Dismissed

K.v.Chalapati Reddy v. The state of Ap.

Telangana HC8 Sept 2014CRLP/12300/2013

Case brief

AI extract

What is this about?

Single-judge bench dismissed multiple criminal petitions seeking quashment of proceedings for alleged fraud. The court held that irregularities in joining complainants are not fatal and that existences of prima facie offence and available discharge petition preclude exercising inherent powers under Section 482 Cr.P.C.

What did the court decide?

All criminal petitions were dismissed, with liberty for petitioners to urge grounds before the trial court.

K.v.Chalapati Reddy Vs The state of Ap. — Cheque Dishonour | Telangana HC (2014)

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HONOURABLE SRI JUSTICE S.RAVI KUMAR CRIMINAL PETITION Nos.262 OF 2012, 342 OF 2012, 343 OF 2012, & 12300 OF 2013 Dated 8-9-2014

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Between: CRIMINAL PETITION No.262 OF 2012: M.Malla Reddy.

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..Petitioner.

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And:

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State of Andhra Pradesh, represented by its Public Prosecutor, High Court of A.P., Hyderabad and others. …Respondents. CRIMINAL PETITION No. 342 OF 2012: Between:

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M/s.Farmax India Limited and another

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Petitioners.

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And:

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State of Andhra Pradesh, represented by its Public Prosecutor, High Court of A.P., Hyderabad and others. …Respondents. CRIMINAL PETITION No. 343 OF 2012: Between:

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G.Raju and others.

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Petitioners.

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And:

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State of Andhra Pradesh, represented by its Public Prosecutor, High Court of A.P., Hyderabad and others. …Respondents. CRIMINAL PETITION No.12300 OF 2013: Between: K.V.Chalapati Reddy.

…Respondents.

Petitioner.

And:

State of Andhra Pradesh, represented by its Public Prosecutor, High Court of A.P., Hyderabad and others. …Respondents.

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HONOURABLE SRI JUSTICE S.RAVI KUMAR CRIMINAL PETITION Nos.262 OF 2012, 342 OF 2012, 343 OF 2012, & 12300 OF 2013 COMMION ORDER:

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All these petitions are filed to quash proceedings in C.C.No.409 of 2011 on the file of Special Judge for Economic Offences, Nampally, Hyderabad for alleged offences punishable under Sections 116 and 628 of Companies Act and Sections 477 and 477-A of I.P.C.

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All the petitioners are accused in the above referred C.C. and separate petitions are filed by different accused. A1 and A.2 filed Criminal Petition No.342 of 2012, A.3 filed Criminal Petition No.262 of 2012, A.4 to A.6 and A.10 filed Criminal Petition No.343 of 2012 and A.8 filed Criminal Petition No.12300 of 2013.

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According to petitioners, there was amalgamation of two companies and the original promoter of M/s. Bhagyanagar Casting Limited is the GPA Holder of the complainant and after amalgamation, he started demanding amount from the Directors of A.1 company and when they refused, he started blackmailing tactics taking advantage of possession of empty share certificates He fabricated the contents by filing the certificates in collusion with the share broking agency and send the certificates to the effect that two lack shares they have been acquired by one company named A.B.N. Hotels Private Limited which is Benami company of G.P.A. Holder and accused after verifying their records found that the said share certificates are fake and therefore, rejected the claim and G.P.A.Holder having failed in getting shares in the accused company, he has taken GPA from the complainants and filed the present complaint with false and frivolous allegations.

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Heard both sides. Advocate for petitioners prayed for quashing of the

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above referred C.C. on two grounds. Firstly that the complaint as filed is not maintainable because it is filed by as many as 16 victims and there is no provision in the Cr.P.C. for joining of complainants unlike in a civil suit and therefore, the complaint as filed is not maintainable.

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The second ground on which he prayed for quashing of proceedings in C.C. is that the allegations in the complaint do not attract any of the offences alleged and that there is no prima facie material for the offences under Sections 116 and 628 of Companies Act and Sections 477 and 477-A I.P.C.

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On the other hand, it is the contention of advocate for respondents 2 to 16 that the objection with regard to joining of number of victims in a complaint is not tenable because, it may be an irregularity but not an illegality. With regard to second objection, he submitted that there are allegations and counter allegations between the parties, according to petitioners, G.P.A.Holder fabricated certain share certificates and according to respondents 2 to 16, the petitioners have failed to issue stickers in spite of applied for them and all the original certificates are filed before the trial court and trial court after considering the documents and the material placed before it, took cognizance against the petitioners and now, at this stage, the correctness of these aspects cannot be decided in a 482 Cr.P.C. petition.

