TaxTMI 
TaxTMI 
2017 (4) TMI 1400
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....f 2014 has been filed by Mr. Naresh Prasad Agarwal, who is the second accused in C. CNo.3 of 2014 ,on the file of the learned Special Judge for CBI cases ( XII Judge, City Civil Court), Chennai under Section 482 of the Code of Criminal Procedure to quash the charge sheet filed against him by the respondent-police. 3A. The petitioner Mr. Ganesh Agarwal had originally filed a petition in Crl.M.P.No.3615 of 2014 under Section 239 of the Code of Criminal Procedure to discharge him from the criminal case in C.C.No.3 of 2014 pending on the file of the learned Special Judge, CBI cases ( XII Additional City Civil Court), Chennai. That petition was dismissed on 04.08.2015. Challenging the correctness of the order, Mr.Ganesh Agarwal (A3) has preferred this petition in Crl.R.C.No.1191 of 2015 before this Court after invoking the revisional jurisdiction of this Court under Sections 397 and 401 of the Code of Criminal Procedure. 4. Section 482 of the Code of Criminal Procedure encompasses the following three ingredients: (a) to make such orders as may be necessary to give effect to any Order under this Code; &nb....
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....error on a point of law; (iii) excess jurisdiction, (iv) abuse of power, & (v) where the decision upon which the trial Court relied has since been reversed or overruled when the revision petition was being heard. 8. As observed by the Supreme Court in State of M.P. Vs. S.B.Johari, (AIR 2000 SC 665: (2000) 2 SCC 57: 2000 SCC (Crl) 311 : 2000 Crl.L.J.944), under Section 401 of Criminal Procedure Code quashing of the charge by the High Court would be justified if even on considering the entire prosecution evidence, the offence is not made out. 9. In Trilok Singh V Satya Deo Tripathi, (AIR 1979 SC 850: (1979) 4 SCC 396: (1980) Crl.L.J. 822) , the Supreme Court has observed that if the charge in a criminal proceeding constituted a bona fide civil dispute, the High Court can quash the charge. 10. It has mainly been alleged that the petitioners (A2 and A3) along with the 1st accused have conjointly practiced FRAUD on the MMTC Ltd., Chennai. The allegations made against the petitioners (A2 &.A3) and the 1st accused are: Mr.V.Gu....
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....into a criminal liability? and if it is done so, could it be construed as abuse of process of Court? 15. While speaking on behalf of a Division Bench of the Apex Court in Indian Oil Corporation vs M/S NEPC India Ltd., & Ors.(2006) 6 SCC 736) : (2006) 3 SCC (Crl.) 188), Hon ble Mr Justice Raveendran has dealt elaborately with the point Existence or availment of civil remedy under criminal law . While answering the above question he has observed that: It is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. Such a tendency is seen in several family disputes also, leading to irretrievable break down of marriages/families. There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure though criminal prosecution should be de....
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....tion of India), Chennai Regional Office, Chennai; 2.Thiru.V.Gurumurthy, former General Manager, (Finance & Accounts) MMTC Limited (Minerals & Metals Trading Corporation of India), Chennai Regional Office, Chennai; and 3.Thiru.N.P.Agarwal, Proprietor, M/s.Shiv Sahai & Sons, PO Box No.7428, No.60-61 Narasima Dasari Lane, NSC Bose Road, Chennai-600 001 as well as against unknown officials of MMTC Ltd., Chennai Regional Office, Chennai and Union Bank of India, Main Branch, Chennai. 22. The petitioner in Crl.O.P.No.21243 of 2014, Mr. N.P. Agarwal was originally ranked as third accused in the First Information Report. Mr. N.Ganesh Agarwal, who has been arraigned as 3rd accused in the Charge sheet (petitioner in Crl.R.C.No.1191 of 2015) was originally not at all shown as an accused in the First Information Report. 23. As per the prosecution, the suspected offences alleged to have been committed by the accused persons are, criminal conspiracy, cheating, falsification of accounts and criminal misconduct. 24. The term offence has been defined in the first part of Section....
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....iable by a Criminal Court.) As defined in Section 2 Children Act it means any offence punishable under any law for the time being in force. This definition is akin to that of the expression defined in the General Clauses Act. As held in Calcutta case S.3(30) of the Bengal General Clauses Act and S.4(O) of the Cr.P.C. define offence to mean any act or omission made punishable by any law for the time being in force. It is thus clear that to bring an act within the amplitude of the term offence mens rea is an inevitable constituent part. 25. The crucial question as to whether the petitioners were having such criminal intention to commit the offence as alleged by the prosecuting agency assumes importance and to be answered by them in an unambiguous manner: 26. Secondly the entire prosecution case seems to have been constructed on the foundation of the Memorandum of Understanding dated 02.04.2008 which was entered into between MMTC Limited, Chennai House, No.6 Esplanade, Chennai 600 108, having registered office at Core 1 Scope Complex No.7 Lodi Ro....
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....ed that the entire prosecution case is revolving around the pivot of the Memorandum of Understanding, dated 02.04.2008. 31. Mr. Muralikumaran, learned counsel appearing for M/s.McGan Law Firm, who is on record for the petitioners has submitted that the entire prosecution case as well as the dispute are civil in nature. 32. As it is revealed from the First Information Report, during the period from 2007-2010 at Chennai and at other places Mr. S.Gurusamy (A1), former Chief General Manager, South Zone, MMTC Limited (Minerals and Metals Trading Corporation of India) Chennai Regional Office, Chennai, Mr. V.Gurumurthy (A-2), former General Manager (Finance & Accounts), MMTC Ltd., Chennai Regional Office, Chennai and unknown officials of MMTC Ltd., Chennai Regional Office, Chennai had entered into a criminal conspiracy with Mr. N.P.Agarwal, (A3) Proprietor M/s.Shiv Sahai and Sons and with unknown officials of Union Bank of India Main Branch, Chennai to cheat the MMTC Ltd., in the matter of bullion trading through buyers Credit Scheme and in pursuance of the said conspiracy , Mr.S.Gurusamy (A1), Mr. V.Gurumurthy (A2) and unknown o....
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....t Mr.S.Gurusamy (A1) that he along with Mr.V.Gurumurthy (A2) and unknown officials of MMTC Ltd., Chennai Regional Office had failed to safeguard the interests of the MMTC Ltd., by extending undue favours to Mr. N.P.Agarwal (A-3), Proprietor, M/s.Shiv Sahai & Sons by the above said transactions and thereby caused a wrongful loss to the tune of Rs. 89.6 crores to MMTC and a corresponding wrongful gain to the accused themselves. 35. After completion of the investigation, the Inspector of Police CBI/ACB Chennai had filed a final report under Section 173(2) of the Code of Criminal Procedure before the Special Court (CBI cases) on 28.1.2014. It appears that it was forwarded by the Superintendent of Police CBI/ACB Chennai on 27.1.2014. 36. This Court would also like to place it on record, that the investigation pertaining to the allegations leveled against the accused persons 1 to 3 as shown in the First Information Report was taken up by one S.Subramanian, Inspector of Police, CBI/ACB/Chennai and it was he, who had filed the final report on 28.1.2014 before the learned Special Judge for CBI cases ( XIII Additio....
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....f the value of the Indian rupee against the US Dollors , they could gain on the forward premium amount by not taking forward cover. When the value of Indian rupee against US Dollar started depreciating in June, 2008, the accused 1 to 3 had attended a meeting convened by Mr.S.Gurusamy, the then Chief General Manager, MMTC Ltd., ( whose name was originally cited as the first accused in the First Information Report, but subsequently deleted at the time of filing of the final report) and in the said meeting, they were informed of the uncovered foreign exchange position and instructed to fix the exchange rate as the Indian rupee against US Dollar was getting depreciated. 41. In pursuance of the criminal conspiracy, A-3 Mr.Ganesh Agarwal had falsely informed that his interaction with the major banks revealed that the value of Indian rupee would strengthen in the near future and falsely affirmed that they would honour their commitments fully without any loss to the MMTC Ltd., on the due dates. Subsequently the accused 2 and 3 had informed by their letter dated 18th June, 2008 that they were closely monitoring the exchange rate fluctuations and shall cover it immediately as soon as it r....
