TMI Blog2017 (4) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent:- Mr. K.Srinivasan, Spl. Public Prosecutor for CBI (cases) COMMON ORDER Heard Mr.Muralikumaran, learned counsel appearing for M/s.Mc.Gan Law firm, who is on record for the petitioner in Crl.O.P.No.21243 of 2014 and in Crl.R.C.No.1195 of 2015 and Mr. K.Srinivasan, learned Special Public Prosecutor for CBI (cases) appearing for the respondent in both the cases. 2. With the crucial issue, involved in both the petitions is one and the same, and the parties to the petitions are also one and the same, both the petitions have been consolidated together, heard jointly, and disposed of in this common order. 3. Criminal Original Petition No.21243 of 2014 has been filed by Mr. Naresh Prasad Agarwal, who is the second accused in C. CNo.3 of 2014 ,on the file of the learned Special Judge for CBI cases ( XII Judge, City Civil Court), Chennai under Section 482 of the Code of Criminal Procedure to quash the charge sheet filed against him by the respondent-police. 3A. The petitioner Mr. Ganesh Agarwal had originally filed a petition in Crl.M.P.No.3615 of 2014 under Section 239 of the Code of Criminal Procedure to discharge him from the criminal case in C.C.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood, the object behind this Section is to empower the High Court to exercise the powers of an appellate Court to prevent failure of justice in cases where the Code does not provide for appeal. The power, however, is to be exercised only in exceptional cases where there has been a miscarriage of justice owing to : (i) a defect in the procedure or (ii) a manifest error on a point of law; (iii) excess jurisdiction, (iv) abuse of power, (v) where the decision upon which the trial Court relied has since been reversed or overruled when the revision petition was being heard. 8. As observed by the Supreme Court in State of M.P. Vs. S.B.Johari, (AIR 2000 SC 665: (2000) 2 SCC 57: 2000 SCC (Crl) 311 : 2000 Crl.L.J.944), under Section 401 of Criminal Procedure Code quashing of the charge by the High Court would be justified if even on considering the entire prosecution evidence, the offence is not made out. 9. In Trilok Singh V Satya Deo Tripathi, (AIR 1979 SC 850: (1979) 4 SCC 396: (1980) Crl.L.J. 822) , the Supreme Court has observed that if the charge in a criminal proceeding constituted a bona fide civil dispute, the High Court can quash the charge. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i and M/s. Shiv Sahai Sons. 14. Under these circumstances, a prime question has arisen as to whether a civil liability can be converted into a criminal liability? and if it is done so, could it be construed as abuse of process of Court? 15. While speaking on behalf of a Division Bench of the Apex Court in Indian Oil Corporation vs M/S NEPC India Ltd., Ors.(2006) 6 SCC 736) : (2006) 3 SCC (Crl.) 188), Hon ble Mr Justice Raveendran has dealt elaborately with the point Existence or availment of civil remedy under criminal law . While answering the above question he has observed that: It is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. Such a tendency is seen in several family disputes also, leading to irretrievable break down of marriages/families. There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, (Finance Accounts) MMTC Limited (Minerals Metals Trading Corporation of India), Chennai Regional Office, Chennai; and 3.Thiru.N.P.Agarwal, Proprietor, M/s.Shiv Sahai Sons, PO Box No.7428, No.60-61 Narasima Dasari Lane, NSC Bose Road, Chennai-600 001 as well as against unknown officials of MMTC Ltd., Chennai Regional Office, Chennai and Union Bank of India, Main Branch, Chennai. 22. The petitioner in Crl.O.P.No.21243 of 2014, Mr. N.P. Agarwal was originally ranked as third accused in the First Information Report. Mr. N.Ganesh Agarwal, who has been arraigned as 3rd accused in the Charge sheet (petitioner in Crl.R.C.No.1191 of 2015) was originally not at all shown as an accused in the First Information Report. 23. As per the prosecution, the suspected offences alleged to have been committed by the accused persons are, criminal conspiracy, cheating, falsification of accounts and criminal misconduct. 24. The term offence has been defined in the first part of Section 40 of IPC in the following manner: Except in the chapters and sections mentioned in clauses 2 and 3 of this Section, the word offence denotes a thing made punishable by this Code T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made punishable by any law for the time being in force. It is thus clear that to bring an act within the amplitude of the term offence mens rea is an inevitable constituent part. 25. The crucial question as to whether the petitioners were having such criminal intention to commit the offence as alleged by the prosecuting agency assumes importance and to be answered by them in an unambiguous manner: 26. Secondly the entire prosecution case seems to have been constructed on the foundation of the Memorandum of Understanding dated 02.04.2008 which was entered into between MMTC Limited, Chennai House, No.6 Esplanade, Chennai 600 108, having registered office at Core 1 Scope Complex No.7 Lodi Road, New Delhi, (hereinafter referred to as seller ) and M/s. Shiv Sahai Sons, having its registered Office at P. Box No.7428, Narasima Dasari Lane, 60-61 NSC Bose Road, Chennai 600 001 (hereinafter referred to as customer ). 27. Minerals and Metals Trading Corporation of India Limited, (in short it may hereinafter be referred to as MMTC Ltd.,) a public sector undertaking of the Government of India, is one of the agencies of the Government, which is authorized t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Regional Office, Chennai and unknown officials of MMTC Ltd., Chennai Regional Office, Chennai had entered into a criminal conspiracy with Mr. N.P.Agarwal, (A3) Proprietor M/s.Shiv Sahai and Sons and with unknown officials of Union Bank of India Main Branch, Chennai to cheat the MMTC Ltd., in the matter of bullion trading through buyers Credit Scheme and in pursuance of the said conspiracy , Mr.S.Gurusamy (A1), Mr. V.Gurumurthy (A2) and unknown officials of MMTC Ltd., by abusing their official position, had extended undue favours to Mr. N.P.Agarwal, Proprietor, M/s. Shiv Sahai and Sons (A3) and thus caused a wrongful loss to the tune of ₹ 89.6 crores on MMTC Ltd by intentionally omitting to recover the said amount from the account of Mr. N.P.Agarwal, Proprietor of M/s. Shiv Sahai Sons (A3). 33. Further, in pursuance of the criminal conspiracy Mr. S.Gurusamy (A1), Mr. V.Gurumurthy (A2) and unknown officials of the MMTC Ltd., along with unknown officials of the Union Bank of India, Main Branch had manipulated the books of accounts of MMTC Ltd., and the Union Bank of India and Mr.S.Gurusamy (A1) and Mr.V.Gurumurthy (A2) and unknown officials of the MMTC Ltd., had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons leveled against the accused persons 1 to 3 as shown in the First Information Report was taken up by one S.Subramanian, Inspector of Police, CBI/ACB/Chennai and it was he, who had filed the final report on 28.1.2014 before the learned Special Judge for CBI cases ( XIII Additional City Civil Court), Chennai. 37. On perusal of the final report, the last paragraph therein reveals that the first accused Mr.V.Gurumoorthi had retired from MMTC Ltd., Chennai on 30th November, 2010 and hence the sanction for prosecution is not required for him. It is also revealed that that the allegations against Mr. S.Gurusamy, who was originally cited as accused No.1 in the First Information Report could not be proved conclusively, as the investigation did not reveal his involvement in the case and hence, he was not charge-sheeted. 38. Further, the final report also reveals that one Mr.Ganesh Agarwal has been implicated as third accused. He is non other than the son of Mr. N.P.Agarwal. The final report has further tend to disclose that Mr. Ganesh Agarwal who is the , Proprietor of M/sShiv Sahai and Sons (India) Limited had been actively associated in the bullion business of his f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MTC Ltd., on the due dates. Subsequently the accused 2 and 3 had informed by their letter dated 18th June, 2008 that they were closely monitoring the exchange rate fluctuations and shall cover it immediately as soon as it reached a comfortable level for them. In the subsequent meeting held by the MMTC officials in August, 2008 also, A2 and A3 had given false assurances that they would cover the foreign exchange. 42. It is also alleged that accused 1 to 3 had intentionally omitted to cover the Indian rupee against the US Dollars, on the date of availing the foreign currency loans. 43. It is also the case of prosecution alleged that the first accused Mr. V.Gurumoorthi in conspiracy with accused 2-3 had intentionally omitted to collect the loss due to speculation on foreign exchange from accused 2 -3. Instead in pursuance of the conspiracy and by abusing and misusing his official position, A-1 Mr.V.Gurumoorthi had availed a series of loans against the fixed deposits (LADs) and made repayments of the foreign currency loans availed for the transactions of accused 2 3. It is also alleged that the accused 2 3 knowing fully well that the failure to cover the foreign exchange result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Sons and his son A-3 Shri Ganesh Agarwal, entered into criminal conspiracy at Chennai and other places during the year 2008-2009, and cheated the MMTC Ltd., to the tune of ₹ 113.38 crores, by speculating in Indian Rupee-US dollar foreign exchange fluctuation and intentionally omitting to take forward cover for the purchases made under the Buyers Credit Scheme. In pursuance of the criminal conspiracy, A-1 maintained improper accounts and falsified the books of accounts of the MMTC Ltd., by showing inflated fixed deposit amount of ₹ 38,99,01,189/- and deflated Loan-Against-Deposit amount of ₹ 45,43,17,044/- both in the account of the MMTC Ltd., in Union Bank of India, Chennai Main Branch, Chennai.A-1 Shri V.Gurumoorthi also obtained pecuniary consideration to tune of ₹ 41,700/- offered by A-2 Shri. N.P.Agarwal and A-3 Ganesh Agarwal in the form of air ticket for his visit to Singapore along with his wife, during October, 2010. Thus A-1 to A-3 committed the offences punishable u/s.120-B,r/w 420 , 477-A IPC and 13(2) r/w 13(1)(d) of PC Act and substantive offences thereof. 