2025 (5) TMI 934 - SC - Indian Laws

Supreme Court Blocks Stock Exchange Fund Release, Preserves Fraud Investigation Integrity Under Section 482 CrPC

NDA SECURITIES LTD. Versus STATE (NCT OF DELHI) & ANR.

The SC overturned the HC's order releasing Rs. 15.90 lakhs withheld by the Bombay Stock Exchange. The Court held that the HC exceeded its inherent ... Jurisdiction and scope of Section 482 CrPC - Release of the money withheld by the Bombay Stock Exchange (‘BSE’) as payout for sale of shares - FIR registered under Section 420, 120B of the Indian Penal Code - Appellant received a phone call by a person impersonating himself as their client -investigation revealed that around 72000 shares (worth Rs. 15.90 lakhs) were sold by respondent no. 2. The charge sheet was filed against one Amit Jain, who is said to have made the alleged phone call. HELD THAT:- It is our considered opinion that the High Court has travelled beyond its inherent jurisdiction under Section 482 CrPC, by allowing the petition filed by respondent. The High Court ought not to have made any observations regarding the absence of any role played by respondent no. 2 in the whole transaction because investigation is yet to be completed. The charge sheet itself states that the main accused (Amit Jain) is absconding and the role of respondent no. 2 can only be ascertained once the main accused is arrested. Considering the same, we are of the opinion that the release of the sale value of the concerned shares in favour of respondent no. 2, may cause an irreparable loss to the appellant and vitiate the entire investigation. Moreover, in the present case it is pertinent to note that respondent no. 2 was the main beneficiary of the alleged fraudulent transaction. As has been stated above, the chargesheet in the present case mentions that the role of respondent no. 2 cannot be ruled out. The role of respondent no. 2 has yet to be ascertained and a clear picture would emerge only after the investigation. It is therefore premature to give a clear chit to respondent no. 2 and hold that he is entitled to the sale value of the shares sold by him, especially when the market value is negligible. When the investigation is still underway, releasing the sale value of the shares will frustrate the investigation. Both the Magistrate Court as well as the Revisional Court, have rightly held that the funds in question cannot be released at this stage. The High Court should not have disturbed these findings. Thus, in our opinion, the order dated 25.02.2025, passed by the High Court deserves to be set aside. We make it clear that we make no observations on the merits of the case. The Trial Court is directed to proceed with the trial expeditiously. The appeal is accordingly allowed and the impugned order dated 25.02.2025 is set aside. The sale value of the shares sold by respondent no. 2 (amounting to Rs. 15.90 lakhs) shall be kept with the BSE during the pendency of the trial, meanwhile. 1. ISSUES PRESENTED and CONSIDERED- Whether the High Court, in exercising inherent jurisdiction under Section 482 CrPC, erred in allowing the release of Rs. 15.90 lakhs withheld by the Bombay Stock Exchange as payout for sale of shares by respondent no. 2, before completion of investigation and trial.- Whether the High Court was justified in holding that respondent no. 2's role in the alleged fraud could not be ascertained at the stage of investigation and therefore directing release of the sale proceeds.- Whether the release of sale proceeds to respondent no. 2 at this stage would cause irreparable loss to the appellant and vitiate the ongoing investigation.- The scope and limits of the High Court's inherent jurisdiction under Section 482 CrPC in interfering with ongoing criminal investigations and orders passed by lower courts in such matters.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Jurisdiction and scope of Section 482 CrPC in releasing withheld funds during investigationRelevant legal framework and precedents: Section 482 CrPC confers inherent powers on the High Court to prevent abuse of process of law or to secure ends of justice. However, it is well settled that such jurisdiction is not to be exercised to conduct a mini trial or to interfere with ongoing investigations prematurely. The Court relied on precedents such as Central Bureau of Investigation v. Aryan Singh & Ors. (2023) and Dharambeer Kumar Singh v. The State of Jharkhand (2025), which emphasize that the High Court should not usurp the role of the investigating agency or trial court by adjudicating disputed questions of fact under Section 482 CrPC.Court's interpretation and reasoning: The Supreme Court held that the High Court exceeded its jurisdiction by allowing the release of the sale proceeds under Section 482 CrPC, particularly when investigation was incomplete and the charge sheet indicated that the main accused was absconding and further interrogation was necessary to ascertain respondent no. 2's role.Application of law to facts: The High Court's order was based on an observation that respondent no. 2's complicity was not established at that stage and that the sale proceeds could not be withheld