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.... and 2010-2011 in pursuance of the criminal conspiracy knowing fully well that they were not eligible for refunds due to the loss caused on account of failure to cover the foreign exchange during the year 2008-2009 applied for refunds of R.33,88,72,922/- and A-1 by abusing and misusing his official position had recommended and approved the same and the amount was paid to A-2 and A-3. According to the prosecution, the Special Audit revealed that the total recoverable amount from A- 2 and A- 3 as on 31.3.2011 was Rs. 97.97 crores. This amount includes an amount of Rs. 96.58 crores recoverable for the financial year 2008-2009. 46. Eventually, the final report filed by the prosecuting agency discloses as follows: By the above said acts, A1 Shri.V.Gurumoorthi, Deputy General Manager (Finance & Accounts) (Bullion Finance) and then General Manager (Finance & Accounts), MMTC Ltd., Chennai, A-2 Shri N.P.Agarwal, Proprietor M/s.Shiv Sahai and Sons and his son A-3 Shri Ganesh Agarwal, entered into criminal conspiracy at Chennai and other places during the year 2008-2009, and cheated the MMTC Ltd., to the tune of Rs. 113.38 crores, by speculating in Indian Rupee-US dollar for....
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....nvironment, cyber crimes, serious frauds of banking/financial institutions, smuggling of arms & ammunition, forgery of passports etc. and other matters falling within the purview of CBI and verify the same to ascertain whether any prima facie material is available to undertake an open probe. While all CBI Officers are free to develop such information through discreet means, the Officer developing any information must keep his superior officer informed regarding information being developed by him. The immediate superior officer may also keep the Competent Authority, i.e. DIG/JD/ADCBI/SDCBI/DCBI informed in case the officer against whom information is being developed is of a rank against whom only such officer can order registration of a case . Clause No.8.27 is extracted as under: The source information once developed must be submitted in writing giving all available details with specific acts of omissions and commissions and copies of documents collected discreetly. The internal vigilance enquiries or departmental enquiry reports should normally not be used as basis for submitting the Source Information. The SP concerned after satisfying himself that there is a pr....
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....ions in brief, the complete details of the suspects involved should be recorded in the PE Registration Report. In respect of the public servants found involved in the matter, their Group, the Service (IAS, IRS, IPS etc.), present designation, scale of pay, present pay and date of superannuation (if available) should also be mentioned in the P.E. registration report. The copies of the PE Registration Reports should be sent to the authorities mentioned in the Annexure 9-A to this chapter. Clause 9.10 says that the Preliminary Enquiries relating to allegations of bribery and corruption should be limited to the scrutiny of records and interrogation of bare minimum persons which may be necessary to judge whether there is any substance in the allegations which are being enquired into and whether the case is worth pursuing further or not. 49. As rightly pointed out by Mr.Muralikumaran, learned counsel appearing for the petitioners no preliminary enquiry registration report is filed in this case. Hence, there is reason to presume that no preliminary enquiry was conducted, in this case. As it is manifested from the FIR, this Court is able to understand that the source of information w....
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....proval from the Competent Authority (in this case Director of CBI) and after such approval by Competent Authority, the verification officer shall submit his detailed report to the Competent Authority for obtaining orders. Then, after due application of mind, the Competent Authority shall pass orders for preliminary enquiry. The preliminary enquiry may either result in registration of regular case or in departmental action or refer to the concerned Department through a self contain note for such action. For registration of regular case in cases of officer of high rank, orders should be obtained from the Competent Authority. Chapter 8 of CBI Manual clearly states about the above said procedures to be followed. In paragraph Nos.50, it has been observed that: "Before going into the merits of the arguments advanced by the learned senior counsel, we have to see whether the provisions of the CBI Manual is mandatory or directory. In determining the said question, the subject matter, the importance of the provision, the relation of that provision to the general object intended to be served by the Act will decide whether the provision is mandatory or directory. The provisions ref....
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.... whatever be his status, is publicly charged with acts of dishonesty which amount to serious misdemeanor or misconduct of the type alleged in this case and a first information is lodged against him, there must be some suitable preliminary enquiry into the allegations by a responsible officer. The lodging of such a report against a person specially one who like the appellant occupied the top position in a department, even if baseless, would do incalculable harm not only to the officer in particular but to the department he belonged to, in general ..... The means adopted no less than the end to be achieved must be impeccable". 57. This Court in R.Subramanium (Crl.O.P No.8438 of 2011, & Green Signal Bio Pharma Private Limited rep. by its Managing Director, Sundaraparipooranan (Crl.O.P.No.9611 of 2011) Vs Union Government of India by Additional Superintendent of Police CBI/ACB/Chennai has held that strict compliance and adherence to the above guidelines are sin quo non for the officials, whenever they happen to register and take up a case for investigation. The clauses, enumerated in the above CBI (Crime) Manual, are the complete shape of track to be followed by the investigating of....
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....urt in P.Sirajuddin etc., Vs State of Madras reported in (1970 I SCC 595 has held that in the context of offences relating to corruption, a preliminary enquiry before proceeding against the public servants is must. 59. As it is revealed from the records, MMTC Ltd., (Minerals and Metals Trading Corporation of India ) was a 100% largest public sector trading body and the same is a State owned Corporation of the Union of India. It is registered under the Companies Act as a Company and all the shares are owned by the Government of India. As per Section 619 of the Companies Act, 1956 the auditor of a government company shall be appointed or re-appointed by the Central Government on the advice of the Comptroller Auditor- General of India to direct the manner in which the company' s accounts shall be audited by the auditor so appointed. Thus it is clear that the MMTC Ltd., is a State owned Corporation of the Union of India and since its shares are all owned by the Central Government, the Memorandum Of Understanding dated 02.04.2008 entered into between the MMTC Ltd., on the one part and M/s.Shiv Sahai and Sons a proprietorship concern owned by Mr. N.P.Agarwal, the petitioner in Crl....
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....obligations arising out of the contract after entering into the same is regulated by the terms and conditions of the contract itself. 63. The same principle is laid down by the Patna High Court in Pyrites Phosphates & Chemicals Ltd., vs. Bihar Electricity Board, AIR 1966 Part I, wherein it is observed that: The requirement of fairness implies that even administrative authority must act in good faith, and without bias, apply its mind to all relevant considerations and must not be swayed by irrelevant considerations; must not act arbitrarily or capriciously and must not come to a conclusion which is perverse or is such that no reasonable body of persons properly informed could arrive at. The principle of reasonableness would be applicable even in the matter of exercise of executive power without making law. It is settled principle of law that the Court would strike down an administrative action which violates any foregoing conditions. 64. This Court has perused the Memorandum Of Understanding dated 2.4.2008 entered into between the MMTC Limited and the petitioner Mr. N.P.Agarwal, who is the proprietor of M/s.Shiv Sahai and Sons. He has bee....
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....ith. 67. The Supreme Court in State of Bihar Vs Majeed, (AIR 1954 SC 786) has held that It may be noted that like other contracts, a Government contract is also governed by the Indian Contract Act, yet it is distinct a thing apart. In addition to the requirements of the Indian Contract Act such as offer, acceptance and consideration, a Government contract has to comply with the provisions of Article 299 of the Constitution. Thus subject to the formalities prescribed by Article 299 the contractual liability of the Central or State Government is same as that of any individual under the ordinary law of contract. 68. On coming to the instant case on hand, this Court finds that no reference is available to show as to whether P.Ramachandran, the then General Manager of the MMTC Ltd., was specifically authorized to enter into a contract with the petitioner Mr. N.P.Agarwal, Proprietor of M/s .Shiv Sahai and Sons , Chennai as contemplated under Article 229 of the Constitution of India. 69. Here, we are not concerned with the validity of the contract. The petitioners in Crl.O.P.No.21243 of 2014 and in Crl.R.C.No.1191 of 2015 also have not disputed the genesis as we....
