TMI Blog2017 (12) TMI 1825X X X X Extracts X X X X X X X X Extracts X X X X ..... h is not acting in accordance therewith and not making the payments as demanded by respondent No.3. Here in the case, it is nowhere alleged in the complaint, even for the sake of it, that since beginning the applicant Ramesh Shah had dishonest or fraudulent intention of cheating the respondent No.3. Conversely, both the parties are having their respective rival contentions for not fulfilling the terms of the Share Holding Agreement. Hence, it is apparent that the grievance is against subsequent non-fulfillment of terms and conditions of the Agreement and not of applicant Ramesh Shah having such intention of cheating since beginning - A clear finding is arrived at, about the allegations made in the complaint, by the Company Law Board totally ruling out mismanagement of the affairs of the company or any fraudulent intention. It was also held that there was no mismanagement and siphoning of funds. The allegations of illegal alteration of share holding and denial of information to the complainant were also negated. In the case of State of Maharashtra and ors -vs- Arun Gulab Gawali, [ 2010 (8) TMI 1150 - SUPREME COURT ], relied upon by learned counsel for respondent No.3, Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be appointed on the Board of Directors and designated as Vice Chairman of ETCO Denim on execution of agreement. Moreover, as Vice Chairman, he was to receive remuneration of ₹ 2.75 lacs per month. All important decisions of the company were to be taken jointly by him and the applicant Ramesh Shah. In pursuance of the said agreement respondent No.3 invested substantial amount through him and his companies in ETCO and thereby acquired 45% stake in the total share holding of ETCO. However, he was not called for AGM and EOGM meetings. The Directors and financers of ETCO were neglecting and avoiding him. They also did not keep their promises like appointing him as Vice Chairman, paying remuneration of ₹ 2.75 lacs per month, giving authority to sign all the cheques, inform the change in share holding to the bank, allow him to take decision of the company jointly with him etc., and thus, cheated him. 5] It is further case of respondent No.3 that the applicant Ramesh Shah has submitted project report about erection and installation of plant of ETCO at Bijapur, Karnataka and availed loan of ₹ 237 crores from Corporation Bank and other four banks. However, he did not ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out of the Share Holding Agreement entered into between the parties and therefore, this dispute is predominantly of a civil nature and hence availing criminal remedy to settle the same is totally a gross abuse and misuse of the law. It is further submitted by learned counsel for the applicants that respondent No.3 has already availed civil remedies, including the remedy before the Company Law Board and also the Arbitration Proceeding. Respondent No.3 has also filed suits for recovery of this amount which are pending in the Court. Only after he failed to get the reliefs in other forums, in order to recover the amount which he could not do in civil proceeding, Respondent No.3 has resorted to criminal process. It is urged that none of the ingredients of the offence alleged being made out and launch of the criminal process being malafide, the F.I.R. needs to be quashed and set aside. 9] Per contra, according to learned counsel for respondent No.3, the contents of the F.I.R. clearly reveal commission of cognizable offences like cheating, fabrication of accounts etc., and hence merely because civil proceedings are also resorted to, the complaint cannot be quashed at the threshold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Exhibit A . Clause (D), (E) and (F) of the Agreement reads as under :- D. That Shareholder No.3 (Respondent No.3) is one of the leading and renowned distributors of the Denim Fabric in India and is well versed with the market conditions. Shareholder No.3 is also the Chairman and equity Shareholder in another two companies i.e. Tushar Clothing Private Limited and Tushar Fabrics Private Limited. Share holder No.3 has shown interest in the business of the Company and accordingly approached Shareholder No.I (Applicant Ramesh Shah), to buy the Shares of the Company either by self and or his nominees. (emphasis supplied) E. The Shareholder Nos.I have clearly informed Shareholder No.3 the intention behind selling the equity Shares is to sustain profit to the Company at least for a period of five years as mentioned in para C hereinabove mentioned. F. The Shareholder No.3 has accordingly agreed to buy the product of the Company that is to the limit of 40 million meter of Fabric as a Sole Distributor either through his company i.e. Tushar Fabrics Private Limited and/or through other companies brought in by Shareholder no.3 at the cost of sales (fixed cost+variable cost) +fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly, Ramesh Shah and ETCO Denim Pvt. Ltd were bound to give me and my companies exclusive distributorship of Denim Fabrics to be manufactured by ETCO Denim Pvt. Ltd., from May 2013 onwards. If they had given this distributorship to me and my companies, we could have earned approximately ₹ 35.40 crores as on today. Ramesh Shah and ETCO Denim Pvt. Ltd, by denying this distributorship to us, have caused loss of approx. ₹ 35.40 crores to me and our companies. Due to this, we have also sustained heavy loss as far as goodwill and/or reputation of our companies in the market is concerned. I say that Ramesh Shah owes us 1) ₹ 29.38 crores against our unsecured loan and security deposit by TCPL and TFPL, 2) Interest amount of ₹ 29.35 crores against our unsecured loan and security deposit and 3) ₹ 35.40 crores due to failure to supply denim fabrics by him. Ramesh Shah also along with others has, thereby cheated me and my companies to the tune of ₹ 94.13 crores . 