47. On a conjoint reading of the allegations made in the First Information Report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected discreetly. The internal vigilance enquiries or departmental enquiry reports should normally not be used as basis for submitting the Source Information. The SP concerned after satisfying himself that there is a prima facie material meriting action by CBI and further verification is likely to result in registration of a regular case, would order verification if it falls within his competence. In the cases which are within the competence of higher officers, he will forward his detailed comments to the DIG and obtain orders from superior officer competent to order registration. The verification of SIRs must begin only after the Competent Authority has approved its registration. At this stage a regular SIR number will be assigned to the SIR which will also be entered in the Source Information sub-module of CRIMES Module with all other details . Clause No.8.29 reads thus: After registration, verification may be entrusted to an officer other than who has submitted the SIR. As far as possible, the requisition of records/documents should be avoided during verification of SIRs. In case, it is absolutely necessary to do so, the requisition must go to the concerned Vigilance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case. Hence, there is reason to presume that no preliminary enquiry was conducted, in this case. As it is manifested from the FIR, this Court is able to understand that the source of information was received on 13.6.2012 at 06.30 p.m. and the case in Cr.No.R.C.MA1 2012A 0025 was registered on the very same date. The FIR was dispatched to the learned special Judge for CBI Cases, ( XII Additional Judge, City Civil Court) Chennai on the said date. It is thus made clear that the procedures enunciated in Chapters 8 and 9 of CBI Manual have not been followed. 50. Clause 9.1 of the CBI Manual says that it is therefore, necessary that the SP must carefully analyze the material available at the time of verifying and verification report submitted by the superior officer, registration of preliminary enquiries is not resorted to where a case can be registered. Where material or information available clearly indicates that it would be a case of misconduct and not criminal misconduct it would be appropriate that the matters referred to the department at this stage by sending a self- contained note. In such cases, no 'preliminary enquiry' should be registered. 51. Mr.Muralikumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provision, the relation of that provision to the general object intended to be served by the Act will decide whether the provision is mandatory or directory. The provisions referred to above would use the words 'shall' and 'must' and as such it can hardly be directory, since the use of such language is per se indicative of the intent that the provision is mandatory. The effect of non compliance with the rule if could deprive the right of the person, then serious prejudice would be caused to the said person. 53. In Manu Sharma's case cited supra, the Apex Court has held that if any source of information is received against an officer of high rank even for verification of source information the respondent / CBI has to get approval from the Competent Authority. The Competent Authority is the director of CBI, and after such approval by Competent Authority, the Verification officer shall submit his detailed report to the Competent Authority for obtaining orders. This procedure has not been followed in this case, because the provisions of the CBI manual are mandatory to be followed. 54. In Nirmal Singh Kahlon v. State of Punjab (2009) 1 SCC 441,it has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to register and take up a case for investigation. The clauses, enumerated in the above CBI (Crime) Manual, are the complete shape of track to be followed by the investigating officers, who are responsible to take up the investigation in respect of a cognizable offence. This Court in paragraph 14 of the said Judgment has made a reference to the decision of the Apex Court in Noor Aga Vs State of Punjab and another, reported in 2008 (56) BLJR 2254 wherein Hon ble Mr Justice S.B.Sinha while penning down the Judgment on behalf of a Division Bench, in paragraph Nos. 122,123 and 124 has observed as under: 122. Guidelines issued should not only be substantially complied, but also in a case involving penal proceedings, vis-a-vis a departmental proceeding, rigours of such guidelines may be insisted upon. Another important factor which must be borne in mind is as to whether such directions have been issued in terms of the provisions of the statute or not. When directions are issued by an authority having the legal sanction granted therefor, it becomes obligatory on the part of the subordinate authorities to comply therewith. 123. Recently, this Court in State of Kerala and Ors. v. Kuri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into between the MMTC Ltd., on the one part and M/s.Shiv Sahai and Sons a proprietorship concern owned by Mr. N.P.Agarwal, the petitioner in Crl.O.P.No.21243 of 2014 ,on the other part, can very well be termed as government contract . Since the Memorandum Of Understanding comes under the category of Government contract, Articles 298,299,300 as well as 14 of the Constitution of India come into play. 60. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterize every state action, whether it be under the authority of law or in exercise of executive power without making of law. The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational or non-discriminatory. The action of the Executive Government should be informed with reason and should be free from arbitrariness. 61. It is indeed unthinkable that in a democracy governed by the rule of law, the executive Government or any of its officers should possess arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MTC Limited and the petitioner Mr. N.P.Agarwal, who is the proprietor of M/s.Shiv Sahai and Sons. He has been referred to as customer in the above said Memorandum Of Understanding, whereas the MMTC Ltd., has been referred as the seller . At page No.3, at the tail end of the Memorandum of Understanding it seems that on behalf of the MMTC Ltd., (seller) one P.Ramachandran, General Manager had signed. Apart from him, two witnesses have also signed, whereas in the place of customer viz., Shiv Sahai no signature is found and beneath the signature of Mr. P.Ramachandran, it is stated MMTC Limited, a Government of India Undertaking, Chennai House, 6, Espalanade, Chennai-600 001. 65. The Executive Power of the Union of India and the State to carry on any trade or business, acquire, hold and dispose property and make contracts is affirmed by Article 298 of the Constitution of India. It is to be mentioned here that if the formal requirements of Article 299 of the Constitution of India are complied with, the contract can be enforced against the Union or the States. Thus, Article 299 lays down three conditions for making valid contracts in the exercise of the executive power of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as the existence of the Memorandum Of Understanding, dated 2.4.2008. 69 (a) The prime question is as to whether the petitioners could be prosecuted before a Criminal Court for their alleged failure to make payment to MMTC Ltd., Chennai. 70. As already discussed in the preceding paragraphs, the entire case has been revolving around the center point of Memorandum Of Understanding , dated 2.4.2008. Clause 11 of the Memorandum Of Understanding enables the parties to go for arbitral proceedings, if any dispute or difference whatsoever arising between them relating to the construction, meaning, scope, operation or effect of the sale purchase agreement, or even if there is any breach thereof, shall be settled through arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties. This is the specific stipulations made in clause 11 of the said Memorandum Of Understanding. It is also to be noted that the venue of arbitration shall be Chennai . 71. Page Nos.37 to 72 of the typed set of papers filed by the petitioners contain the copy the plaint filed by MMTC Ltd., in C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013, on the file of this Court as against the plaintiff, MMTC Limited, Chennai and thereby requested the Court to refer them as well as the plaintiff to arbitration, as per the terms and conditions of clause 11 of the Memorandum Of Understanding , dated 02.04.2008, , and as accepted between the parties vide communications exchanged between them dated 23.8.2012, 17.10.2012, 7.1.2013, 10.1.2013, 17.1.2013, 29.1.2013, 31.1.2013, 4.2.2013, 5.2.2013, 6.2.2013 and 26.2.2013, since nothing remains to be decided in the suit except reference to arbitration. 