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....0,12,547/-; ii) directing the defendants 1 and 2 to pay jointly and severally the plaintiff a sum of Rs. 2,13,14,744/- in addition to the amount stated in prayer (i) above; iii) directing the defendants to pay jointly and severally to the plaintiff a sum of Rs. 74,59,25,228/- as interest on the sum of Rs. 96,10,12,547/- at the rate of 18% p.a. from the due date of payment till the filing of the suit; iv) directing the defendants 1 and 2 to pay jointly and severally, to the plaintiff a sum of Rs. 38,63,820/- as interest on the sum of Rs. 2,13,14,744/- at the rate of 18% p.a. from the due date of Payment till the filing of the suit; v) directing the defendants to pay the plaintiff interest on the sum of Rs. 170,09,37,775/- at the rate of 18% p.a. from the date of filing of the suit till the date of realization; and vi) directing the defendants 1 and 2 to pay the plaintiff interest on the sum of Rs. 2,51,78,564/- at the rate of 18% p.a. from the date of filing of the suit till the date of realization. 74. On perusal of the records, this Court is able to find that the defendants 1 and 2 viz., Shiv Sahai and Sons, represented by Mr. N.P.Ag....
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....aintiff, and there were no detail, regarding the role played by the first and second defendants in connection with the fraud committed by the third defendant. In such circumstances it is to be seen whether the application has to be rejected on the ground that fraud has been alleged in the plaint. (para 27). Reverting to the facts of the present case, it is seen that the allegations of fraud were made against the third defendant, who was the Officer of the respondent-Corporation and by reason of the fraudulent conduct of the third defendant, applicants/defendants 1 and 2 made wrongful gains and that was sought to be recovered in the suit. In other words, the allegations of fraud were made only against the third defendant, and except the allegation that the third defendant in connivance and in collusion with the applicants fudged the accounts and caused loss to the respondent/plaintiff, no specific allegations were made against the applicants. Further, the respondent was able to find out the actual loss caused by the third defendant and the wrongful gains made in favour of the applicants. by reason of the fraud committed by the third defendant. Therefore no detailed evidence, acco....
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....garwal (Director). The learned Judge after referring to the serious allegation of fraud that has been attributed against the third defendant, viz., Mr.V.Gurumurthy, (retired General Manager (Finance & Accounts) of MMTC Ltd, Chennai, who has been shown as 1st accused in the charge-sheet , which is sought to be quashed in this case, has ultimately found that the dispute arising between the parties to the Memorandum Of Understanding, dated 2.4.2008 is civil in nature for which no prosecution could be launched. 78. The view expressed by this Court has also been endorsed by the learned single Judge (R.S.Ramanathan,J) of this Court and that is why he has concluded that the respondent/plaintiff (MMTC Ltd.,) had submitted to the arbitration proceedings initiated by the applicants viz., Shiv Sahai and Sons and M/s.Shiv Sahai and sons (India) Ltd., represented by Mr. N.P.Agarwal (Director). In his order, the learned single Judge has also concluded that when the Suit itself is not maintainable in pursuance of clause 11 of the Memorandum Of Understanding, dated 2.4.2008, criminal prosecution could not be launched against the petitioners. 79. On the other hand, Mr. K.Srinivasan learned Sp....
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....ties. 82. Based on clause 11 of the Memorandum of Understanding, dated 2.4.2008, it was contended before the Division Bench that in view of the above said clause, the dispute between the parties is one of accounting and the appellant should not be permitted to wriggle out of the mode of resolution of disputes by arbitration. Further, with reference to clause 11 of the Memorandum of Understanding, the Hon ble Chief Justice in paragraph 16 of the Judgment has observed that There is really no dispute about the existence of arbitration clause. If one may say, there is a dual plea raised by the appellant: (a) that in view of the allegations of fraud, which are really serious in nature and the charge sheet having been filed, this is an appropriate case where trial should take place before the Civil Court; (b) the third defendant becomes necessary to the proceedings, who is not a party to the arbitration clause and the allegations of fraud are not only against the third defendant, but also against the first two defendants/respondents. 83. Paragraph 19 of the said Judgment also assumes much importance. It is extracted as under: We find it quit s....
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....ted fact that under the buyer s credit scheme, the amount deposited by the customer towards the CIF which includes an additional payment towards LIBOR, SPREAD and further 5% of the additional deposit of the value towards dollar/rupee value fluctuation is deposited by MMTC Ltd., in its name in the bank as fixed deposit and based on that, MMTC gets a credit or loan from the foreign banks where the lending interest rate is lesser than the interest on fixed deposits and pays the supplier abroad. 87. Mr. Muralikumaran, learned counsel for the petitioner has elaborately made submission on the following issues:- a) That the entire transaction is civil in nature and also the dispute. b) When the Loss has not been recovered, is it due to fudging of account and whether there is any fraud ? c) Why Loss occurred ? d) Who has to conclude Fraud ? e) Why the complaint ? f) Whether the CBI is influenced in this matter ? g) The Legality of the Complaint h) Whether the Criminal Complaint was given to arm-twist, threaten, coerce and harass the customer? i) The Legality of the Special Audit Report. j) The corr....
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.... the instructions issued on 18th December,2016, each transactions to be treated as separate and squared off on completion so as to avoid carry forward of balances. In other words, hunching of transactions was prohibited. 92. In the charge sheet, the respondent has mainly alleged that the first accused Mr. V. Gurumoorthi, the then Deputy General Manager (Finance & Accounts) (Bullion Finance) and the then General Manager (Finance & Accounts) MMTC Ltd., Chennai, the second accused, Mr. N.P.Agarwal, Proprietor of M/s.Shiv Sahai and Sons and his son Mr. Ganesh Agarwal had entered into a criminal conspiracy at Chennai and in other places during the year 2008-2009 and cheated the MMTC Ltd., to the tune of Rs. 113.38 crores by speculating in Indian Rupee-US Dollar foreign exchange fluctuation and intentionally omitted to take forward cover for the purchases made under the Buyers Credit Scheme. It is also alleged that in pursuance of the criminal conspiracy, first accused Mr.V.Gurumoorthi had maintained improper accounts and falsified the books of accounts of the MMTC Ltd., by showing inflated fixed deposit amount of Rs. 38,99,01,189/- and deflated Loan-Against-Deposit amount of Rs. 45,4....
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....ditor s report is made or any document of the company is signed or authenticated , if any default occurs, the person who actually committed the willful default shall be punishable with fine which may extend to Rs. 10000/-(Rupees ten thousand only) What Section 233A of the Companies Act would say is that the Central Government is empowered to direct special audit in certain cases if it is of the opinion that the affairs of the company are not being managed in accordance with sound business principles or prudent commercial practices. It also says that any company is being managed in a manner likely to cause serious injury or damage to the interests of the trade, industry or business in which it pertains. As per clause (c) of sub section (1) in case the financial position of any company is such as to endanger its solvency the Central Government may at any time order to conduct a special audit on the company s accounts. 95. As already stated, clause 5.1 of Chapter V of Report 13 of 2013 (page No.218 of the Index to the additional typed set of papers filed by the petitioner) says that there is non recovery of dues due to lapses in bullion transactions and camouflaged accounting. It a....
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....ce and delay in booking of accounting transactions, delay in reconciliation of bank account, non-maintenance of proper record of financial securities (Fixed Deposits etc.,) failure to seek periodical timely confirmation of balances from the customers, non accounting of interest and other expenses recoverable from the customers, recovery of TDS from the customers, wrong refunds to the customers, misuse of suspense accounts to manipulate vendor accounts which could not be pointed out by professional internal Auditors (CA) and Statutory Auditors. Reply of the Management was not acceptable in view of the following: Keeping FERC open was in violation of the specific instructions mandating compulsory FERC requirements issued on 10th March, 2008; The contention of the Management that it was not possible to settle on transaction to transactions basis was not acceptable as it is contrary to company s own specific instructions dated 18th December, 2006 which required that each transaction be treated as separate and carry forward of balances be avoided. It further stipulated that any release of bullion to any of the customers was to be made only when the party account was fully....
