager,

through DGM for approval for delivery of gold. Once approval

is given by the General Manager, delivery challan is generated

through Bullion Trading System by PMD Officials. After the

Delivery Challan (DC) is generated, the same shall be signed by

two authorized signatories of PMD and one finance officer,

then DC would be sent to the custodian with a copy to the

customer for arranging delivery to the authorized

representative of the customer directly. On receipt of

confirmation of delivery the finance officer of PMD shall

prepare the invoice through BTS and send the same to the

customer and obtains acknowledgement. In case of loan

transactions, the strength of bank guarantee, fixed deposits

and availability of securities shall be verified by both the PMD

and finance officials.

5. In the present case, according to the 1st respondent,

investigation revealed that while placing indent on the Central

Bullion Division, New Delhi, a certificate of Bullion indent

clearance cum compliance report is required to be given

certifying inter alia that there is no exposure on account of any

customer for any bullion transaction and there is no foreign

exchange exposure on any customer. But the said certificate

was issued on the indent placed falsely certifying that there

was no exposure on any customer though, there was exposure

on account of MBS group companies by the above accused

knowing fully well, in order to conceal the exposure

deliberately by abusing their official position.

6. According to their investigation, they found that in

many cases, the required process notes was not initiated and

approval was not obtained, whereas delivery was affected

without obtaining approval of competent authority adhering to

the provisions of bullion drill. Further in the charge sheet it is

mentioned that as per procedure the DCs should be signed by

three officials i.e., two from PMD and one finance officer. The

delivery challans were signed by the officials Sri K.V.Prakash,

Sr. Manager, Sri A. Vijay Bhaskar, Deputy Manager, Sri

A.Sarvanan, Deputy Manager from PMD and Sri K.Ravi

Prasad, Senior Manager and Sri S.Prashanth, Deputy

Manager. In some case, Sri Anantha Krishna, DGM Finance

and Sri V. Mohan Rao, GM, had also signed the DCs and

delivered the gold in violation of bullion drill procedure without

collecting the additional margin money as required. Once DC

was issued and bullion delivered to the customer, the finance

in charge of PMD is required to generate invoice though EPR

system, but the same was not done in many of the cases and

there was abnormal delay in generation of invoices and it is

due to the fact that the forward cover on the Buyers credit

availed in respect of delivery to MBS group was not taken in

violation of bullion drill. As such, the liability on the bullion

delivered to the customer i.e, MBS was not crystalised in the

absence of forward cover. Further, the Buyers credit facility is

given to the customer by MMTC on the strength of bank

guarantee or fixed deposit as security. The credit facility is

entered into between the Bank and MMTC at the request of

customer which is for a period of 90 days from the date of

Airway bill. The foreign exchange exposure in respect of

Buyers credit had to be covered through forward cover.

However, the customer had an option to keep it open by

placing extra margin of 5% with MMTC. The charges/premium

paid to the bank for taking a forward cover to hedge the foreign

currency was also on account of the customer and had to be

debited to their account. In case the customer opted for not

covering the foreign currency exposure, through forward cover,

the foreign exchange loss, if any, on the due date of the

Buyer's credit was to be to the account of customer and

required to be debited to their account.

7. In case, FDR duration is more than 90 days i.e.,

beyond the maturity date of Buyers credit, the customer is

required to deposit funds with MMTC, so that same amount

be deposited with the bank to discharge the liability on

account of Buyers credit and its maturity date.

