Page 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL/CRIMINAL APPELLATE JURISDICTION
CIVIL APPEAL NO.__4540________OF 2013
[Arising out of S.L.P.(C) No.13120 OF 2013]
CHANDRAN RATNASWAMI APPELLANT
VERSUS
K.C. PALANISAMY AND OTHERS RESPONDENTS
WITH
CRIMINAL APPEAL NOs. 736-737 __________OF 2013
(Arising out of S.L.P.(Crl.) Nos.3273-3274 OF 2013)
CHANDRAN RATNASWAMI APPELLANT
VERSUS
THE STATE & ANOTHER RESPONDENTS
AND
CRIMINAL APPEAL NOs. 731-733 __________OF 2013
(Arising out of S.L.P.(Crl.) Nos.1924-1926 OF 2013)
K.C. PALANISAMY APPELLANT
VERSUS
THE STATE & ANOTHER ETC. ETC. RESPONDENTS
WITH
CIVIL APPEAL NOs. 4537-4538 __________OF 2013
(Arising out of S.L.P.(C) Nos.11342-11343 OF 2013)
K.C. PALANISAMY APPELLANT
VERSUS
RAMASWAMY ATHAPPAN & OTHERS
ETC. ETC. RESPONDENTS
AND
1Page 2
CRIMINAL APPEAL NOs. 734-735 __________OF 2013
(Arising out of S.L.P.(Crl.) Nos.1947-1948 OF 2013)
PAUL RIVETT APPELLANT
VERSUS
THE STATE & ANOTHER RESPONDENTS
AND
CONTEMPT PETITION (CIVIL) NO. 166 OF 2013
IN
S.L.P.(CRL.) NO. 9853 OF 2010
CHANDRAN RATNASWAMI PETITIONER
VERSUS
V. BALAKRISHNAN & ANR. RESPONDENTS
J U D G M E N T
M.Y. EQBAL, J.:
Leave granted.
2. Since common questions of law are involved, these appeals
have been heard together and are being disposed of by this common
judgment. However, for the sake of convenience, the factual matrix
giving rise to these cases as alleged in the civil appeal arising
out of SLP(C) No. 13120 of 2013 is set out hereinafter.
3. The appellant – Chandran Ratnaswami, alleged to have
settled in Canada since 1974, is an officer of Hamblin Watsa
Investment Counsel, a wholly-owned subsidiary of Fairfax Financial
Holdings Limited (in short, “Fairfax”) which is based in Canada and
2Page 3
has also made investments in India worth more than USD 1 billion.
The said appellant is also a Director on the Boards of various
renowned companies including ORE Holdings Limited (in short, “ORE”),
a Fairfax Group company, based in Mauritius, and has to travel to
India on business commitments. The said holding company, ORE on 30th
January, 2004 entered into a Joint Venture Agreement (JVA) with CG
Holdings Private Limited (respondent No. 1 – K.C. Palanisamy’s
company) and N. Athappan (a Singapore citizen) for constructing and
developing a hotel property, a shopping complex and an IT Park of the
properties owned by Cherraan Properties Limited (CPL) and Vasantha
Mills Limited (VML) (respondent No.1’s companies). ORE invested
Rs.75 crores and got 45% in Cheran Enterprises Private Limited
(CEPL). N. Athappan invested Rs. 4 crores and got 10% in CEPL. It
is alleged that as CPL and VML have immovable assets, respondent No.
1 transferred shares of CPL and VML to CEPL instead of bringing
money and got 45% share holding in CEPL. Respondent No. 1 is
alleged to have swindled the said Rs. 75 crores that was deposited
in the bank account contrary to the JVA and transferred the
immovable assets of CPL and VML, subsidiaries of CEPL. Thereupon,
ORE filed Company Petition No. 76 of 2005 before the Company Law
Board, Additional Principal Bench, Chennai (in short, “the CLB”) on
account of the alleged acts of oppression and mismanagement indulged
in by respondent No. 1. The Company Law Board by order dated 13th
August, 2008 directed respondent No. 1, CG Holdings Private Limited
3Page 4
and CEPL to return the investment of ORE and N. Athappan amounting to
Rs. 79 crores with 8% interest within one year, failing which the
land of VML was to be transferred to ORE and N. Athappan. It was
directed that once the aforementioned amount is paid, respondent No.
