Indo Rama Synthetics Ltd v. State & Anr

ORDER

23.09.2013

¶1In the above-captioned eight petitions, quashing of FiR No.505/2005registeredat P.S. DefenceColony,Delhifor theoffeneesof criminalbreachof trust, criminalmisappropriation,forgery,etc. and FIR No.511/2005registeredat P.S. ConnaughtPlace,Delhi for the aforesaid offences, is sought by petitioners-MorganSecurities &Indo Rama Syntheticson the ground that the dispute raised in these two FIRs is essentiallyof civil nature and the ingredientsof the offencealleged are and that the proceedingarisingout ofthese FIRs is the abuse of processof law. In Cri. M.C.2059/2005,petitioner-MorganSecuritiesand Credits Pvt. Ltd. seeks quashingof FIR No.108/2005registeredin the State of HimachalPradeshat the instanceoSM/s. MorepenLaboratoriesLtd. for the aforesaid offences on identical grounds as taken m Crl.M.C.4603/2005. Under die orders of the Apex Court, aforesaid petitionwas transferredto this High Court for being heard alongwith Crl.M.C.4603/2005etc. In Crl.M.Cs.279/2011,280/2011 and 281/2011, trial court's order of 14" January, 2011 is assailed on the ground that since the pledged shares have been sold in open market to bonafide purchasers,therefore,superdariofthe pledgedshares in questionto the complainant/firstinformant is unwarrantedas subject matter of these .FIRs is already under active considerationin the civil proceedings Paee 5 of28 ^ \3) between the parties. Thus, quashing of order of U'" January, 2011 is soughtin the abovereferredthreepetitions. With the consentof learned counsel for the parties, above titl eight petitionswere heard togetheras the quashingof the proceedings arisingout of the three FIRs in questionis soughton identicalgrounds and so, by this common judgment, these eight petitions are bemg disposedof.

¶4The relevant factual background of these matters can be convenientlypickedup from the statusreportfiled by respondent-Statem February,2008 in Crl.M.C.5004/2005,whichis as under:- "The brieffacts of the case FIR No.511 dt.07.09.05 under Section 406/409/465/468/471/120BofIPC PS Con. Place New Delhi are that the complainantM/s. Petunia Financial Services P. Ltd. (PFSPL) reported that their companywas the pledgertowardsInter CorporateDeposit

(ICD) of Rs.5erares. taken by M/s. Morepen Laboratories Ltd. (MLL) from petitionerM/s. Morgan Securities and Credits Pvt. Ltd (MSCPL). The complainant company pledged2,70,000equitysharesofM/s. Blue CoastHotels& Resorts Ltd (BCHRL) for securing the said ICD. The borrowerM/s. MLL repaid the principalamountand have some disputeoverpaymentofinterestandnegotiationswere going on hetM>een the parties for reconciliationof the interest.Duringthatperiod, theywere shockedto learn that the lenderM/s. MSCPL has disposedoffthe pledgedshares by transferringthem to their sister concerns/concernsoj their relatives without their knowledge or.consent. These transferswere done with malafideintentionand in collusion with co-accused knowing that such transfers were fraudulentlydone on apricefar belowthe actualpricevalue ^ Page6of28 ofthe sharesin question.No creditwas given to borrower for such transfers/sales.These transactionswere sham and were made on the basis offalse documents in conspiracy with relative/associatecompaniesofthe petitionerin or er to cause wrongfulgain to them and wrongful loss to the complainant. That on the basis ofthe complaint, above case was registered on 07.09.05 at PS Connaught Place and investigationwas taken up by localpolice. That subsequently,the investigationof the case was transferred to Economic Offences Wing vide order NO.53095-105/C&T(AC-lII)dt. 21.10.05by the PHQ. That the investigation revealed that M/s. MLL obtainedan ICD of r 5 crores and f 2 croresfrom the lender M/s. MSCPL in accordance with agreement dt.

19.09.02and 30.10.02,withoutsecurityfor aperiodof120 days. The witnesses belongingto borrowerand guarantor companiesstatedthat due to unforeseeablecircumstances, the MLL couldnot repay the ICDs. They were requestedby Sh. Suresh ChandGoyaletc. ofthe MSCPLfor pledgingas securitythe 15 lac equitysharesofM/s. Blue CostHotel& Resorts Ltd (BCHRL) one of the group company of the borrower. The complainant stated that they were also assuredthat the saidsecurityis requiredfor thepurposeof corporatedocumentationsand that the same would not he sold withoutprior intimation &consent. Therefore, they agreedto pledge the 15 lac shares as securitythroughsix associate companies namely Niketan Traders P. Ltd., PetuniaFinancialP. Ltd., Beckers Traders P. Ltd, Cross TradersP. Ltd., Ebony TradersP. Ltd. &TendrilFinancial Sei'yicesP. Ltd., holdingtheseshares.Pledgeagreementsdt. 0/.02.02 were also signedbypledgers&handedover to the MSCPL. Accordingly,scheduleofrepaymentwas extended. '~Crl.M.C.4603/2005' Mr Snshil Suri, CMD M/s. MIL. the borrower company stood as guarantor The complainant company Petunia pledged2,17,000equitysharesofBCHKLout ofthe IS lac shares. , That the borrowerMLL defaultedand did not make paymentsas per the schedule. Both the partiesnegotiated and a MemorandumofSettlement(MOS) was executedon

27.05.03 in which new schedule ofpayment was agreed upon At that time, late Sh. Arun Suri. CMD. BCHU also became personal guarantor and M/s. BCHRL stood as suretyfor thepurposeofsecuringthe due payment On the basis of the MOS, the consent award was passed by the Hon'bleArbitratorvide orderdt. 28.06.03. Thatpursuantto the MOS dt. 27.05.03andawarddt.