75. The respondent/plaintiff has contested the above said Application by filing their counter-affidavit. After hearing both parties, a learned single Judge of this Court, (R.S.Ramanathan,J) while allowing the said Application has held that having regard to the fact that the respondent/plaintiff submitted to the arbitration proceedings initiated by the applicants, it is not open them to recede and file a Suit in respect of the dispute covered under MOU and also in respect of various claims made against the applicants. Therefore, I am of the firm view that the dispute raised in the Suit is liable to be referred to Arbitration, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , having regard to the allegations made in the plaint, the Judgment reported in (2010) 1 SCC 72 (supra) cannot be relied upon by the learned senior counsel for the respondent/plaintiff to substantiate their contention that the application is liable to be rejected. (para 29). Considering the allegations made in the case, as quoted above, the Hon ble Supreme Court held that no serious allegations of fraud were made for not referring the dispute to arbitration. According to me, in the case on hand, as stated supra, no serious allegations of fraud were attributed against the applicants/defendants 1 and 2 and the allegations of fraud, or suppression of facts were made only against the third respondent, who was the Officer of the respondent-Corporation. (para 31). In the Judgment reported in (2003) 6 SCC 503 (supra), viz., the Judgment relied upon by the learned senior counsel for the applicants, the Hon ble Supreme Court held as follows: If, in an agreement between the parties before the Civil Court, there is a clause of arbitration, it is mandatory for the civil Court to refer the dispute to an arbitrator. In the instant case, the existence of an arbitral clause in the agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the learned single Judge of this Court in I.A.No.2830 of 2013 in C.S.No.249 of 2013 was challenged by the MMTC Limited, Chennai before the Division Bench of this Court in O.S.A.No.244 of 2004. The Division Bench of this Court headed by the Hon ble Chief Justice as he then was, after hearing both sides, had dismissed the Appeal in O.S.A.No.244 of 2014 with a finding that the Appeal is meritless. 80. This Court has also perused the Judgment of the Division Bench, dated 28.10.2014, wherein the Hon ble Chief Justice,while penning down the Judgment, has made reference to paragraph 8 of the plaint in C.S.No.244 of 2013. In paragraph 4 of the Judgment, the Hon ble Chief Justice has observed that: a perusal of the plaint shows that in paragraph 8, there is a categorical averment that a request was made by the first respondent/first defendant for commencement of purchase of bullion under Buyers Credit Scheme and on that basis, goods were sold on the understanding that all expenses and losses in respect of the transactions will be on the account of the first respondent. These transactions took place from the period 01.04.2007 to 31.12.2012. The plaint also alleges that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the background in which the suit has come to be filed. 84. Mr. K.Srinivasan learned Special Public Prosecutor (CBI cases) appearing for the respondent in both the petitions has canvassed that the Judgment in the above said O.S.A. No.244 of 2014 dated 28.10.2014 was challenged before the Apex Court in a Special Leave Petition No.9678 of 2015. It appears that the Hon ble Supreme Court of India has granted an interim order, but the details of the orders are not available in the typed set of papers. However, from page No.30 of the Index annexed to the typed set of papers filed by the learned Special Public Prosecutor, this Court is able to understand that the above said Special Leave Petition came up before the Supreme Court on 5.7.2016 and on that day, the Hon ble Supreme Court has ordered that interim order to continue till the next date of hearing 85. Mr. Muralikumaran, learned counsel appearing for M/s. Mcgan Law Firm, has submitted that the entire case of prosecution, as observed by the Division Bench of this Court in the afore said Judgment in O.S.A.No. .244 of 2014 dated 28.10.2014 is civil in nature and therefore, the criminal proceedings initiated by the respondent po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 337 of 2012 dated 14.02.2013, passed by this Court and the counter Affidavit of MMTC in Application No. 2830 of 2013 in C.S.No. 249 of 2013, and contended that the entire amount for the bullion lifted by the petitioners were paid upfront. 89. Relying on the CAG report, the plaint in C.S.No. 249 of 2013, counter affidavit in Application No. 2830 of 2013 and the charge-sheet, he pointed out that MMTC if the transactions are to be treated as buyer s credit deposits the sale consideration as fixed deposits in the name of MMTC itself and based on that deposit loan is taken from foreign banks. 90. He further contends that with regard to the allegations of loss towards foreign exchange at ₹ 36.02 crores, interest on the LAD which was alleged to have not been passed on to the customer at ₹ 36.18 crores and loss of a sum of ₹ 18.42 crores towards usance of LC charges, that the foreign exchange loss even according to prosecution was due to not taking up of the forward cover and taking up forward cover is the duty of the MMTC. Relying on the CAG report and the Special Audit report in Page.No. 498, the counsel for the petitioners contended that the instruction of the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr.Ganesh Agarwal in the form of air ticket for his visit to Singapore along with his wife, during October, 2010. Therefore, the respondent has levelled charges against the petitioners that they had committed offences of criminal conspiracy, cheating, falsification of accounts, criminal misconduct and corruption after obtaining pecuniary consideration. 93. In this connection, this Court would like to refer to the provisions of Sections 233 and 233A of the Companies Act, 1956. Section 233 says that if any auditor s report is made, or any document of the company is signed or authenticated, otherwise than in conformity with the requirements of Section 227 and 229, the auditor concerned and the person, if any, other than the auditor, who signs the report or signs or authenticates the document shall, if the default is willful, be punishable with fine which may extend to ₹ 10000/- (Rupees ten thousand only) Section 233A deals with the Power of Central Government to direct special audit in certain cases. Sub Section (1) enacts that Where the Central Government is of the opinion- (a) that the affairs of any company are not being managed in accordance with sound business pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December 2012) towards interest. The Report (at page No.219) further proceeds to say that in so far as the Chennai Regional Office of the Company is concerned it was noticed in audit that the Chennai Regional Office of the company failed to adhere to the bullion drill, instructions issued by the company from time to time and the internal control measures in day to day operations which resulted in huge loss to the company as discussed in the succeeding paragraphs. 96. The next paragraph of the Report refers to the Memorandum of Understanding dated 2.4.2008 entered into between the petitioner, Mr. N.P.Agarwal and the MMTC Ltd., It reads that The Chennai Regional Office of the Company entered into gold trading under Buyers Credit System with M/s.Shiv Sahai and Sons (M/s.SSS) from 2007-2008 onwards. However, it was observed that foreign exchange exposure was not hedged as the forward cover was kept open. As per para 7 (i) of the Agenda item No.2 given in the Note for Consideration of Audit Committee of Directors for 67th meeting of the Committee held on 10th February, 2012, the differential exchange rate and the buyers credit expenditure to the tune of ₹ 36.36 crores was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponsibility of ensuring adherence to bullion drill and internal orders and preparation of true and fair financial statements was that of the Management/Corporate Office of the Company. The Company also did not provide any reason for transferring unclassified/unlinked entries from suspense account to vendors account. Thus failure in adherence by RO, Chennai to the instructions on bullion trading, camouflaged accounting and ineffective internal control resulted in non-realization of dues ₹ 99.82 crores and avoidable loss of ₹ 38.56 crore (till December, 2012) towards interest to the Company. 97. At page No.88 of the additional typed set of papers , Tour Report on visit to MMTC Chennai (10.9.08 to 14.09.08) find a place. In paragraph No. 4 of that report it is stated that the fixed deposit receipts are made in the name of MMTC Ltd., and lodged with banks due to lien against Buyers Credit or loan and all the deposits are maintained with ten banks in respect of transactions with Shiv Sahai. Beneath this line, the position in respect of Shiv Sahai as on 12.09.08 is given. The report further says that the transactions involving bullion trade and especially Buyer s cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udit observations of the CAG, fraud was not alleged even by MMTC with regard to the very same issue. The counsel for the petitioner vehemently contends that the very same issues arose with 3 others as found in special audit report in Page. Nos. 14, 24, 61, 106-110, 151,154, 446 and 502, but no prosecution against them were launched. 