HARSH CONSUL vs STATE & ANR
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 10.07.2024
Pronounced on: 03.09.2024
+ CRL.M.C. 6084/2005
HARSH CONSUL …..Petitioner
Through: Mr. Bharat Chugh, Mr. Jai Allagh and Mr. Ashok Kumar Sharma, Advocates.
versus
STATE & ANR. …..Respondents
Through: Ms. Rupali Bhandopadya, ASC for the State with Mr. Abhijeet Kumar and Mr. Sagar Mahlawat, Advocates for R-1
CORAM:
HON’BLE MS. JUSTICE SWARANA KANTA SHARMA
JUDGMENT
SWARANA KANTA SHARMA, J.
1. By way of present petition filed under Section 482 of Code of Criminal Procedure, 1973 (Cr.P.C.) read with Article 227 of the Constitution of India, the petitioner seeks quashing of FIR No. 456/2005, registered at P.S. Moti Nagar, Delhi for offences under Sections 420/465/467/471/120B/34 of the Indian Penal Code, 1860 (IPC), pursuant to order dated 03.10.2005 passed under Section 156(3) of Cr.P.C. by the learned Metropolitan Magistrate, Tis Hazari, Delhi.
2. The facts of the case, in brief, are that a complaint was filed by the complainant, Mr. Prateek Puri, who claimed that he was a small investor, who had made investments in shares after analyzing the financial statements of companies. In 2005, the complainant had examined the balance sheet of M/s VLS Finance Ltd., a company where the accused persons, including Mr. T.B. Gupta (Managing Director), Mr. Somesh Mehrotra (Director), and Mr. Harsh Consul (Company Secretary), held key positions. The balance sheet of the said company indicated that it was holding shares in various companies, classifying them as long-term investments and shares held as stock in trade. One significant disclosure had shown that VLS Finance Ltd. was holding shares of M/s Sunair Hotels Ltd., valued at Rs. 23.59 crores, which had been described as a long-term investment on a cost basis. Given that Sunair Hotels Ltd. was operating a five-star hotel, Hotel Metropolitan, this investment had appeared as highly profitable to the complainant. It is alleged that this information, along with other similar representations, had induced the complainant to invest in VLS Finance Ltd., believing it to be a secure and lucrative opportunity. However, the complainant had later discovered that VLS Finance Ltd. was involved in fraudulent activities. The accused persons had allegedly cheated investors by making false disclosures in their prospectus during a public issue in 1994, and this deception had been further confirmed during income tax raids conducted on 22.06.1998, and the findings had been detailed in an appraisal report by the Income Tax Department. Shocked by these revelations, the complainant had contacted M/s Sunair Hotels Ltd. directly to verify the actual value of the shares. Their response had revealed that the shares had been sold at par value, i.e., Rs. 9.59 crores, contrary to the inflated valuation shown in the balance sheet of VLS Finance Ltd. It is thus alleged that accused persons had deliberately misrepresented the value of the shares, falsely inflating them to Rs. 23.59 crores. This had been allegedly achieved through fraudulent accounting practices, likely involving false entries routed through directors or associated companies. It was alleged that the accused had committed multiple offences, including forgery, as they had created and used false documents in their books of accounting. The fraudulent entries had been made with the intent to deceive investors and to gain wrongful financial benefits. The false information presented in the balance sheet had caused the complainant and other investors to suffer significant financial losses, while the accused had unlawfully enriched themselves. It was alleged that despite lodging a complaint with the P.S. Moti Nagar, no action had been taken by the police. The complainant had thus been compelled to file a complaint, alleging that the accused persons had committed cognizable offences under Sections 420, 465, 467, 468, 471, 120B, and 34 of IPC.
3. On the basis of this complaint, an order dated 03.10.2005 was passed by the learned Metropolitan Magistrate, New Delhi (learned Magistrate) directing the SHO, P.S. Moti Nagar, New Delhi to register an FIR against the accused persons and investigate the matter. Thereafter, in compliance with the order dated 03.10.2005 passed by learned Magistrate, the FIR No. 456/2005 was registered, inter alia, against the petitioner herein.
4. The petitioner thus prays for quashing of FIR No. 456/2005, registered at P.S. Moti Nagar, pursuant to order dated 03.10.2005.