8. The security is given in the form of BG for 110% value

of the metal. On maturity of the Buyers credit, the party

would repay the loan with all applicable charges and bank

guarantee liabilities are discharged. According to the

investigation, the credit facility was extended to MBS group of

companies during the year 2011-12 in several loan

transactions arranged from various banks in the name of

MMTC on behalf of MBS group companies. The request for the

said buyers was made in writing by MMTC through authorized

signatories to the Bank. The said letters were signed by

accused Nos. 2 to 5. The details of working in respect of the

said buyers credit transactions of 42 value dates and losses

incurred out of those transactions were to the extent of Rs.387

crores as on 31.03.2012 and on due date of maturity the

amount was required to be paid by MBS group of companies in

order to liquidate the loans taken from the banks. The

transactions of Buyer's credit are not secured by taking

forward cover to bridge the risk factor against foreign exchange

fluctuations. Further, the forex should not be kept open

without hedging the same, whereas, the forex position was

kept open at the request of accused No.1 and for keeping the

forex position open, an additional amount of cash deposit of

5% of the forex rate was required to be collected, but the same

was not collected in violation of bullion drill by the accused

officials in connivance with accused No.1. As such, the net

payable amounts to the banks exceeded compared to the

securities held by MMTC against the Buyers credit

transactions.

9. The repeated issue of gold without collecting the dues

earlier incurred forex losses resulted in accumulation exposure

on account of MBS group of companies to a tune of Rs.387.95

Crores as on 31.03.2012, for which there was only security to

the extent of Rs.167 Crores in the form of bank guarantees.

Thus, there was a shortage of security for the exposure of

Rs.220.95 Crores.

10. In the investigation it is also revealed that fictitious

entries were made in the MMTC books of account i.e., ledger of

MBS group. The said fictitious entries made with regard to the

fake receipts from MBS jewelers to the extent of

Rs.52,10,30,500/- on 31.12.2012 and another fake receipt

from MBS Impex to the extent of Rs.124,98,70,000/- on

31.03.2012 amounting to Rs.177,09,00,500/- which is to be

added to the recoverable amount of Rs.210,87,50,987/- from

the MBS group as per the reconciliation of accounts all these

credits were false credits. If this amount is added the total

recoverable amount would be Rs.387.96 Crores.

11. According to the investigation of CBI against exposure

on account of MBS group was about Rs.220 Crores as on

31.03.2012 which was brought forward from December, 2011

onwards. This is confirmed from the email sent on 21.12.2011

to MBS group representatives. The corporate office of MMTC

was informed the exposure as Rs.43.44 Crores in December

2012. The accused No.5 was communicating periodically with

the MBS group of companies informing about the outstanding/

recoverable amounts from them along with relevant calculation

sheets pertaining to outstanding dues.

12. The process of concealing the actual exposure and

limiting it to the under reported amount of Rs.43.44 Crores,

the Buyers Credit outstanding statement issued by the State

Bank of India, CAG Branch, Hyderabad on 31.03.2012 was

manipulated by accused No.5 by removing the figure of USD

4156448.45 for the BC due date 18.04.2012 and total figure of

USD 61875153 from the original statement of SBI and the said

figure was replaced with the figures of USD 2764568.45 for the

due date 18.04.2012 and total figure with USD 60483273.60.

13. For the purpose of resumption of business in view of

huge outstanding liability of MBS group the corporate office of

MMTC has instructed the Regional office of MMTC to stop

business with the MBS group and based on the proposal of

MBS group for resumption of business, has put some

conditions to MBS group for resumption of business. To fulfill

the conditions, the MBS group of companies gave cheques, but

the said cheques were returned upaid and the said fact was

not brought to the notice of CO, MMTC and instead, the mail

dated 28.05.2012 was sent confirming the receipt of funds

though the cheques were returned unpaid on 26.05.2012.

Further, an amount of Rs.10.30 Crores was received from MBS

on 28.05.2012 and the same was deposited in Axis Bank and a

quantity of 35 Kg gold was issued to MBS Jewellers on

28.05.2012 and 29.05.2012 vide Dcs No.32 for 10 kg, 33 for

10 kg, 35 for 5 kg and 36 for 10 kg instead of adjusting the

said amount against the earlier dues in violation of the

corporate office, MMTC instructions and misguiding it.