28.06.03, the MLL made full andfinal payments towards ICD of f 2crores by 13.03.2004. The paymentincludean amountofr8,94,220/-realizedfrom sale of19,701pledged sharesofBCHRL.Aletterwas sentto MSCPL to this effect, whichwas duly receivedby it. However, the MLL couldnot makepaymenttowardsICDoff 5a oi es. That the lender and the borrower resorted to litigationin the courts. Of the various litigations,in Jan. 2004 the petitioner M/s. MSCPL filed two Execution Petitionsin the Hon'bleHigh Courtprayingfor executionof the award On 08.0L04 and 26.03.04, the Hon'ble Court issuedattachmentwarrantsfor recoveryof f 6,24.44.250/- againstthe borrowerand the guarantorsi.e. M/s MLL and M/s. BCHRL. Inpursuanceofthe saidattachmentwarrants, few bank accounts of M/s. MLL and M/s. BCIIRI. were attached. That the CMD ofBCHRL late Sh. Arun Suni, Sh. I S Deo, Vice President,BCHRL and Sh. PK Singh, Company Secretarv,MLLstatedthaton 24.02.04,theyapproachedSh. Pa^e 8 of28 Snresh Chand Goyal. CMD. MSCPL and heldameetingto son out the disputebecauseissuingofattachmentwarrants were threat to their business. In the said meetmg, S. Goyaltoldthem thatthere is no needto rake up the dispute ,n the court. He statedthat thoughI lacsharesapprox.have been sold in the open market but assured that remaining shares have been kept/parkedin his associate companies underhis control.Hefurtherassuredthatthe samewouldbe returnedonce the ICD is repaid He also agreedto charge interest@17%p.a. insteadofthe 30%per annum as was done in the ICD of ^2 crores. That on 17.03.04, the MSCPL also filed an urgent applicationin the ExecutionPetitionNo.13/04prayingfor restraining the BCHRl. from increasing or changing its status of equity shares of the company as it may cause decrease in value of the security held by them. This confirmedthe statementof Sh. SC Goyal, CMD, MSCPL made on 24.02.04to borrower/suretythatabout1lacshares have beensoldandremainingare parked/transferredby him in his associate companies, which would be returned on repaymentofthe ICD. However, both thepartiesnegotiated and settledthe matter amicably. On 05.04.04, the BCITRL filedan undertakingnot to increaseor change the statusof its eauityshares, the MIL withdrew its applicationasking for details ofsale ofpledged.shares and assuredto make repaymentsof the ICD. In view of the same, the Hon'ble High Courtwithdrewthe attachmentwarrantsissuedearlier anddisposedoffthe mattervide orderdt. 05.04.04. That accordingly, the borrower M/s. MLL paid the^ principalamountofr5croresfrom Apr. 2004 to Apr 200d throughpay orders drawn at their banks. They have also paidpart interestcomponent. The dispute remains on the rate of interest to be paid After paying the complete '' Pc/ee 9 of28 ^ ' o) nrimipal amount the MIL asked the lender MSCPL to reconcilethe rest paymentof interestand ^-f"' return oftheirpledgedshares vide letterdt. 29.0605. The MSCPL throughits letterdt. 02.07.05askedthe MLL topay the remainingdebt of Rs. 1.17,59.339/-but did not state aboutsale ofshares The disputeagain arose betweenboth theparties.Both thepartiesfiledpetitionsin the High Court at Delhi. That thereafter, the witnesses stated that Sh. Arm Suri was informed by Sh. SC Goyal saying that the entities/companies with whom remaining shares were parked, are willing to return the same only at the then current market price. This propositionif acceptedwould have resulted into unreasonable and unjust loss to t e borrowerandgain to the lenderand its associateswho are Mr Goyal and his relatives/friendsbecause they have acquired these pledged shares at an abnormally beaten downpriceof^8/9pershareand the samewere quotedat f 100pershareapprox. at thattime. The valueoftheseshares became ^15 croresapprox.at the thenprevailingprices. That it has been allegedby the borrower,suretyand pledgers against the lenders that they have not sold the pledged shares as claimed by them but have been transferredclandestinelyinto their associatecompaniesor in the companiesoftheirrelativesat an abnormallybeaten downprice ofr8/10persharewithaill-motiveto resellat higher prices to the borrower and to earn illegally in multiple manners. That the complainant, borrower and surety have allegedthat dvring litigationbefore the courts, the lender neither informedthem nor the courts at any point of time that they had invokedthe pledge and had sold the pledged shares. Further the amount realised towards the saie ^l.M.C.4603/2005 Page!Oof28 'yi proceedsofthe shareswas not adjustedtowardsrepayment of the ICD of f 5crores. They purposelyconcealedthe material informant throughoutwith malafide intention to misappropriatethe sharesentrustedas collateralsecurity. That the borrowerMIL and the suretyBCHRL have stated that the prices of their 15 lac pledged 'hares of BCHRL were lowereddown with manipulationby Sh. hL Goyal in connivance and conspiracywith his associates. This reflectedfrom the workingofthe price mechanismm share marketforces. The BCHRL ownedParkHyattResort and Spa, Goa which was commercially launched on