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Both sides have cited rulings of Honourable Supreme Court and also other High Courts in respect of their respective contentions. Besides the general contentions, A.8 specifically pleaded that he was inducted as Director on 31-7-2008 and seized to be director from 30-1-2010, therefore, he is no way connected with the allegations and on that, the proceedings against him have to be quashed.

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On the other hand, advocate for respondents 2 to 16 contended that as per the records, the respondents

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are shareholders from 2000 onwards and therefore, it is a continuing offence and simply because the 8^th accused has joined as Director in the middle, he cannot plead ignorance particularly when specific allegations are levelled against him also.

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Now the point that would arise for my consideration in this petition is whether the proceedings in C.C.No.409 of 2011 on the file of Special Judge for Economic Offences, Nampally, Hyderabad are liable to be quashed or not?

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POINT:

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The first ground urged on behalf of petitioners is that the complaint as filed is not maintainable. There are as many as 15 complainants. He submitted that according to provisions of Section 200 Cr.P.C., there is no procedure of joining several complainants in one complaint and filing a suit unlike interested parties filing a suit jointly. He further submitted that even charges cannot be mixed, there must be independent charges.

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I have perused the complaint. No doubt there are as many as 15 victims and all of them are represented by one G.P.A.Holder and he filed the complaint. Further, even if the argument of advocate for petitioners is accepted, that may be only an irregularity but not an illegality. As rightly pointed out by other side, a complaint can not be quashed on the ground of irregularity and only if there is any illegality, then such complaint can be quashed. So, when the objection raised is only an irregularity, that by itself do not vitiate the proceedings. Therefore, the first ground urged for quash is not at all tenable and the same is negatived.

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Second ground contended by the petitioners is that even if the allegation in the complaint are accepted in toto, they do not attract any offence much less the offences for which cognizance was taken.

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Respondents 2 to 16 filed a complaint before

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Special Judge for Economic Offences, Nampally, Hyderabad alleging that they are equity share holders of M/s. Bhagyanagar Casting Limited a company registered which is now changed as M/s. Formax India Limited. It is contended that management of M/s. Formax India Limited was taken over by A.12 and A.13 and before taking over management, A.12 and A.13 have given an open offer for purchase of the shares of complainant at Rs.4/- per share but they have not accepted and not participated in the said offer. In July, 2009, this M/s.Formax India Limited was taken over by A.2 who had considerable equity shares in M/s.Bhagyanagar Casting Limited and after coming to know about the same, their G.P.A.Holder was deputed for getting the new share certificates/stickers from A.1 company and as there was no response for it, they got issued a legal notice for which A.1 company represented by A.11 sent a letter seeking 15 days time, which disclose the collusion and the fraudulent nature. A.3 to A.11 who are the Directors and Executive Directors colluded and committed fraud by means of impersonation fraudulently and dishonestly, which caused the equity share holding standing in the name of complainant and their relatives in A.1 company be erased or destroyed and thereby falsified the book and accounts that are maintained by first accused. It is contended that acts committed by them not only punishable under Sections 116 and 628 of the Companies Act but also under Sections 477 and 277-A of Indian Penal Code.

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On the other hand, it is the contention of the petitioners that Bhagyanagar Casting Limited has been established in the year 1995 and thereafter, no business had taken place and in the year 2000, A.12 and A.13 have taken over the said company and they also did not conduct any business and therefore, in the year 2007, A.2 has taken over by acquiring Rs.31 lakh equity shares of Rs.10/- each and at that time, A.12 and A.13 furnished

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share holdings and records submitted by them and they do not disclose holding of any shares by the complainants and advertisement has been published in daily news papers in terms of Rules and Regulations and no one raised any objection and there is no falsification of accounts and the petitioners are falsely implicated only with a view to compel the petitioners to accede to the demand of G.P.A.Holder of the complainants.

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Many points are raised on behalf of both parties. One of the contention of the petitioners is that the certificate register folio numbers mentioned in the complaint have been in the name of A.12 and thereafter, A.2 acquired those shares. It is contended that before acquiring shares, a public announcement was issued to the equity share holders of M/s. Bhagyanagar Casting Limited and advertisement has been published in daily news paper in terms of SEBI Regulations and no one raised any objection.

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On the other hand, it is the contention of the respondents, till 2009, complainants have no knowledge and even otherwise, this being a registered company, they have to follow rules but till 2009, this was not listed on the stock exchange.

