TMI Blog2019 (12) TMI 1607X X X X Extracts X X X X X X X X Extracts X X X X ..... at criminal acts under Sections 409, 410 and 420 of I.P.C. are general offences/crimes, whereas the case on hand falls within the offence relating to company affairs is falling within a special category that requires special kind of investigation unlike normal investigation into general offences under I.P.C. - It is the duty of the State to ensure that every citizen of the Country should have the free and fair investigation and trial. The preamble and the Constitution are compulsive and not facultative, in that free access to the form of justice is integral to the core right to equality, regarded as a basic feature of our Constitution. Therefore, such a right is a constitutional right as well as a fundamental right. Such a right equally be protected to the accused and to the victim depending upon the facts of the case. Therefore, such a right is not only a constitutional right but also a human right. Any procedure which comes in a way of a party in getting a fair trial would be violation of Article 14 of the Constitution of India. Thus, the investigation should be judicious, fair, transparent and expeditious to ensure compliance with the basic rule of law. These are the fundamen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 436 of the Companies Act, 2013; the arrest of the 2nd petitioner by the police in respect of the aforesaid crimes amounts to illegal detention and consequently sought for directions to respondents 1 to 10 to release the 2nd petitioner from Women Prisoners Jail, Chenchalguda, Hyderabad, forthwith; not to entertain any further complaint in respect of the alleged offences relating to the petitioners company which might be lodged by any investor of the 1st petitioner company; to withdraw the above complaints in the aforesaid F.I.Rs.; and to forward the complaints lodged by respondent Nos.12 to 15 to respondent No.11 (Serious Fraud Investigation Office) in terms of the Companies Act, 2013. Writ Petition No.7950 of 2019 is filed seeking a Writ of Certiorari calling for records in respect of F.I.Rs., vide F.I.R.No.33 of 2019 dated 07.02.2019, F.I.R.No.40 of 2019 dated 16.02.2019 and F.I.R.No.53 of 2019 dated 01.03.2019 of Central Crime Station, Hyderabad, and declare that the registration of the said F.I.R.s as illegal, arbitrary, unconstitutional, violative of principles of natural justice, fundamental rights and against the provisions of the Companies Act, 2013 since respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 1st petitioner company have earned more dividends than the actual capital amount which they invested with the company. It is stated that few months prior to filing of the complaints by the investors there was a delay for payment of the dividends due to the fact that there is some unexpected down flow in the market, as a result of which, the 1st petitioner company has decided to pay the dividends to its investors once in three months and the said factum has been intimated to the respective investors. In view of the delay in payment of dividends, some hyper-sensitive investors demanded for refund of the investment made by them with the 1st petitioner company. As per the arrangement and contracted terms and conditions, the investment cannot be refunded to its customers after the expiry of the lock-in period and the investors have to make an application as per the terms and conditions of the agreement entered with the 1st petitioner company and then only the investments will be refunded. But, some of the investors decided not to follow the terms of the agreement i.e., insofar as the people, who have invested are concerned, from Telangana only nine persons lodged complaints to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Atul-Islam-Urdu, an Arabic Development Society. It is also stated that the 2nd petitioner launched a political party by name All India Mahila Empowerment Party in the State of Telangana, by virtue of good reputation in the Muslim Community. The existing Muslim leader, who belongs to political party AIMIM namely Asaduddin Owaisi, lodged a false complaint vide F.I.R.No.154 of 2012 dated 14.08.2012 on the file of the Additional Director General of Police, Law and Order, for the offences punishable under Sections 420 and 406 of I.P.C., and ultimately the police has filed a report stating that it is a false complaint. It is stated that if the party launched by the 2nd petitioner contest in the State General Elections in 2018, it would be an impediment to the AIMIM party and this would divide the votes between both the parties, in which event the said AIMIM party may be defeated. However, as against the said complaint, the 2nd petitioner filed a suit for defamation vide O.S.No.835 of 2017, which is pending before the Chief Judge, City Civil Court, Hyderabad. Therefore, the complaints, which were filed by respondent Nos.12 to 15 in W.P.No.5449 of 2019 and respondent Nos.8 to 10 in W.P.