1 would take control of CEPL and its subsidiaries. The Company Law
Board held as under:
“17. In view of the foregoing conclusions and in exercise
of the powers under Sections 397 & 398 read with Section
402 and with a view to bringing to an end the grievances
of CG Holdings, KCP, ORE and Athappan, the following order
is passed:
CEPL shall return a sum of Rs. 75 crores and Rs. 4
crores invested by ORE and Athappan respectively,
together with simple interest at the rate of 8% per
annum from the date of investment till the date of
repayment within a period of 12 months in one or
more instalments, commencing from 01.11.2008. While
making the payment CEPL, CG Holdings and KCP shall
ensure that at least 25% of the amount due is paid in
every quarter. CEPL CG Holdings and KCP are at
liberty to make use of the fixed deposit held by CEPL
with the SBI, Erode Main Branch, free of any liens or
encumbrances towards refund of the investments of ORE
and Athappan. VML shall not alienate or sell any of
its immoveable properties till full payment is made
to ORE, in terms of this order. In the event of any
failure to make the repayment within the specified
time, CEPL CG Holdings, KCP and VML will duly convey
the immovable properties of VML, namely, 17.15 acres
of land in favour of ORE and 7.80 acres of land in
favour of Athappan by executing and registering
necessary deeds of conveyance in strict compliance
with all applicable laws, as consideration for
reduction of capital and surrender of the shares of
ORE and Athappan, upon which ORE as well as Athappan
will deliver the share certificates and blank
transfer forms in respect of their holdings in CEPL
and the subsidiaries, if any, in favour of CG Holdings
and KCP. CEPL is consequently authorized to reduce its
share capital and in the meantime, operation of the
4Page 5
impugned agreements is suspended, to expedite and
ensure due completion of the modalities of exit by
ORE and Athappan, thereby, bringing to an end the acts
complained of in the present proceedings. CEPL shall
ensure necessary statutory compliances till the whole
process, in accordance with the aforesaid directions,
is properly completed. The parties are at liberty to
apply in the event of any difficulty in
implementation of the smooth exist of ORE and
Athappan from CEPL.”
4. Cross appeals were filed by the parties before the High Court
of Judicature at Madras and the High Court vide order dated 5th
August, 2011 confirmed the order dated 13th August, 2008 passed by
the CLB, in the following terms:
“54. On analysis of various aspects, Company Law Board
concluded that it was no longer possible for the parties
to carry out joint venture business of CEPL as per the
terms of JVA. Only to have smooth exit of ORE and
Athappan, the Company Law Board passed the order directing
CEPL to repay Rs. 75 Crores and Rs. 4 Crores invested by
ORE Holdings and Athappan respectively. By perusal of the
order of Company Law Board, in our considered view,
Company Law Board has elaborately gone into the issues
arisen between the parties even though those objections
were filed under Sections 397 and 398 of the Companies
Act. As demonstrated infra, there are commonality of
issues raised in both the Company Petitions, O.S. No.90 of
2007 and the petition filed before I.C.C. seeking for
arbitration.
55. Criminal Cases:- The learned counsel for appellants
Mr. Karthik Seshadri contended that the purport of the
criminal proceedings are different and initiating of
criminal complaints does not amount to waiver of
arbitration. Of course, a party does not waive his right
to invoke arbitration by filing criminal complaints. But
what is relevant is the allegations in the plethora of
criminal complaints filed at the instance of the
appellants/father of KCP/respondents. Both parties have
made serious allegations of cheating, forgery,
falsification of records, etc., against one another. Even
before the arbitral Tribunal, the same allegations are
5Page 6
made. The Honourable Supreme Court and the Madras High
Court have held that the arbitration is not the
appropriate forum if allegations of fraud,
misappropriation and complicated facts are involved.
xxx xxx xxx
84. By a careful reading of the order of Company Law
Board in C.P. Nos.65 and 76 of 2005, it is clear that the
alleged breach of Clause 9.2 has been elaborately dealt
with. Company Law Board dealt with not only the issues
pertaining to the oppression and mismanagement of CEPL and
also the larger issues arising between the parties. Only
to ensure smooth exit of ORE and Athappan, the order dated
13.8.2008 came to be passed by the Company Law Board. It
is pertinent to note that KCP had not challenged the said
order of Company Law Board.
xxx xxx xxx
112. As pointed out earlier, several criminal cases have
been filed and number of quash petitions also came to be
filed. Of course a party does not waive his right to
invoke the arbitration of the dispute by filing of
criminal complaints. When a party deliberately chooses
not to adopt a particular course of action, the
arbitration agreement becomes inoperative and as the
parties have waived or abandoned the arbitration clause,
by invoking the jurisdiction of Civil Court, the doctrine
of wavier applies. The appellants had the option to go
before ICC even in 2005 but the appellants chose to file
C.P. No.65 of 2005 and also stoutly defended C.P. No.76 of
2005 filed by ORE Holdings. Even in C.P. No.76 of 2005,
the appellants have not sought for reference to
arbitration. By agitating the matter before the Company
law Board for nearly two years, and filing the Civil Suit
in O.S. No.90 of 2007 before District Munsif’s Court,
Kangeyam, by their conduct the appellants must be deemed
to have given a go bye to the arbitration clause.