Though the outstanding amount was under reported as 43.44

Crores the actual exposure having known to the officials of

MMTC, they have not obtained additional securities from

Sukesh Gupta-accused No.1 of MBS group of Company in the

form of equitable mortgage of landed property situated in

Sy.No.172 of Hydernagar. The said mortgage deed clearly

indicates mortgage for repayment severally of advances already

made in by MBS group of companies in respect of outstanding

amounts. Though the deposit of title deeds is the main issue

in the mortgage of property involved, the original title deeds

were not obtained from accused No.1 by the officials in

furtherance of conspiracy who were signatories for mortgage

deed as executant and witness respectively. The MMTC is now

in possession of colour photocopy of original title deed and it is

in the name of MMTC, registered in Sub-Registrar Office,

Kukatpalli as revealed during the course of investigation.

Further, accused No.1 was sanctioned loan under BG facility

for Rs.50 Crores from Andhra Bank, Somajiguda, for which he

has given Ac.5.00 situated in Hydernagar as security which

was mortgaged on 26.09.2011 and the original title deeds were

deposited with the said Bank. However, subsequent to the

mortgage, the loan of bank guarantee was cancelled and not

released as the earlier consortium loan account of MBS

Jewellers was found to be unsatisfactory. But, the original title

deeds were not released to Sukesh Gupta, in view of the earlier

outstanding of loans under consortium arrangement with a

view to cover the security to the said outstanding as there is a

condition memorandum of understanding that the property

offered as security can be used for any credit facility of the

company to the bank other than the purpose for which the

security is offered. But this fact was concealed with the MMTC

and mortgaged the same property and registered to MMTC.

14. The investigation further revealed that the MD of MBS

group could not pay the outstanding dues payable by him to

the MMTC and also in view of the findings of the three member

committee inspection report in September, 2012 and the

Directors inspection findings that huge amounts to the extent

of Rs.181.39 Crores were outstanding than the reported

exposure amount of Rs.43.44 Crores, the management of the

MMTC took steps for recovery of the dues from MBS group and

persuaded the MD of MBS group for making payment of the

dues payable to MMTC by MBS group. As a result,

memorandum of understanding was executed on 05.10.2012,

which indicates that on 03.10.2012 on the invitation of MMTC

the MBS group participated in the good faith negotiations in

which the MMTC acknowledged that the MBS group has

shown its bonafide by taking on the liability of Rs.181.39

Crores, apart from interest as intimated by MMTC without

prejudice which indicates that the liability was accepted by

accused No.1.

15. Pursuant to the said MOU accused No.1 submitted

certain original title deeds of immovable properties at

Hyderabad which are in the names of his family members, post

dated cheques for Rs.130 Crores, jewellery claimed to be of

Rs.41.32 Crores, personal and corporate guarantees in

addition to Rs.50 Lakhs amount paid by way of cheques. On

15.09.2011, Sri Suresh of MBS group has given a letter

requesting to keep the forex open and the same may be

finalized on the value dates. He further stated that the

eventual difference shall be arranged by them on the due date

at the time of repayment and requested not to adjust the

differential amount from the repayment and allow the reissue

of metal as usual and amounts pertaining to forex dues would

be paid separately. On 14.02.2012, the accused No.1

confirmed the dues payable to MMTC arising out of the dollar

rupee exchange difference and the same would be paid by

them separately. The GM has addressed various letters to the

MD of MBS group informing that security is falling short and

to provide the security to take care of volatility of dollar-rupee

exchange rate. Further, there were several audits conducted

during the period 2011-12 by Professional Internal Auditors,

Concurrent Auditors, Statutory Auditors, but none of them

ever pointed out about the actual exposure, except exposure

reported by the RO, MMTC in December 2011 i.e., 43.44

Crores. It is the primary duty of any auditor to report the

shortcomings and irregularities, whereas none of the said

agencies have gone into the entire gamet of transactions to

verify the reported exposure by RO was in order and there is

more to it. They have not gone into verification of DC wise

transaction and exposure relating to internal audit party has

also in its quarterly audit reports state that everything is in

order and no deviation was found. Similarly the statutory

auditors have also not pointed out anything adverse except the

already reported exposure.