5. Learned counsel appearing on behalf of the petitioners has argued that the impugned order dated 03.10.2005, passed under Section 156(3) of Cr.P.C. is bereft of any reasons, and it is not stated in order as to which particular offence of IPC and/or of any other statue is disclosed from the complaint. It is submitted that no time was given by the learned Magistrate to conduct preliminary enquiry before directing registration of FIR.
6. It is argued that there are major concealments and suppressions, by the complainant/respondent no. 2 in his complaint, to obtain an order under Section 156(3) of Cr.P.C. by playing fraud upon the Court. It is stated that the complainant admits to have purchased 200 shares of VLS @ Rs 20/- per share in September 2005 from open/secondary market and got shares transferred in his name to become shareholder of VLS in 2005. It is submitted that in the complaint dated 23.09.2005 filed before the learned Magistrate, the complainant admits to be a small investor, who had invested after analysing the Balance sheet of VLS for year 2002-2003 before purchasing shares in September 2005. In this regard, it is stated that if he had become a shareholder of VLS in September 2005, he could not have got the Balance sheet of previous years of VLS. It is argued that the complainant had received the Balance sheet of VLS, for the financial year 2002-2003, from Sunair Hotels Limited. It is thus argued that the present complaint was made at the behest of and as proxy of S.P. Gupta & Associates, of the Sunair Hotels Limited.
7. It is argued that a plain and simple reading of the complaint does not disclose any cognizable offence and essential ingredients of cheating, criminal breach of trust, forgery, etc., as are flimsily alleged in complaint, are missing and not made out. It also stated that a criminal complaint cannot be permitted to be lodged on the basis of fall /fluctuations in share price of listed companies. Therefore, it is argued that the impugned order is perverse, does not show application of mind, is without jurisdiction, non-reasoned and non speaking order, passed without conducting preliminary enquiry and without calling for Action Taken report and therefore, the complaint /FIR and all subsequent actions are liable to be set aside. In support of these arguments, reliance has been placed on several case laws by the learned counsel for petitioners, which have been filed on record by way of different compilations.
8. On the other hand, there has been no appearance by any counsel on behalf of the respondent no. 2 for, at least, last two years, i.e. since this Bench has been hearing this matter. The respondent no. 2 has also never appeared in person. Further, neither any arguments have been addressed on his behalf nor have any written submissions been filed.
9. This Court has heard arguments addressed on behalf of the petitioner, and has gone through the material placed on record.
10. In the present case, this Court notes that the allegations against the accused persons, including the petitioner herein, in a nutshell, are that the complainant/respondent no. 2 had been induced to invest in VLS Finance Ltd. after reviewing its balance sheet, which portrayed an inflated and misleading valuation of certain investments, particularly its shares in Sunair Hotels Ltd. The complainant had later discovered that these financial statements were forged and fabricated. Consequently, the complainant alleges that he was deceived and cheated by the accused persons through fraudulent disclosures and accounting practices.
11. Pursuant to hearing arguments on behalf of the complainant and perusing the material placed on record along with the complaint, the learned Magistrate had arrived at an opinion that the allegations in the complaint revealed commission of offences, and thus, the FIR was ordered to be registered. The order dated 03.10.2005 passed by the learned Magistrate under Section 156(3) of Cr.P.C. is extracted hereunder:
I have heard the Ld. Counsel for complainant on the application u/s. 156(3) CRPC. It is stated that in the complaint that Sh. Prateek Puri after analysing the annual report of VLS Finance Ltd., was induced to buy its shares. Subsequently, complainant through a communication with M/s. Sunair Hotel Ltd. came to know that the balance sheets other old documents of VLS Finance Ltd. upon which the complainant relied before investing in its shares have been forged by the accused persons on the conspiracy with each other. It is further alleged that complainant has been cheated by the accused persons on the basis of aforesaid forged documents. I have gone through the complaint as well as the documents filed therewith. Same discloses an offence. Ld. Counsel for the complainant has relied upon 2005 II AD (Crl) DHC 429 S.P. Gupta Vs. State and 1993 Cr. Law General 2888 – Radhey Shyami Khemka Vs. Nand Kishore. Apart from these two judgments complainant has also relied upon other judgements dealing with section 156 (3) CRPC. The court is convinced that it is fit case which requires investigation by the police. SHO PS Moti Nagar is directed to register a case against the accused, investigate the matter and file the report on or before 27.01.2006.