01.10.03. The hotel has the potentials to grow and earn income. The quarterlyfinancial results for the quarter ending 31 12.03 &31.03.04 reflected increased earning from the operationsofthe hotel. The assetsofthe company also increasedAccordingly,as per the marketforces, the sharepriceswere bound to increase in the stock exchange duringthisperiod But, contraiyto thefact, the shareprices have come down heavilyas shown by the lendersand their associates. Again during the lean period in the hotel industiy, the prices are normallydecreasedslightlybut in the instanttransactions,these have been shown risen. After the sale ofpledgedsharescompleted,thepricescontinuedto increase thereafterbecause the hotel is doing well. These facts established that the prices of the shares were manipulated by accused persons while transferring the pledgedsharesbetween16.12.03to 25.03.04. That the MSCPL through Sh. PK Gupta filed an applicationdated 23.08.05 in EP No.13/04 in the Hon'ble High court, Delhi attachingtherewitha copy of the sale statementand ledger accounts showing details of sale of shares. The complainant, borrowerand surety stated that prior to this date, they,were never informedabout sale of of28 shares nor prov.deddetails of the sale ofshares, amomt realizedfrom the sale and adjustedtowards repaymentof the ICD of f 5 crores. They repaid complete principal amount of f 5 crores w.e/ Apr. 2004 without gethng adjusted sale proceeds of the pledged shares from the principalamountbecausethey were not informedatom the sale. " On the investigationaspect,the statusreportis as follows: "That during investigations,it has been revealedthat the pledged15 lac shares (except9) have been sold by MSCFL bet^veen 16.12.03 to 25.C3.04. Majorityof the shares have been soldthroughspecificand limitednumberofbrokersat the BSE. Majorityofthe shares 10,89,400(73%) were so through M/s. Anand Rathi Securities P. Ltd of which 9,70,0.00(65%) werepurchasedthroughthis very brokeron

24.02.04 and 06.03.04 by the Northern Projects Ltd In which co-accusedParkashAggarwalwho is son in law of Sh. SC GoyalandMrs. Meera Goyal is the Director,who is also Directorin the sellercompanyi.e. MSCPL, as well as in its holdingcompanyM/s. Goyal MG Gases P. Ltd And other group company Morgan Venture Ltd It has been fwther been revealed that Northern Projects Ltd have openeddemat accountwith AnandRathi SecuritiesP. Ltd for the purpose of these transactionsonly. The sellerM/s., MSCPL and its group companiesMorgan VentureLtd. and Pai-veenElectronicsLtd have also regulardemat accounts with this broker." The statusreportconcludesas under:- "Thatthus, outofthe 15 lac shares13,89,400approx(93%; shares have been bought by three companies namely CrI.AlC.4603/2005 •r

¶5Northern ProjectsLtd.. 65%, Parveen ElectronicsP Ltd. 20% and Namedi Leasing&FinanceLtd 8%. About 715 shares initiallywere purchasedby Morgan Venture Lt . whichis directunderthe controlofsellerMSCPL Lateron. this company acquired about 45.345 (3%) shares as on

30.06.04.". At the hearing, learnedsenior counsel for the parties assistedby learnedcounselfor tlie partieswere heard and with their able assistance the material on record was perused. The written synopsis and the decisionsin Renu Kumariv.SanjayKumar&Ors. 2008 [2] JCC J032; IqbalSinghMarwah&Anr V. MeenakshiMarwah&Anr. 2005 II AD (Cr.) SC. 12; decisionofthis Court in CS (OS) No.2281/2006rendered on II'"December,2006;JCailashChandSharma.v. State&Ors. 2005 [2] JCC 602; .I.R.D. Tata. Chairman, Tata Iron &Steel CompanyLtd. And etc. V. Mrs. Payed Kumar and another 1987 CrI.L.J. 447; M/s. A.E.C. EnterprisesLtd. &Anr. V. Ms. PeacockChemicalsPvt. Ltd &Others75

(1998) DLT 484; AcharyaArun Dev v. State &Anr. 2005 [2] JC 897,

5.R Sharma, v. NationalCapitalTerritoryofDelhi&Ors. 1999 [1] JCC [Delhi]59; IqbalSinghMarwah&Anr. V. MeenakshiMarwah&Anr. 2005 n AD (Cr.) SC; KG. Premshankarv. Inspectorof Police ana Another2002 Crl. L.J. 4343;SubhakarnLuharuka&Anr. V. State (Govt OfNCTofDelhi)&Anr.170 (2010)DLT 516,havebeenalsoperused.

¶6On behalfofpetitioners,it was contendedthatthis is aclassiccase where the borrowerafterhaving receivedthe monies is unableto repay the debts and resortsto criminalactionto avoid it's habihtiesunderthe contractwhich it had signed without any pressureor coercion.It was Crl.M.C.4m/2005 asserted that the admitted position between the parties is that the Borrowerhad talcen an InterCorporateDepositof?5croresreturnable within120 days and had defaultedin the repaymentleadingto additional securitiesbeingprovidedto the lenderthroughthe associatecompaniesof the BoiTowers in the form of pledge of demated shares by the complainants.Petitionersassertthatthe consentawardwas passedanda scheduleofthepaymentwas arrivedat andthe borroweralso defaultedm thesameand it was only aftersuchdefaultthatthe petitionerinvokedthe pledgeand soldthe shares.As perpetitioners,theiractionwas strictlyin consonancewith the covenantsofthe differentICD Agreementsand the LetterofPledgeand the ConsentAwardpassedby the learnedArbitrator and hence cannot be subject matter of a criminal action. It was next submittedthat contentsofdifferentimpugnedFIRs only allegeviolation of different agreements which cannot ipso facto lead to criminal prosecutionofDirectorsofthe Companyagainstwhomno specificrole is attributed in the FIR.