16. According to respondent No.1, the role of this

petitioner is that the MBS Group of Companies is consisting of

MBS Jewellers Pvt. Ltd., and MBS Impex Pvt. Ltd., represented

by Sri Sukesh Gupta, Managing Director has received gold

from MMTC on Buyers Credit loan basis by keeping the forex

position open without taking additional 5% margin money

because of which MMTC suffered exposure to a tune of Rs.220

Crores. He has also given a letter to MMTC asking them to

keep the forex open and received the gold knowingly though

the outstanding dues were there in connivance with the public

servants. He also gave a cheque for Rs.10 Crores for

resumption of business knowingly well that there was no

balance in his bank account for receiving gold. The company

dues were paid by the public servants using the MMTC funds,

FDRs without approval of the Corporate Office of MMTC, New

Delhi.

17. The CBI also collected hard disk of the computers

used by the accused were sent to CFSL for furnishing the data

and reply sent along with the data submitted a CD confirmed

the buyers credit outstanding and amount recoverable from

MBS Group in respect of 42 value dates mentioned earlier

along with summery sheet pertaining to all DCs for a total

quantity of 16155 kg gold and showing the total recoverable

exposure amount of Rs.215.49 Crores. Hence, filed the charge

sheet showing the role of each accused.

18. The petitioner filed this petition for quashing of the

proceedings against him on the ground that MMTC already

filed suit for recovery of the amount alleged to be due from the

petitioner. In such circumstances, it is apparent that the

criminal proceedings are initiated simply to short cut to other

available remedies. The MMTC initiated criminal proceedings

to circumvent the breach of terms of MOU from its end, upon

which second arbitration notice was issued by the petitioner.

The MMTC did not accept the request of petitioner for

reconciliation of accounts. The reconciliation of account would

bare the exact amount of losses, if any. The petitioner in the

absence of reconciliation accepted to take on the alleged forex

loss liability of Rs.181.39 Crores in good faith with an

understanding to resume the business. The losses alleged to

have been caused to MMTC was solely attributable to the

officials of MMTC. The suspension of the officials of MMTC will

confirm the negligence on the part of MMTC, is fastened on the

petitioner. The alleged losses were caused to MMTC on

account of non-monitoring of the exchange rate and non-

taking of the forex cover, it is on account of negligence of

MMTC in monitoring its officials, therefore, petitioner/s

company suffered heavy loss. The alleged losses suffered

under the Contract would trigger a commercial or civil dispute

but not the criminal proceedings. There is no intention to

cheat or dishonestly induce MMTC or its officials from the

inception of contract.

19. On the contrary, the buyer gave large business to

MMTC resulting in huge profits, that registration of FIR itself is

illegal and it is nothing but conversion of civil remedy into a

criminal offence. MMTC merely to cover its lapses even post

execution of MOU upon breach of terms lodged a complaint

against the petitioner ignoring the MOU dated 25.11.2005 and

05.10.2012. It is settled law that a purely civil dispute arising

out of contractual relationship between the parties cannot be

converted into criminal offence in order to get favourable result

and relied on the judgment of the Hon'ble Supreme Court in

Indian Oil Corporation Vs NEPC India Limited & Others 1,

wherein, the Hon'ble Supreme Court observed that any effort

to settle civil disputes and claims, which do not involved any

criminal offence by applying pressure through criminal

prosecution should be deprecated and discouraged. The

dispute between the petitioner and MMTC is purely

commercial transaction to be conducted as per the terms of

MOU. The liability on the part of petitioner arose only due to

derivative losses resulting from the USD-Rupee exchange rate

fluctuation, that too due to bullion drill. The MMTC cannot

foist any provisions pertaining to fabrication of documents,

manipulation of accounts and records of MMTC, on the

1 (2006) 6 SCC 736

contrary the officials of MMTC failed to maintain and follow the

bullion drill. Further it is submitted that it is settled law that

invoking provisions of criminal law to recover the amounts

which a party is unable to recover by civil mode is an abuse of

process of law and relied on the judgment in State of Haryana

Vs Bhajan Lal2.