113. The parties have been engaged in pitched battle
before the Company Law Board and orders were passed by the
Company Law Board on 13.8.2008. When the matter was
pending before the Company Law Board, the Company Law
Board has passed interim orders at various stages. The
learned counsel for plaintiffs would submit that even
settlements/proposals have been made disclosing parties
6Page 7
intentions and discovery process has been utilized. We
find much force in the contention of the respondents that
Athappans and Ore have spent consideration time and money
before the Company Law Board. In so far as O.S. No.90 of
2007 pending before District Munsif’s Court, Kangeyam, the
suit is ready ripe for trial and the respondents are
diligently defending the same. Having initiated
proceedings before various forums, cannot now seek to
invoke arbitration as an additional remedy.
xxx xxx xxx
120. Company Appeal Nos. 21,25 to 27 and 29 of 2009:- The
gist of order in C.P. Nos.65 and 76 of 2005 dated 13.8.2008
is that:-
CEPL, KCP and C.G.Holdings were to return Rs. 75
Crores to ORE and Rs. 4 Crores to Athappan. The
money was to be paid within a period of one year
starting 1.11.2008 with 25 percent of the same, being
paid every year.
CEPL, KCP and C.G.Holdings were to utilize Rs. 20
Crores maintained in the fixed deposit at State Bank
of India, Erode to pay ORE and Athappan. In the
event of failure to pay the money the property of VMC
situated in Coimbatore is to be transferred to ORE and
Athappan in the proportion of 17.15 acres and 7.80
acres respectively. Until then VML was refrained from
dealing with the property.
On receipt of money, ORE and Athappan were to
surrender their shares in CEPL and CEPL shall
accordingly be permitted to reduce its share capital.
The parties were given liberty to approach Company
Law Board for limited purpose of overcoming
difficulties in implementation of the said order.
xxx xxx xxx
145. As per Order of Company Law Board amount invested by
ORE has to be refunded which of course, must be in
accordance with applicable laws: be it compliance with
FEMA or other Regulations, ORE, being a foreign investoran entity of foreign origin , as per FEMA, cannot own
7Page 8
immovable property in India. Compliance of FEMA or other
applicable regulations cannot be bypassed. By the order
dated 3.8.2009, Company Law Board modified its earlier
order directing VML to execute the sale deed conveying
immovable properties of 17.15 acres to the nominee of ORE
and thereby modified its earlier order. The Order of the
Company Law Board modifying its earlier order directing
VML to convey the properties to ‘nominee of ORE’ is to be
modified to the effect that any such conveyance should be
subject to applicable laws and regulations and with
required approval/permission to be obtained by ORE from
the competent authorities. The Order of the Company Law
Board in C.A. No.155 of 2008 is to be modified to that
extent.
146. …. Company Appeal Nos. 21 and 29 of 2009 preferred
by ORE and Company Appeals Nos. 25 and 26 of 2009
preferred by N. Athappan and R. Athappan are allowed.
Company appeal No.27 of 2009 is disposed of modifying the
order of Company Law Board dated 3.8.2009 in C.A. No.155
of 2008 to the effect that the conveyance of immovable
properties to nominee of ORE is subject to all applicable
laws and regulations and if need be, with necessary
approval/permission to be obtained by ORE from the
competent authorities.”
5. ORE and N. Athappan filed execution petitions before the CLB in
December 2011 and the same are stated to be pending as on date.
6. While the proceedings before the CLB were pending, respondent
No. 1 started filing multiple criminal complaints. On 27th February,
2006, respondent No. 1 filed a complaint before the Economic
Offences Wing, Chennai (EOW) against ORE, Fairfax, Prem Watsa,
Ramaswamy Athappan, Chandran Ratnaswami (appellant herein), Paul
Rivett, M/s. Odyssey America Reinsurance Corporation and N. Athappan
making them accused Nos. 1 to 8 inter alia on the following
8Page 9
allegations:
“Through this strategic acquisition accused No. 1,
through Accused No. 7 and Accused No. 4 through Accused
No. 8 acquired substantial ownership and management rights
in VML and CPL also. The complainant states that the sole
objective of the sacrifice made by the complainant of his
highly valuable prime immovable properties is the
assurance of the Accused No. 3, 4, 5 & 6 that about Rs.
375 crores would be brought into the JV Company as
investment and loans and projects worth thousands of
crores would be commenced.
The complainant states that, as per the joint venture
agreement dated 30.1.2004, M/s. Odyssey America Reinsurance
Corporation, the 7th accused herein which is a subsidiary
company of the Fair Fax Group and the Accused No. 2 had
agreed to extend a Corporate Guarantee in favour of the
lender for arranging the syndicated credit facility of US$
65 Million (approximately Rs. 300 crores) to the JV
company. In confirmation of the said fact the Accused No.