12. During the course of arguments, the learned counsel appearing on behalf of the petitioners had taken this Court through various documents, running into thousands of pages, including: the MOU entered into between the VLS Finance and Sunair Hotels Ltd.; copies of earlier complaints/FIRs/chargesheets filed in criminal cases initiated by the petitioners herein against the Sunair Hotels Ltd and its directors/promoters, since the respondent no. 2 herein has been alleged to have acted on their instructions to initiate criminal action against the petitioners; copies of all the petitions/appeals etc. filed by the accused persons in the previous criminal cases and the orders/judgments passed by different Courts; orders passed by the Company Law Board; orders of Income Tax Department; financial documents/statements of the companies; minutes of the meetings; and civil proceedings filed/pending before other Courts/Tribunals. However, this Court is conscious of its power, and the scope of inquiry it can conduct into the allegations levelled by the complainant and the documents placed on record in the present petitions.
13. On the strength of above documents and material, the petitioners have sought to persuade this Court that the order, under Section 156(3) of Cr.P.C., directing registration of FIR has been passed without application of mind and in a mechanical manner, and the complaint/FIR in question does not disclose the commission of any criminal offence whatsoever and, therefore, the said order as well as the FIR must be quashed and set aside.
14. Insofar as grievance of the petitioners regarding order passed under Section 156(3) of Cr.P.C. is concerned, it would be apt to first take note of the statutory provision, which reads as follows:
156. Police officers power to investigate cognizable case.(1) Any officer in charge of a police station may, without the order of a Magistrate, investigate any cognizable case which a Court having jurisdiction over the local area within the limits of such station would have power to inquire into or try under the provisions of Chapter XIII.
(2) No proceeding of a police officer in any such case shall at any stage be called in question on the ground that the case was one which such officer was not empowered under this section to investigate.
(3) Any Magistrate empowered under section 190 may order such an investigation as above-mentioned.
15. There are no two views about the fact that the power and the discretion under Section 156(3) of Cr.P.C. has to be exercised judiciously and after application of mind, and not arbitrarily, by the Magistrate.
16. In addition, the necessity of applying judicial mind to the allegations levelled by a complainant and the material placed on record to support those allegations, understanding as to how the ingredients of the alleged offences are prima facie made out, recording of reasons, etc. have been held as some of the requirements while passing an order under Section 156(3) of Cr.P.C. by the Honble Supreme Court of India in various judgments, also relied upon by the learned counsels for the petitioners [Ref: Maksud Saiyed v. State of Gujarat (2008) 5 SCC 668; Anil Kumar v. MK Aiyappa (2013) 10 SCC 705; Priyanka Srivastava v. State of UP (2015) 6 SCC 287; Shri Subhkaran Luharuka v. State ILR (2010) VI Delhi 495].
17. However, this Court is also conscious of the fact that the order impugned herein was passed in the year 2005 i.e. at a time when none of the judgements cited on behalf of the petitioners had been penned down for the benefit of the learned Magistrates by either this Court or by the Honble Supreme Court. Further, Section 156(3) of Cr.P.C., in the statute, does not specifically mention any requirement of recording detailed reasons before directing registration of an FIR. Thus, the judicial precedents available today, were not available for the benefit of the learned Magistrate in the year 2005.
18. Be that as it may, insofar as the argument regarding lack of application of mind is concerned, this Court notes that the learned Magistrate has observed in the impugned order dated 03.10.2005 that after hearing the arguments and perusing the complaint, he was of the view that as per allegations, the complainant had been induced to buy shares of the accused company after analyzing its annual reports; however, he had later come to know that the accused persons had forged the balance sheets and other documents of the company, and the complainant had thus been cheated in this manner by the accused persons. The learned Magistrate further observes that after perusing the complaint and documents, he was of the view that offence had been committed, for which investigation by the police was required. The learned Magistrate has also referred to the judgments which were cited by the learned counsel for complainant in relation to the law of Section 156(3) of Cr.P.C. Thereafter, the police was directed to register an FIR and investigate the matter.
19. In this Courts opinion, in cases such as the present one, where several allegations of cheating, forgery, and criminal conspiracy for commission of these offences have been levelled by one party against the other, and where such allegations include commission of certain financial irregularities by the accused persons, neither this Court while exercising its powers under Section 482 of Cr.P.C., nor a court of Magistrate who was then exercising power under Section 156(3) of Cr.P.C. would usurp the powers of the investigating agencies and conduct a roving enquiry into the allegations and appreciate in detail the documents submitted along with the complaint by the complainant, and not direct the registration of an FIR by the police for the purpose of carrying out of a fair and proper investigation, even though certain prima facie offences, considering the allegations and the material placed before the Court, have been made out.