20. A bare perusal of the charge sheet and the charges

framed against the petitioner for the offences under Section

120-B, 409, 420, 471 and 477-A of IPC have not been made

out. On the contrary, these offences are foisted against the

petitioner simply because he is the representative of MBS

Group and relied on the judgment of the Hon'ble Supreme

Court in Omkar Nath Mishra and others Vs State (NCT of

Delhi) and another 3, wherein it is observed that what needs to

be considered is whether there is a ground for presuming that

the offence has been committed and not a ground for

convicting the accused has been made out. At that stage even

strong suspicion founded on material which leads the Court to

form a presumptive opinion as to the existence of the factual

ingredients constituting the offence alleged would justify the

framing of charge against the accused in respect of the

2 AIR 1992 SC 605 3 (2008) 2 SCC 561

commission of that offence. Hence, prayed the Court to quash

the proceedings against the petitioner in C.C.7 of 2015.

21. Heard Sri Abhinav Mukherjee, learned Senior counsel

appearing for Sri Rajesh Kumar Heroor, learned counsel for

the petitioner on record, Sri T.Srujan Kumar Reddy, learned

Standing Counsel appearing for CBI-1st respondent and Sri

Manu, learned counsel appearing for the 2nd respondent.

22. Learned counsel for the petitioner filed written

arguments. Learned Standing counsel for the 1st respondent

filed written arguments and also filed counter and learned

counsel for the 2nd respondent also filed counter.

23. Learned counsel for petitioner in his written

submissions stated that the case is of civil nature and the facts

disclose no criminal offence as there is MOU between the

parties and as there is also an arbitration clause in the said

MOU, the matter was referred to arbitrator. The

Memorandum of deposit of title deeds was executed by the

petitioner in favour of 1st respondent as the original documents

were to be released by Andhra Bank. There was no loan

availed against these title deeds which is part and parcel of the

charge sheet. Further, as the documents were not released,

there was no credit facility or credit of whatsoever nature was

availed by the petitioner's companies against these documents.

The issues in this case was also being monitored by the

corporate office of the 2nd respondent, as the 2nd respondent

continued to make illegal demands, they were compelled to

invoke the arbitration in terms of Clause 12 of the first MOU.

Further with a view to avoid arbitration to cover up their

lapses, the 2nd respondent approached the purchaser

companies and made a representation that it would

recommence business with them, if they accept the forex loss

liability of the 2nd respondent and withdraw its arbitration

invocation notice. It is further stated that in the light of the

good faith negotiations, the parties executed another MOU on

05.10.2012 (second MOU). The second MOU recognizes that

parties had carried out business successfully for almost eight

years prior to the incident without any hitch. As per the

second MOU, petitioner also provided additional securities in

compliance of the MOU dated 05.10.2012 of approximately

Rs.600 Crores, which shows the bonafides of the purchaser

companies and maintained good business relations being

conscious of the reputation in society. It is further stated that

in addition to additional securities the 2nd respondent was

holding jewellery which they have taken from the petitioner's

companies for exhibition-cum- sale basis as the 2nd respondent

used to conduct exhibition for sale of Jewellery in various

places India. The value of the jewellery is Rs.528 Crores. As

the liability is a contractual liability, therefore, no case is

maintainable. As the companies are not made as accused, no

vicarious liability can be fastened against the petitioner merely

because he is a Director.

24. Learned counsel for the petitioner relied on the

judgment of the Hon'ble Supreme Court in Sushil Sethi Vs

State of Arunachal Pradesh 4, wherein it is observed that

Sections 409 and 420 of I.P.C cannot be made out together as

ingredients of both are different. He also relied on the

judgment of Hon'ble Supreme Court in Mahindra & Mahindra

Financial Services Vs Delta Classic Pvt. Ltd 5. Hence,

prayed the Court to quash the proceedings against the

petitioner.