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.... inadequate strength in the Officers level. 99. Therefore, as argued by Mr. Muralikumaran, the situation wanting of officials has left the management in the condition of improper maintenance of accounts . 100. The counsel for the petitioners has further contended that as per the accounting standards, the foreign exchange fluctuation is to be booked as a loss or gain and therefore is purely Civil in Nature. Further with regard to the loss due to loan against deposit the counsel contended that even as per the Special Audit report in Page No.65, the loans were taken on the deposits to take advantage on the arbitrage. He also points out the special audit report to contend that with regard to fixed deposit interest, interest on loan, fixed deposit were maintained in single code and MMTC itself has accepted that it was not passed as a whole due to paucity of time and pressure of account closing for the year 2009-2010. Further with regard to loss due to usance of LC, pointing out to Page.No.516 of the special audit report the counsel for the petitioners contended that the beneficiary bank straight away claimed it from the usance letter credit bank, who in turn debi....
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....xamination is a part of the normal auditing procedures. Fraud has a legal (criminal) connotation. Audit teams/officers do not make legal determinations of whether fraud has actually occurred. Hence Audit teams/officers can put red flags (an indication that further scrutiny of the items would be required) which need further investigation by appropriate agencies. When the evidence is clear, audit teams/officers can come to a conclusion about a suspected fraud and include in their findings. 105. With reference to respective responsibilities of management and audit, clause 3 of the Standing Order states that the responsibility for the prevention and detection of fraud and error rests primarily with the management of the audited entity through the implementation and continued operation of accounting and control systems designed to check fraud. Audit must, however, evaluate and report on the adequacy of the systems in place and competence with which the management has discharged its responsibility in relation to prevention, detection, response and follow up/remedial measures in relation to fraud and corruption. 106. Further the Standing Order on Role of Audit in relation to cases o....
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.... Court finds that the instructions given in this Annexure to the Standing Order on Role of Audit in relation to cases of fraud and corruption have not been followed by the MMTC Limited. Clause 19.7 says that cases relating to suspected/presumptive fraud and corruption should be highlighted in the Inspection Reports, Audit Notes et., and also in the Audit Reports. All such cases should be printed in bold type. 108. Mr.Muralikumaran ,while advancing his arguments has invited the attention of this Court to Indian Audit and Accounts Department Auditing Standards (2nd Edition 2002). Chapter IV of the Auditing Standards contemplates reporting standards. Clause 9 of Chapter IV says that fraud, illegal acts and other non compliance. Clause 9.1 reads that when auditors conclude based on evidence obtained, that fraud or an illegal act either has occurred or is likely to have occurred they should report relevant information. Auditors need not report information about fraud or an illegal act that is clearly inconsequential. Auditors should also report other noncompliance (for example a violation of a contract provision) that is material to the financial s....
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....planations given to us, the Accounts of the Chennai Regional Office together with the Accounting Policies and Notes on Accounts forming part thereof give the information required by the Companies Act, 1956 in the manner so required and subject to:- Note No.10(a) of Schedule 21 to Accounts regarding non realization of sale value amounting to Rs. 24.72 crores, the effect of which on the financial statements are not ascertainable. Note No.12 of Schedule 21 to Accounts on non confirmation/ Reconciliation of certain accounts shown under sundry Debtors/sundry creditors/loans and advances, the effect of Which on the financial statements are not ascertainable. 112. From the above context, this Court understands that the financial statements of MMTC Limited were not ascertainable and that there was non realization of sale value amounting to Rs. 24.72 crores. This report conveys the meaning that there was mismanagement and improper maintenance of accounting system. In Clause 6 of the report of Purushottam and Company, Chartered Accountants , it is stated that we are informed that Regional Office, Chennai has assigned internal audit to an outside agency. In ou....
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....ill today MMTC had never provided him any details and decisions regarding the buyer s credit scheme taken at MMTC discretion without consulting him or disclosing any details, and therefore he did not know as to why MMTC Chennai had been maintaining this secrecy with them. However, no satisfactory reply was given by MMTC Ltd., Chennai to N.P.Agarwal. 116. In the letter, dated 11.10.2011 addressed to Mr. Oorkavalan of M/s.MMTC Limited, Chennai, the petitioner Mr. N.P.Agarwal had expressed his anxiety saying that As informed to you earlier, forex buying was done by your good office for the FY 2008-09 and no day wise, week wise, month wise or year wise details were provided to us. We further bring it to your notice that Mr. Ganesh deputed an accountant for reconciliation on two occasions, as required by you. But reconciliation was not possible. Finally, he had handed over the available statement of records to Mr. Oorkavalan. 117. Under these circumstances, ignoring the grievances expressed by the petitioner in their letters as aforestated, Mr. Oorkavalan Deputy General Manager (F & A) of M/s.MMTC Limited, Chennai in his letter, dated 28.12.2011 addressed to M/s.Shiv Sahai &....
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....yer s credit; f. Our confirmation for the said deal under Buyer s Credit System; g. The details of the forward rate booked for the payment to be made to the banker providing the Buyer s Credit; h. The details of the fixed deposits made with the Banker by the funds provided by us along with the interest rate agreed and the tenure of the fixed deposit. i. Details of all other charges to be paid by us for this deal; j. The expected profits to be earned by us for this deal, since we would not have authorized and given our go ahead with the deal, if it was clear that there would be loss from day one. 120. On behalf of M/s MMTC Ltd., Chennai one Mr. Umesh Sharma, who was the then Chief General Manager (IA) had addressed a letter dated 5.1.2012 to M/s. Venkat & Rengaa, Chartered Accountants, Chennai with reference to the subject of special audit of bullion transactions and reconciliation of debit balances in the sundry creditors account of RO Chennai The scope of auditing work was for analyzing/locating debit balance of Rs. 116.69 crores. 121. In an another letter, dated 8.2.2012, addressed to M/s. MMTC Ltd., Chennai, the auth....
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....tries-Credit balance of Rs. 12,23,92,414/- iv)M/s.Shiv Sahai & Sons-Debit balance of Rs. 91,79,79,805/- v) M/s.Surana Corporation-Debit balance of Rs. 18,21,59,354/- vi) M/s.GRT Group-Credit balance of Rs. 19,486/- vii) Code No.12401/- Foreign Currency Loan from bankRs.597,05,13,188/- IN VIEW OF THE NON CONFIRMATION OF BALANCE (CREDIT/DEBIT BALANCES) IN RESPECT OF ABOVE MENTIONED DEBTORS/CREDITORS ITEM NO.1 (a),(b) & (c), WE ARE UNABLE EITHER TO FORM ANY OPINION OR TO COMMENT UPON THEIR IMPACT ON THE FINANCIAL RESULTS FOR THE FINANCE YEAR ENDED 31.03.2012. 123. In the very same report in clause III (a), M/s.Vardhaman and Co., Chartered Accountants Chennai have stated that As on 1.4.2011, this account showed a debit balance of Rs. 116,68,79,881.91. In 2011-12, this debit balance was adjusted/transferred in to-Claims recoverable-Pending Reconciliation-Account Code No.25258 Further, the following transactions were reco....
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.... 127. In this connection, it is imperative on the part of this Court to state that in the Audit report dated 13.6.2012 given by M/s. Vardhaman and Co., Chartered Accountants it is stated that based upon the audit procedure performed and information and explanations given by the management, we report that no fraud on or by the region has been noticed as reported during the course of our audit. When the Chartered Accountants, viz., M/s.Vardhaman and Company themselves were able to say that during the course of their audit, they did not notice any fraud on or by the region, how, could M/s ELP say that in the course of the audit of the transactions with Shiv Sahai it came to their knowledge that the Shiv Sahai & Sons in connivance and in conspiracy with some of their officers had fraudulently manipulated the accounts and thereby cheated MMTC of the amounts due to MMTC under the MOU. 128. From the angle of judicial perception this court would like to say that it is very easy to make such allegations against a person, but it is very difficult to prove or substantiate those allegations against such a person. Similarly, in the given case on hand also, the prosecuting agency is able to s....
