Dismissed

Ireo Pvt. Ltd. v. Bennett, Coleman and Co. Ltd. and 5 Ors.

Bombay HC12 Mar 2012NMS/508/2011

Case brief

AI extract

What is this about?

Dismissing a notice of motion for a permanent injunction and compelling source disclosure in a defamation suit, the court held that since the plaintiff virtually admitted the raids were conducted to investigate alleged financial irregularities, there was no need to compel the media defendants to disclose their sources.

What did the court decide?

Notice of motion dismissed; plaintiff not entitled to injunction on ground of non-disclosure of sources.

Ireo Pvt. Ltd. Vs Bennett, Coleman and Co… — Civil Procedure and Limitation | Bombay HC (2012)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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NOTICE OF MOTION NO.508 OF 2011 IN SUIT NO.429 OF 2011

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IREO Private Limited ....Plaintiff V/s. Bennett Coleman & Co. Ltd. & Ors. ....Defendants

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Mr.Virag Tulzapurkar, Senior Counsel with Mr.Venkatesh Dhond, Senior Counsel, Mr.Gaurav Gopal and Ms.Helina Desai i/b M/s.Wadia Ghandy & Co. for the Plaintiff.

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Mr.Arif Bookwala, Senior Counsel with Mr.Swanand Ganoo, Mr.Pranav Sampat and Mr.Rajesh Ravindran i/b Mr.Rajesh Ravindran for the Defendants.

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CORAM : S.J. VAZIFDAR, J. DATE : 12TH MARCH, 2012.

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P.C. :-

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This is an action for defamation. The plaintiff seeks a permanent injunction restraining the defendants from further publishing four articles or any other article in respect of the allegations therein including that the income tax raids on the plaintiff and its group of companies were conducted due to the links between the group to one Sudhanshu Mittal ; that the group is linked, connected or related to the said Mittal or to the CWG contracts ; that the raids by the Income Tax Authorities on the group were in connection with CWG contracts or

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on account of round tripping by inflow of funds from Mauritius and Cyprus based entities into the companies belonging to the group ; that the funds invested in the group are part of the returns on political deals re-routed through tax havens and invested in real estate and the various deals and transactions undertaken by the group are suspect property deals and/or through suspect investment channels.

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The plaintiff alleges that the liable falls under two categories. The first category relates to the allegation of financial irregularities and the second relates to the reasons for the raids. Mr.Bookwala, the learned senior counsel appearing on behalf of the defendants clarified at the out-set that the defendants do not for a moment suggest that they subscribe to or even believe the allegations about the alleged financial irregularities by the plaintiff and its group companies. Nor do they allege any link between the plaintiff and its group companies with the said Sudhanshu Mittal. The defendants state that they only reported that the Income Tax Authorities had conducted the raids inter-alia in order to investigate the allegations. In other words, the defendants did not suggest any financial irregularities on the part of the plaintiff and its group of companies. Nor have they formed an opinion or conveyed their views in respect thereof. They have only reported the reasons for and the circumstances in which the authorities conducted the raids and search operations.

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The first question therefore, is whether the articles

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published by the defendants contained any allegations by the defendants themselves against the plaintiff. I find on a reading of each of the articles as a whole, that they do not. The articles in effect and essentially are the reports about the purpose of and the basis on which the authorities were investigating the financial dealings of the plaintiff and its group of companies and its connection with the said Mittal. It is also necessary to note that each of the articles refers to the plaintiff’s case in that regard as well.

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The first article was published in the 23.10.2010 edition of the Times of India (Exhibit “C” to the plaint). The last paragraph refers to a denial by the said Mittal of any connection with the plaintiff and any of its group companies and his statements that he did not own any share in any of the companies raided by the Income Tax officials, that the plaintiff was associated with one of his relatives, that he had nothing to do with the plaintiff’s business interests and that the I-T raids were a political witch hunt. The preceding paragraphs expressly refer to the acts of the investigating agencies, their interests in probing into the plaintiff’s transactions and the dealings of its directions and reasons for which the raids were targeted against them. It is sufficient to refer to the following paragraph in the article :-

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“The raids on the premises of IREO group of companies in Gurgaon and five persons linked to it – Lalit Goyal, Sapna Goyal, Anil Agarwal, Sangeeta Agarwal and Madhukar Tulsi – were carried out to ascertain if some of the proceeds from the CWG contracts were used in real estate business and in

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development of integrated township and SEZ. Mittal’s connection with Goyal is being looked into by the agencies.”

