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TMI Blog2013 (9) TMI 1307X X X X Extracts X X X X X X X X Extracts X X X X ..... ered at P.S. Defence Colony, Delhi for the offences of criminal breach of trust, criminal misappropriation, forgery, etc. and FIR No.511/2005 registered at P.S. Connaught Place, Delhi for the aforesaid offences, is sought by petitioners-Morgan Securities & Indo Rama Synthetics on the ground that the dispute raised in these two FIRs is essentially of civil nature and the ingredients of the offence alleged are lacking and that the proceeding arising out of these FIRs is the abuse of process of law. 2. In Crl. M.C.2059/2005, petitioner-Morgan Securities and Credits Pvt. Ltd. seeks quashing of FIR No.108/2005 registered in the State of Himachal Pradesh at the instance of M/s. Morepen Laboratories Ltd. for the aforesaid offences on identical grounds as taken in Crl.M.C.4603/2005. Under the orders of the Apex Court, aforesaid petition was transferred to this High Court for being heard alongwith Crl.M.C.4603/2005 etc. In Crl.M.Cs. 279/2011, 280/2011 and 281/2011, trial court's order of 14th January, 2011 is assailed on the ground that since the pledged shares have been sold in open market to bonafide purchasers, therefore, superdari of the pledged shares in question to the complainan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing vide order No.53095-105/C&T (AC-III) dt. 21.10.05 by the PHQ. That the investigation revealed that M/s. MLL obtained an ICD of Rs. 5 crores and Rs. 2 crores from the lender M/s. MSCPL in accordance with agreement dt. 19.09.02 and 30.10.02, without security for a period of 120 days. The witnesses belonging to borrower and guarantor companies stated that due to unforeseeable circumstances, the MLL could not repay the ICDs. They were requested by Sh. Suresh Chand Goyal etc. of the MSCPL for pledging as security the 15 lac equity shares of M/s. Blue Cost Hotel & Resorts Ltd. (BCHRL) one of the group company of the borrower. The complainant stated that they were also assured that the said security is required for the purpose of corporate documentations and that the same would not be sold without prior intimation & consent. Therefore, they agreed to pledge the 15 lac shares as security through six associate companies namely Niketan Traders P. Ltd., Petunia Financial P. Ltd., Beckers Traders P. Ltd., Cross Traders P. Ltd., Ebony Traders P. Ltd. & Tendril Financial Services P. Ltd., holding these shares. Pledge agreements dt. 07.02.02 were also signed by pledgers & handed over to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res. That on 17.03.04, the MSCPL also filed an urgent application in the Execution Petition No.13/04 praying for restraining the BCHRL from increasing or changing its status of equity shares of the company as it may cause decrease in value of the security held by them. This confirmed the statement of Sh. SC Goyal, CMD, MSCPL made on 24.02.04 to borrower/surety that about 1 lac shares have been sold and remaining are parked/transferred by him in his associate companies, which would be returned on repayment of the ICD. However, both the parties negotiated and settled the matter amicably. On 05.04.04, the BCHRL filed an undertaking not to increase or change the status of its equity shares, the MLL withdrew its application asking for details of sale of pledged shares and assured to make repayments of the ICD. In view of the same, the Hon'ble High Court withdrew the attachment warrants issued earlier and disposed off the matter vide order dt. 05.04.04. That accordingly, the borrower M/s. MLL paid the principal amount of Rs. 5 crores from Apr. 2004 to Apr. 2005 through pay orders drawn at their banks. They have also paid part interest component. The dispute remains on the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esort and Spa, Goa which was commercially launched on 01.10.03. The hotel has the potentials to grow and earn income. The quarterly financial results for the quarter ending 31.12.03 & 31.03.04 reflected increased earning from the operations of the hotel. The assets of the company also increased. Accordingly, as per the market forces, the share prices were bound to increase in the stock exchange during this period. But, contrary to the fact, the share prices have come down heavily as shown by the lenders and their associates. Again during the lean period in the hotel industry, the prices are normally decreased slightly but in the instant transactions, these have been shown risen. After the sale of pledged shares completed, the prices continued to increase thereafter because the hotel is doing well. These facts established that the prices of the shares were manipulated by accused persons while transferring the pledged shares between 16.12.03 to 25.03.04. That the MSCPL through Sh. PK Gupta filed an application dated 23.08.05 in EP No.13/04 in the Hon'ble High court, Delhi attaching therewith a copy of the sale statement and ledger accounts showing details of sale of shares. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2281/2006 rendered on 11th December, 2006; Kailash Chand Sharma, v. State & Ors. 2005 [2] JCC 602; J.R.D. Tata, Chairman, Tata Iron & Steel Company Ltd. And etc. V. Mrs. Payal Kumar and another 1987 Crl.L.J. 447; M/s. A.E.C. Enterprises Ltd. & Anr. V. Ms. Peacock Chemicals Pvt. Ltd. & Others 75 (1998) DLT 484; Acharya Arun Dev v. State & Anr. 2005 [2] JC 897; S.P. Sharma, v. National Capital Territory of Delhi & Ors. 1999 [1] JCC [Delhi] 59; Iqbal Singh Marwah & Anr. V. Meenakshi Marwah & Anr. 2005 II AD (Cr.) SC; K.G. Premshankar v. Inspector of Police and Another 2002 Crl. L.J. 4343; Subhakarn Luharuka & Anr. V. State (Govt. Of NCT of Delhi ) & Anr. 170 (2010) DLT 516, have been also perused. 6. On behalf of petitioners, it was contended that this is a classic case where the borrower after having received the monies is unable to repay the debts and resorts to criminal action to avoid it's liabilities under the contract which it had signed without any pressure or coercion. It was asserted that the admitted position between the parties is that the Borrower had taken an Inter Corporate Deposit of Rs. 5 crores returnable within 120 days and had defaulted in the repayment leadin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners that breach of contract is by respondent- complainant which gives rise to a purely civil dispute and does not entail any criminality. During the course of hearing, attention of this Court was drawn by petitioners' counsel to Clause 4 (iii), Clause 7 (ii) and Clause 9 (vii) of Pledge Agreements in question and to the Award already given by the Arbitrator, to assert as under: - "a. That in event of default the Lender (petitioner) had unfettered rights to deal with the shares in any manner whatsoever including realizing itself. b. That the Award clearly provided that in event of default in payments the Lender could take unilateral steps and all the steps for sale of shares were taken by the petitioner in terms of the Award and the Letter of Pledge and hence no criminal liability can be foisted on the petitioner. c. That the complaint/F.I.R. clearly relates to interpretation and application of the covenants of the Letter of Pledge and the Award which clearly would have a Civil Flavour." 10. Infact, it is the case of respondents-complainant that they were misled into believing that the pledged shares were not sold and only in the year 2005, they came to know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whose details are given in the above-said Annexure-I. 14. At the hearing, it was contended on behalf of respondents- complainant that though the offence in question was committed post December, 2003, but petitioners are trying to give it a colour of civil matter and are burdening the court with irrelevant material and these petitions are premature as the question of petitioner-M/s. Morgan Securities and Credits Pvt. Ltd. selling pledged shares without Notice clearly attracts the offence of misappropriation of the shares in question. Not only this, it was asserted on behalf of respondents-complainant that petitioner-M/s. Morgan Securities and Credits Pvt. Ltd. in collusion with remaining accused had collusively sold the pledged shares at a price much below the fair market value of these shares and since the selling of pledged shares in question without notice is per se bad in law in view of the dictum in J.R.D. Tata. (supra) and M/s. A.E.C. Enterprises (supra), therefore, no case for quashing of the criminal proceedings is made out. 15. To contend that when cognizable offence is prima facie made out then FIR cannot be quashed on the ground that the matter appears to be of civil n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be addressed and it will clinch the whole issue. 