25. The 1st respondent filed written submissions stating

that petitioner played key role in misappropriation and the

officials of MMTC criminally conspired and colluded with

petitioner and other Directors of MBS for extending wrongful

gains to M/s.MBS, by acting dishonestly or fraudulently, the

officials have caused wrongful losses to MMTC, with criminal

4 (2020) 3 SCC 240 5 (2011) 6 Gauhati Law Reports 604

intent. Further, there are certain fictitious entries made in

MMTC books of account i.e., ledger of MBS group. The said

entries are made with regard to fake receipts of jewellery to the

extent of Rs.52,10,30,500/- and another fake receipt from

MBS Impex to the extent of Rs.124,98,70,000/- totaling to

Rs.177,09,00,500/- to be added to the recoverable amount of

Rs.210,87,50,987/-. Further, the petitioner herein admitted

the said amount and the MBS Group of Companies consisting

of MBS Jewellers Pvt. Ltd., and MBS Impex Pvt. Ltd.,

represented by the Sukesh Gupta, Managing Director, has

received gold from MMTC on Buyers Credit Loan basis by

keeping the forex position open without paying the additional

5% margin money because of which MMTC suffered exposure

to a tune of Rs.220 Crores. He himself gave a letter to the

MMTC asking them to keep the forex open and received the

gold knowingly though the outstanding dues were there in

connivance with the public servants. He also gave cheques for

Rs.10 Crores knowing fully well that there is no bank balance

and his company dues were paid by the public servants using

the MMTC funds, FDRs without the approval of corporate office

of MMTC, New Delhi. Though the counsel for petitioner

contended that the matter is of civil nature, there exists

multiple commercial transactions and the charge sheet clearly

establishes violations with criminal intent. The inherent power

of the High Court should be used sparingly. The Court can

only come to conclusion when there is manifest injustice or

there would be abuse of process of Court or law, if such power

is not exercised, the Court may quash the proceedings.

However, in the economic offences, the Court must not only

keep in view that money has been paid to the Bank, which has

been defrauded, but also the Society at large. As such, prayed

the Court to dismiss this criminal petition.

26. The 2nd respondent-MMTC has also filed written

submissions stating that there is sufficient evidence against

the accused which will establish the charges. There is prima-

facie evidence disclosing commission of offence. The aspect of

sufficient evidence against the petitioner has been taken into

consideration by this Court in Crl.R.C.No.544 of 2018. The

said Crl.R.C.No.544 of 2018 was filed by the petitioner with the

same grounds for discharge and the same was dismissed by

this Court. This Court has already taken into consideration the

correctness and legality of the proceedings initiated by the CBI.

He also relied on the judgment of the Hon'ble Supreme Court

in Central Bureau of Investigation Vs Aryan Singh Etc., 6

wherein it is observed that the charges are required to be

6 AIR 2023 Supreme Court 1987

proved during the trial on the basis of evidence lead. The

Court further observed that whether the criminal proceedings

are malicious or not, is required to be considered at the

conclusion of trial. At this stage, what is required to be

considered is prima-facie case and the material collected

during the course of investigation, which warrants the accused

to be tried. He also relied on another judgment in

M/s.Medchal Chemicals and Pharma Pvt. Ltd., Vs

M/s.Biological E.Ltd., and others 7, wherein it is observed

that complaint cannot be quashed merely on the ground that

civil remedy is available and further relied on the judgment in

Sesami Chemicals Pvt. Ltd., Vs State of Meghalaya 8. In

similar circumstances, when the High Court quashed the FIR,

the Apex Court observed that High Court erred in quashing the

FIR and set-aside the orders of the High Court, when the facts

are seriously in dispute, truth or otherwise of such facts can

only be established by evidence at trial. In CBI Vs Ravi

Shankar Srivastava IAS and another 9, it is observed that

when information is lodged at the police station and an offence

is registered, then the malafides of the informant would be of

secondary importance. It is the material collected during the

AIR 2000 Supreme Court 1869

(2015) 3 SCC (Cri) 585 9 AIR 2006 SC 2872

investigation and the evidence led in Court, which decides the

fate of the accused person. The allegations of malafides

against the informant have no consequence and it is not a

ground for quashing the proceedings. The allegations leveled

against the petitioner herein constitute the offences. As such,

he prayed the Court to dismiss this petition.