103. He has further maintained that though there is a vague allegation of the prosecution contending that Mr. V.Gurumoorthy has mismanaged his official position, there is no documentary evidence to prove as to what his position was and how he misused it. Further placing reliance on the Memorandum and Article of Association of the MMTC the learned counsel for the petitioners contended that the administration of the MMTC is vested with the Board and with regard to Loans and deposits it specifically states that, it can be done only by Board resolutions and the Board functions. The Department of Public Enterprises under the Ministry of Heavy Industries and Public Enterprises, Government of India Guidelines issued on Corporate Governance for Public Sector Enterprises, which MMTC Board of Directors in its meeting adopted the said guidelines as Board Charte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity audits and also of performance audit, when it forms one of the audit (sub) objectives. Clause 2 says that fraud examination is a part of the normal auditing procedures and it includes: Being alert for situations, control weakness, inadequacies In record keeping, errors and unusual transactions or Results, which could be indicative of fraud, corruption, Improper expenditure or lack of probity; and Focusing audit strategy on areas and operations prone to fraud and corruption by developing effective high risk indicators for fraud Clause 3.7 reads as under: The mandate of Government Audit is broader than solely that of financial statement auditor and includes responsibility for verification of regularity and performances. Hence, the auditor should be aware of the possibility of fraud not only in the preparation and presentation of financial statements but in other areas covered by regularity (compliance) and performance audits as well Clause 7 envisages respective responsibilities of management and audit. Clause 7.1 says It is the responsibility of those charged with governance of the entity to ensure through oversight of management, that the entity establishes and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the autonomous body received a government grant) auditors may have a duty report it directly (to the other government/agency), if management fails to take remedial steps. 109. Section 619 of the Companies Act, 1956 deals with Application of sections 224 to 233 to Government companies. Sub Section (3) of Section 619 of the Companies Act contemplates that the Comptroller and Auditor- General of India shall have power-- (a) to direct the manner in which the company' s accounts shall be audited by the auditor appointed in pursuance of sub- section (2) and to give such auditor instructions in regard to any matter relating to the performance of his functions as such; Sub Section 3(a) of Section 619 of the Act says that the Comptroller and Auditor- General of India shall have power to give directions to the auditor appointed in pursuance of sub section (2) to do the auditing work in respect of the company s accounts in such a manner 110. Page No.66 of the additional typed sets of papers contains the directions under Section 619(3)(a) of the Companies Act, 1956. Annexure IV deals with system of Accounts financial control. Clause V deals with fraud/risk. Clause 5 of Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been prescribed for Regional Office, Chennai by the Central Government under clause (d) of sub section (1) of Section 209 of the Companies Act, 1956. 114. Purushottam and Company, (Chartered Accountants), Chennai in their report says that However, the internal control mechanism needs to be strengthened in the following areas: a) Active and prompt follow up of old debts, advances and claims by the respective commodity division; and b) Periodic confirmation of outstanding balances and reconciliation of centrol accounts. From the report of Purushottam and Company, Chartered Accountants Chennai, this Court finds that the internal control mechanism of MMTC Ltd., was not in an expected level. There was lack of follow up action in respect of recovery of old debts, advances and claims by the respective commodity division and therefore it was suggested that these mechanisms need to be strengthened. 115. From the perusal of the records it is manifested that the petitioner, N.P.Agarwal, Proprietor of Shiv Sahai and Sons, Chennai seems to have written three letters to Mr. Oorkavalan of M/s. MMTC Limited, Chennai. In the letters, dated 19.09.2011 and 22.09.2011 he had exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i requesting them to furnish necessary details about the transactions. In this regard he has raised a question that without furnishing the required details with reference to their purchases, how, MMTC Ltd., Chennai could have claimed a sum of ₹ 33,90,15,577/- towards interest on loan against deposits for the FY 2008-09,2009-10 and 2010-11 along with interest at 18% per annum? He has also stated that the above facts would clearly indicate that the entire transaction was civil in nature and as such the dispute between the parties concerned ought to have been sorted out through the procedures known to common law and not through criminal proceedings. 119. It may also be relevant to make reference to the letter, dated 31.12.2011 addressed to MMTC Ltd., Chennai by Shiv Sahai and Sons. In this letter, the petitioner has stated that the entire buyers credit business was solely handled by MMTC and hence they did not have the records with them. Under these circumstances, the petitioners had sought some clarification from MMTC Ltd., Chennai for the purpose of reconciliation of accounts and to check and confirm what M/s MMTC Ltd., have claimed was correct or not. The following clarifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omer, unless the entire funds for the said metal has already been reached the bank account of MMTC. Hence, you could not have delivered 1000 s of tones of metal to us over the past 4-5 years, without receiving the entire funds from us. 122. On perusal of the report of the Auditors on the Accounts of the Chennai Regional Office of MMTC for the year ending 31st March, 2012, M/s. Vardhaman Co., Chartered Accountants in their report dated 13.6.2012 have stated thus: Item No.1 a) Note No.32 Extra Ordinary items representing the adhoc provisions of ₹ 115,57,18,266/- pending completion of Internal Investigation/Special Audit on account of acts of commission and omission pertaining to amount recoverable from Debtors/others ParticularsAmount (Rs.) M/s.Shiv Sahai Sons91,79,79,805 M/s Surana Corporation 18,21,59,354 Claims pending 5,55,79,107 ------------------------ Total 115,57,18,266 ------------------------ b) Note No.33- Non confirmation/non-reconciliation of certain accounts shown under sundry debtors/sundry creditors/loans and advances/claim recoverable; c) Non confirmation of extra ordinary balance in the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the area of clause 2(a) referred to therein. 124 .Ultimately in page No.14 at paragraph 15 of the Report of M/s.Vardhaman and Co., Chartered Accountants, it is stated that based upon the audit procedure performed and information and explanations given by the management, we report that no fraud on or by the region has been noticed as reported during the course of our audit. 125 . In the letter dated 17.10.2012 addressed by one Tarun Gulati on behalf of ELP addressed to the Registrar, Indian Council of Arbitration, New Delhi it is stated that in the course of the audit of the transactions with Shiv Sahai, it came to our knowledge that Shiv Sahai in connivance and in conspiracy with some of our officers have fraudulently manipulated the accounts and thereby cheated MMTC of the amounts due to MMTC under the MOU and a special audit has been directed which is in progress, and the final report is expected shortly. In the last line of the said letter, it is sated that we accordingly also request you to extend the date for filing of the defence statement and counter claim. 126. On perusal of this letter it is revealed that this letter was written to the Registrar of Indian Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party who substantially asserts the affirmative of the issue and not upon the party who denies it; for a negative is usually incapable of proof. It is an ancient rule founded on consideration of good sense and should not be departed from without strong reasons. It is also to be noted here that a person who desires to assert a particular fact, it is for him to prove its existence. In view of the provisions of Sections 101 and 102 of the Indian Evidence Act the burden of proving a fact always lies upon a person who asserts. Until such burden is discharged the other party is not required to be called upon to prove his case. 131. The court has to examine as to whether the person upon whom the burden lies has been able to discharge his burden. Until he arrives at such a conclusion, he cannot proceed on the basis of weakness of the other party. This ratio has been laid down in Bibhuti Vs Bhusan Datta Vs Samarendra Nath Misra, (2002 (3) CHN 482 (Cal) 132. The strict meaning of the term Onus probandi is this that if no evidence is given by the party on whom the burden is cast, the issue must be found against him.(Per PARKE B, in Barry Vs Butlin,2 Moo PCC 430) That is the reason wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiv Sahai and Sons, Chennai? 