20. Petitioner-Morgan Securities & Credits P. Ltd.'s letter of 9th December, 2003 sent by registered post to all concerned and respondent- M/s Morepen Laboratories Ltd.'s letter of 7th February, 2004 (Annexure F Colly) are reproduced for ready reference as under:- December 09, 2003 M/s Tandril Financial Pvt. Ltd. B-202, Plot No.52 Sukhnagar Apartment I.P. Extension Delhi-110092 .... Pledger M/s Niketan Traders Pvt. Ltd. 3627, Sector 46D Chandigarh-160019 .... Pledger M/s Ebony Traders Pvt. Ltd. 1008, Sector-19B Chandigarh-160019 .... Pledger M/s Becker Traders Pvt. Ltd. 334, Sector-7 Panchkula .... Pledger M/s Cross Trading Pvt. Ltd. B-202, Plot No.52 Sukhnagar Apartments Delhi-110092 .... Pledger M/s Petunia Financial Services Pvt. Ltd. 31-H, Pocket-L, Sheikh Sarai-II New Delhi-110017 .... Pledger M/s Morepen Laboratories Ltd. 4th Floor, Antriksh Bhawan 22, K.G.Marg New Delhi-110001 .... Borrower Mr. Sushil Suri S/o Sh. P.L.Puri R/o C-40, Anand Niketan New Delhi .... Guarantor Mr. Arun Suri s/o Shri P.L. Suri R/o E-9/1, Vasant Vihar New Delhi-110057 .... Guarantor M/s Blue Coast Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Pvt. Ltd. 53, Friends Colony (East) New Delhi Dear Sir, Pending formalization of understanding arrived at between us as mentioned in our letter dated 6th February, 2004. You are requested to stop selling the equity shares of M/s Blue Coast Hotels & Resorts Limited and to maintain the status quo in the matter. Thanking you, Yours faithfully, For Morepen Laboratories Limited Sd/- Authorized signatory" 21. Upon in-depth consideration of the submissions advanced by both the sides and on careful perusal of the FIRs in question, the material on record and the decisions cited, it emerges that the case of respondents- complainant has to be taken on its face value and then, it is to be seen as to whether any criminal offence is made out or not. The crux of respondents' entire case is whether respondent/complainant-M/s. Morepen Laboratories Ltd. was put to notice prior to the selling of the pledged shares in question. On this crucial aspect, the stand of petitioners is that copy of Information (Annexure-I in Crl.M.C. 4603/05) downloaded from the official website of National Stock Exchange points out that the sale of pledged shares in question took place in De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent jurisdiction under Section 482 of Cr.P.C. is to be exercised on sound principles as reiterated by Apex Court in State of Haryana v. Bhajan Lal 1992 Supp (1) SCC 335 and in Harshendra Kumar D. V. Rebatilata Koley and Others (2011) 3 SCC 351. Keeping in mind the parameters governing exercise of powers under Section 482 of Cr.P.C., I have scanned through the three FIRs in question, in the light of the latest decision of the Apex Court in Chandran Ratnaswami v. K.C. Palanisamy, (2013) 6 SCC 740 reiterating the dictum of Apex Court in Uma Shankar Gopalika v. State of Bihar (2005) 10 SCC 336, which is as under: - "6. Now the question to be examined by us is as to whether on the facts disclosed in the petition of complaint any criminal offence whatsoever is made out much less offences under Sections 420/120-B IPC. The only allegation in the complaint petition against the accused persons is that they assured the complainant that when they receive the insurance claim amounting to Rs 4,20,000, they would pay a sum of Rs 2,60,000 to the complainant out of that but the same has never been paid. Apart from that there is no other allegation in the petition of complaint. It was pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring, it was brought to the notice of this Court that the civil litigation initiated by respondents-complainant is to get the sale of pledged shares declared as null and void. The applicability of The Depositories Act, 1996 and the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 is quite relevant but it is required to be considered in detail in the civil proceedings and not in these criminal proceedings. 27. No doubt, civil and criminal proceedings can go on simultaneously but, in the instant matters, I have found that the ingredients of the criminal offence alleged are utterly lacking and the dispute between the parties is infact of purely civil nature and that civil litigation between the parties is already pending. Thus, this Court is of the considered opinion that from the FIRs in question, even a prima facie case to continue the proceedings arising out of the FIRs in question is not made out and lodging of these three FIRs is nothing but an abuse of the process of the court and the case of petitioners falls in the first illustrative category indicated by Apex Court in State of Haryana v. Bhajan Lal (supra) which is reproduced as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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