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopers (Hyd.) Pvt. Ltd., (12) Heera Medical City Private Limited, (13) Heera Foodex Private Limited, (14) Heera Gold Fabrics Private Limited and (15) HG Gold Private Limited, in which some companies are shell companies. There is no business and no returns have been submitted by the petitioners/accused since incorporation of the above said companies. Apart from that during the course of investigation, it is disclosed that the 1st petitioner and others diverted funds from one company to other companies, by violating their M.O.A. of companies for their wrongful gain, for which effect the above criminal cases have been registered, as the profits/dividends are not paid to the complainants. The contention of the 2nd petitioner/A2 that the 1st petitioner is doing business not only from all over India and also in other Countries and paying dividends regularly to the investors is not correct. It is stated that the office of the 1st petitioner company is located at H.No.8-2-609/K, Road No.10, Banjarahills, Hyderabad, and other branch offices across India. The 1st petitioner company has appointed 181 Marketing Agents and about 2050 Direct Selling Agents across India and abroad and collected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above seized data and material objects, have been sent to TSFSL, Hyderabad, for analysis and expert report, vide Nos. SFSL (TS)/10612/COM/420/18, dated 13.12.2018 and SFSL (TS)/2743/COM/80/19, dated 04.04.2019 which are pending. It is also stated that during the investigation so far, more than 240 bank accounts were identified across India, pertaining to Nowhera Shaik (2nd petitioner), her companies, its Directors and others. On verification, only Rs.25.00 Crores approximately was found in the said bank accounts and the same were frozen under Section 102 of Cr.P.C. Apart from, several foreign bank accounts pertaining to the said Nowhera Shaik (2nd petitioner) and her companies were also identified. In this regard to ascertain the details of foreign accounts/deposits, letters were addressed to the Enforcement Director, Income Tax Department, Serious Fraud Investigation Office and Reserve Bank of India, for information about foreign accounts and analyse the large data, for taking the investigation further. It is also stated that so far 81 properties have been identified pertaining to Nowhera Shaik (2nd petitioner) and her companies, its Directors and others in the States of Tel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than Companies Act. Further it makes it very clear that the Serious Fraud Investigating Office shall share any information with any investigating agency, including police authorities. Therefore, the police authority can proceed with the investigation for the offences under Sections 409, 406 and 420 read with Section 34 of the I.P.C., as well as Section 5 of the Telangana Protection of Depositors of Financial Establishments Act, 1999 and sections 3, 4, 5 and 6 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. Further, Section 14 of the Telangana Protection of Depositors of Financial Establishments Act, 1999, states that the provisions of the said Act shall have over riding effect in any other laws. Therefore, viewed from any angle, the conduct of investigation by the police authorities is different and distinct with the different object in compliance with the offences, from the investigation conducted by the Serious Fraud Investigation Office under Companies Act. It is also stated that Section 2 (c) of the Andhra Pradesh Protection of Depositors of Financial Establishment Act, 1999, was amended in the year 2003, thereby bringing the companies under the purvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II(SER), dated 27.03.2018, assigned investigation into the affairs of 14 companies of Heera Group to the Serious Fraud Investigation Office under Section 212 (1) (d) of the Companies Act, 2013 and directed the Director of Serious Fraud Investigation Office, to decide such number of Inspectors, as he may consider necessary, for the purpose of investigation. The Director, Serious Fraud Investigation Office, in exercise of powers conferred under Section 212 (1) of the Companies Act, 2013, designated three officers as Inspectors to carry out the investigation into the affairs of 14 Heera Group Companies. The aforesaid investigation is presently continuing in terms of the provisions of the Companies Act, 2013. However, pending investigation into the affairs of the said companies, the petitioners herein sought, inter alia, calling for the records in respect of the F.I.R.s registered against them and declaring the registration of the said F.I.R.s as illegal, arbitrary, unconstitutional, violative of principles of natural justice and also violative of the fundamental rights of the petitioners and consequently release the 2nd petitioner from Women Prisoners Jail, Chenchalguda. It is also st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be initiated. It is also stated that respondent No.12 filed an application for withdrawal of her investment on 07.07.2018, but the 1st petitioner company gave a letter fixing a schedule for withdrawal within 45 days from 07.07.2018 which is on or after 27.08.2018 and failed to keep up their side of commitment. It is also stated that on 31.08.2019, the petitioners forced her to accept and sign in an undertaking that they would return the money within two months and also not to approach the police regarding this issue and after constant threats and harassment they would not refund the money. As she has no other option, she lodged the complaint. It is also stated that almost all 26 F.I.R.s have been lodged throughout India against the 1st petitioner company represented by the 2nd petitioner. The said F.I.Rs are genuinely lodged by the innocent investors, who