136. Page Nos.202 to 216 of the additional typed set of papers contain the replies to the RTI Application of N.P.Agarwal. In Serial No.27 of this reply there is a query; If the Auditors have pointed out certain issues, which have significance and relevance to the financial result of a PSU, and no action has been taken, then who is responsible for the same? For this query, it is replied that Only supplementary or test audit is done by CAG u/s619 of the Companies Act, 1956. Serial No.28, is the query relating to whether the situation as specified under Section 233A of the Companies Act, prevails in MMTC Ltd.,? If so, whether CAG/Central Government have ordered any special Audit of MMTC Ltd., or any of its Regional Offices? Please also furnish us the details of the appointment of Special Audit done by you under Section 233A? , for which it is replied that CAG s Report on the given subject has been laid in Parliament, Central Government takes decision on special audit as per section 233A. Serial No.135 is with reference to the following query: whether MMTC RO has maintained any records to show which party s funds were placed in FDR and LAD t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sons (India) Ltd. Serial No.5 is the query made by Mr. N.P.Agarwal which reads as follows: Please provide a copy of the communication by which the appointment of M/s. Venkat and Ranga, Chartered Accountants to conduct a Special Audit on the Bullion Transactions of Chennai Regional Office of MMTC Ltd., was brought to your notice and knowledge. If such appointment is brought to your notice, please furnish the copy of the communications, note sheets, documents by which the said appointment be construed as, appointed in accordance with the provisions of Sec. 233 of the Companies Act, 1956 or not ? For this query, it was answered as This office has not made any appointment of Special Auditor 139. Such an answer given by M/s.MMTC Ltd., Chennai is absolutely wrong and seems to be absurd, because with reference to the subject special audit of the bullion transactions and reconciliation of debit balances in the sundry creditors account of Regional Office, Chennai on behalf of MMTC Ltd., Chennai a letter was addressed on 5.1.2012 to M/s.Venkat and Rengaa, Chartered Accountants, signed by one Umesh Sharma, the then Chief General Manager (IA), wherein it is stated that we ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tings of the Board:- (a) the power to make calls on shareholders in respect of money unpaid on their shares; (aa) the power to authorize the buy back referred to in the first proviso to clause (b) of sub section (2) of Section 77A; (b) the power to issue debentures; (c) the power to borrow moneys otherwise than on debentures; (d) the power to invest the funds of the company; and (e) the power to make loans . 143. Clause 1.0 of Board Charter is the background wherein it is stated that the department of public enterprise under Ministry of Heavy Industries and public enterprises, Government of India has issued detailed guidelines on corporate governance for Central Public Sector Enterprises (CPSEs) MMTC Board of Directors in its 384th meeting held on 31st January, 2011 has approved adoption of these guidelines. The guidelines envisage inter alia a formal statement of Board Charter clearly defining the roles and responsibilities of the Board and individual directors. Accordingly, this Board Charter has been approved by the Board in its 392nd meeting held on 12th December, 2011. Clause 3.0 contemplates the responsibilities and powers of the Board of Directors whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to Government on account of culpability of Government servants by the Central Government Department or State Government concerned with the transaction; (3) making recovery from the erring Government officials; (4) reporting of all cases involving loss of Government money arising from erroneous or irregular issue of cheques or irregular accounting of receipts will be reported to the Controller General of Accounts along with the circumstances leading to the loss to enable him to take steps to remedy defects in rules or procedures, if any, connected therewith; (5) reporting of losses above the prescribed value due to suspected fire, theft, fraud etc., to the police for investigation as early as possible; a formal investigation report should be obtained from the Police Authorities in all cases, which are referred to them; (6) fixing of responsibility for loss on the concerned officers; (7) prompt disposal of cases of loss at each stage of detection, reporting , write off, final disposal, in cases of losses including action against delinquents and remedial measures. All the above seven points are bullet points pertaining to auditors to be followed scrupulously. 146. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he audited accounts shall be conclusive. It further says that every account of the company when audited and approved by a general meeting shall be conclusive except as regards any error discovered therein within three months next after the approval thereof. Whenever any such error is discovered within the period, the account shall forthwith be corrected and thenceforth shall be conclusive. 149. In vol.3 at page No.406, Clause 40 of the Special Audit Report submitted by Venkat and Rangaa, Chartered Accountants narrates that an enterprise should disclose: (a) the amount of exchange differences included in the net profit or loss for the period and (b) net exchange differences accumulated in foreign currency transaction reserve as a separate component of shareholders funds, and a reconciliation of the amount of such exchange differences at the beginning and end of the period However, the profit and loss does not have any figure relating to Loss/Gain on foreign exchange. The revaluation difference has been routed through Purchase and Sales Accounts as detailed below. In our opinion, the same is in contravention of the provisions of AS 11. 150. M/s. Venkat and Rangaa, Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 2009-10 153. The reply of MMTC Ltd., Regional Office, Chennai to the remarks made by the auditors is found at page No.458 of volume 3 of Special Audit Report. It is extracted herewith: We wish to inform that the FDR as well as LAD was maintained in a single code from 1.4.2007 to 30.9.2008. At the instances of the auditors, the account was bifurcated and the same was not done correctly. In order to cover the differences in 2008/09, the LAD of UBI as per books was understated by ₹ 45.44 crores (Reported by Special auditors in 2008/09). The differences in loan against deposits was corrected by passing entry for ₹ 40.80 crores. Due to operation of single code for FDR as well as Loan Against Deposit in 2007/08 and major part of 2008/09 both got mixed up and in the absence of complete documentary evidence, the above entries were passed as a whole due to paucity of time and pressure of account closing for the year 2009-10 In their reply, the MMTC Ltd., Regional Office Chennai themselves have confessed their mistake stating that the bifurcation of accounts at the instance of the auditors was not done properly and that the differences in loan against deposit w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant rate of the period actual tenor of the concerned banks. 158. At page Nos.66-67 of volume I of Report on Special Audit of MMTC Ltd., Regional Office, Chennai for the year ending March, 2009 the auditors have stated as follows: UNQUOTE We have carefully gone through the reports of the teams and have done independent analysis of the data for Buyers Credit taken during 2008-09. Taking into account, what should be the position of FD and LAD be as explained above; our comments on the above figures are given below. 1. FD should be equal to BC O/S or may be 110% of the BC O/S. As the BC O/S ₹ 1499 crores, FD should be maximum of ₹ 1650 crores. However, the FD on that date was ₹ 2288 crores. How is it possible as no customer pays advance money for gold not lifted? 2. There was no necessity for a LAD of ₹ 776 crores as on 12.9.08 which is within a period of 18 days has increased to ₹ 885 crores?. It should have been NIL as per the reasoning given above. They have also stated that however, if the value of the subsequent supply is more than the previous one, additional FD would have to be placed. Thus, from both the situations, the necessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited has been maintained in an improper manner and several transactions are not accounted though lot of improvement were noticed compared to previous years. 3. It took time for verification due to volume and we have to spend considerable time to analyze and form an opinion in view of the maintenance of accounts was not as per laid down norms, though there was considerable improvement as compared to previous years. 4. Our verification of accounts reveals that there was no internal control in financial matters as well as in accounting of the transactions. A control up to certain level has been observed in the books of accounts 2010-11. Only a few entries have been passed without any proper documentary evidence and proper authorization. 5. This report is issued on the basis of the ERP reports furnished to us and the documents and explanations provided to us. 6. The entire Suspense accounts transactions and purchase accounting has not been matched. We are not in a position to express a view/opinion on the impact of the above on the difference in vendor account. 7. No confirmation of balances have been obtained either from Vendors or from Customers. 8. There is no ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod of ninety days and deliberately failed to take steps with reference to cover premium/foreign exchange fluctuations . M/s. Venkat and Rangaa, Chartered Accountants Chennai seems to have submitted their auditing report on 20.07.2012. 166. From the above context it can easily be inferred that the First Information Report is antedated as 13.06.2012, when the audit report was filed on 20.7.2012. When there is a confliction between the dates, viz., the date on which the FIR was registered and the date on which the audit report was filed by M/s.Venkat and Rangaa Chartered Accountants, a crucial question that arises for consideration of this Court is as to how the respondent-police (CBI) could have predicted or pre-conceived that the accused persons including Mr. N.P.Agarwal, Proprietor of M/s.Shiv Sahai and Sons (third accused) had caused wrongful loss to the tune of ₹ 36.6 crores to MMTC Ltd, Chennai and corresponding gain to themselves. 