27. Having regard to the submissions made by the

respective counsel, the allegations leveled against the

petitioner is that he is the Managing Director of MBS Group

and he in collusion with the officials of 2nd respondent

indulged in fraud. According to the investigation made by the

1st respondent, the first allegation is that petitioner knowing

fully well, mortgaged the document which is the colour photo

copy of the original document. Basing on the said document,

he already obtained loan in Andhra Bank and again gave such

document to MMTC as security. Further, with the help of

officials of MMTC without giving sufficient security he took gold

from the 2nd respondent. It is the contention of respondents

that petitioner is an instrumental for the alleged offences, he

has also given letter to the MMTC asking them to keep forex

open and the outstanding dues were paid in connivance with

the public servant. Further, he also gave cheque for Rs.10

Crores knowing fully well that there is no balance in his bank

account. Further his company dues are paid by the public

servant using MMTC funds and due to the acts of the

petitioner, the 2nd respondent suffered exposure to a tune of

Rs.220 Crores.

28. The contention of learned counsel for the petitioner is

that the matter is civil in nature and there is MOU between the

petitioner and MMTC, wherein the arbitration clause No.12 is

that when disputes arose, the matter to be referred to the

arbitrator, whereas, to settle the civil dispute, the 2nd

respondent filed criminal case to expedite the payment from

the petitioner.

29. The contention of learned counsel for the 1st and 2nd

respondents is that merely there is a civil remedy the criminal

case cannot be quashed as there are irregularities on the part

of the petitioner and he is the instrumental for the loss caused

to MMTC. While quashing the case, the Court has to see

whether the averments in the charge sheet constitute offence

otherwise, or whether there is any manifest irregularity. At the

stage of quashing the proceedings while exercising power

under Section 482 of Cr.P.C, the Court is not required to

interfere with the jurisdiction of the trial court. The

prosecution is required to prove charges during trial, basing on

the evidence lead by the investigating agency. At the stage of

quashing the proceedings, this Court has very limited

jurisdiction and is required to consider whether sufficient

material is available to proceed further against the accused for

which accused is required to be tried or not. In the present

case, the charge sheet clearly shows that there are fictitious

entries made in MMTC books of accounts, ledgers of MBS

group and petitioner gave a cheque for Rs.10 Crores knowing

fully well that there is no balance in his account and availed

gold from the 2nd respondent. Further he gave letter to the

MMTC to keep forex open without paying margin money of 5%

which caused loss to the MMTC, shows that there are

averments to constitute criminal offences.

30. It is the specific contention of learned counsel for the

petitioner that the matter has to be decided by the civil Court

as it is a contractual liability. In Indian Oil Corporation

(referred supra), the Hon'ble Supreme Court made pertinent

observations concerning the application of jurisdiction under

Section 482 Cr.P.C. The principles relating to exercise of

jurisdiction under Section 482 of Cr.P.C., to quash complaints

and criminal proceedings have been stated and reiterated by

the Hon'ble Supreme Court in several decisions. The relevant

principles reads as under :

"(i) A complaint can be quashed where the allegations made in the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out the case alleged against the accused.

For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint.

(ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable.

(iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution.

(iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence.

(v) A given set of facts may make out: (a) purely a civil wrong; or

(b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not."

31. In the above said judgment it is also observed by the

Hon'ble Supreme Court that the defences that may be available

to the accused have to be put forth and to be considered

during the trial but not at the threshold. The relevant portion

reads as under :

"Defences that may be available, or facts/aspects when established during the trial, may lead to acquittal, are not grounds for quashing the complaint at the threshold. At this stage, we are only concerned with the question whether the averments in the complaint spell out the ingredients of a criminal offence or not.

32. Reverting to the facts of the case on hand, when there

are serious allegations against the petitioner, this Court cannot

go into the evidence and the possibility of proving the case in

the trial Court. Further as seen from the record, petitioner

filed revision against dismissal of discharge petition vide

Crl.R.C.No. 544 of 2018 which was dismissed by this Court

observing that the issues involved are triable issues. Further

learned counsel for the petitioner relied on the judgment in

International Advanced Research Centre for Powder

Mettallurgy and New Materials (ARCI) and others Vs Nimra

Cerglass Technics (P) Ltd. And others 10, wherein the Apex

Court allowed the quash petition stating that there is no