2, 3 and 4 and 8 while signing the JV agreement, cleverly
included in the same, a model draft of the Irrevocable
Corporate Guarantee Agreement to be furnished by the 7th
accused in favour of the lender and even signed the said
draft so as to make believe the complainant in no
uncertain terms about their intention to honour their
commitments. Thus, the joint venture business could
commence only upon the 1st accused arranging for the
syndicated credit facility of US$ 65 million, on the
strength of the Corporate Guarantee to be given by the 7th
accused.
xxx xxx xxx
….. On the one hand the accused had miserably failed
to organize the funds even after the complainant had
parted with the ownership rights over valuable properties
held by him through VML and CPL and on the other hand they
defrauded and cheated the complainant by not organizing
the promised funds, upon the receipt of which alone, the
complainant would be able to commence the projects worth
thousand of crores.
…. From the above, it is therefore evident that the
consideration of entering into the JV agreement was the
promise and assurance that the accused 2 to 6 shall also
arrange for a loan of Rs. 300 crores in addition to the
9Page 10
share investment of Rs. 75 crores as stipulated under the
JV agreement.
xxx xxx xxx
Thus the accused have induced the complainant to
enter into an agreement under the guise of a joint venture
agreement which was conceived in pursuance of a criminal
conspiracy with an intention of cheating. In addition to
the above, the accused 4 and 8 have also obtained a
gratification, amounting to approximately Rs. 37.40 cr.
from the complainant, by getting the shares of the
companies allotted to them to a discounted rate, as
consideration for facilitating the joint venture and for
arranging the term loan thereby making wrongful gains to
themselves while causing wrongful loss to the complainant.
Moreover after receiving the said consideration in the
form of shares at a discounted value, the accused 4 and 8
have now joined hands with M/s ORE Holdings Ltd. for
gaining an illegal majority in the JV company and have
thus defrauded the complainant of several crores of
rupees.
Therefore, the accused Nos. 1 to 7 have committed
various offences under section 120-B, read with sections
409, 420, 405, 471 and 389 among other provisions of the
Indian Penal Code, which amount to the offences of
Criminal Conspiracy, Cheating, Criminal Breach of Trust,
making False Representation and Promises and Extortion by
putting the fear of accusation of offences against the
complainant among others, and have induced the complainant
to part with the shares of his company and the control
over the valuable immovable properties owned by him
through VML and CPL on the strength of the false promises
and assurances made by the accused.”
7. Since the Economic Offences Wing refused to take any action, the
Respondent No.1 filed Criminal O.P. No. 9791 of 2006 before the High
Court seeking direction to EOW to take action, which petition was
later withdrawn. Thereafter, he filed a similar private complaint
(Criminal M.P. No. 6096 of 2006) for offences under Sections 406, 406
r/w 109, 420, 467 r/w 420 IPC before the Judicial Magistrate,
10Page 11
Perundurai which was dismissed on 13th March, 2007 holding the same
to wreak vengeance and observing as under:
“7. On a careful consideration of the aforesaid
complaint, depositions, and Exhibits it is unbelievable to
state that the respondents have cheated and committed
breach of trust, the complainant who is a former member of
the Legislative assembly, a former member of the parliament
and running business houses which have properties worth of
the more than 100 crores of Rupees. Because, no documents
were filed to show that the shares of Rs. 10/- face value
of the Cheran Properties were sold in the market for
Rs.60/- and the shares of Rs.10/- face value of the
Vasanthi Mills were sold at Rs.105/-. It is not believable
that the shares of Rs. 10/- face value was transferred to
the same value of Nandakumar and paid about Rs. 22 crores
as commission, as the complainant himself has admitted in
the complaint that some of the respondents and the
complainant have started a Joint Venture Company. The
memorandum of understanding/Joint venture agreement is not
submitted for the perusal of the court. In the memorandum
of understanding the details to the investment of each of
the parties, the shares allotted to each of them, the
relief to the parties when the conditions are violated,
and the court which has jurisdiction to entertain such
matter. The failure to file the memorandum of
understanding in the court, and the failure to give the
reasons for not filing the same is not acceptable.
8. It is clearly seen from the deposition of the
petitioner and the complaint that the respondents have
arranged for about 17 million American Dollars through a
firm Odyssey. It is also seen that the said sum is with
the Cheran Holdings Private Limited and the affidavit filed
in the Hon’ble High Court at Delhi confirms the same,
while examining details, it is seen that a sum of 17
million American Dollars have come to Cheran Holdings
Limited in which the complainant is a share holder.
Hence the petitioner complainant might not have sustained
any loss. There is no explanation in the complaint as to
whether after the receipt of 17 million American Dollars,
it was invested in the business. In the first meeting of
the petitioner with the respondents, it was agreed that
foreign investments are to be made accordingly the same has
been done. It is seen from the deposition of the
petitioner that 17 million American Dollars, it is not
11Page 12
believable that the respondents have cheated the
petitioner/complainant.