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....this case is concerned, the whole edifice is founded on the basis of fraud . When the Chartered Accountants M/s.Vardhaman and Co., has been able to say that during the course of their audit they did not notice any fraud, the allegations made by the prosecuting agency has become pale into insignificance. 134. On perusal of the records, this Court is able to find that the letter, dated 18.02.2013 seems to have been addressed by ELP, signed by one Tarun Gulati, partner, to the Registrar, Indian Council of Arbitration, New Delhi is with reference to the matter of arbitration between M/s.Shiv Sahai and Sons Chennai and M/s.MMTC Ltd., Chennai . Paragraph 2 of this letter is very much relevant, wherein it is stated that we state that there is no arbitration agreement and therefore, the present arbitration is not maintainable. Further, we wish to point out that the arbitration is not maintainable as in the course of the audit of the transactions with the claimants. It came to our knowledge that the claimants in connivance and in conspiracy with some of our officers have fraudulently manipulated the accounts and thereby cheated our clients of the amounts due to them. A cas....
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....re debited/credited to Customers Account? In such circumstances, the liability fixed or charged on the customers, the interest credits/debits and the customer balances shown in the financial statements are correct and accurate and the Financial Statements show a true and fair view? (i) The sale of Gold by the RO is done under Outright or Loan Schemes. whatever be the scheme, the delivery of Gold to customer is done on receipt of Money or LC/BG. (ii) RO takes 100/110% cash margin/SBLC for the scheme and opens SBLC in favour of the supplier. (iii) MMTC also takes Buyer s Credit from Indian Banks in foreign currency for immediate payment to the Supplier and the same to be liquidated in 90 days. The entire value for the supply is obtained as margin from the customer and placed as FD with the Bank granting buyer s credit. (iv) In all above Buyer s Credit Schemes, the exchange cover was supposed to be taken and MMTC limits were not to be used. The extinguishment of the liability was to be done out of the FD/LC available i.e. self-liquidating. For this query it is simply replied As referred above 137. M/s. MMTC Ltd., Chennai has add....
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....bsp; we are pleased to inform you that the competent authority has approved the appointment of your firm as per the terms and conditions thereon. The scope of this work was to analyze and locate the debit balance of Rs. 116.69 crores. 140. From the above context, this Court finds that the appointment of M/s.Venkat and Rengaa, Chartered Accountants was approved by the management of MMTC Ltd., Chennai, but in their reply MMTC Ltd., Chennai has gone to the extent of saying lie that their Office had not made any appointment of Special Auditor viz., appointment of M/s.Venkat and Rengaa , in respect of the transactions of Chennai Regional office of MMTC Ltd.,Chennai. 141. In a communication dated 24.9.2014 addressed to Mr. N.P.Agarwal (the petitioner), as it is seen from page No.241 of the additional typed set of papers, the Indian Audit and Accounts Department, Office of the Principal Director of Commercial Audit and Ex-Officio Member, Audit Board-1 has given a reply with reference to supply of information under RTI Act, 2005. In Serial No.15 of the reply the following query seems to have been made Whether the said Special Audit Report of Chennai Region copy was forwarded/pr....
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....ntemplates the responsibilities and powers of the Board of Directors wherein it is stated that the operations of the company shall be managed under the directions of the Board within the framework set out by the Companies Act, 1956 and the Memorandum and the Articles of Association of the Company. 144. Serial No.3 of Standing Order on Role of Audit in Relation to Cases of Fraud and Corruption distinguishes the characteristics of fraud : 3.1 Fraud should be distinguished from error. The distinguishing factor between fraud and error is whether the underlying action is Intentional or unintentional. For examples, the following actions amount to error and not fraud. A mistake in gathering or processing data from which financial statements are prepared. An incorrect accounting estimate arising from oversight or misinterpretation of acts and A mistake in the application of accounting principles relating to measurement, recognition, classification, presentation or disclosure. 3.2. The meaning and nature of fraud can be understood by referring to the following definitions: Fraud is an in....
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....l of cases of loss at each stage of detection, reporting , write off, final disposal, in cases of losses including action against delinquents and remedial measures. All the above seven points are bullet points pertaining to auditors to be followed scrupulously. 146. The Learned counsel for the petitioners points out to Page.No. 419 of the special audit report to contend that even the special audit did not find any cheques having been issued for placement of FD s. It was further contended by the counsel for the petitioners that the investigation to make out a prima facie case did not even set out as to :- 1. What are the powers of the MMTC Ltd, Board ? 2. What are powers of the Directors? 3. What are the departments ? 4. Who are the Heads of the Departments ? 5. What are the respective Roles & Duties ? 6. What are the Resolutions of the Board empowering each person to deal with the money? 7. What are the Resolutions of the Board authorizing investments and taking loans ? 8. Who are the persons, who are authorised to sign the cheques? 9. What are the procedures involved in the same? 10.....
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....nt of such exchange differences at the beginning and end of the period However, the profit and loss does not have any figure relating to Loss/Gain on foreign exchange. The revaluation difference has been routed through Purchase and Sales Accounts as detailed below. In our opinion, the same is in contravention of the provisions of AS 11. 150. M/s. Venkat and Rangaa, Chartered Accountants in their Special Report pertaining to Chennai Regional Office for the years 2007-2008 to 2009-2010 have given their observations on verification of purchases and sales as under: (see page 19 of vol.1 of Special Audit Report) 1. Bullion Drill instructions have not been followed in several cases. 2. To satisfy the customers needs to take input credit, invoices have been issued outside the BTS system and also accounted for gold issued on loan basis. 3. Sales and purchases accounting during the year varied from time to time and leads to a lot of confusion. 4. The reporting of turnover and purchase to statutory authorities are also incorrect. 5. VAT Audit was conducted from 15.7.2011 to 29.7.2011 by CTO enforcement and show-cause ....
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....oan Against Deposit in 2007/08 and major part of 2008/09 both got mixed up and in the absence of complete documentary evidence, the above entries were passed as a whole due to paucity of time and pressure of account closing for the year 2009-10 In their reply, the MMTC Ltd., Regional Office Chennai themselves have confessed their mistake stating that the bifurcation of accounts at the instance of the auditors was not done properly and that the differences in loan against deposit was corrected by passing entry for Rs. 40.80 crores. They have also stated that the major part of 2008-09 got mixed up due to operation of single code for FDR as well as loan against deposit in 2007-08. They have also stated that in the absence of complete documentary evidence, the above entries were passed as a whole due to paucity of time and pressure of account closing for the year 2009-10. 154. As it is seen from page No.434 of volume 3, with reference to special audit of bullion transactions of MMTC Ltd., the auditors have stated thus: Our observations on verification of purchases and sales is as under: 1. No documents, given to the bank for obtaining loan against deposits er....
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....e FD on that date was Rs. 2288 crores. How is it possible as no customer pays advance money for gold not lifted? 2. There was no necessity for a LAD of Rs. 776 crores as on 12.9.08 which is within a period of 18 days has increased to Rs. 885 crores?. It should have been NIL as per the reasoning given above. They have also stated that however, if the value of the subsequent supply is more than the previous one, additional FD would have to be placed. Thus, from both the situations, the necessity for LAD continuance for a long period is not necessary. The value of FD should be equal to the value of gold taken on loan. 159. At page 591 of volume-3 of Report on Special Audit of MMTC Ltd., Regional Office, Chennai for the year ending March, 2011 the auditors have stated that there were many contra entries passed during the year. There were totally 266 contra entries passed throughout the year. Bank receipt entries were reversed by bank payment entries and similarly debit notes were reversed with credit notes. So many entries were passed unnecessarily leading to confusion. 160. At page No.25 of Volume-I under the head Suspense Accounts , the auditors have stated that ....
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.... been observed in the books of accounts 2010-11. Only a few entries have been passed without any proper documentary evidence and proper authorization. 5. This report is issued on the basis of the ERP reports furnished to us and the documents and explanations provided to us. 6. The entire Suspense accounts transactions and purchase accounting has not been matched. We are not in a position to express a view/opinion on the impact of the above on the difference in vendor account. 7. No confirmation of balances have been obtained either from Vendors or from Customers. 8. There is no maker checker concept and some irrelevant codes have been used. 163. As it is seen from page No.1 of the second additional typed set of papers, MMTC Ltd., Chennai have issued a debit note dated 08.09.2011 for buyers credit expenses for the financial year 2008-09 to M/s.Shiv Sahai and sons and thereby they have claimed Rs. 36,36,15,997/-. For the above said Debit Note M/s Shiv Sahai and Sons have given a reply dated 19.9.2011 to M/s. MMTC Ltd., Regional Office Chennai, wherein they have stated that to the best of our knowledge we state that no payments are due on a....