167. Viewing this from any angle, this Court finds that a dark cloud prevails over the genesis of the First Information Report . 167. He further points out that when the FIR had the following names :- S.Gurusamy, former Chief Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of M/s.Shiv Sahai Sons, (India) Ltd., Chennai for and on behalf of Shiv Sahai and Sons would go to show that both parties were willing to sort out their disputes through arbitral proceedings. 170. To the letter dated 10.1.2013 written by M/s. Surana and Surana International Attorneys, Chennai on behalf of M/s.Shiv Sahai Sons , M/s. MMTC Ltd., through their Law firm ELP have given a reply dated 17.1.2013,wherein they have stated that the proposal of ad hoc arbitration before a single arbitrator is not acceptable to their clients. They have also made reference to the letter, dated 7.1.2013 addressed on behalf of MMTC Ltd., for reference of all disputes between the parties to arbitration. In this connection, they had requested M/s. Shiv and Sahai and Sons to confirm the following arbitration clause between the parties within seven days of the receipt of their letter. All disputes, differences and claims of whatsoever nature arising between parties i.e. Shiv Sahai Sons and Shiv Sahai Sons (India) Ltd., on one hand and M/s.MMTC Ltd., on the other out of or in relation to the construction meaning, scope operation or effect under the said MOU, dated 02.04.2008 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jection in your filing or continuing the complaint against the ex or present officers of MMTC and proceeding against them, since that would be an internal matter of MMTC. f. By returning the seized documents, stock and cash to our clients, your client will be creating a level playing field and all disputes can be well resolved by the Arbitration in the way suggested by your client. g. Even if your client does consent for and return all the seized documents, stock and cash, and thus desires to continue to arm twist our client, nevertheless, our clients would still agree to refer all disputes to Arbitration (ICA-Three Arbitrators), so that all disputes between the parties can be resolved. h. It is hoped that your client will be fair and reasonable by consenting to CBI returning back to our clients all the seized documents, stock and cash. 172. The conduct of the parties viz., M/s. MMTC Ltd., and Shiv and Sahai and Sons would go to show that the disputes between them are only civil in nature and not criminal. 173. It is to be noted that in paragraph 30 of the plaint in the suit in C.S.No.249 of 2013, filed by M/s.MMTC Ltd., as against the petitioners and the first acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants had asked their counter parts in Mombassia, Kenya to confirm delivery of consignment asking it to see that the cargo is delivered only against presentation of original bills of lading. The goods in question were said to have been delivered by the agent of the petitioner to the original consignee without their producing the bills of lading. The respondent complainant had issued a notice to the accused persons attributing negligence to the agencies in delivering the cargo without the original bill of lading, committing a breach of carriage and acting in violation of their contract and obligation. A claim for a sum of US $ 84,353.31 was made and a suit was filed by the respondent. More than one year after filing of the suit a complainant petition was filed against the appellants for committing breach of trust by causing criminal misappropriation of the valuable property of the complainant. With reference to the application for quashing the order issuing summons to the appellant was dismissed by the High Court which held that the allegations made in the complaint prima facie disclosed the offence of breach of trust. The appeal preferred before the Apex Court was allowed. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of ₹ 45.01 crores towards LAD interest, ₹ 36.36 crores towards Buyer s Credit exchange difference relating to the transactions held in 2008-2009,Rs.0.22 crores towards Buyer s Credit exchange difference relating to the transactions initiated in 2007-08 and settled in 2008-09, ₹ 0.97 crores towards FDR interest were found to have wrongly credited to M/s.Shiv Sahai and Sons instead of M/s.Surana Corporation Limited and raising of invoice for the supply of silver amounting to ₹ 1.42 crores not completed in the BTS. He has also stated that the total amount not debited to M/s.Shiv Sahai and Sons was found initially to be of ₹ 83.98 crores. The remaining amount of ₹ 21.94 crores pertaining to M/s.Surana Corporation Limited (Rs.17.74 crores), ₹ 3.43 crores to be debited to the MMTC Ltd., Calcutta and ₹ 0.77 crores to be debited to M/s.Khazana Jewellery. 177. He has further stated that all LADs were taken to settle the Buyer s Credit loans. Since M/s.Shiv Sahai and Sons only had availed the Buyer s Credit facility from the MMTC Ltd., (except for one transaction to another customer), it was concluded that all cost of LAD has to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner (3rd accused) could be culled out from the materials and evidence adduced by the prosecution during the course of trial. He had also found that on perusal of the documents and the statements of witnesses produced along with the charge sheet, it could be seen that a prima facie case was made against the petitioner (3rd accused) and the evaluation of materials projected by the prosecution disclosed that there were sufficient grounds for proceeding further against the petitioner. Challenging the order, dated 04.03.2015 the petitioner (3rd accused) had preferred the Criminal Revision Case before this Court in Crl.R.C.No.1191 of 2015. 181. What he would contend in the petition in Crl.M.P.No.3615 of 2014 is that even though the first information report was registered against two of the officials of MMTC Ltd., Chennai viz., Mr.Guruswami and Mr. Gurumoorthi by preempting the charge sheet, dated 27.01.2014, a Civil Suit was filed against Mr. V.Gurumoorthi who is named in the charge sheet as the 1st accused and the civil suit also confines its litigation only against Mr.Gurumoorthi even before the conclusion on the investigation by the CBI as to whether Mr.Guruswami who is named as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st US Dollar did not get appreciated they could gain on the forward premium amount by not taking forward cover; (d) the petitioner (3rd accused) along with two accused had, in pursuance of the criminal conspiracy, intentionally omitted to cover the Indian rupee against US Dollar on the date of availing of the foreign exchange loan and the petitioner along with two other accused had speculated and continued to keep the foreign exchange open (uncovered) or to cover the foreign exchange very late; (e) during the relevant period inspite of mismatch the first accused had passed a sum of ₹ 111 crores as the interest earned on the First Deposit to the concern of the petitioner and his father; (f) The petitioner along with two other accused had cheated the MMTC Ltd., a Government of India undertaking to the tune of ₹ 113.38 crores by making wrongful loss to the Government and corresponding wrongful gain to themselves and an amount of ₹ 36.02 crores due to exchange difference, and an amount of ₹ 36.18 towards interest on loan against fixed deposits and an amount of ₹ 18.42 crores towards usance LC charges. (g) During the year 2009-2010 and 2010-2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced before the trial Court, on behalf of the petitioner (Ganesh Agarwal) was that he was not listed as a defendant in the suit in C.S.No.249 of 2013 and that the dispute between the parties to the Memorandum of Understanding, dated 02.04.2008 was only civil in nature and as such it could be settled through arbitral proceedings. 186. The Trial Court after citing the decisions of the apex Court in Kailash Varma vs Punjab State Civil Supplies (2005 (2) SCC 420) and Trisuns Chemical Industry case (1999 (2) SC 112) had observed that the existence of an arbitration proceedings or a civil suit does not absolve the offender of the criminal prosecution, if the acts of the accused disclosed criminal offences. Finally, the petition in Crl.M.P.No.3615 of 2014 filed by the petitioner (3rd accused) was dismissed. 187. This court has carefully perused the impugned order of the learned Special Judge, dated 04.08.2015. The learned Special Judge, had, in the impugned order made reference to the statements of prosecution witnesses viz., LWs. 82, 83, 86 and 17 and other documentary evidences. 