9. It is seen that on orders of Hon’ble High Court,
Delhi in C.P. No.292/2004, a sum of Rs. 78 crores has to be
deposited and Cheran Enterprises and Cheran Holdings
Limited have not deposited in the Bank Accounts. The
reasons adduced by the complainant was hold an important
post in the Cheran Group of Companies for not depositing
the sum into the Bank, do not seem to be accepted.
Moreover, Chandran Ratnaswami has obtained powers from the
petitioner for the conduct of the case and as such, he has
to face the consequences of the orders of the court. On
that aspect also, the petition would sustain.
xxx xxx xxx
12. The petitioner on 23.9.2005 sent an e-mail to the
State Bank of India to give Bank guarantee to BSNL, that
when he approached the Bank, he came to know that Chandra
Ratnaswami and Athappan Ramaswamy have sent independent
letters to the Bank requiring that the request of the
petitioner should not be accepted. It cannot be
considered by the Court as a criminal act. It can be
considered as an act of safe guard in the trade. The
proceedings between the petitioner and respondents are of
civil nature relating to contract Act and Company Law. If
the conditions therefore are violated, the petitioner has
to seek remedy under Contract Act or Company Law. Instead
the filing of this case terming the respondents as accused
the court considers that it cannot be accepted.
13. On world level, the foreign investments made in each
country enhance the economy and it is a day to day
commercial activities. The petitioner and the respondents
and some others, with an intention to establish a joint
venture company having done so, have to take steps for the
developmental activities, and one party should not, with
intention to wreak vengeance against the other should not,
term them as accused and approach the court, and this
court cannot accept it. Because, the petitioner has not
handed over any property to the respondents under section
406 IPC. Hence there is no ingredient for breach of
trust. In the circumstances that the respondents have
arranged for 17 million American Dollars, that Chandran
Ratnaswamy himself has agreed to the Rs.78 crores case in
the Hon’ble High Court, Delhi that the petitioner has
not mentioned in the complaint that date, time and place
12Page 13
where he was cheated, that like wise, the Respondent
cheated the petitioner and thereby he sustained loss, and
that there are no ingredients for sections 420, 467 read
with 420 are found in the complaint or depositions.
Therefore, no prima facie case to show that the
respondents with criminal intention indulged in criminal
activities is found in the complaint, or depositions or
documents.
14. Hence, for the reasons as aforesaid, this petition is
dismissed under Section 203 of Cr. P.C.”
8. Respondent No. 1 then filed another similar complaint before
Judicial Magistrate, Kangayam suppressing the fact of filing earlier
complaints and the order dated 13th March, 2007 passed by the
Magistrate Perundurai, whereupon the Crime Branch, Erode was
directed to register an FIR. Accordingly, FIR No. 7 of 2007 was
registered by Police Station DCB, Erode under Sections 120-B, 420,
169, 408, 409 IPC, but the case was said to have been closed on 20th
May, 2009 and the police filed the Closure Report. Meanwhile,
Criminal O.P. Nos. 12695 and 19384 of 2007 had been filed for
quashing the FIR by the persons shown as accused in the said FIR,
in which the High Court vide order dated 8th February, 2010 frowned
upon the conduct of respondent No. 1 in the following terms:
“3. It is brought to the notice of this court by the
learned Senior Counsel Mr. Habibullah Basha, appearing for
the accused/petitioners 1 to 3 in Crl.O.P. No.12695 that
the de facto complainant, on the very same allegations
preferred a complaint in C.C. No.1096 of 2006 on the file
of the learned District Munsif-cum-Judicial Magistrate
Court at Perundurai and the said court was pleased to pass
an order of dismissal under Section 203 Cr.P.C. It is
impressed upon this court that such dismissal came about
13Page 14
after consideration of the complaint and the statement of
the witnesses and on finding no ground to proceed thereon.
4. Though in view of the submission made by the learned
Government Advocate (Crl.side) nothing survives for
consideration in the matter, this Court would frown upon
the conduct of the defacto complainant in indulging in
repeated harassment of the petitioners. The criminal
original petitions shall stand closed. Consequently,
connected miscellaneous petitions are closed.”
9. The respondent then preferred Special Leave Petition in the
Supreme Court being SLP (Crl.) No. 9853 of 2010 against the order
dated 8th February, 2010, which was dismissed by this Court on 22nd
November, 2010 with liberty to pursue protest petition, if any, said
to be pending on the file of the Judicial Magistrate, Kangayem. It
is alleged that no protest petition was pending on that day.
10. Though in different context, respondent No.1, K.C. Palanisamy,
filed three writ petitions against the State of Tamil Nadu,
Superintendent of Police, Economic Offences Wing, Chennai, Director
General of Police, State of Tamil Nadu, Union of India, Central
Bureau of Investigation and Reserve Bank of India, in which
respondent No.1 prayed for issuance of writ of mandamus directing the
respondents in writ petitions for investigation as also for transfer
of investigation and FIR making allegations against another Company,
DAIL. In the said writ petitions, the contention of the writ
petitioner was that he was the resident of Coimbatore and former
Member of Legislative Assembly of the State of Tamil Nadu and
14Page 15
Managing Director of the Company viz. CEPL. The said Company was
formed for the purpose of sharing a Joint Venture between the CG
Holdings Private Limited, ORE Holdings Limited, Mauritius and one N.