merely on the basis of the fraud played on the appellant. The Supreme Court found this approach premature and beyond the scope of inherent jurisdiction, as the investigation was ongoing and the role of respondent no. 2 was yet to be determined.Treatment of competing arguments: The appellant argued that releasing the funds would cause irreparable harm and interfere with the investigation. The respondent contended that it was the genuine seller of shares and entitled to the sale proceeds. The Supreme Court favored the appellant's position, emphasizing the need to protect the integrity of the investigation and avoid pretrial disposition of disputed issues.Conclusion: The High Court's exercise of inherent jurisdiction was inappropriate at this stage, and the order releasing the funds was set aside.Issue 2: Whether release of sale proceeds to respondent no. 2 would cause irreparable loss and vitiate investigationRelevant legal framework: In criminal investigations involving alleged fraud and criminal conspiracy, courts have recognized the necessity to preserve assets or funds to prevent their dissipation or misuse, which could frustrate the investigation or trial.Court's interpretation and reasoning: The Supreme Court noted that respondent no. 2 was the main beneficiary of the alleged fraudulent transaction. Since the charge sheet explicitly stated that the role of respondent no. 2 could not be ruled out and required further investigation, releasing the sale proceeds prematurely could cause irreparable loss to the appellant and impede the investigation.Key evidence and findings: The FIR alleged impersonation and fraudulent purchase of shares, with respondent no. 2 benefiting from the sale of approximately 72,000 shares worth Rs. 15.90 lakhs. The main accused was absconding, and investigation was incomplete.Application of law to facts: Both the Magistrate Court and Revisional Court had rightly refused to release the funds, considering the ongoing investigation and potential prejudice to the appellant's rights. The Supreme Court agreed with these courts and held that the High Court should not have disturbed their findings.Treatment of competing arguments: Respondent no. 2's claim to genuine sale proceeds was weighed against the risk of frustrating investigation and causing irreparable harm to the appellant. The Court prioritized safeguarding the investigation and trial process.Conclusion: The release of the sale proceeds at this stage was premature and likely to vitiate the investigation; hence, the funds should remain withheld.Issue 3: Appropriateness of High Court's observations on respondent no. 2's involvement in fraudRelevant legal framework: Courts must refrain from expressing conclusive findings on disputed facts during preliminary stages such as investigation or bail proceedings. The principle of presumption of innocence and the need to avoid prejudgment are paramount.Court's interpretation and reasoning: The Supreme Court criticized the High Court for making observations that respondent no. 2's role in the fraud was not established, which effectively gave a 'clear chit' to respondent no. 2 before investigation and trial concluded.Application of law to facts: The charge sheet indicated that the role of respondent no. 2 was still under inquiry and could only be ascertained after arrest and interrogation of the main accused. Therefore, such observations were unwarranted and premature.Treatment of competing arguments: While respondent no. 2 sought to negate its complicity, the Court held that such factual determinations are the domain of the trial court and investigation, not the High Court under Section 482 CrPC.Conclusion: The High Court's observations on respondent no. 2's innocence were inappropriate and beyond the scope of its jurisdiction.3. SIGNIFICANT HOLDINGS'It is a settled position of law that while exercising the inherent jurisdiction under section 482 CrPC, the High Court is not supposed to conduct a mini trial.''The High Court has travelled beyond its inherent jurisdiction under Section 482 CrPC, by allowing the petition filed by respondent. The High Court ought not to have made any observations regarding the absence of any role played by respondent no. 2 in the whole transaction because investigation is yet to be completed.''Considering the same, we are of the opinion that the release of the sale value of the concerned shares in favour of respondent no. 2, may cause an irreparable loss to the appellant and vitiate the entire investigation.''Both the Magistrate Court as well as the Revisional Court, have rightly held that the funds in question cannot be released at this stage. The High Court should not have disturbed these findings.''We make it clear that we make no observations on the merits of the case. The Trial Court is directed to proceed with the trial expeditiously.'Final determinations:- The High Court's order directing release of Rs. 15.90 lakhs to respondent no. 2 under Section 482 CrPC is set aside.- The sale proceeds shall remain withheld with the Bombay Stock Exchange during the pendency of the trial.- The trial court is directed to proceed expeditiously with the trial.