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2015 (12) TMI 709 - DELHI HIGH COURT

2015 (12) TMI 709 - DELHI HIGH COURT - TMI - Allegation of Cheating, fraud, criminal misappropriation, etc., by Office Bearers of the Congress Party who also happen to be the members of a Private Company-Young Indian Private Company (hereinafter referred to as Y.I.) and major shareholders of Associated Journals Private Limited (hereinafter referred to as AJL), which was engaged in publishing of newspapers including National Herald, etc. - Held that:- This Court finds no hesitation to put it on r .....

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made out. Questionable conduct of petitioners needs to be properly examined at the charge stage to find out the truth and so, these criminal proceedings cannot be thwarted at this initial stage. Such a view is being formed on a birdís eye view of the whole case and the observations in the impugned order of there being a prima facie case have to be read in the context of there being sufficient grounds for summoning petitioners.

Without casting any reflection on the merits of this case .....

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te, with Mr. Devadatt Kamat, Mr. Rajesh Inamdar, Mr. Javedur Rahman and Mr. Adit Pujari, Advocates For The Respondent : Mr. Rahul Mehra, Standing Counsel (Crl.) with Mr. Sanyog Bahadur, Mr. Shekhar, Advocates & Mr. Vinod Diwakar, Additional Public Prosecutor, Mr. Yatinder Chaudhary, Mr. Ishkaran Bhandari and Mr. Ravi Raghunath, Advocates JUDGMENT 1. Probity of a legendary National Political Party is under scanner in these petitions. This case is one of its own kind. The complainant claims to .....

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usade against corruption. This time, he has sought to expose cheating, fraud, criminal misappropriation, etc., by Office Bearers of the Congress Party who also happen to be the members of a Private Company-Young Indian Private Company (hereinafter referred to as Y.I.) and major shareholders of Associated Journals Private Limited (hereinafter referred to as AJL), which was engaged in publishing of newspapers including National Herald, etc.. 2. On a criminal complaint filed by Dr. Subramanian Swam .....

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ctions 403, 406 and 420 read with Section 120-B of IPC. 3. All the seven accused are petitioners in the above captioned five petitions. Accused Nos.1 to 4 are the President, Vice-President, General Secretary and Treasurer of the Congress Party, who are also the Director/Shareholders of Y.I.. Accused Nos. 3 and 4 are also the Directors of AJL. Accused No.3 is also the Chairman of AJL. Accused Nos. 5 and 6 are the Directors of Y.I. as well as AJL. Accused No.7 is Y.I. having a share capital of  .....

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es to the Congress Party. Although this debt had accumulated over a period of time, but it is pertinent to note that this huge unpaid debt was outcome of interest free loans extended by the Congress Party to AJL from time to time. It has to be kept in mind that AJL was a Public Limited Company, which had immovable assets having value of crores of rupees. It is matter of record that Congress Party had assigned the huge debt of ₹ 90 crores to a Section 25 Company i.e. Young Indian on receivi .....

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unk of its shares to Young Indian in lieu of the debt owed to Congress Party which now stood assigned to Young Indian. Thus, AJL became a wholly owned company of Y.I. by merely paying ₹ 50 lacs and in this manner, Y.I. acquired complete control of AJL which had real estate assets of at least ₹ 2,000 crores in prime areas of New Delhi, Lucknow, Bhopal, Mumbai, Indore, Patna, Panchkula and other places. According to respondent-complainant, the conservative real estate worth of AJL is & .....

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acy with accused Nos. 3 to 6, who are their loyalists, to defraud the Congress Party and AJL by dubiously forming Y.I. Company to misappropriate the huge assets of AJL and petitioners/accused have committed criminal breach of trust reposed in the Congress Party as well as AJL and its shareholders. According to respondent-complainant, the rights of the shareholders of AJL and its properties had been dishonestly misappropriated by petitioners/accused by conversion of loan of ₹ 90 crores odd .....

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d times the amount invested by them originally and the Congress Party would have got back the loan with interest, but instead of adopting such a transparent course, by dubious means, petitioners have misappropriated the entire assets of AJL by gaining effective control over the entire assets of AJL and thus, the original shareholders of AJL as well as the supporters/donors of Congress Party have been cheated by petitioners. 7. The substratum of the pre-summoning evidence led by respondent-compla .....

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cepted by the Chairman and Board of AJL. Step 3: Accused no.1 to 4 as Senior Office Bearers of Congress Party used their position to provide an unsecured zero interest of loan of ₹ 90 crores. Step 4: The AJL thereafter held a meeting of their Board and without reference to the Shareholders resolved that in lieu of Young Indian owing the debt and for a further consideration of ₹ 50 Lakhs, the entire share equity of AJL would be transferred to Young Indian. Thus, AJL became a wholly ow .....