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....ered Accountants, a crucial question that arises for consideration of this Court is as to how the respondent-police (CBI) could have predicted or pre-conceived that the accused persons including Mr. N.P.Agarwal, Proprietor of M/s.Shiv Sahai and Sons (third accused) had caused wrongful loss to the tune of Rs. 36.6 crores to MMTC Ltd, Chennai and corresponding gain to themselves. 167. Viewing this from any angle, this Court finds that a dark cloud prevails over the genesis of the First Information Report . 167. He further points out that when the FIR had the following names :- S.Gurusamy, former Chief General Manager, South Zone, MMTC Limited, Chennai Regional Office, Chennai. V.Gurumurthy, formet General Manager (Finance and Accounts), MMTC Limited, Chennai Regional Office, Chennai. N.P.Agarwal, Proprietor, M/s. Shiv Sahai & Sons and many other unknown officials as being involved in the conspiracy belonging to MMTC and Union Bank of India, the MMTC was able to pre-empt the names in the charge sheet and filed the civil suit deleting the name of Mr. Gurusamy (as found deleted in the charge sheet) and not naming any other person in MMTC or the bank, as ....
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....o made reference to the letter, dated 7.1.2013 addressed on behalf of MMTC Ltd., for reference of all disputes between the parties to arbitration. In this connection, they had requested M/s. Shiv and Sahai and Sons to confirm the following arbitration clause between the parties within seven days of the receipt of their letter. All disputes, differences and claims of whatsoever nature arising between parties i.e. Shiv Sahai & Sons and Shiv Sahai & Sons (India) Ltd., on one hand and M/s.MMTC Ltd., on the other out of or in relation to the construction meaning, scope operation or effect under the said MOU, dated 02.04.2008 or otherwise for the period 2007-08 to 2011-2012 be referred to arbitration under the ICA Rules. The number of arbitrator shall be three. The seat of arbitration shall be Chennai. The language shall be English. 171. For this letter, M/s Surana and Surana International Attorneys on behalf of M/s.Shiv and Sahai and sons had issued a reply on 29.01.2013 through which M/s.Shiv and Sahai and sons had expressed their willingness to refer all disputes, differences and claims of whatsoever nature arising between the parties i.e. (a) M/s.Shiv and Saha....
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....inue to arm twist our client, nevertheless, our clients would still agree to refer all disputes to Arbitration (ICA-Three Arbitrators), so that all disputes between the parties can be resolved. h. It is hoped that your client will be fair and reasonable by consenting to CBI returning back to our clients all the seized documents, stock and cash. 172. The conduct of the parties viz., M/s. MMTC Ltd., and Shiv and Sahai and Sons would go to show that the disputes between them are only civil in nature and not criminal. 173. It is to be noted that in paragraph 30 of the plaint in the suit in C.S.No.249 of 2013, filed by M/s.MMTC Ltd., as against the petitioners and the first accused Mr. V.Gurumurthy , M/s. MMTC Ltd. has made a reference to the criminal complaint lodged by them before the CBI against M/s.Shiv Sahai and Sons and others to investigate the alleged fraud. M/s. MMTC Ltd., Chennai being the plaintiff has stated that there was no arbitration agreement between the parties and that the dispute could not be sorted out before the arbitral proceedings. The specific averments made by the plaintiff in paragraph 37 of the plaint clearly shows that M/s. MMTC Lt....
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....ivering the cargo without the original bill of lading, committing a breach of carriage and acting in violation of their contract and obligation. A claim for a sum of US $ 84,353.31 was made and a suit was filed by the respondent. More than one year after filing of the suit a complainant petition was filed against the appellants for committing breach of trust by causing criminal misappropriation of the valuable property of the complainant. With reference to the application for quashing the order issuing summons to the appellant was dismissed by the High Court which held that the allegations made in the complaint prima facie disclosed the offence of breach of trust. The appeal preferred before the Apex Court was allowed. While allowing the Appeal Hon ble Mr Justice S.B.Sinha has spoken on behalf of the Division Bench as follows: The allegations made in the complaint petition, even if given face value and taken to the correct in its entirety, do not disclose an offence. No allegation whatsoever was made against the appellants in the notice. What was contended was negligence and/or breach of contract on the part of the carriers and their agent. Breach of contract simplic....
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.... raising of invoice for the supply of silver amounting to Rs. 1.42 crores not completed in the BTS. He has also stated that the total amount not debited to M/s.Shiv Sahai and Sons was found initially to be of Rs. 83.98 crores. The remaining amount of Rs. 21.94 crores pertaining to M/s.Surana Corporation Limited (Rs.17.74 crores), Rs. 3.43 crores to be debited to the MMTC Ltd., Calcutta and Rs. 0.77 crores to be debited to M/s.Khazana Jewellery. 177. He has further stated that all LADs were taken to settle the Buyer s Credit loans. Since M/s.Shiv Sahai and Sons only had availed the Buyer s Credit facility from the MMTC Ltd., (except for one transaction to another customer), it was concluded that all cost of LAD has to be recovered from the customer. In this manner, we found a total amount of Rs. 71.97 crores incurred on account of the interest on LAD for M/s.Shiv Sahai and Sons Out of this amount Rs. 26.99 crores was debited to M/s.Shiv and Sahai and sons during the FY 2008-09 itself having a balance of Rs. 44.98 crores un-debited to M/s.Shiv Sahai and Sons. 178. In his statement he had also admitted that the benefit of availing the Buyer s Credit Scheme is higher margin for t....
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....e petitioner. Challenging the order, dated 04.03.2015 the petitioner (3rd accused) had preferred the Criminal Revision Case before this Court in Crl.R.C.No.1191 of 2015. 181. What he would contend in the petition in Crl.M.P.No.3615 of 2014 is that even though the first information report was registered against two of the officials of MMTC Ltd., Chennai viz., Mr.Guruswami and Mr. Gurumoorthi by preempting the charge sheet, dated 27.01.2014, a Civil Suit was filed against Mr. V.Gurumoorthi who is named in the charge sheet as the 1st accused and the civil suit also confines its litigation only against Mr.Gurumoorthi even before the conclusion on the investigation by the CBI as to whether Mr.Guruswami who is named as an accused in the first information report had committed any offence or not? Secondly, he had contended that if any adequate grounds were available to proceed against him, he (A3) would have been implicated or impleaded in the first information report as one of the accused even at the earliest point of time. Thirdly, he would contend that, when the Superintendent of Police, CBI, who happened to register the FIR, was able to conclude that a prima facie case w....
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....ge open (uncovered) or to cover the foreign exchange very late; (e) during the relevant period inspite of mismatch the first accused had passed a sum of Rs. 111 crores as the interest earned on the First Deposit to the concern of the petitioner and his father; (f) The petitioner along with two other accused had cheated the MMTC Ltd., a Government of India undertaking to the tune of Rs. 113.38 crores by making wrongful loss to the Government and corresponding wrongful gain to themselves and an amount of Rs. 36.02 crores due to exchange difference, and an amount of Rs. 36.18 towards interest on loan against fixed deposits and an amount of Rs. 18.42 crores towards usance LC charges. (g) During the year 2009-2010 and 2010-2011 the petitioner (3rd accused) and his father A2), knowing fully well that they were not eligible for refunds due to the loss caused on account of failure to cover the foreign exchange during the year 2008-2009 applied for refund of R.33,88,72,922/- and the 1st accused by abusing and misusing his official position had recommended and approved the same and the said sum was paid to the petitioner and his father (2nd accused) According to th....