have been cheated in broad daylight at behest of getting high interests in the name of profits up to 36% to 40% per annum by luring gullible people of high returns contrary to public policies. The company is not solvent as stated in paragraph No.7 of the writ petition. It is also stated that the police have followed the due pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and does not fall under the purview of the Telangana Protection of Depositors of Financial Establishments Act, 1999 is incorrect. It is also stated that the petitioner is already enlarged on bail in all subject matter crimes and charge sheet also filed. The Writ is devoid of merits and is liable to be dismissed. Respondent No.14 in W.P.No.5449 of 2019, who is the President of Heera Group Victims Association, also filed counteraffidavit reiterating the contentions made in the counter-affidavit filed by respondent No.12 in W.P.No.5449 of 2019. Apart from that, respondent No.14 also stated that another victim Dr.Aluru Shamsunnisa, working as a Gynaecologist in Riyadh, Saudi Arabia, also invested Rs.50,00,000/- in Heera Textiles on 23.07.2017 and after maturity, the amount was not refunded and she has come over to India and her statement was recorded by the police in Crime No.170 of 2018. Presently, as many as 10,000 applications are pending for withdrawal and more particularly Heera Textiles is not made as party in this writ petition and contrary to that the petitioner is seeking bail against the company. It is also stated that he filed W.P.(PIL) No.33 of 2019 before this Court se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a State Legislation. Pitted against each other, the Central Legislation will prevail over the State Legislation. It is further stated that insofar as offences under Sections 406 and 420 of I.P.C. are concerned, the Constitutional Courts have time and again held that for a person to be convicted under Section 420 of I.P.C. the intention should be from the inception till culmination. As there is no breach of trust, Section 406 of I.P.C. is also not applicable. It is further submitted that the 1st petitioner is a Company incorporated under the provisions of the Companies Act and the 2nd petitioner is its Managing Director. The 1st petitioner is doing its business since 1998 and it is confined only to Muslims. Under Muslim Law, the question of interest does not arise. It is also stated that as per clauses 2, 14, 15, 19, 20, 21 and 22 of Heera Group Terms and Conditions, the membership is confined only to Muslims; payments are accepted only through bank, cash payment will not be entertained; members were strictly prohibited to handover cash to any HG Office/Executive/Person; withdrawal request shall be submitted as per the respective TCN s terms and conditions; HG TCN membership is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of Telangana from the de facto complainants, the Central Government directed the Director of Serious Fraud Investigation Office, to take action against the petitioners. Hence, the Serious Fraud Investigation Office is already ceased off the matter. A perusal of the orders passed by the Central Government coupled with Section 212 (2) of the Companies Act, it is clear that no other agency, except the Serious Fraud Investigation Office, has to look into the complaints. Therefore, the complaints are already under investigation and the Serious Fraud Investigation Office issued summons to the petitioner on 28.08.2018. Therefore, the State Government ought not to have registered the F.I.R.s basing on the complaints lodged by the Unit Holders, who have complained to the concerned authority under the provisions of the Companies Act, 2013. All the complaints are stereo type and it is nowhere mentioned in the complaints that whether the amount due to them is outside the lock-in period or whether it is within the lock-in period. In view of the provisions of the Companies Act, State of Telangana has no authority or empowerment to register the F.I.R.s and the State is denuding from its po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank accounts were seized and even some of the staff members have been arrested. During the course of pendency of the Writ Petition, a charge sheet has been filed in one case. Since it is a continuation of the proceedings, the same has also to be set aside by this Court and all the complaints are to be transferred to the Serious Fraud Investigating Agency. It is also stated that the contention of the unofficial respondents that the other sister concern companies of the petitioners are not before this Court is falls to ground as there is nothing against the sister concern companies and they need not be made as parties in the writ petitions. It is also stated that the contention of the State that a single writ petition is not maintainable to quash more than one F.I.R., is a sheer technical objection, which is not tenable and liable to be rejected. In support of his contentions, learned Senior Counsel relied on the following citations. 1. Neeraj Singal v. Union of India and others (2019) Crl.L.J. 191 2. Rakesh Kumar Paul v. State of Assam (2017) 15 SCC 67 3. Vihaan Direct Selling (I) Pvt. Limited and others v. Union of India and others W.P.