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was against the declared objective submitted for obtaining the registration under Section 25 of the Companies Act. Step 7: The Memorandum of Association of the AJL bars the Company from entering into any transaction which is not for furthering its objective to publish newspapers. Step 8: National Herald House is a prime property in Bahadur Shah Zafar Marg and was given by the Government for the purpose of publishing a newspaper at concessional rates. However, the Young Indian now owner of the Na .....

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bearers of All India Congress Party, Directors of Associated Journal Limited and the Directors of Young Indian company. For ready reference, the relied upon Chart (Annexure-15) is reproduced as under: - a) Composition of AICC Office Bearers 1 1 1 1 A1 A2 A3 A4 President Vice President Treasurer General Secretary b) Members of Board of Directors/ Shareholders of Associated Journals Ltd. (AJL) 1 1 1 1 1 A2 A3 A4 A5 A6 (Since2008 in Control of 3,00,000 shares) Director and CMD Director Director Dir .....

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contrary. After adverting to the ingredients of the offence of cheating, criminal breach of trust, dishonest misappropriation and criminal conspiracy, trial court has concluded as under: - From the complaint and the evidence led so far it appears that YI was infact created as a sham or a cloak to convert public money to personal use or as a special purpose vehicle for acquiring control over ₹ 2000 crores worth of assets of The AJL and since all the accused persons have allegedly acted in .....

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ead evidence in their defence. However, as the complainant has established a prima facie case against the accused u/s 403, 406 and 420 read with section 120B I.P.C. hence, let the accused No 1 to 6 namely Mrs. Sonia Gandhi, Mr. Rahul Gandhi, Sh. Moti Lal Vohra, Sh. Oscar Fernandes, Sh. Suman Dubey and Mr. Sam Pitroda be summoned for 7.08.2014. Let the accused No.7 (Young Indian) be summoned through it s authorized representative for the same date. 10. At the hearing, it was submitted by both the .....

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oper understanding of facts in the light of the evidence led and the contextual reference to the judicial precedents. 12. To assail the impugned order, vide which petitioners have been summoned as accused, precise submissions have been advanced in the form of written synopsis, which were supplemented by oral submissions and reliance was placed upon various decisions to highlight that upon a bare reading of the complaint in question, no criminal offence is prima facie made out. 13. With much pers .....

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legacy and tradition of secularism and non-alignment. It was pointed out that there is no statutory provision, rule, regulation or by-law which prohibits disbursement of money to a newspaper, which is closely linked to the Congress Party and infact Section 13 A of Income Tax Act contemplates income from other sources in respect of Political Parties, which are run on donations and other Political Parties have also invested money in mutual funds, etc.. Pointed reference was made to Bhartiya Janta .....

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ch has nothing to do with the immovable property. To assert that there is no criminal breach of trust, it was pointed out that in the first place, there was no entrustment of any money to Congress Party and so, there is no question of any misappropriation or breach of trust as the donations received by the Congress Party could have been dealt with in the manner it liked. It was asserted that there is no fraudulent misrepresentation as AJL had no net worth and was unable to repay the debt to Cong .....

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any contract/trust in giving of loan to AJL. It was pointed out that neither the Representation of the Peoples Act nor the Income Tax Act or any other Act prohibits giving of loans by Political Party. To maintain that a Political Party can invest in commercial ventures, reliance was placed upon a decision of Income Tax Tribunal in Bhartiya Janata Party v. Deputy Commissioner of Income Tax CIT (2003) 258 ITR 1. It was further submitted that writing off the loans by Congress Party is not an illeg .....

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ation and the control of the assets of AJL rests with the Company and there was no dishonest inducement because allotment of the majority of equity shares of AJL to Y.I. stands duly approved in the AJL s Extraordinary General Meeting of 21st January, 2011 and in the event of winding up of Y.I., which is a Section 25 Company, its assets, if any, shall vest in another Section 25 Company. It was pointed out that there is nothing on record to indicate that the emoluments were being drawn by petition .....

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ome of AJL has been misappropriated by petitioners. Thus, it was submitted that there is neither wrongful gain or loss to AJL or Y.I. and no illegal act has been committed by petitioners and so, on a plain reading of the complaint in question, it can be certainly said that neither the offence of cheating nor of fraudulent or dishonest misappropriation is made out. It was thus submitted that in view of the dictum of Apex Court in Thermax Limited and Others v. K.M. Johny and Others (2011) 13 SCC 4 .....