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....il Supplies (2005 (2) SCC 420) and Trisuns Chemical Industry case (1999 (2) SC 112) had observed that the existence of an arbitration proceedings or a civil suit does not absolve the offender of the criminal prosecution, if the acts of the accused disclosed criminal offences. Finally, the petition in Crl.M.P.No.3615 of 2014 filed by the petitioner (3rd accused) was dismissed. 187. This court has carefully perused the impugned order of the learned Special Judge, dated 04.08.2015. The learned Special Judge, had, in the impugned order made reference to the statements of prosecution witnesses viz., LWs. 82, 83, 86 and 17 and other documentary evidences. 188. During the course of his arguments before this Court, Mr. K.Srinivasan, learned Special Prosecutor (CBI) has drawn the attention of this Court to the statements of the prosecution witnesses viz., L.W.1 Mr. CA. S. Manisekaran, partner M/s.Venkat and Rangaa, Chartered Accountants, Chennai, L.W.17 Mr. William Saidanha, Chief General Manager, (Retd) MMTC Ltd., Mumbai ,L.W.82 Mr. Vithaldas, Manager, M/s.Shiv Sahai and Sons, Chennai, L.W.83, Mr.Prabhat Kumar Jain, Manager, M/s.Shiv Sahai and Sons, Chennai, L.W.85 Mr.Dllip Kumar, Di....
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.... is impermissible. If the contention of the accused is accepted, there would be a mini trial at the stage of framing of charge. That would defeat the object of the Code. It is well-settled that at the stage of framing of charge the defence of the accused cannot be put forth. The acceptance of the contention of the learned counsel for the accused would mean permitting the accused to adduce his defence at the stage of framing of charge and for examination thereof at that stage which is against the criminal jurisprudence. By way of illustration, it may be noted that the plea of alibi taken by the accused may have to be examined at the stage of framing of charge if the contention of the accused is accepted despite the well settled proposition that it is for the accused to lead evidence at the trial to sustain such a plea. The accused would be entitled to produce materials and documents in proof of such a plea at the stage of framing of the charge, in case we accept the contention put forth on behalf of the accused. That has never been the intention of the law well settled for over one hundred years now. It is in this light that the provision about hearing the submissions of the accused....
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....ct of this provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well- founded error and it may not be appropriate for the court to scrutinize the orders, which upon the face of it bears a token of careful consideration and appear to be in accordance with law. If one looks into the various judgments of this Court, it emerges that the revisional jurisdiction can be invoked where the decisions under challenge are grossly erroneous, there is no compliance with the provisions of law, the finding recorded is based on no evidence, material evidence is ignored or judicial discretion is exercised arbitrarily or perversely. These are not exhaustive classes, but are merely indicative. Each case would have to be determined on its own merits. (para 12) Another well-accepted norm is that the revisional jurisdiction of the higher court is a very limited one and cannot be exercised in a routine manner. One of the inbuilt restrictions is that it should not be against an interim or interlocutory order. The Court has to keep in mind that the exercise of revisional jurisdiction itself should not lead to injustice ex facie. Where the Court is dealing ....
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....ed between the parties. 195. In this case, the first information report seems to have been registered by the respondent police on 13.06.2012. The charge sheet seems to have been filed before the Special Court on 28.01.2014, but the suit seems to have been filed in March, 2013. As argued by Mr. Muralikumaran, the petitioner (Mr.Ganesh Agarwal) is neither an accused in the First Information Report nor a party to the suit in C.S.No.249 of 2013. In the First Information Report in RC MA1 2012 A 0025, it is alleged that the accused persons 1 to 3 viz, Mr. S.Gurusamy, Mr.V.Gurumurthy, and Mr.N.P.Agarwal, had committed an offence under Sections 120-B,r/w 420 477-A IPC and Section 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988 and the Superintendent of Police , who seems to have registered the case on 13.06.2012 has also alleged in the first information report that Mr.S.Gurusamy, (1st accused), Mr. V.Gurumurthy (2nd accused) and unknown officials of MMTC Ltd., Chennai Regional Office, Chennai had deliberately concealed the transactions of Rs. 36.6 crores on account of failure to take proper foreign exchange cover and Rs. 53 crores on account of unauthorized Loan Against Deposit....
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....o had registered the case,the source information discloses prima facie commission of offence under Sections 120-B,r/w 420 , 477-A IPC and Section 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988 by Mr.S. Gurusamy, (1st accused), former Chief General Manager, South Zone MMTC Limited, Chennai Regional Office, Chennai, Mr.V.Gurumurthy, (second accused), former General Manager, (Finance & Accounts),MMTC Limited Chennai Regional Office, Chennai and Mr.N.P.Agarwal (3rd accused), Proprietor, M/s.Shiv Sahai & Sons and unknown officials of MMTC Ltd., Chennai Regional Office, Chennai and Union Bank of India, Main Branch, Chennai. 199. When the Superior Officer, viz., the Superintendent of Police, CBI/ACB, Chennai had found a prima facie case against Mr.S.Gurusamy, Mr. V.Gurumurthy and Mr. N.P.Agarwal, how an officer inferior, in rank , who had taken up the case for investigation could say that the allegations made against Mr.S.Gursamy who is cited as first accused in the first information report could not be proved conclusively? Further, the Inspector of Police, who filed the final report has not stated as to whether any investigation in any manner was conducted in respect of the ....
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.... If, upon considering the police report and the documents sent with it under section 173 and making such examination, if any, of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, the Magistrate considers the charge against the accused to be groundless, he shall discharge the accused, and record his reasons for so doing. 206. Section 239 of the Criminal Procedure Code shall have to be read with the provisions of Section 241(1) which follows, being complementary to each other. Reading the two together, the meaning is that if there is no ground for presuming the accused to have committed an offence, there is no ground for framing a charge under section 240(1) and the accusation brought against the accused must in such a case, be held to be groundless, for the purpose of Section 239 207. Groundless in other words, means that there is no prima facie case regarding the commission of an offence. If the evidence which the Prosecutor proposes to adduce to prove the guilt of the accused, even if fully accepted before it is challenged in cross-examination or rebutted by the defence evide....
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....as explained in Debendra Nath Padhi's case (supra) by the larger Bench therein to which the very same question had been referred. 209. While penning down the Judgment on behalf of a Division Bench of the Supreme Court in Rajiv Thapar and others Vs Madan Lal Kapoor (2013) 3 SCC 330), Hon ble Mr Justice J.S.Khekar has observed that: The discretion vested in a High Court under Section 482 of the Cr.P.C. can be exercised suo-moto to prevent the abuse of process of a court, and/or to secure the ends of justice. The High Court, in exercise of its jurisdiction under Section 482 of the Cr.P.C., must make a just and rightful choice. This is not a stage of evaluating the truthfulness or otherwise of allegations levelled by the prosecution/complainant against the accused. Likewise, it is not a stage for determining how weighty the defences raised on behalf of the accused are. Even if the accused is successful in showing some suspicion or doubt, in the allegations levelled by the prosecution/complainant, it would be impermissible to discharge the accused before trial. This is so, because it would result in giving finality to the accusations levelled by the pro....
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....inal proceedings, for that would prevent abuse of process of the court, and secure the ends of justice. The following steps should be followed by the High Court to determine the veracity of a prayer for quashing of proceeding raised by an accused by invoking the power vested in the High Court under Section 482 of the Cr.P.C.:- (i) Step one: whether the material relied upon by the accused is sound, reasonable, and indubitable, i.e., the material is of sterling and impeccable quality? (ii) Step two: whether the material relied upon by the accused would rule out the assertions contained in the charges levelled against the accused, i.e., the material is sufficient to reject and overrule the factual assertions contained in the complaint, i.e., the material is such as would persuade a reasonable person to dismiss and condemn the factual basis of the accusations as false? (iii) Step three: whether the material relied upon by the accused, has not been refuted by the prosecution/complainant; and/or the material is such that it cannot be justifiably refuted by the prosecution/complainant? (iv) Step four: whether proceeding with the trial would res....
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.... Similarly no details of premature closure or for loan against deposits were furnished to us for verification . ... The Regional Office does not have any copy of the FDR application or Loan against FD application to verify who signed the same on Company s behalf. At page No. 418 :- 1. RO has maintained a single ledger code 24800 for both FD as well as LAD. Bank wise FD details are not available. 2. We have been informed that the schedules file has been misplaced and details for final bank wise list of FD is not available. 3. Neither FD copies are available for verification nor has a FD register been maintained. 4. Several Fund transfers for placement of FD in other banks has been made but the same has not been routed through the current account of the other banks. 5. We also find that no cheque has been issued for placement of FDs. All these are not in line with the established accounting practices. At page No.433 - In respect of the above, the repayment is more than the outstanding as on 31.3.2009 by Rs. 2,90,00,000/- RO was not in a position to explain how the difference was adjuste....