20. In such cases, the necessity of a police investigation may arise, considering that not only the documents available with the complainant may be relevant for deciding the dispute, but also the other documents and relevant records from various concerned authorities, including financial bodies etc., would be required to be procured and examined, alongwith recording statements of the witnesses and confronting them with the documents etc., to reach at a conclusion as to whether the offence, as alleged, has actually been committed by the accused persons or not, and if there is criminality involved in the alleged actions of the accused persons, what role can be ascribed to each accused.
21. Therefore, in the peculiar facts and circumstances of the present case, this Court at this stage finds no ground to quash the order dated 03.10.2005 passed by the learned Magistrate vide which the FIR was directed to be registered, as the allegations in the complaint, prima facie, make out a case for commission of cognizable offences.
22. Insofar as the prayer of the petitioner for quashing of FIR is concerned, this Court, guided by the principles laid down by Honble Supreme Court in case of M/s Neeharika Infrastructure v. State of Maharashtra 2021 SCC OnLine 315 and State of Haryana v. Bhajan Lal 1992 SCC (Crl) 426, is of the opinion that the discretion to quash an FIR at a nascent stage is to be exercised with great caution and circumspection. In case of Skoda AutoVolkswagen India Private Limited v. State of Uttar Pradesh 2020 SCC OnLine SC 958, the Honble Supreme Court has observed as under:
40. It is needless to point out that ever since the decision of the Privy Council in King Emperor v. Khwaja Nazir Ahmad, the law is well settled that Courts would not thwart any investigation. It is only in cases where no cognizable offence or offence of any kind is disclosed in the first information report that the court will not permit an investigation to go on.
41. As cautioned by this Court in State of Haryana v. Bhajan Lal, the power of quashing should be exercised very sparingly and with circumspection and that too in the rarest of rare cases. While examining a complaint, the quashing of which is sought, the Court cannot embark upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or in the complaint.
42. In S.M. Datta v. State of Gujarat this Court again cautioned that criminal proceedings ought not to be scuttled at the initial stage. Quashing of a complaint should rather be an exception and a rarity than an ordinary rule. In S.M. Datta, this Court held that if a perusal of the first information report leads to disclosure of an offence even broadly, law courts are barred from usurping the jurisdiction of the police, since the two organs of the State operate in two specific spheres of activities and one ought not to tread over the other sphere.
(Emphasis supplied)
23. Thus, the settled principles of quashing of FIRs have to be strictly followed, and it is only if the allegations levelled in the FIR persuade a Court to a conclusion that the allegations are patently absurd and the offence could not have been committed on the basis of the material placed on record or it is an abuse of process of law, a Constitutional Court should intervene and quash the FIR without even giving an opportunity to the police to investigate the matter and reach a conclusion.
24. However, the proceedings for quashing of FIR under Section 482 Cr.P.C. or Article 226 of the Constitution of India are not meant for the purpose of appreciating the evidence or examining the correctness of evidence or material placed on record. In the present case, the documents placed on record, detailed arguments addressed on behalf of the petitioners and the contentions raised by the learned counsels, are all, essentially, matters of trial.
25. This Court is further of the opinion that investigation by the police will only bring out the clarity, including as to whether any case is actually made out against the accused persons under the relevant sections of law or not. Needless to say, if no such commission of offence will be made out, the police will be at liberty to file an appropriate report under Section 173 of Cr.P.C.
26. Therefore, in view of the reasons recorded in preceding discussion and being guided by the principles laid down by the Honble Supreme Court in catena of judgments for exercising powers under Section 482 of Cr.P.C. for quashing of criminal proceedings, this Court finds no ground to quash the FIR registered against the petitioners herein.
27. However, the petitioners herein will be at liberty to raise all their arguments raised before this Court, before the learned Trial Court at the time of addressing arguments on charge, in case a chargesheet is filed after investigation, and the learned Trial Court, after giving due consideration to the material placed on record before it, would, as per law, be required to pass an order on charge.
28. Accordingly, the present petition along with pending applications stands dismissed.
29. The judgment be uploaded on the website forthwith.
SWARANA KANTA SHARMA, J
SEPTEMBER 3, 2024/zp
CRL.M.C. 6084/2005 Page 1 of 13