(Crl.) No.31 of 2017, Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigate into the matters. It is also submitted that the investigation in the above mentioned crimes is being conducted properly, fairly, impartial and efficiently in an unbiased manner, as a result of which critical and crucial evidence has been seized. It is also submitted that there are about 1,72,000 investors having deposited a sum of Rs.5,600 Crores approximately across India and abroad. In order to protect the interest of the said victims, it is just and necessary to the police authorities to proceed with the investigation otherwise, the petitioners will be left off from the clutches of law. It is also submitted that writ petition is not maintainable as the prayer sought for is to quash more than one F.I.R. It is also submitted that charge sheets have been filed in some cases and as such the prayer has to be amended. He relied on the judgment of the High Court of Delhi in S.P.Gupta v. State (2005) 119 DLT 214. The learned Standing Counsel appearing for the Serious Fraud Investigation Office and the Union of India, would submit that as per the directions of the Central Government, the Director, Serious Fraud Investigation Office, has appointed the Inspectors to carry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (2003) 4 SCC 488 7. Ramesh Govindaram (dead) through LRs v. Sugra Humayun Mirza Wakf (2010) 8 SCC 726 Sri M.Sudheer Kumar, learned Counsel appearing for the proposed respondent No.17 in W.P.No.5449 of 2019 would submit that believing the assurances and inducement made by the 2nd petitioner/A2 and other Directors of the 1st petitioner/A1 company, several innocent people have invested their hard earned money with Heera Group Companies. In the year 2014, the Marketing Executive of Heera Group of Companies, approached the proposed respondent No.17 stating that Heera Group is owning about 15 companies in India and abroad and running them with all legal permissions and induced him to invest in the said companies as Halal Policy on Islamic Religious Law in Assets Management, Real Estate Securities, stock bonds, shares, mutual funds etc. and assured of very high returns and believing the assurances made by the writ petitioners and the other Directors, he had invested huge amounts totaling to Rs.1,44,00,000/- under various cheques and the writ petitioners issued Unit Purchase Receipts for the amounts invested by him under different schemes and for different durations. Though the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling within the special law namely the Companies Act, 2013, the investigating agency under the said Act has to investigate into the offences or irregularities committed by the Company or the Directors. He would also submit that such kind of irregularities said to have been committed by a Company in its business affairs requires a special skill and knowledge including accounting, compliance with regulatory mechanisms like ROC, SEBI, RBI etc., and for doing such kind of skilful investigation, it is the Serious Fraud Investigator under the Companies Act is the appropriate agency and normal investigation by the police may not be able to do such investigation. The contention of the learned Government Pleader for Home, is that under the pretext of a Corporate Veil, the 2nd petitioner has resorted to cheat the gullible people, collected multiple crores of money, played fraud on them and siphoned off those funds to foreign countries and if the investigation is completed, all these crimes committed by the accused will be unravelled. His further contention is that the Writ Petitions are intended to thwart the investigation by the Police and there is nothing to be investigated by the Seri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he chit is a trustee of the funds paid into the chit by the subscribers. Therefore, the instant case falls within the domain of Companies Act, 2013. Further, the law is well settled by the Apex Court in its recent judgment that failure to repay a loan is not a criminal offence unless there is a fraudulent intent. In Satishchandra Ratanlal Shah v. State of Gujarat (9 supra) the Apex Court observed as under: The law clearly recognizes a difference between simple payment/investment of money and entrustment of money or property. A mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 of I.P.C., without there being a clear case of entrustment. It is further observed by the Apex Court that inducement and dishonest intention are necessary ingredients to attract the penal provisions of sections 415 and 420 of I.P.C. On the other hand, the Companies Act, which is a special legislation dealing with the affairs of the Company envisaged a special crime and investigation under the caption serious frauds . Section 210 of the Companies Act, provides investigation into affairs of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the core right to equality, regarded as a basic feature of our Constitution. Therefore, such a right is a constitutional right as well as a fundamental right. Such a right equally be protected to the accused and to the victim depending upon the facts of the case. Therefore, such a right is not only a constitutional right but also a human right. Any procedure which comes in a way of a party in getting a fair trial would be violation of Article 14 of the Constitution of India. In Zahira Habibulla H.Sheikh v. State of Gujarath the Apex Court has observed as under: 36. The principles of rule of law and due process are closely linked with human rights protection. Such rights can be protected