18] Thus, the case made out in the complaint of respondent No.3 is to the effect that by avoiding to pay this amount which, according to him was due to him, applicant Ramesh Shah and his c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such an agreement, with fraudulent intention of cheating him since beginning does not arise. Therefore, apparently the dispute appears to be in respect of breach of the Agreement, which may be on account of subsequent developments, in respect of which allegations and counter allegations are made by the parties against each other. On the basis of mere breach of Agreement, it would not be possible to hold that applicant Ramesh Shah, had since beginning dishonest or fraudulent intention of cheating respondent No.3. 22] This inference that dispute appears to be of a predominantly civil nature can be drawn also from the fact that the dispute was first taken before the Company Law Board, Mumbai Bench, Mumbai, by respondent No.3 himself. Copy of the judgment delivered in the Company Petition No.28 of 2014 on 30.4.2015 is produced on record and it shows that in paragraph No.83, Company Law board was pleased to observe that:- 83. ... ... ... ... ... In the early stage of hearing, learned counsel for the petitioner (respondent No.3 herein) had proposed on their behalf that if the Respondents agree to pay back their contribution towards the equity as its face value per share and the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Suits for recovery of the amounts bearing COMS/188/2016 and COMS/222/2016, respectively, are pending in the Court which are filed by Respondent No.3 Company M/s Tushar Fabrics. The applicant's company Denim Private Limited has also filed Summery Suit No.COMSL/257/2016 for recovery of ₹ 124 crores towards loss and damages for non lifting of denim by Respondent No.3. Arbitration Petition No. ARBP/262/2017 under Section 14 has also been filed by the applicant Ramesh Shah against Respondent No.3. 29] As to the allegations of respondent No.3 made in the complaint that applicant Ramesh Shah has over-invoiced for availing loan of ₹ 237 crores from Corporation bank and four banks and he did not install the machinery in the plant as per project report, but installed second hand machinery from Gulf Denim Company, which was 18 years old; it is again a matter of record that the applicant M/s Yardi Prabhu Consultants and Valuers Pvt. Ltd., was appointed for the purpose of verification of the same. Thereafter the matter was even referred to the applicant M/s A.V. Shetty and Associates, which was appointed by the Corporation Bank. Both of them have also submitted their project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar intervals for monitoring of the project. On completion of the project, another LIE i.e. M/s A.V. Shetty Associates from Lead Bank's panel list was also engaged. The fresh valuations have been carried out by M/s A.V. Shetty Associates and they have already submitted their report wherein the valuation of machinery and the project on the whole have been found to be satisfactory. The report concludes as under:- After inspection and verification of the cost of the project based on the data provided by the Company and market information based on primary and secondary research and analysis of the comparative cost estimates of reputed suppliers (domestic international) for plant and machinery purchased and installed by the Company the costs incurred by the Company are reasonable and fair and in line with the market norms taking into account the specification/configuration and suitability for the project . Hence the reports furnished by both LIE's are satisfactory . 32] As regards the allegations of applicant Ramesh Shah indulging in money laundering or over invoicing and therefore, being black listed for a period of five years and two years respectively, by SEBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when such disputes have been finally resolved by the Court of competent jurisdiction, then it is apparent that complainant wants to manipulate and misuse the process of Court. In this judgment, it was held that, it would be unfair if the applicants are to be tried in such criminal proceeding arising out of the alleged breach of a Joint Venture Agreement. It was further held that the wholesome power under Section 482 of Code of Criminal Procedure entitles the High Court to quash a proceeding when it comes to the conclusion that allowing the proceeding to continue would be abuse of the process of the Court or that the ends of justice require that the proceedings ought to be quashed. 36] As a matter of fact in the case in Indian Oil Corpn-vs- NEPC India Ltd and ors, 2006 (3) SCC Cri 736, the Apex Court was pleased to caution about the growing tendency in business circles to convert purely civil disputes into criminal cases. It was observed that:- Any effort to settle civil disputes and claims which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged 37] Learned counsel for applicant has also relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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