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The next article was published on 4.11.2010 in the Times Nation. The headline “Co with CWG blot flush with fgn funds” and the caption below it “Gurgaon Realty Firm ‘Linked’ To BJP’s Mittal Got `.8k Cr in 5 Years” by themselves do not bare out Mr.Bookwala’s statement. They do suggest the defendants’ perception of the matter. It is however, necessary to read the article as a whole and not just the headline and the caption which unfortunately in many cases are misleading. Nor is it not correct to pick out individual sentences. The articles must be read as a whole. So read, it is clear that what is reported is the purpose of the investigation and the belief or perception of the investigating agencies. The articles do not contain even the defendants’ assessment of the matter. I will assume that the sentences in the middle of various paragraphs read by themselves may not establish this. It is however, important to note that every paragraph is prefaced with a reference to the investigations, probes and raids by the authorities conducted on the plaintiff and its group companies. The first sentence in each of the paragraphs read as under :-

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“The investigation trail in the IREO case – one of the half-a-dozen companies raided by the income-tax authorities over CWG contracts – has revealed a phenomenal rise in investments flowing into the firm.

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The initial probe has revealed that none of the foreign investors who had pledged funds to the company is present on the board of directors or has any say in its

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affairs.

I-T raids were first conducted on IREO in 2008 but not much came of that. “

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Merely because every sentence in the article does not refer

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to the investigation / probe / raid does not indicate that it is the defendants’ opinion, assessment or view of the matter. In fact even some of these sentences clearly refer to the purpose of the raids and the beliefs of the authorities.

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The article refers in detail to the response of the plaintiff’s spokesperson as well as the said Mittal to the defendants’ queries. 7. It is also important to note that the plaintiff has not denied what is stated in the article regarding its response. The plaintiff’s response inter-alia was that all its group companies had nearly 3000 acres of land ; that they are entirely held by Mauritius-based IREO Private Equity Funds and have raised nearly US $ 2 billion in capital from a base of global blue chip investors, including renowned global financial institutions, university endowment funds and sovereign wealth funds ; that all its investments in India were in compliance with the relevant laws and that suggestions of any wrongdoing, such as roundtripping of funds, were without any basis and that the relevant details pertaining to investors were being furnished to the regulatory authorities.

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The response of the plaintiff’s spokesperson to the effect that the suggestion of any wrongdoing such as round-tripping of funds,

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were without any basis is important. It indicates prima-facie at least an admission of the plaintiff’s spokesperson that the authorities had suspected irregularities “such as round-tripping of funds”. Whether these allegations or suspicions were reasonable or correct or not is not relevant for the present purpose. What is relevant is that the authorities harboured them leading to raid the plaintiff’s establishment. At the cost of repetition, the defendants did not suggest in the article and do not suggest even today at the hearing before me that they have formed any opinion as to the veracity of such suspicious or allegations by the authorities.

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The third article also dated 4.11.2010 published in Times Nation (Exhibit “E” to the plaint) is similar to the other article dated 4.11.2010.

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The fourth article was published on the front page in the Mumbai and New Delhi editions of the defendants’ publications on 14.11.2010. The headline itself refers to I-T probing into Rs.7,300 crores inflow in twenty six companies linked with the said Mittal. The headline also contain Mittal’s denial of any connection with the plaintiff or its group companies as well as his defence of the plaintiff. The articles state that a flow of over Rs.7,300 crores into 26 companies has caught the attention of tax sleuths. It further states that sensing that this could be a case of round-tripping, the Income Tax department had approached the Mauritius and Cyprus governments for the ownership

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details of the investor companies. Almost every sentence refers to what the authorities have done or found. There is not even a suggestion that the defendants believe the same. The defendants have only reported the same. This article also with almost equal prominence refers to the plaintiff’s response to the defendants’ queries in this regard. It also refers to the said Mittal’s denial of any connection with the plaintiff. The article does comment that interestingly, though the said Mittal denied having any connection with the plaintiff, dismissed the allegations against the plaintiff and its group companies. This is a fair comment.