effectively when a citizen has recourse to the courts of law. It has to be unmistakably understood that a trial which is primarily aimed at ascertaining the truth has to be fair to all concerned. There can be no analytical, all comprehensive or exhaustive definition of the concept of a fair trial, and it may have to be determined in seemingly infinite variety of actual situations with the ultimate object in mind viz. whether something that was done or said either before or at the trial dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been further held that Rule of Law is a facet of equality under Article 14 of the Constitution of India. Considering the duty of an investigator to conduct a proper investigation, the Apex Court in Manohar Lal Sharma v. Principal Secretary and others (2014) 2 SCC 532 made its observation that a proper investigation into crime is one of the essentials of the criminal justice system and an integral facet of rule of law. The investigation by the police under the Code has to be fair, impartial and uninfluenced by external influences. The Apex Court in the case of Sidhartha Vashisht @ Manu Sharma v. State (NCT of Delhi) 3 (2010) 6 SCC 1 held as under: 197. In the Indian criminal jurisprudence, the accused is placed in a somewhat advantageous position than under different jurisprudence of some of the Countries in the World. The criminal justice administration system in India places human rights and dignity for human life at a much higher pedestal. In our jurisprudence an accused is presumed to be innocent till proved guilty, the alleged accused is entitled to fairness and true investigation and fair trial and the prosecution is expected to play balanced role in the trial of a cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions of the Companies Act, 2013 cannot be investigated by Police because, such investigation requires special qualifications like, verification of balance sheet, company accounts and statements, Board resolutions, validity of Share purchase agreements, compliance with the regulatory requirements with Banks and Financial Institutions, SEBI and Registrar of Companies are vested with the absolute powers, competence and methodology for investigation into those special matters and not the normal police. If general Police investigates into a special offence, since they lacking expertise, as rightly argued by the learned Counsel for the petitioners that there is likelihood of ensuring prejudice to the accused. If that happens, the rule of law that State is under obligation to ensure unbiased and transparent investigation in furtherance of fair trial principle is abrogated. Inspection of Books of Accounts, taken up in isolation, would not serve much purpose. Indeed, in the present form as provided for under the Companies Act, there is a danger that such inspections may be taken as a part of administrative routine. There would be a considerable expenditure of time and energ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Inspector under Section 217 of the Companies Act, 2013. As per sub-section (5) of Section 212 of the Companies Act, 2013, it shall be the responsibility of the company, its officers and employees, who are or have been in the employment of the company to provide all information, explanation, documents and assistance to the investigating officer as he may require for conduct of business. As per sub-section (11) of Section 212 of the Companies Act, 2013, the Serious Fraud Investigation shall submit an interim report, if so directed by the Central Government. As per sub-section (12) of Section 212 of the Companies Act, 2013, on completion of investigation, the SFIO shall submit the Investigation Report to the Central Government. As per sub-section (17) (a) of Section 212 of the Companies Act, in case Serious Fraud Investigation Office has been investigating any offence under this Act, any other investigating agency, State Government police authority, income-tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the Serious Fraud Investigation office. As per sub-section (17) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, are under statutory obligation to assign (transfer) such investigation to the SFIO for proper investigation. In the reported case, the transfer petitions are allowed by the Apex Court and granted conditional bail to accused with a direction to surrender before the SFIO/Special Court. The underlying ratio of criminal jurisprudence is to protect the rights of not only the aggrieved but also of the accused. Where similar offences are registered in various police stations and they are falling within the Companies Act (a special legislation) and normal police are investigating into the offences at various police station limits, this will lead to absurdity, confusion, conflict of views and consume long time. On the other hand, it will cause harassment to the accused besides humiliation as she will be forced to run from pillar to post every day during investigation. Therefore, in view of the legal position above, and without expressing any opinion whether all the F.I.Rs., registered by the Police under Indian Penal Code are attracted or not, this Court is of the view that ends of justice would be met if all the crimes are transferred to SFIO for investigation with the following d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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