188. During the course of his arguments before this Court, Mr. K.Srinivasan, learned Special Prosec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 and 239 of the Code. In this regard, Hon ble Mr Justice Y.K. Sabharwal observed as under: We are unable to accept the aforesaid contention. The reliance on Articles 14 and 21 is misplaced. The scheme of the Code and object with which Section 227 was incorporated and Sections 207 and 207 (A) omitted have already been noticed. Further, at the stage of framing of charge roving and fishing inquiry is impermissible. If the contention of the accused is accepted, there would be a mini trial at the stage of framing of charge. That would defeat the object of the Code. It is well-settled that at the stage of framing of charge the defence of the accused cannot be put forth. The acceptance of the contention of the learned counsel for the accused would mean permitting the accused to adduce his defence at the stage of framing of charge and for examination thereof at that stage which is against the criminal jurisprudence. By way of illustration, it may be noted that the plea of alibi taken by the accused may have to be examined at the stage of framing of charge if the contention of the accused is accepted despite the well settled proposition that it is for the accused to lead evidence at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussion as to the ambit and scope of the power which the courts including the High Court can exercise under Section 397 and Section 482 of the Code. Section 397 of the Code vests the court with the power to call for and examine the records of an inferior court for the purposes of satisfying itself as to the legality and regularity of any proceedings or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well- founded error and it may not be appropriate for the court to scrutinize the orders, which upon the face of it bears a token of careful consideration and appear to be in accordance with law. If one looks into the various judgments of this Court, it emerges that the revisional jurisdiction can be invoked where the decisions under challenge are grossly erroneous, there is no compliance with the provisions of law, the finding recorded is based on no evidence, material evidence is ignored or judicial discretion is exercised arbitrarily or perversely. These are not exhaustive classes, but are merely indicative. Each case would have to be determined on its own merits. (para 12) Another well-acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Memorandum of Understanding, dated 02.04.2008 did not constitute an offence. He has also contended that where a civil suit was pending and the complaint was filed one year after the filing of the suit the Court for the purpose of finding out as to whether such allegations were prima facie correct has to take into consideration the correspondences exchanged between the parties. 195. In this case, the first information report seems to have been registered by the respondent police on 13.06.2012. The charge sheet seems to have been filed before the Special Court on 28.01.2014, but the suit seems to have been filed in March, 2013. As argued by Mr. Muralikumaran, the petitioner (Mr.Ganesh Agarwal) is neither an accused in the First Information Report nor a party to the suit in C.S.No.249 of 2013. In the First Information Report in RC MA1 2012 A 0025, it is alleged that the accused persons 1 to 3 viz, Mr. S.Gurusamy, Mr.V.Gurumurthy, and Mr.N.P.Agarwal, had committed an offence under Sections 120-B,r/w 420 477-A IPC and Section 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988 and the Superintendent of Police , who seems to have registered the case on 13.06.2012 has also alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first information report could not be proved conclusively, as the investigation did not reveal his involvement in the case and hence he is not charge sheeted. Obviously, Mr. S.Subramanian, Inspector of Police, CBI/ACB/Chennai is inferior in rank to the Superintendent of Police, who happened to register the case on 13.06.2002. As per the Superintendent of Police, who had registered the case,the source information discloses prima facie commission of offence under Sections 120-B,r/w 420 , 477-A IPC and Section 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988 by Mr.S. Gurusamy, (1st accused), former Chief General Manager, South Zone MMTC Limited, Chennai Regional Office, Chennai, Mr.V.Gurumurthy, (second accused), former General Manager, (Finance Accounts),MMTC Limited Chennai Regional Office, Chennai and Mr.N.P.Agarwal (3rd accused), Proprietor, M/s.Shiv Sahai Sons and unknown officials of MMTC Ltd., Chennai Regional Office, Chennai and Union Bank of India, Main Branch, Chennai. 199. When the Superior Officer, viz., the Superintendent of Police, CBI/ACB, Chennai had found a prima facie case against Mr.S.Gurusamy, Mr. V.Gurumurthy and Mr. N.P.Agarwal, how an officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar the submissions on behalf of the accused and the prosecution on the question whether there is sufficient ground for proceeding against the accused ; (c) If it is in the affirmative, he shall proceed to frame charge under Section 228. 205. On coming to the provisions of Section 239 of the Criminal Procedure Code it enacts that: If, upon considering the police report and the documents sent with it under section 173 and making such examination, if any, of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, the Magistrate considers the charge against the accused to be groundless, he shall discharge the accused, and record his reasons for so doing. 206. Section 239 of the Criminal Procedure Code shall have to be read with the provisions of Section 241(1) which follows, being complementary to each other. Reading the two together, the meaning is that if there is no ground for presuming the accused to have committed an offence, there is no ground for framing a charge under section 240(1) and the accusation brought against the accused must in such a case, be held to be groundless, for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.P.C. the Court is free to consider material that may be produced on behalf of the accused to arrive at a decision whether the charge as framed could be maintained. This, in my view, appears to be the intention of the legislature in wording Sections 227 and 228 the way in which they have been worded and as explained in Debendra Nath Padhi's case (supra) by the larger Bench therein to which the very same question had been referred. 209. While penning down the Judgment on behalf of a Division Bench of the Supreme Court in Rajiv Thapar and others Vs Madan Lal Kapoor (2013) 3 SCC 330), Hon ble Mr Justice J.S.Khekar has observed that: The discretion vested in a High Court under Section 482 of the Cr.P.C. can be exercised suo-moto to prevent the abuse of process of a court, and/or to secure the ends of justice. The High Court, in exercise of its jurisdiction under Section 482 of the Cr.P.C., must make a just and rightful choice. This is not a stage of evaluating the truthfulness or otherwise of allegations levelled by the prosecution/complainant against the accused. Likewise, it is not a stage for determining how weighty the defences raised on behalf of the accused are. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be such, as would persuade a reasonable person to dismiss and condemn the actual basis of the accusations as false. In such a situation, the judicial conscience of the High Court would persuade it to exercise its power under Section 482 Cr.P.C. to quash such criminal proceedings, for that would prevent abuse of process of the court, and secure the ends of justice. The following steps should be followed by the High Court to determine the veracity of a prayer for quashing of proceeding raised by an accused by invoking the power vested in the High Court under Section 482 of the Cr.P.C.:- (i) Step one: whether the material relied upon by the accused is sound, reasonable, and indubitable, i.e., the material is of sterling and impeccable quality? (ii) Step two: whether the material relied upon by the accused would rule out the assertions contained in the charges levelled against the accused, i.e., the material is sufficient to reject and overrule the factual assertions contained in the complaint, i.e., the material is such as would persuade a reasonable person to dismiss and condemn the factual basis of the accusations as false? (iii) Step three: whether the material reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a register was maintained giving detail of FDR number, date of deposit, period, rate of interest, maturity date, Amount, maturity amount . Similarly no details of premature closure or for loan against deposits were furnished to us for verification . ... The Regional Office does not have any copy of the FDR application or Loan against FD application to verify who signed the same on Company s behalf. At page No. 418 :- 1. RO has maintained a single ledger code 24800 for both FD as well as LAD. Bank wise FD details are not available. 2. We have been informed that the schedules file has been misplaced and details for final bank wise list of FD is not available. 3. Neither FD copies are available for verification nor has a FD register been maintained. 4. Several Fund transfers for placement of FD in other banks has been made but the same has not been routed through the current account of the other banks. 5. We also find that no cheque has been issued for placement of FDs. All these are not in line with the established accounting practices. At page No.433 - In respect of the above, the repayment is more than the outstanding as on 31.3.2009 by ₹ 2,90,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot passed . and contends that neither in the Internal Audit nor in the Regular Audit or in the Special Audit or in the reply given to the CAG, any fraud was alleged and in such circumstances, only when the demand was resisted by initiating arbitration proceedings, some interested officials of the MMTC who wanted to cover up their lapses alleged fraud and given a criminal complaint to divert the issue. He further contends pointing out the CAG instructions, Section 209 of the Companies Act 1956 and the MMTC Board charter that it is the Directors who are responsible for the loss i.e., accordingly MMTC, in order to cover up their negligence, the present criminal proceedings have been initiated. There is no valid reply by the prosecution for all these contentions. Therefore, When the entire amount of the Bullion along with the additional charges such as LIBOR, SPREAD etc. has been paid by the customers and in the absence of any allegation of fraud being alleged in the Internal Audit, External Audit, Special Audit and CAG Audit and even at the time of raising the demand for the losses occurred, alleging a fraud subsequently and launching of criminal proceedings is a clear cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of process of law and such proceedings are required to be stopped in early stages. 