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The defendants have stated that the articles are not based on any documentary evidence. The question therefore, of calling upon the defendants to disclose the same cannot and does not arise. Mr.Tulzapurkar submitted that the defendants have not produced any material to indicate that the said articles were based on information from the authorities including the Income Tax authorities. He denied that the raids were conducted based on the perception or belief or suspicions of the Income Tax authorities of the alleged financial irregularities or were even to investigate the same. He submitted that it was necessary therefore for the defendants to disclose their source or sources of even such information.

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I will presume for the purpose of this order that normally where a publication is based on oral information received from a

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source, in an action for liable the publisher is bound to disclose the source or suffer an injunction. I will assume this to be so normally. In the facts of the present case however, I do not think it necessary to compel the defendants to disclose their source for I find that the plaintiff has not only not denied but to a considerable extent admitted that the raids were conducted for the purpose of investigating whether or not there were financial irregularities as referred to in the articles.

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Firstly, the plaintiff has not suggested that the articles do not correctly reproduced their response to the defendants’ queries. 14. I appreciate, as submitted by Mr.Tulzapurkar, that the purpose of and the circumstances relating to the raid are of vital importance. If a raid is conducted for one purpose, a suggestion that it was conducted for another can in certain cases certainly be defamatory. For instance, if a raid is conducted only to investigate whether the invoices had been inflated, it would be per-se defamatory to say that the raid was conducted to investigate the generation of funds from smuggling or trafficking in narcotic substances. This however is not so in the present case.

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As I noted earlier, the article dated 4.11.2010 (Exhibit “D” to the plaint) refers to the plaintiff’s spokesperson stating that the suggestions of any wrongdoing such as round-tripping of funds were without any basis. It is not even the plaintiff’s case that the suggestions emanated from the defendants. The spokesperson understood the

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suggestion to be those of the authorities. Thus the plaintiff itself virtually admitted that the raids were on account of the authorities investigating whether the plaintiff was involved in wrongdoing such as round-tripping of funds. The fact that the raids were conducted is admitted.

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In this regard, it is also important to note the queries addressed by the defendants to the plaintiff and the plaintiff’s response thereto. The same are contained in an e-mail dated 3.11.2010 addressed by the plaintiff to defendant No.6, which read as under :-

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“1. The firm was surveyed by the Income Tax department on October 19. Incidentally, the ED had also carried out searches in April. The charges were tax evasion, illegal investment of money and forex violations. What is the firm's reaction on the recent raid by I-T?

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Ans: The IT department approached Ireo for a search on Oct 19th, and Ireo is cooperating with all requests for information/clarifications. Unfortunately, recent media coverage has incorrectly speculated and cast aspersions in connection with this event. We feel this resembles a motivated campaign designed to harass the company, as none of these media reports have shown any factual data pertaining to any wrongdoing. It's only purpose seems to be to damage the credibility of the Ireo brand which has been painstakingly built up over the last few years.

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According to the Income Tax department (IT dept) and the Enforcement Directorate (ED), Ireo has brought foreign funds to the tune of Rs 8,000 crores from countries like Mauritius and Cyprus among others, but has not followed proper forex rules. It is also alleged that you have violated the provisions under the Income Tax Act and the Foreign Exchange Management Act. What is the firm's version on these charges?

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Ans: Shareholding of all Ireo Group companies in

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India ( with the exception of JVs in India) is entirely held by Ireo Private Equity Funds, which are domiciled in Mauritius. The Funds , in turn, have raised nearly USD 2 billion in capital from a base of global blue chip investors including renowned global financial institutions, university endowment funds and sovereign wealth funds. All investments into India by Ireo Private Equity Funds is in complete compliance with all relevant rules and regulations, and suggestions of any wrongdoing such as round trippping of funds etc are entirely without any factual basis. The relevant details pertaining to investors in Ireo Private Equity Funds are also being furnished to the regulatory authorities.

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According to the I-T and ED probe, Ireo has invested funds brought from abroad into purchasing lands and constructing real estate across various places in the National Capital region (NCR), Haryana, Punjab, Tamil Nadu and Maharashtra, in contravention of I-T and FEMA provisions? The charges are that Ireo bought agricultural land, which is against the FDI regulations. Your reaction?

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Ans: Ireo has approximately 3000 acres of landholding across India, all of which has been legitimately purchased in full compliance with all relevant state regulatory norms. As per FDI regulations, use of FDI for agricultural activity like farming, plantations etc is prohibited; however it is not against the law of the land for FDI-funded Indian companies to purchase agricultural land for development purposes.