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....was not passed . and contends that neither in the Internal Audit nor in the Regular Audit or in the Special Audit or in the reply given to the CAG, any fraud was alleged and in such circumstances, only when the demand was resisted by initiating arbitration proceedings, some interested officials of the MMTC who wanted to cover up their lapses alleged fraud and given a criminal complaint to divert the issue. He further contends pointing out the CAG instructions, Section 209 of the Companies Act 1956 and the MMTC Board charter that it is the Directors who are responsible for the loss i.e., accordingly MMTC, in order to cover up their negligence, the present criminal proceedings have been initiated. There is no valid reply by the prosecution for all these contentions. Therefore, When the entire amount of the Bullion along with the additional charges such as LIBOR, SPREAD etc. has been paid by the customers and in the absence of any allegation of fraud being alleged in the Internal Audit, External Audit, Special Audit and CAG Audit and even at the time of raising the demand for the losses occurred, alleging a fraud subsequently and launching of crimin....
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....mitted to vent vindictiveness through abuse of process of law and such proceedings are required to be stopped in early stages. 211. This Court has carefully perused the order of the learned Special Judge, dated 04.08.2015 and made in Crl.M.P.No.3615 of 2014 in C.C No.3 of 2014. On perusal of the said order along with other materials placed before this Court, this Court finds that no prima facie case is made out against the petitioner Mr. Ganesh Agarwal. The same view has also been taken by a learned single Judge of this Court in his order, dated 30.06.2014 made in Application No.2830 of 2013 in C.S.No.249 of 2013. A Division Bench of this Court has also confirmed the said order of this Court by itsJudgment, dated 28.10.2014 made in O.S.A .No. 244 of 2014. 212. The learned Special Judge for CBI cases ought to have allowed Crl.M.P.No.3615 of 2014 in C.C .No.3 of 2014. Unfortunately, the Special Judge, had, without considering the submissions made on behalf of the petitioner as well as the materials placed on his behalf dismissed the said petition saying that the ingredients for constituting the offence against the petitioner can be culled out only from materials and evidence ad....
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....o be done effectively. 217. As rightly argued by Mr. Muralikumaran, learned counsel for the petitioner, the prosecution did not produce even a single scrap of paper to show that Mr.V.Gurumoorthi was either authorised person or the only person authorised to make deposits and to take loans from foreign banks. 218. It is therefore clear that it is the duty of the prosecution to put forth some documents such as Board s resolution, its guidelines, norms and authorisations pertaining to making of deposits and availing of loans from the deposits for the purpose of making out a prima facie case. In the absence of such documents, it can easily be presumed that the prosecution has miserably failed to make out a prima facie case as against the petitioners. 219. On careful examination of the materials placed before this Court, this Court finds that there is no investigation on the line as to how, crores and crores of deposits were made in banks out of the sale proceeds without paying the suppliers and how loans were taken and how the banks were chosen for deposits as well as for taking loans and why for the serious lapses no bank officials were made liable?. Moreover, no documents wer....
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.... the matter to be dealt with because under Section 619A read with Section 233A sub clause 6 of the Companies Act, the Central Government is empowered to take action on such reports. 226. The Special Audit Report says that the maintenance of accounting system is improper. There was inadequate strength at the official level for maintaining the accounts with reference to the financial transactions. 227. On a careful perusal of the entire records placed before this Court, it is found that no incriminating materials are available as against the petitioners to show that they had indulged in the practice of fraud in connivance with the Mr. V. Gurumoorthi (1st accused). The allegations of fraud were made only against the first accused Mr.V. Gurumoorthi and not against the petitioners. It is to be noted that even as per the prosecution case, the first accused Mr.V.Gurumoorthi in connivance and in collusion with the petitioners had fudged the accounts and caused loss to the MMTC Ltd., Chennai From this language, it could be easily understood that no serious allegations of fraud were made against the petitioners because the petitioners could not have had access to the accounts maintaine....
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....n two or more persons to do or cause to be done an illegal act or a legal act by illegal means subject to the proviso that the agreement does not except agreement to commit offence, amount to a conspiracy unless it is followed by an overt act done by one or more persons in pursuance of such an agreement. An agreement to do an illegal act which amounts to a conspiracy will continue as long as the members of the conspiracy remain in agreement and as long as they are acting in accord and in furtherance of the object for which they entered into the agreement. 232. In the charge sheet it is stated that during the period 2008-2009 A1 to A3 (as per charge sheet) (1) Mr.V.Gurumurthy, former General Manager (Finance & Accounts), MMTC Ltd., Chennai Regional Office, Chennai and unknown officials of MMTC Ltd., Chennai Regional Office, Chennai (2) Mr. N.P.Agarwal, Proprietor M/s.Shiv Sahai and Sons and (3) Mr. Ganesh Agarwal (A3 as per charge sheet) had entered into a criminal conspiracy at Chennai and other places to do or cause to be done certain illegal acts., viz., to cheat MMTC Ltd., Chennai (A Government of India Undertaking) in the matter of purchase of gold under the Buyer s Cr....
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....Ganesh Agarwal to cheat MMTC Ltd., Chennai. 238. In this connection a question that arises for the consideration of this Court is who had actually committed the offence of criminal conspiracy? Section 415 of IPC is relating to the offence of cheating. It reads that : whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to cheat . Explanation A dishonest concealment of facts is a deception within the meaning of this section Section 416 IPC deals with Cheating by personation Section 417 IPC is the penal provision for cheating. It reads that whoever cheats shall be punished with imprisonment of either description for a term which may extend to one year, or with fine, or with both. Section 418 IPC deals with Cheating with kno....
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....er for the purchases made and availed foreign exchange loan under Buyer s Credit Scheme and thereby caused wrongful loss of Rs. 113.38 crores to the MMTC Ltd., Chennai and corresponding wrongful gain to the petitioners. In order to substantiate these allegations no substantial or adequate grounds are available against the petitioners. Admittedly, the transaction between the complainant MMTC Ltd., and the petitioners is a commercial transaction. In the absence of proof of conspiracy and the criminal intention to cheat the MMTC Ltd., it could not be heard to say that the petitioners have committed the offence of cheating. Everything is borne out by records as stated in the Special Audit Report. The failure, on the part of the officials of MMTC Ltd., to maintain proper accounting system could not rise to the commission of any offence much less the offence of cheating. Therefore, the alleged charges leveled against the petitioners under Section 120B r/w Section 420 IPC are liable to be quashed, as no case of cheating is made out. 241. The next charge levelled against the petitioners is under Section 477A IPC. At the outset, this Court would say that the charge under Section 477A of ....
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....tion leveled by the prosecution against the petitioners is that during October, 2010 Mr. N.P.Agarwal (A2) and Mr. Ganesh Agarwal (A3) had offered pecuniary consideration to A1 Mr. V.Gurumurthy by purchasing Air ticket from Chennai to Singapore for Rs. 41,700/- for A1 and his wife Mrs. Kausalya Gurumurthy from M/s.Miles and Miles Tours and Travels Private Ltd.. and A1 Mr.V.Gurumurthy had accepted the same. 244. To prove this charge, the prosecuting agency has failed to make out a case. L.W.85 (Listed witeness 85) Mr. Dilipkumar is the Proprietor of M/s.Miles and Miles Tours and Travels Private Ltd., . He says that their Office used to book air tickets either through M/s.Agbar Travels, Nungambakkam, Chennai or through M/s.Riya Travels, Egmore, Chennai. He never stated in his statement, through which travel agency he had booked air tickets for Mr. V.Gurumurthy and his wife Mrs. Kausalya Gurumurthy. No employee either from M/s.Agbar Travels, Nungambakkam, Chennai or from M/s.Riya Travels, Egmore, Chennai was examined by the prosecution in order to prove the charge of pecuniary consideration. 245. No person who has been indicted with a particular charge could be convicted on the b....