¶7The basic stand of petitionersis that even if the FIRs in question and the documents relied upon by the complainant/firstinformantare taken on their face value, still no criminal offence is made out. Pertinently,the precisestandoflearnedseniorcounselfor the contesting respondents-complalnant/firstinformantofFIRsin qiestionis thatselling of pledgedsharesdoes not give riseto criminaloffencesin question,but it is the sellingof3,10,000 pledgedshai'esofM/s. NiketanTradersPvt. ' Ltd and 2,70,000pledgedsharesof MA. PetuniaFinancialServicesP. Ltd. without mandatoryNotice under Section 176 of the ContractAct, 1876 and that to subsidiarycompaniesownedby petitioner-^Morgan Crl.M.a4603/2005 Page 14of28 ,\^o SecuritiesandCreditsPvt. Lid. at muchlesserpricethanthemarketvalue and by not giving credit lor it, mal«s petitioners liable to face the proceedingsarisingoutofthe FIRs in question.

¶8Respondent-complainantalso claimsthataforesaidInterCorporate Depositof?5croreswas returnedto petitioner-MA. MorganSecurities andCreditsPvt. Ltd. duringthe periodfrom April,2004upto April,2005 and very nominaldisputeregardingpaymentof interestis pending.On behalfofrespondent-complainant,it was assertedthatfraudulenttransfer of shares by petitioners-accusedclearly attracts the ingredients of offencesofcriminalbreachoftrust,misappropriation,forgery,etc.

¶9On the contrary,it was assertedwith much vehemenceby learned counsel for petitioners that breach of contract is by respondent-complainaniwhichgivesriseto apurelycivildisputeand does not entail any criminality.Duringthe courseofhearing,attentionof tliisCourt was drawnby petitioners'counselto Clause4(ill),Clause7(ii) and Clause9

(vii)ofPledgeAgreementsin questionandto the AwardalreaaygivenDy the Arbitrator,to assertas under: - "a. That in event ofdefault the Lender (petitioner) hadunfetteredrightsto dealwith the sharesin any manner whatsoeverincludingrealizingitself b. Thatthe Awardclearlyprovidedthatin eventof defaultin paymentsthe Lendercouldtake unilateralsteps and all the stepsfor sale of shares were taken by the petitionerin terms ofthe Awardand the Letterof Pledge and hence no criminal liability can he foisted on the petitioner. c. That the complairit/F.LR. clearly relates to interpretationand application of the covenants of the CrlM~Jmm05 X LetterofPledgeand the Awardwhich clearlywouldhave a Civil Flavour."

¶10Infact, it is the case of tesponieats-comphimnthat they were misled into believingthat the pledgedshareswere not sold and only in theyear2005,theycameto toowaboutthe sellingoftirepledgedshares. Thus the stand ofrespondents-compfa/m«/is that they had no noticeof the sale of pledged shares by petitioner-M..Morgan Securitiesand Credits Pvt. Ltd To the contrary is the assertionof petitioners,who maintainthatthe pledgedsharesin questionweresold in open marketat stock exchangebet^vecnDecember,2003 and March, 2004 after giving due noticeto Kspondents-complainantvideNoticeof9'" December,2003 by registeredPostand at the hearing,attentionofthisCourtwas drawnto the copiesofaforesaidNoticeand the postalreceipts.

¶11Attentionofthis Courtwas also drawnto copiesofletterssent to petitioner-MA.MorganSecuritiesami CreditsPvt. Ltd by respondents-conplainanton 7"' February,2004,25'" February,2004.4'" March,2004 and 14'" June, 2004 to point out that respondent/complalnant-M's. MorepenLaboratoriesLtd was well awareofthe saleofpledgedshares as M/s. MorepenLaboratoriesLtd had failedto adhereto Memorandum ofSettlementofll" May, 2003. Thus, accordingto learnedcounselfor petitioners,no criminaloffenceis madeout and the liability,ifany, is of purelycivil nature.

¶12To repel the contention of learned counsel for respondents complainantofsaleofpledgedsharesbeingashamtransaction,attention of this Courtwas drawn to the SecuritiesAppellateTribunal'sjudgment • •••III !•! CrlM.C.4603/2005 ^ of29" August,2011 in AppealNo.55/2011relatingto PledgeAgreement, Consent Awai'd, etc. to assert that the transactionin questionhas been •found to be validas the creditfor the saleofpledgedshareswas givenby petitioner-Ms.Morgan Securitiesand Credits Pvt. Ltd. to respondent-M/s. MorepenLaboratoriesLtd before the initiationof these cruninal proceedings.

¶13To assert that the factum of sale of pledged shares was in the knowledgeofrespondent/complainant-M'i.MorepeHLaboratoriesLtd in the year 2004 itself, attention of this Court was drawn to Execution AppUcationNo.l29 of2004 whereinit is clearlystatedthat the pledged sharesin questionhavebeensold. Attentionofthis Courtwas also drawn to acopy ofInformation(Annexure-Iin Crl.M.C. 4603/05)downloaded fromthe officialwebsiteofNationalStockExchangeto pointoutthatthe sale of pledged shares in questiontook place in December,2003 and January,2004 upon invocationof the pledgedshares,whose detailsare givenin the above-saidAnnexure-1.