Athappan. As part of the Joint Venture business CEPL looked for
acquiring a Telecom Company called DAIL which was a Delhi based
Company involved in the business of International Long Distance
Telephony Services and Internet Services. In those writ petitions,
a common counter affidavit was filed by the respondents refuting all
the averments made in the three writ petitions and stated that more
than nine cases were pending against the respondent No.1, writ
petitioner. In the order dated 19th October, 2011 passed by the
Madras High Court in those three writ petitions, the numbers of
cases pending against the writ petitioner were mentioned in para 19
of the order, extracted hereunder:
“19. The cases pending against the petitioner in various
provisions of IPC including Section 420 IPC, there were as
many as 9 cases in Coimbatore alone. They are as
follows:-
“a) Coimbatore City Crime Branch
Cr. No.37/99 u/s. 420 IPC.
b) Coimbatore City Crime Branch
Cr. No.17/2000 u/s. 420 IPC.
c) Coimbatore City Crime Branch
Cr. No.62/2000 u/s. 420 IPC.
d) Coimbatore City Crime Branch
Cr. No.18/2001 u/s. 420 IPC.
15Page 16
e) Coimbatore City Crime Branch
Cr. No.25/2001 u/s. 420 IPC.
f) Coimbatore City Crime Branch
Cr. No.29/2001 u/s. 384 IPC.
g) Coimbatore City Crime Branch
Cr. No.20/2002 u/s. 467, 468,471
472 and 477(A), IPC.
h) Coimbatore Economic Offences Wing
Cr. No.03/2001 u/s. 408 IPC.
i) Coimbatore City Crime Branch
Cr. No.26/2003 u/s.406 IPC.”
11. In para 20 of the order dated 19th October, 2011, the Court
observed that the modus operandi of the writ petitioner was to
defraud a person or entity and thereafter approach the Courts with
multiple petitions in order to distract attention from his own
misdeeds.
12. The High Court dismissing all the afore-mentioned three writ
petitions observed as under:-
“28. However, this Court is not inclined to accept the
request made by the petitioner. The petitioner is not an
innocent party in filing such complaints and he himself
has not obeyed the order passed by the Delhi High Court in
the application for winding up and asking him to refund
the amount siphoned off by him which was obtained as a
loan by DAIL. Parties who come to court must come with
clean hands. Not only the petitioner has come to this
Court with unclean hands, but he himself being an accused
16Page 17
in several cases had also suppressed the entire
proceedings of the Delhi High Court including the order
directing the company to retransfer the money siphoned off
from DAIL.
xxx xxx xxx
31. In the present case, the petitioner has filed series
of Crl.Ops including the prayer which has been made in the
writ petitions and they were negatived by this Court more
than once. All that this Court held was that
investigation should be conducted by the State Police and
a report should be filed expeditiously and that has been
done in this case as noted in the counter affidavit filed
by the second respondent.
xxx xxx xxx
34. Therefore, in the light of the above, there is no
case made out to grant any direction sought for by the
petitioner either in the first writ petition or to call for
a report from RBI as demanded in the second writ petition
or for any direction to the Central Government to take
steps to retransfer the funds siphoned off from this
country. The petitioner has not made out any prima facie
case for grant of any such direction and he has suppressed
the information relating to winding up proceedings before
the Delhi High Court. The petitioner himself is not a
person above board and faced with several criminal cases
under Section 420 IPC not only as revealed in the affidavit
filed in support of the petition for impleadment but also
as noted by this Court in the decision cited in Ramaswamy
Athappan’s case (cited supra). The petitioner himself is
guilty of several commissions and omissions and at his
instance no direction can be granted by this Court.
35. In view of the above, all the three writ petitions
will stand dismissed. However, there will be no order as
to costs. Consequently, connected miscellaneous petitions
are closed.”
13. Curiously enough, on 2nd January, 2012, respondent No. 6 -
Superintendent of Police, Tiruppur allegedly in collusion with
respondent No. 1 and relying upon the order dated 22nd November, 2010
reopened FIR No. 7 of 2007 and ordered re-investigation. Charge-
17Page 18
sheet being CC 162 of 2012 ultimately came to be filed by respondent
No. 5 - Dy. Superintendent of Police, District Crime Records Bureau,
Erode before the Judicial Magistrate, Erode-III on 11th September,
2012 inter alia against Paul Rivett, Chandran Rathnaswami, Ramasamy
Athappan, Nandakumar Athappan, M/s. Fairfax Financial Holdings
Limited, M/s. Hamin Watsa Investment Council, Odyssey America
Reinsurance Corporation and ORE Holdings Limited showing them
respectively as accused Nos. 2, 3, 4, 6, 8, 9, 11 and 12 for
committing offences under Sections 120-B, 420, 409 read with 109 IPC.