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The Indian promoters have unmatched and unhindered control of these foreign funds As mentioned in Q6 - In 100% Ireo owned companies , there are no Indian promoters to exercise any sort of control.

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In 5 Ireo JV companies, the Indian promoter (unrelated to Ireo) has 50% control while Ireo excercises the balance 50% control.

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No nominee on board of directors from these people who have pumped in the foreign funds

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All the directors of 100% Ireo Group-owned companies in India are salaried employees of Ireo, and have been

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appointed based on consent of shareholders. The same applies for Ireo nominees on the board of JV companies.”

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The first query itself related to the survey/search by the Income Tax authorities and Enforcement Director and that the charges levelled by them against the plaintiff related to the tax evasion, illegal investment of money and foreign exchange violation. What is significant is that the plaintiff did not deny the fact of the survey/searches or that the said charges were made. If the charges had not been made by the I.T. and E.D., the first response would have been one of surprise to the question itself stating that no such charges had been made.

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The second query also expressly stated that the according to the Income Tax department and the Enforcement Directorate the plaintiff had brought funds to the tune of even Rs.8000 crores from Mauritius and Cyprus contrary to law. The response was on merits and not that this was not the belief of the authorities and the basis of the search conducted by them. The answer to the second query is important for another reason. The query merely stated that according to the I.T. and E.D. departments the plaintiff had brought in the said funds without following the provisions of the Income Tax Act and the Foreign Exchange Management Act. The response was that the suggestions of any wrongdoing such as round-tripping of funds etc. were entirely without any factual basis. Inherent in the response is the

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plaintiff’s admission that the I.T. and E.D. departments had in fact investigated whether there was “any wrongdoing such as round-tripping of funds etc.”

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If in fact the raids/searches were conducted to investigate the said allegations, I see no reason at least at the interlocutory stage to compel the defendants to disclose their source of information.

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Added to this is the fact that the plaintiff has not stated the purpose of or circumstances in which the raids/searches were conducted. They have not even stated that they are unaware of the reason or purpose for or the circumstances in which the raids/searches were conducted. It is reasonable to presume therefore that they are aware of the facts relating to the search/raids. Despite this, the plaintiff has not disclosed the facts relating to the raids/searches known to it. If indeed, they were conducted for any other purpose, it is obvious that the plaintiff would have disclosed the information itself. I see no justification then for speculating or even presuming that the raids/searches were conducted for any other purpose or in any other circumstances.

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There is nothing to suggest malice on the defendants’ part. The defendants sought the plaintiff’s response to their information. They also sought the said Mittal’s response to the same. Each of the articles refers with almost equal prominence to the plaintiff’s as well as the said Mittal’s response. The defendants had in fact sought the

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plaintiff’s response in writing by addressing the said questionnaire. Similar articles have appeared in almost a dozen other publications. That however, by itself would not deny the plaintiff an injunction if it was otherwise entitled to it.

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At the cost of repetition, it is not for a moment suggested that the plaintiff is in fact guilty of any wrongdoing whatsoever. It is not even remotely suggested that the defendants believe that the plaintiff is guilty of any wrongdoing.

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In this view of the matter, it is not necessary to consider the judgments relied upon by both the learned counsel as regards the obligation of the defendants in such an action to disclose material upon which the publications are based. If the plaintiff had denied the purpose of the raids, it would have been necessary to decide an important question of law viz. whether if a publication is based on information from a source and the contents of the publication are denied, the defendants can be compelled to disclose the source and if not whether the defendants must suffer an injunction if they choose not to disclose the source.

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In the present case the fact viz. the reason or basis for the raids is virtually admitted. In the circumstances, I see no reason to compel the defendants to disclose their sources. Accordingly the plaintiff would not be entitled to an injunction on the ground that the identity of the source or sources has not been disclosed.

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The notice of motion is therefore, dismissed with the

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clarifications furnished on behalf of the defendants.

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No order as to costs.

Ireo Pvt. Ltd. v. Bennett, Coleman and Co. Ltd. and 5 Ors.

Case brief

What is this about?

What did the court decide?

Ireo Pvt. Ltd. v. Bennett, Coleman and Co. Ltd. and 5 Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

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