211. This Court has carefully perused the order of the learned Special Judge, dated 04.08.2015 and made in Crl.M.P.No.3615 of 2014 in C.C No.3 of 2014. On perusal of the said order along with other materials placed before this Court, this Court finds that no prima facie case is made out against the petitioner Mr. Ganesh Agarwal. The same view has also been taken by a learned single Judge of this Court in his order, dated 30.06.2014 made in Application No.2830 of 2013 in C.S.No.249 of 2013. A Division Bench of this Court has also confirmed the said order of this Court by itsJudgment, dated 28.10.2014 made in O.S.A .No. 244 of 2014. 212. The learned Special Judge for CBI cases ought to have allowed Crl.M.P.No.3615 of 2014 in C.C .No.3 of 2014. Unfortunately, the Special Judge, had, without considering the submissions made on behalf of the petitioner as well as the materials placed on his behalf dismissed the said petition saying that the ingredients for constituting the offence against the petitioner can be culled out only from materials and evidence adduced by the prosecution during the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 217. As rightly argued by Mr. Muralikumaran, learned counsel for the petitioner, the prosecution did not produce even a single scrap of paper to show that Mr.V.Gurumoorthi was either authorised person or the only person authorised to make deposits and to take loans from foreign banks. 218. It is therefore clear that it is the duty of the prosecution to put forth some documents such as Board s resolution, its guidelines, norms and authorisations pertaining to making of deposits and availing of loans from the deposits for the purpose of making out a prima facie case. In the absence of such documents, it can easily be presumed that the prosecution has miserably failed to make out a prima facie case as against the petitioners. 219. On careful examination of the materials placed before this Court, this Court finds that there is no investigation on the line as to how, crores and crores of deposits were made in banks out of the sale proceeds without paying the suppliers and how loans were taken and how the banks were chosen for deposits as well as for taking loans and why for the serious lapses no bank officials were made liable?. Moreover, no documents were produced by the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause under Section 619A read with Section 233A sub clause 6 of the Companies Act, the Central Government is empowered to take action on such reports. 226. The Special Audit Report says that the maintenance of accounting system is improper. There was inadequate strength at the official level for maintaining the accounts with reference to the financial transactions. 227. On a careful perusal of the entire records placed before this Court, it is found that no incriminating materials are available as against the petitioners to show that they had indulged in the practice of fraud in connivance with the Mr. V. Gurumoorthi (1st accused). The allegations of fraud were made only against the first accused Mr.V. Gurumoorthi and not against the petitioners. It is to be noted that even as per the prosecution case, the first accused Mr.V.Gurumoorthi in connivance and in collusion with the petitioners had fudged the accounts and caused loss to the MMTC Ltd., Chennai From this language, it could be easily understood that no serious allegations of fraud were made against the petitioners because the petitioners could not have had access to the accounts maintained by the MMTC Ltd., Chennai as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not except agreement to commit offence, amount to a conspiracy unless it is followed by an overt act done by one or more persons in pursuance of such an agreement. An agreement to do an illegal act which amounts to a conspiracy will continue as long as the members of the conspiracy remain in agreement and as long as they are acting in accord and in furtherance of the object for which they entered into the agreement. 232. In the charge sheet it is stated that during the period 2008-2009 A1 to A3 (as per charge sheet) (1) Mr.V.Gurumurthy, former General Manager (Finance Accounts), MMTC Ltd., Chennai Regional Office, Chennai and unknown officials of MMTC Ltd., Chennai Regional Office, Chennai (2) Mr. N.P.Agarwal, Proprietor M/s.Shiv Sahai and Sons and (3) Mr. Ganesh Agarwal (A3 as per charge sheet) had entered into a criminal conspiracy at Chennai and other places to do or cause to be done certain illegal acts., viz., to cheat MMTC Ltd., Chennai (A Government of India Undertaking) in the matter of purchase of gold under the Buyer s Credit Scheme. 233. One can easily infer and understand the contradiction and inconsistency between the First Information Report and the char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffence of criminal conspiracy? Section 415 of IPC is relating to the offence of cheating. It reads that : whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to cheat . Explanation A dishonest concealment of facts is a deception within the meaning of this section Section 416 IPC deals with Cheating by personation Section 417 IPC is the penal provision for cheating. It reads that whoever cheats shall be punished with imprisonment of either description for a term which may extend to one year, or with fine, or with both. Section 418 IPC deals with Cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect. Section 420 deals with Cheating and dishonestly inducing delivery of property. It enacts as under: whoever cheats and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no substantial or adequate grounds are available against the petitioners. Admittedly, the transaction between the complainant MMTC Ltd., and the petitioners is a commercial transaction. In the absence of proof of conspiracy and the criminal intention to cheat the MMTC Ltd., it could not be heard to say that the petitioners have committed the offence of cheating. Everything is borne out by records as stated in the Special Audit Report. The failure, on the part of the officials of MMTC Ltd., to maintain proper accounting system could not rise to the commission of any offence much less the offence of cheating. Therefore, the alleged charges leveled against the petitioners under Section 120B r/w Section 420 IPC are liable to be quashed, as no case of cheating is made out. 241. The next charge levelled against the petitioners is under Section 477A IPC. At the outset, this Court would say that the charge under Section 477A of IPC as well as under Section 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988 could not be made against the petitioners, as they are not concerned with this offence. The reason why is that the offence under Section 477A IPC is relating to falsification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A1 Mr.V.Gurumurthy had accepted the same. 244. To prove this charge, the prosecuting agency has failed to make out a case. L.W.85 (Listed witeness 85) Mr. Dilipkumar is the Proprietor of M/s.Miles and Miles Tours and Travels Private Ltd., . He says that their Office used to book air tickets either through M/s.Agbar Travels, Nungambakkam, Chennai or through M/s.Riya Travels, Egmore, Chennai. He never stated in his statement, through which travel agency he had booked air tickets for Mr. V.Gurumurthy and his wife Mrs. Kausalya Gurumurthy. No employee either from M/s.Agbar Travels, Nungambakkam, Chennai or from M/s.Riya Travels, Egmore, Chennai was examined by the prosecution in order to prove the charge of pecuniary consideration. 245. No person who has been indicted with a particular charge could be convicted on the basis of mere gesture and surmise. 246. In so far as the charge under Section 420 of IPC is concerned, a short question which arises for consideration is as to whether the case of cheating within the meaning of Section 415 of IPC has been made out or not? 247. In B.Suresh Yadav V Sharifa Bee and Anr.(2008 Crl.L.J. 431(SC): AIR 2008 SC 210, the apex Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14) 10 SCC 663) a civil liability cannot be converted into a criminal liability and that therefore, the charge sheet filed as against the petitioners can be quashed on the ground that the allegations made in the charge sheet, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the petitioners. The charge sheet also deserves to be quashed on the ground of abuse of process of Court, as the criminal proceedings initiated by the prosecuting agency is manifestly attended with malafide with an ulterior motive for wreaking vengeance on the petitioner. 250. In the result, Criminal Original Petition No.21243 of 2014 (a)Petition is allowed and the charge sheet in C.C.No.3 of 2014 pending on the file of the learned Special Judge for CBI cases (XII Additional Judge, City Civil Court), Chennai in so far as the petitioner Mr. N.P.Agarwal is concerned quashed ; Criminal Revision Case No.1191 of 2015 (b) Criminal Revision is allowed and the impugned order, dated 04.08.2015 and made in Crl.M.P.No.3615 of 2014 in C.C.No.3 of 2014 is set aside. The petition in Crl.M.P.No.3615 of 2014 is allowed and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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