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Now these aspects are matter of evidence and they cannot be decided in a quash petition on the basis of oral submissions or the documents.

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One of the contention of complainant is that they applied for stickers but they were not given.

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On the other hand, according to the petitioners, the G.P.A.Holder of the complainant was in possession of several blank shares certificates and those certificates were pressed into service. These contentions are also matter of evidence, which cannot be decided in a quash petition on the basis of oral submissions. Like that, many points were urged on behalf of both parties touching the main merits of the case. If any findings are given on these

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aspects, it will definitely weigh on the lower court at the time of appreciating evidence.

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According to petitioners, there is no prima facie material attracting any of the charges leveled against them. Here, trial court after considering the complaint allegations and the other material took cognizance. If the petitioners feel that there is no material to frame any charges, they have to approach the court below by filing a discharge petition.

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In the decision 4^th cited, (i.e., In PADAL VENKATA RAMA REDDY @ RAMU v. KOVVURI SATYANARAYANA REDDY AND OTHERS), Honourable Supreme Court held that when an alternative remedy is available, petition under Section 482 Cr.P.C. is not applicable and the observation of the Honourable Supreme court in that decision is as follows:

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“It is well settled that the inherent powers under Section 482 can be exercised only when no other remedy is available to the litigant and not in a situation where a specific remedy is provided by the statute. It cannot be used if it is inconsistent with specific provisions provided under the Code. If an effective alternative remedy is available, the High Court will not exercise its powers under this section, specially when the applicant may not have availed of that remedy.”

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Admittedly, the petitioners have not invoked the remedy of discharge before trial court. When an alternative remedy is available, the petitioners have to first avail that remedy. According to BAJAN LAL’s case (8^th cited), proceedings can be quashed only when if the entire allegations in the complaint are accepted in toto as uncontroverted and no offence is made out, then only proceedings have to be quashed.

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But here, the complaint allegations and other material would clearly disclose the offences for which cognizance is taken and the case is at the stage of framing charges. These allegations in the complaint can not be termed as abuse of process of court and therefore,

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there are no grounds to quash proceedings by invoking powers under Section 482 Cr.P.C.

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Both parties have cited the following rulings in support of their submissions in JK INDUSTRIES LIMITED AND OTHERS Vs. AMARLAL V JUMANI AND ANOTHER (^[1] ), STATE OF ORISSA AND OTHER Vs. UJJAL KUMAR BURDHAN (^[2] ), A.ASHOK VARDHAN REDDY AND OTHERS Vs. P.SAVITHA AND ANOTHER (^[3] ), PADAL VENKATA RAMA REDDY @ RAMU Vs. KOVVURI SATYANARAYANA REDDY AND OTHERS (^[4] ), SUSHIL SURI Vs. CBI AND ANOTHER (^[5] ), STATE OF MAHARASTRA Vs.ARUN GALIB GAWALI AND OTHERS (^[6] ), RUMI DHAR (Smt) Vs. STATE OF WEST BENGAL AND ANOTHER (^[7] ), STATE OF HARYANA AND OTHERS Vs.CH. BAJAN LAL AND OTHERS (^[8] ), RADHEY SHAYM KHEMKA AND ANOTHER Vs. STATE OF BIHAR (^[9] ), VISHWA MITTER OF M/S. VIJAY BHARAT CIGARETTE STORES, DALHOUSIE ROAD, PATHANKOT Vs. O.P.PODDAR AND OTHERS (^[10] ), RAJESH BAJAJ & OTHERS Vs. STATE OF NCT OF DELHI & OTHERS (^[11] ).

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Both parties have relied on the above referred decisions in support of their respective contentions touching merits and demerits of the case. In view of the facts of the case and in view of the legal propositions in PADAL VENKATA RAMA REDDY’s case (4^th cited) and BAJAN LAL’s case (8^th cited) which squarely applies to the case on hand, I have not discussed the above referred decisions in detail.

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For these reasons, all these Criminal Petitions are dismissed giving liberty to the petitioners to urge all these

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grounds before trial court and the trial court shall consider them and decide the matter on merits independently without being influenced by any of the observations made in this order.

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As a sequel to the disposal of these revisions, the Miscellaneous Petitions, if any, pending, shall stand dismissed.

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JUSTICE S.RAVI KUMAR

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Dated 8-9-2014. Dvs.

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HONOURABLE SRI JUSTICE S.RAVI KUMAR

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CRIMINAL PETITION Nos.262 OF 2012, 342 OF 2012, 343 OF 2012, & 12300 OF 2013 Dated 8-9-2014

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Dvs