14. On the basis of aforesaid chargesheet, the Judicial Magistrate
on 12th September, 2012 issued summons returnable on 12th October,
2012. On 26th September, 2012, the Dy. Superintendent of Police filed
a report stating that he searched for the accused in Chennai and
Mumbai but could not ascertain their whereabouts and accordingly
prayed for issuance of Non-Bailable Warrants (NBWs) which were
issued by the Judicial Magistrate, Erode on 27th September, 2012.
Based upon the NBWs, the Superintendent of Police issued a LookOut Circular on 9th January, 2013 against the appellant. Unaware
of all this, the appellant landed in India and was detained by the
immigration authorities. He filed a writ petition being W.P. No.
1764 of 2013 and on 22nd January, 2013 the High Court passed an
interim order restraining appellant’s detention and directed to post
the writ petition on 29th January, 2013. SLP filed against this order
18Page 19
was disposed of on 24th January, 2013 observing that the High Court
had itself posted the matter on 29th January, 2013. On 29th January,
2013, the High Court directed the appellant to surrender before the
trial court and pray for recall of NBWs vide order passed in
Criminal O.P. No. 2283 of 2013 filed by him for quashing the
chargesheet i.e. CC 162 of 2012. Crl.M.P. No. 3 of 2013 was also
filed in Criminal O.P. No. 2283 of 2013 alleging fraud committed by
the opposite party. On the same day, Crl.M.Ps. No. 3 in Criminal
O.P. No. 2166 of 2013 filed by Ramasamy Athappan & N. Athappan and
Criminal O.P. No.2282 of 2013 filed by Paul Rivett also came up
before the High Court and they were also directed to surrender before
the Judicial Magistrate No. III, Erode. Finally on 1st February, 2013
the High Court directed in respect of the appellant (petitioner in
Criminal O.P. No. 2283 of 2013), Ramasamy Athappan & N. Athappan
(petitioners in Criminal O.P. No. 2166 of 2013) and Paul Rivett
(petitioner in Criminal O.P. No. 2282 of 2013) as under:
“5. Considering the submissions made by all the parties
and also considering the facts and circumstances of the
case, the order dated 29.01.2013 is modified as follows:
“The petitioners are directed to appear before the
trial Court on or before 08.03.2013 and on such
appearance, the warrant, if any, shall be recalled.
If the offences are non-bailable in nature, the
petitioners are directed to file bail application
before the trial Court along with a bond for a sum of
Rs. 10,000/- (Rupees ten Thousand) with two sureties
each for like sum to the satisfaction of the trial
court and on such sureties, the trial court shall
19Page 20
dispose the bail applications on the same day. The
petitioners are at liberty to file to withdraw the
lookout application before this Court, if they are
advised to do so.
With the above directions, these petitions are disposed
of.”
15. The appellant surrendered on 4th February, 2013 and NBWs were
recalled by the Judicial Magistrate III, Erode. However, the
immigration authorities did not allow the appellant to leave India
on 5th February, 2013 stating that the court proceedings were pending.
In the meanwhile, writ petition being W.P. No. 2739 of 2013 was filed
by Ramaswamy Athappan praying to issue a writ of mandamus or any
other writ, order or direction in the nature of a writ of mandamus
forebearing the Superintendent of Police, Tiruppur (Tamilnadu) and
Ministry of Home Affairs, New Delhi including its constituent
officers at all airports from acting upon the non-bailable arrest
warrant dated 27th September, 2012 issued against the petitioner
(Ramaswamy Athappan) in respect of chargesheet CC No. 162 of 2012
pending on the file of Judicial Magistrate-III, Erode and the
alleged Look Out Notice dated 9th January, 2013 issued by the
Superintendent of Police and consequently from in any manner
restraining/restricting the petitioner’s entry into or exit out of
India. Similar writ petition being W.P. No. 2740 of 2013 was also
filed by the appellant – Chandran Ratnaswami who additionally prayed
20Page 21
for directions to DSP, SP, MHA and respondent No. 1 herein K.C.
Palanisamy to jointly and severally pay compensation of Rs. 10
crores to him for his illegal detention on 22nd January, 2013.