¶14At the hearing, it was contended on behalf of respondents-complainantthat though the offence in question was committed post December,2003, but petitionersare trying to give it acolour of civil matter and are burdeningthe court with irrelevantmaterial and these petitions are premature as the question of petitioner-M^. Morgan Securitiesand Credits Pvt. Ltd sellmg pledged shares without Notice clearlyattractsthe offenceof misappropriationofthe shares,in question. Not only this, it was assertedon behalfof vespondents-complainantthat petitionei-MA.MorganSecuritiesand CreditsPvt. Ltd mcollusionwith •remaining accused had collusivelysold the pledged shares at aprice much belowthe fair marketvalueofthesesharesand sincethe sellingof pledgedsharesin questionwithoutnoticeis per se bad in law mview of the dictum in J.R.D. Tata, (supra) and MA. A.EC Enterprises(supra). therefore,no casefor quashingofthe criminalproceedingsis madeout.

¶15To contendthat when cognizableoffenceis primafacie made out thenFIReamiotbe quashedon the groundthatthematterappearsto be of civil nature, reliance is placed upon decisions in S-P.Sharma(supra). KailashChand(supra)and Acha.-yaArunDev (supra).Reliancewas also placedupondecisioninRemKumari(supra)on behalfofrespondentsto contendthat inherentjurisdictionunder Section482 of Cr.P.C. is to be exerciseduponsounaprinciplesandnotto stiflealegitimateprosecution.

¶16To further contendthat civil and criminalproceedingscan go on simultaneously^relianceis placedby respondents'counselupon decision in IgbalSingh (supra)and on the orderin Crl. Rev. P. 808/2006by this Courtmadeon 17'"July,2013 in TapanLahiriv. State&Ors.

¶17Lastly, it was submittedon behalfof respondentsthat lactum of sale of pledgedshareswas not known to respondentsand was.resultof creationof bogus documentsby petitioner-Mi.Morgan Securitiesand CreditsPvt. Ltd., who entered into sham transactions,whose detailscan be unearthedonly afterthoroughpoliceinvestigation.Thus, rejectionof thesepetitionsis soughton thegroundthattheyarepremature

¶18Whereas according to petitioners' counsel, respondent/ complainant-AfeMorepenLaboratories.Ltd haddefaulteain paymentof settledamount in relationto Inter-CorporateDeposit (ICD) in question and in the execution of the Consent Award, to avoid attachmentof Crt.M.C4603/200s' "" ''' f various banlc accounts and other properties, etc. of respondent/cornplainant-mMorepenLaboratoriesLtd., it had launched thesecriminalproceedingsin an attemptto pressurizepetitioners.

¶19Attention of this Court was also drawn to Section 10 of DepositoriesAct, 1996 which governsthe rightsof depositoriesand the Beneficial Owner. The manner of invocation of the pledge is also specifiedundertheSeeuritiesandExchangeBoardofIndia(Depositories and Partieipants)Regulations. 1996. During the course of hearing, attention of this Court was drawn to Regulation 58 of aforesaid Regulationsto pointoutthataPledgeeis entitledto invokethe pledgein accordance with the pledged document i.e. Shares in question and thereafter,the Pledgewouldbe recordedas the BeneficialOwner. Thus, in the face of letters of 9'" December,2003 and T' February,2004 by M/s Morepen LaboratoriesLtd, how the sale of pledged shares by petitioner-MA. MorganSecuritiesand CreditsPvt. Ltd. can attractthe offencesin question,is the mootpointwhichneedsto be addressedand it will clinch the whole issue.

¶20Petitioner-MorganSecurities & Credits P. Ltd's letter of 9 December,2003 sentby registeredpost to all concernedand respondent-M/sMorepenLaboratoriesLtd.'sletterof/• February,2004(AnnexureF Colly)are reproducedforreadyreferenceas under:- December 09, 2003 M/s TandrilFinancialPvt. Ltd. B-202, PlotNo.52 Siikhnagar Apartment I.P.Extension Delhi-110092 -• •r " ^ 79 of28 ^ M/s NiketanTradersPvt. Ltd. 3627, Sector 46D Chandigarh-160019 M/s EbonyTradersPvt. Ltd 1008, Sector-19B Chandigarh-160019 M/sBeckerTradersPvt. Ltd. 334, Sector-7 Panchkula M/s Cross TradingPvt. Ltd. B-202, PlotNo.52 Sukhnagar Apartments Delhi-110092 M/s PetuniaFinancialServicesPvt. Ltd. 31-H, Pocket-L,SheikhSarai-II New Delhi-110017 M/s MorepenLaboratoriesLtd. 4"' Floor, Antriksh Bhawan

¶22K. G.Marg New Delhi-110001 Mr.Sushil Suri S/o Sh. P.L.Puri R/o C-40, Anand Niketan New Delhi Mr. Arun Suri s/o Shri P. L.Suri' R/o E-9/1, Vasant Vihar New Delhi-110057 M/s Blue CoastHotels&ResortsLtd Pledger Pledger Pledger Pledger Pledger Borrower Guarantor Guarantor Page 20 of28 415-417, AntrikshBhawan 22,K.G.Marg New Delhi-110001 •••• 'Gmrantor Sub: Award dated 28.06.2003 in respect of inter corporatedepositdated19.09.2002forRs.5,00,00,000/- Dear Sirs, We wish to drawyour kindattentionto the Awarddated