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isdiction under Section 482 of Cr.P.C. as it is manifestly clear that allegations levelled against petitioners, when taken on their face value, do not constitute any offence. 18. On the issue of locus standi, it was submitted that in a case of cheating and misappropriation, victim or the person or entity cheated, who complains of wrongful loss, alone can maintain a complaint of cheating, misappropriation, etc.. Reliance was placed upon Apex Court s decision in Mohammed Ibrahim & Ors. V. Stat .....

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proceeded with. It was asserted on behalf of petitioners that neither the shareholders of AJL nor any supporter/donor of Congress Party or anyone from Y.I. has made any complaint and infact, only such persons are competent to file the complaint in question and not the respondent-complainant, who has malafidely filed the instant complaint. It was submitted that the complaint in question proceeds on the basis of unwarranted assumptions and presumptions and contains misstatement of facts and so, t .....

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lawful act has been done by petitioners to attract any criminality. It was also pointed out that rental income accruing to AJL has not been transferred to Y.I. or any of its Directors and the incorporation of Y.I. and its objective is not incompatible with the revival of AJL and the decision not to publish any newspaper cannot attract any criminal liability, as it is for the AJL to decide whether to revive National Herald or not. The precise stand taken on behalf of petitioners that the impugned .....

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jurisdiction of the trial court, is barred as it is not preceded by an inquiry. 21. The submissions advanced on behalf of petitioners were concised by Dr. Singhvi, learned Senior Counsel for one of the petitioners, as under: - i) No conversion, appropriation by Y.I. for benefit is possible. ii) Y.I. is Section 25 Company-barred in law from giving any benefit, salary, remuneration, dividend etc to its shareholders. iii) All properties owned by AJL remains in ownership of AJL; only shareholders o .....

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y of AJL at all times. b) Rent received from these properties is received by AJL and so shown in balance sheet. c) AJL is a loss making company, admittedly, and hence no dividend declared. So neither Y.I. nor accused shareholder of Y.I. can get any dividend. d) Y.I. balance sheet similarly shows nil income received. 22. Finally, it was submitted on behalf of petitioners that by entertaining the complaint in question and by passing the impugned order, trial court has abused the process of law and .....

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n on the basis of the complaint and not by taking into consideration any fresh material/documents. To submit so, reliance was placed upon Apex Court s decision in N.Soundaram v. P.K.Pounraj & Anr. 2014 (10) SCC 616. 24. Dismissal of these petitions was sought by respondent-complainant by submitting that petitioners have alternate remedy to approach the trial court while invoking Section 245 of Cr.P.C.. Reliance was placed upon Apex Court s decision in Nupur Talwar v. CBI (2012) 11 SCC 465 to .....

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itted by petitioners, which calls for their prosecution in the instant complaint. It was asserted by respondent-complainant that the question of locus standi does not arise as the supporters/donors, etc., of Congress Party as well as the shareholders of AJL have been blatantly duped and larger public interest has been sacrificed which is a serious cause of concern as the trust reposed in the Congress Party has been openly breached. It was pointed out that with the mala fide intention, Special Pu .....

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of the Deed of Assignment of Loan and the second pre-mediated step, smacking of criminal conspiracy to commit the offences in question, is the extinguishment of the debt of ₹ 90 crores odd by merely paying ₹ 50 lacs and of converting the assigned loan into equity shares and thereby acquiring the control over AJL having huge assets of ₹ 2,000/- crores. 26. According to respondent-complainant, Extraordinary General Meeting (EGM) was indeed held but with just seven shareholders an .....

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viving the newspaper publication, the assets of AJL are being misused to earn commercial profits, which was not the purpose of AJL. In support of the stand taken by respondent-complainant, reliance was placed upon decisions in Binod Kumar & Ors. v. State of Bihar & Anr; (2014) 10 SCC 663; N.Soundaram v. P.K.Pounraj & Anr; (2014) 10 SCC 616, Rishipal Singh v. State of U.P. (2014) 7 SCC 215; Arvind Kejriwal & Ors. v. Amit Sibal & Anr. (2014) 1 JCC 229; Rajiv Thapar & Ors. v .....

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td. & Ors. (2000) 3 SCC 269; Rashmi Kumar v. Mahesh Kumar Bhada (1997) 2 SCC 397; State of Haryana & Ors. v. Bhajan Lal & Ors. (1992) Supp. (1) SCC 335 and Express Newspapers (P) Ltd. v. Union of India AIR 1986 SC 872. 27. Lastly, it was submitted by respondent-complainant that the conspiracy to commit the offence in question is writ large on the face of it and so, prosecution of petitioners in the complaint in question is very well justified on merits and no case for quashing the in .....