28.6.2003passedby Hon'bleMr. JusticeA.P.Chowhari (Retd.), Sole Arbitrator under Section 30 oj the Arbitrationand ConciliationAct, 1996 wherein as per the joint request of the parties the Memorandum oj Settlement dated 27.05.2003 along^vith its Annexures form an integralpartofthe Award. In terms ofclause 3of the MemorandumofSettlement failure to pay the instalmentsbeing the AMOUNTOf DEBT PAYABLE (wholly or in part)' by the dates specified in Annexure B (to the Memorandum of Settlement)shallin eachcase be an eventofdefault. Asper clause4ofthe MemorandumofSettlement,in the eventthe numberofunpaidinstalments(wholeor inpart) becomethree, then thereshallbe an accelerationand the entire DEBT DUE AND PAYABLE as mentioned in Annexure 'A' (to the MemorandumofSettlement)shall become due and payableforthwithwithoutrequirement of any notice and further without prejudice to ihe executability of the Award in terms thereof On occurrenceofany event ofdefault, withoutprejudiceto other remedieswhich we are Lenderare entitledto. the pledgewill becomeenforceableforthwithwhich includes the rightofsaleofsharespledged. We hereby notify to you all that M/s Morepen LaboratoriesLtd have failed to pay three instalments Page 21 of28 due on

20.09.2003, 20.10.2003 and

20.11.2003 respectivelyhas committeddefault, the right to remedy default also ceases and the amount being the entire 'DEBTDUEAND PAYABLE'has now becomesdue and .payableforthwith. Since the Borrower, Guarantorsand Surety havefailed and neglectedto pay the outstandingamountand/orany part thereof we will be exercisingour right under the said Memorandumof Settlementand the Award to sell the shares of M/s Blue Coast Hotel &Resorts ad pledgedwith us on the expiryof4workingdaysfrom the date of this notice. This isfor your kindinformation. Thanking you, Yoursfaithfully, forMorganSecurities&CreditsPvt. Ltd. sd/- (AuthorisedSignatory) Saturday,February07, 2004 M/s MorganSecuritiesPvt. Ltd. 53, FriendsColony(East) New Delhi Dear Sir, Pending formalization of understanding arrived at betweenus as mentionedin our letterdated6' February, 2004. You are requestedto stopsellingthe equityshares If M/s Blue Coast Hotels &Resorts Limited and to maintain the status quo in the matter. CrlM^C.4603/2005 Page22 of28 / Thanking you, Yoursfaithfully, ForMorepenLaboratoriesLimited Sd/- Authorizedsignatory"

¶21Upon in-depthconsiderationofthe submissionsadvancedby both the sides and on careii.1perusalofthe FIRs in question,the materialon record and the decisionscited, it emergesthat the case of respondents-complainanthas to be takenon its face valueandthen, it is to be seen as to whether any criminal offence is made out or not. The crux of respondents' entire case is whether respondent/complainant-A& MorepenLaboratoriesLtd. was put to noticepriorto the sellingofthe pledgedshai-esin question.On this crucialaspect,the standofpetitioners is thatcopyofInformation(Annexurc-Iin CrlM.C.4603/05)downloaded from the officialwebsiteofNationalStockExchangepomts out that the sale of pledged shares in question took place in December,200j and January,2004 upon invocationof the pledgedshares,whose details are given m the above-said Anmxure-L Pertinently, respondents-complainantshavenot controvertedthe afore-saidstandofpetitioners.

¶22Furthermore, afore-said Information (Annexure-I in CrlM.C. 4603/05)receivesamplecoiToborationfromcommunicationof4'" March, 2004 (Amexure P-I to Rejoinder in CrlM.C 2059/07) of respondent/complainant-A//s.MorepenLaboratoriesLtd. which reads as under: - "March 4, 2004 MorganSecurities&CreditsPvt. Ltd. J <• 53, Friends Colony(East) New Delhi-l 10065 Sub -.-Balancerepaymentfor ICDofRs.2 crores Dear Sir, Pursuantto the MemorandumofUnderstandingsignedon May 27, 2003 please find enclosed therewith P.O. no.241092date March 4, 2004for Rs.15,23,900/-drawn on StateBankofIndorein lieuofchequesearlierissuedlo you butnotclearedasperdetailbelow:- Cheque No. Cheque Amount Dated Amount Paid 812911 14,18,568/- 15/03/04 14,18,568/- 812910 12,50,000/- 15/02/04 1,05,332/-'' Total 15,23,900/- For cheque no.812910. Shares worth Rs.8,94,668/- have been sold by MorganSecurities.Partpaymentmade of ^.50 lacs was made vide pay order no.241019 dt. 25/02/04. Therefore, balance payment due in lieu of chequeno.812910is Rs.1,05,332/-. Bypaymentthe above amount, ICD ofRs.2croresavailed from MorganSecurities&Credits(P) Ltd. standspaidoft Therefore,we requestyou to kindlyM'ithdrawthe petition filedfor the executionofDecree in DelhiHigh Court, all casesfiled under the NegotiableInstrumentsAct, 1881 and/orany otherLegalproceedings/casesfiledagainstus in relation to the above mentionedICD. We are highlygratefuland thankyoufor the cooperation extended. Thanking you. Yours sincerely. ForMOREPENLABOKATOllESLIMITED ^age24of28 Sd-AUTHORlZED SIGNATORY"

¶23Upon a plain reading of the afore-saidInformation(Annexure-I) and above-said Communication(AnnexureP-1), it becomes crystal clear that respondent/complainant-M^.Morepen LaboratoriesLtd. had prior noticeof the sale of pledgedshares. Having found so, it can be certainly said that the decisions in J.R.D. Tata (supra) and M/s. A.E. Enterprises (supra)are of no availtothecaseofrespondents-complainant.