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Party and their associates which is under scanner in this case. 29. Upon evaluating the impugned order on the touchstone of judicial precedents and in the light of submissions advanced by both the sides, this Court finds that question of locus standi of respondent-complainant to maintain the complaint in question pales into insignificance in view of the fact that Apex Court in Subramanian Swamy v. Manmohan Singh (supra) has reiterated that freedom of a private citizen to proceed against the corr .....

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iation, etc., as here is a case where the act of Office Bearers of Political Party having criminal overtones is under scrutiny and so, the challenge to the locus of respondent-complainant to maintain the complaint in question is hereby repelled. 30. Impugned order elaborately notes the facts of this case and considers the pre-summoning evidence, the ingredients of the offences alleged and after considering the judicial precedents and the submissions advanced, concludes that a prima facie case to .....

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stage. 31. In the instant case, it cannot be disputed that the Office Bearers of the Congress Party are the trustees of the funds belonging to the Party. No doubt, a Political Party can have income from other sources as well and can invest money in mutual funds, etc., to augment its resources. However, it has to be kept in mind that the allegations against the Office Bearers of the Congress Party are of siphoning off the party funds in a clandestine manner. The impropriety of extending interest .....

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nture of publishing newspapers. 32. Considering the fact that AJL has sizeable assets of ₹ 2000 crores, it needs to be explained by petitioners as to what was the need to assign the huge debt of ₹ 90 crores when this debt could have been easily liquidated by AJL from its sizeable assets. Even writing off such a huge debt by the Congress Party can legitimately attract allegations of cheating, fraud, etc.. Petitioners had gone step further in conspiring to get this huge debt assigned t .....

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s is certainly questionable and justifiably attracts the allegations of cheating, misappropriation, criminal breach of trust, etc.. Such a view is being taken as it needs to be explained before the trial court as to how the net worth of AJL can be negative when it has assets worth crores of rupees. It also crops up in the mind of a prudent person as to why interest free loan was assigned and why it was not written off. In any case, writing off such a huge debt by a legendry Political Party is in .....

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s aspect needs to be addressed after respondent-complainant is cross-examined at the pre-charge stage. It also needs to be examined at pre-charge stage as to whether lacs of citizens who had donated to the Congress Party felt cheated by assignment of such a huge debt to Y.I. who was managed by none others than petitioners, who were Office Bearers of Congress Party as well as Directors of Y.I.. Not only this, the main persons, who were instrumental in allegedly siphoning off political funds were .....

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do not substantially impact upon the substratum of the case set up against petitioners as it is immaterial as to whether the existing share equity was taken over by Y.I. or fresh shares were floated to marginalize the existing shareholders and without any public issue of the fresh shares floated, they were allotted to Y.I.. Rather, this is more questionable. At this stage, it would not be worthwhile to consider as to whether a share holder owes the assets of the company or not, because more than .....

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at best it is a case of takeover of AJL and the remedy lies in invoking the provisions of the Company Act. Upon reading the complaint as a whole, it emerges that the transactions of the Congress Party with AJL via Y.I. are not a mere commercial transactions as these transactions legitimately attract the allegations of cheating, fraud, breach of trust, misappropriation, etc. 35. During the course of hearing, an apprehension was expressed by respondent-complainant that since petitioners have acqui .....

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se proceedings, but it is indeed a cause of concern, which needs to be addressed if any upright citizen seeks to explore this aspect in the background of this case by having recourse to appropriate forum. This aspect is left open, without expressing any opinion, lest it may prejudice petitioners. 36. This Court has taken notice of the submissions advanced on behalf of petitioners and is constrained to observe that legal jugglery of words does not and cannot persuade this Court to opine at this i .....

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ue, it cannot be prima facie said that the ingredients of the offences alleged are lacking. It needs no reiteration that this is not the stage to even prima facie opine that the ingredients of any of the alleged offences exist to justify putting petitioners on trial or not. Any observation made in this regard by the trial court or this Court shall have no bearing when the case of petitioners is considered at the charge stage. 37. Apex Court in N. Soundaram v. P.K. Pounraj and Another (2014) 10 S .....

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se set up has to be considered as it is, without adding or subtracting anything to it. Applying the afore-noted parameters to the instant case, this Court finds that the ingredients of the offences alleged are not lacking and sufficient ground to proceed against petitioners certainly exists. No mala fides can be alleged against respondent-complainant nor can it be said that the summoning of petitioners is an abuse of process of the court. 38. This Court is of the considered view that the gravity .....

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