¶24This Court is conscious of the settled legal position that inherent jurisdictionunder Section 482 of Cr.P.C. is to be exercised on sound principlesas reiteratedby Apex Court in State ofLIaryanav. BhajanLai 1992 Supp (1) see 335 and in LJarshendraKumar D. V. Rebatilata Koley and Others (2011) 3 SCC 351. Keeping in mind the parameters governing exercise of powers under Section 482 of Cr.P.C., I have scanned through the three FIRs in question, in the light of the latest decisionoftheApex Courtin ChandranRatnaswamiv. K. C. Palanisamy,

(2013) 6 SCC 740 reiteratingthe dictumof Apex Court in Uma Shankar Gopalikav. StateofBihar (2005) 10 SCC 336, whichis asunder: - "6. Now the question to he examined by us is as to whether on thefacts disclosedin thepetition of complaint any criminal offence whatsoeveris made out much less ojfences under Sections 420/120-B IPC. The only allegation in the complaintpetition against the accused persons is that they assured the complainantthat when they receive the insurance claimamountingto Rs 4,20,000, they wouldpay a sum of Rs 2,60,000 to the complainant out of that but the same has never beenpaid. Apartfrom that there is no other allegation in the petition of Page 25 of28 nS) complaint.It waspointed out on behalfof the complainant that the accused fraudulently persuaded the complainant io agree so that the accusedpersons may take stepsfor movingthe ConsumerForum in relation to the claim ofRs 4,20,000. It is well settled that eveiy breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the veiy inception.If the intentionto cheat has developedlater on, the same cannot amount to cheating. In the present case it has nowhere been stated that at the veiy inception there was any intention on behalf of the accused persons to cheat which is a conditionprecedentfor an offence under Section 420IPC.

¶7In our viewpetition of complaintdoes not disclose any criminal offence at all much less any offence either under Section 420 or Section 120-B IPC and the present case is a case of purely civil dispute between the parties for which remedy lies before a civil court by filing a properly constitutedsuit. In our opinion, in view of these facts allowing the police investigationto continue would amount to an abuse of the process of court and to prevent the same it M>as just and expedientfor the High Court to quash the same by exercisingthe powers under Section 482 CrPC which it has erroneously refused. " (emphasis supplied)

¶25Since it is amply clear that the sale of the pledged shares by petitioner-Morgan Securitiesand Credits Pvt..Ltd. was with prior notice to respondent/complainant-M/y.Morepen Laboratories Ltd. and was in consonance with the Pledge Agreements[Annexure-B(Colly.) in Crl.M.C.2059/07],Memorandum of Settlementof 2?"^ May, 2003 and Page 26 of28 \5>^ Consent Award of 28"^ June, 2003 (Annexure-C in Crl.M.C. 2059/07), therefore, in the face of afore-referred Securities Appellate Tribunal's judgmentof 29"' August, 2011, finding the transactionin questionto be valid, it can be unhesitatingly concluded that neither the offence of criminal breach of trust nor of criminal misappropriation or of being in possessionof stolen shares or of forgery, etc. is prima facie made out. Infact,it is nowherespelt out inthe FIRs in questionas to what document has been forged. Rather,the three FIRs inwhichpetitionersaresoughtto be prosecuted, do not disclose the ingredientsof the alleged criminal offences.

¶26During the course of hearing, it was broughtto the notice o! this Court that the civil litigationinitiatedby respondents-complainantis to get thesale ofpledgedsharesdeclaredas null and void. The applicability of The DepositoriesAct, 1996 and the SecuritiesandExchangeBoardof India (DepositoriesandParticipants)Regulations,1996 is quite relevant but it is requiredto be consideredin detail in the civil proceedingsand not in these criminal proceedings.

¶27No doubt, civil and criminal proceedings can go on simultaneously but, in the instant matters, I have found that the ingredients of the criminal offence alleged are utterly lacking and the dispute betweenthe partiesis infactofpurelycivil nature and that civil litigationbetweenthe parties is alreadypending. Thus, this Court is of the consideredopinion that from the FIRs in question, even a prima facie case to continuethe proceedings arising out of the FIRs in question is not made out and lodgingof these three FIRs is nothingbut an abuse of the process of the court and the case of petitioners falls in the first illustrative category PageJ7of28 }- indicatedbyApex CourtinSta/eofHaiyana v. BhajanLai (supra)which is reproduced as under: -" "Where the allegations made in the first information report or the complaint,even if they are takenat theirface value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused."

¶28In the ultimate analysis, finding the initiation of criminal proceedingsinthe afore-saidthreeFIRs inquestion,to be an abuseofthe process of the law, FIR No.505/2005registeredat P.S. DefenceColony, Delhi, FIR No.511/5005registeredat P.S. ConnaughtPlace, Delhi and FIR No.108/2005 registered.at P.S. Parwanoo, Himachal Pradesh and proceedingsemanatingtherefromare hereby quashedwhile refrainingto comment upon the merits of the disputes raised in these criminal proceedings lest it may prejudice either side in the pending civil proceedings.Consequentially,order of 14^'* January, 2011 in Crl.M.C. 279, 280 and 281 of 2011 is also,set aside.

¶29The above captioned eight petitions and the applications are accordingly allowed. (SUNIL GAUR) Judge SEPTEMBER 23, 2013 CrlM.C.4603/2005 • ' Page 28 of2S

\1- IN THE HIGHCOURTOF DELHIAT NEWDELHI rt?r"M.C.4603/2Q05 MORGANSECURITIES&CREDIlSP. " Through: Mi". N. Hanharan,ir.Advocate versus SIATE OF DELHI & ANR. Through; with Ms. PoojaSaigal & Mr. Jitender Batta, Advocates Respondeiits Mr. MukeshGupta,Additional PubUcProsecutorfor respondent No. 1-State Mr. R. N- Mittal,Senior/vdvocate, with Mr. Vijay Aggarwal.. Mr. GurpreetSingh,Mr. Ivladit. Jain, Mr. SugamPuri, Mr. Ankit Goel & Mj". Ashish Dhingra, Advocates m ,M.r.sn04/2005 . imi7.S/07:13nwft7:2094/08;2299/10l2m/»)l:ia'jiklg & 2660/11 MORGAN SECURiTIES&CKEOriS.P, ' / ^ I'tutioncr Through; Mr. N. Hanharan,Sr. /vdvocate with Ms. Pooja Saigal& Mr. Jitender Bal.ta, Advocates versus STAlli OF DELHI & ANR. Through; ilespor dents Mr. Mukesh Gupta, Additional Public Prosecutorfor respondent No 1- State Mi. R. N. Mittal, Senior Advocate, with Mr. Vijay Aggarwa'L Mr. GurpreetSingh,Mr. Mudit Jain,Mr. SugamPuri, Mr. Ankit / c^-28 Certify that the digital and physical file have been compared and the digital data is as per the physical file and no page is missing. f^. H- \V Goel & Mr. AshishDhin^ra, Advocates (3) ri^T..M.C.280/^Ot1&CrLM.As.No.ll63/U&617/12 parveen electronics p. ltd. c Through: Mr. N. Hanharan,Sr. Advocate withMs. PoojaSaigai& Mr. Jitender Batta, Advocates versus STATEOF DELHI & ANR. Through: versus STATE OF DELHI & ANR. Through: Respondents Mr. MukeshGupta,Additional PublicProsecutorfor respondent No.l- State Mr. R. N. Mittal,SeniorAdvocate, withMr. VijayAggarwal, Mr. GurpreetSingh,Mr. Mudit^ Jain,Mr. SugamPuri,Mr. Anlcit Goel & Mr. Ashish Dhingra, Advocates + (4) rRt,.M.C.2S1/2nl&&Crl-M.As.Nn.1105/11&O20/12 northern projects p. ltd. Through: Mr. N. Hariharan,Sr. Advocate withMs. PoojaSaigai& Mr. Jitender Batta, Advocates Respondents Mr. MukeshGupta,Additional PublicProsecutorfor respondent No.l- State Mr. R. N. Mittal, SeniorAdvocate, withMr. VijayAggarwal, Mr. GurpreetSingh,Mr. Mudit Jain,Mr. SugamPuri,Mr. Anldt Page 2 of28 + + +• Goel &Mr. AshishDhingra, Advocates (5) rPI.M.r.197't'?l'"7&&Cr' No.6975-76/2007 INDORAMA SYNTHETICSLTD. Petitionei: Thi-ough; Counsel(appearancenot given) versus STATEOF DELHI&ANR. • Through; Mr. MukeshGupta,Additional PublicProsecutorfor respondent No.l- State Mr. R. N. Mittal,SeniorAdvocate, with Mr. VijayAggarwal, Mr. GurpreetSingh,Mr. Mudit Jain,Mr. SugamPuri,Mr. Ankit Goel & Mr. Ashish Dhingra, Advocates (6) riRT...M.C.1975/2007&Cd.M.A.No.6979/2007 INDO RAMA SYNTHETICSLTD. Petitioner Through; Counsel(appearancenotgiven) versus STATEOF DELHI & ANP- . Through; Mr. MukeshGupta,Additional PublicProsecutorfor respondent No.l- State Mr. R. N. Mittal SeniorAdvocate, with iv/h. VijayAggarwal, Mr. GurpreetSingh,Mr. Mudit^ •Jain,Mr. Sugam Puri, Mr. Ankit Goel & Mr. Ashish Dhingra, Advocates (7) CRL.M.C.2059/2007 Page 3 of28 MORGANSECUTITIESAND CREDITSP. LTD. AND ORS^^ Through: versus STATEOF DELHI & ANR. Through; Mr.N. Hariharan,Sr.Advocate withMs. PoojaSaigal&Mr. Jitender Batta, Advocates Respondents Mr. MukeshGupta,Additional PubUcProsecutorfor respondent No.l- State Mr. R. N. Mittal,SeniorAdvocate, withMr. VijayAggarwal, Mr. GurpreetSingh,Mr. Mudit Jain,Mr. SugamPuri,Mr. Ankit Goel & Mr. Ashish Dhingra, Advocates (8) rm ..M.C.lVQ/lOll&Crl.M.A.No.1101/2011 MORGANSECURITIES&CREDITSP. LTD. Through: Mr. N. Hariharan,Sr. Advocate withMs. PooJaSaigal& Mr. Jitender Batta, Advocates versus STATEOF DELHI & ANR. Through: Respondents Mr. MukeshGupta,Additional PublicProsecutorfor respondent No.l- State Mr. R. N. Mittal, Senior Advocate, withMr. VijayAggarwal, Mr. GurpreetSingh,Mr. Mudit Jain,Mr. SugamPuri, Mr. Ankit Goel &.Mr. Ashish Dhingra, Advocates Page 4 of28 I*- CORAM: HON'BLEMR. JUSTICESUNILGAUR «/"