16. On 26th February, 2013, the High Court again directed the
appellant to appear before the trial court by passing the following
order in W.P. Nos. 2739 & 2740 of 2013 and Criminal O.P. Nos. 2166,
2282 and 2283 of 2013:
“10. Accordingly, Mr. Chandran Ratnaswami the accused
should appear before the learned Judicial Magistrate,
where CC No. 162/2012 is pending, within a period of two
weeks from today to comply with the following:
(i) he must file an affidavit of undertaking before the
court that he would not evade the due process of law and
ensure his appearance as and when required;
(ii) he should execute his own bond for a sum of
Rs.5,00,000/- (Rupees Five Lakhs only) and two cash
sureties of Rs.5,00,000/- (Rupees Five Lakhs only) each to
the satisfaction of the learned Judicial Magistrate-III,
Erode on the same day.
xxx xxx xxx
13. In this case, non-bailable warrant has been
recalled on 04.02.2013 on the accused surrendering before
the learned Magistrate. For non-compliance of the orders
passed by this Court, I am inclined to pass the above
order directing them to appear before the Court for the
purpose of filing an affidavit and furnishing surety.”
17. On 11th March, 2013, this Court granted stay of chargesheet
i.e. CC 162 of 2012 by an order passed in SLP(Crl.) Nos. 1947-1948 of
2013 which have been filed by Paul Rivett, an other accused in the
21Page 22
chargesheet CC 162 of 2012, challenging the orders dated 29th January
and 1st February, 2013 respectively in Criminal O.P. No. 2282 of 2013
and Crl.M.P. No.3 of 2013 in Criminal O.P. No. 2282 of 2013. Paul
Rivett is Law Officer in the Fairfax Group and is a Canadian citizen
and he has also been made an accused in the chargesheet CC 162 of
2012. NBWs as well as the Look Out Notice were issued against Paul
Rivett also.
18. On 12th March, 2013, the appellant prayed before the Single
Judge of High Court that he may be permitted to file affidavit of
undertaking there as proceedings in the trial court were stayed by
this Court which prayer was opposed by respondent No. 1 on 13th
March, 2013 urging that this Court was seized of the matter and the
Single Judge could not pass any order. However, the Single Judge
passed an order dated 14th March, 2013 in M.P. No. 2 of 2013 in W.P.
No. 2740 of 2013 filed by the appellant seeking recall of the Look
Out Notice and directed the appellant to file the affidavit of
undertaking before the High Court and to furnish security deposit of
Rs. 25 lakhs and permitted him to travel.
19. Challenging the above order of the Single Judge, respondent
No. 1 filed a writ appeal being W.A. No. 517 of 2013 which was
allowed by a Division Bench of the High Court vide order dated 22nd
March, 2013 setting aside the order dated 14th March, 2013 passed by
22Page 23
the Single Judge and observing:
“12. From the above narrated facts it is evident that the
first respondent has not filed bail application while
surrendering himself before the Judicial Magistrate
No.III, Erode, for recalling the Non-bailable Warrant and
the fact remains, till date he has not obtained any order
of anticipatory bail/bail.
13. The appellant challenged the interim order dated
26.2.2013 passed in Crl. O.P. No.2166, 2282 and 2283 of
2013 before the Hon’ble Supreme Court in SLP (C ) Nos.
1924-1926 of 2013. Accused No.2 in the said C.C. No.162 of
2012 viz. Paul Rivert filed SLP (Crl) No.1947-1948 of 2013
and prayed to quash the proceedings pending before the
Judicial Magistrate Court No.III, Erode and also prayed
for an interim order to dispense with hi9s personal
appearance before the Judicial Magistrate Court No.III,
Erode in connection with C.C. No.162 of 2012. The Hon’ble
Supreme Court refused to pass any interim order in the
applications filed by the appellant herein.
14. Insofar as the applications filed by Paul Rivert (A-
2), the Hon’ble Supreme Court refused to stay the order
passed by this Court dated 29.01.2013 and 01.02.2013 in
Crl. O.P. 2282 of 2013 and granted stay of the proceedings
in CC 162 of 2013 pending on the file of Judicial
Magistrate Court No.III, Erode, pending further orders.
The prayer for dispensing with his appearance was not
granted. The appellant thereafter filed Crl. M.P. Nos.5810
to 5812 of 2013 in SLP (Crl.) No.1924-1926 of 2013 and
prayed for restraining the first respondent from leaving
India, pending SLP direct the first respondent to
surrender his passport before the Judicial Magistrate
Court No.III, Erode No order was passed in the said
petition and the matter is adjourned to 3.4.2013 before the
Supreme Court for further hearing.
15. The first respondent thereafter moved this High Court
to pass orders in M.P. No.2 of 2013 which was allowed by
the leaned single Judge holding that since CC No.162 of
2012 is stayed by the Hon’ble Supreme Court and the NBW
having been recalled, the basis of the Lookout Notice has
gone.”
xxx xxx xxx
23Page 24
18. On a perusal of the prayer made in the writ petition,
it is evident that the first respondent has challenged the
Look-out Notice issued on 9.1.2013 and consequently prayed
for payment of compensation. The learned Single Judge in
the above miscellaneous petition has held that the Loo-out
Notice dated 9.1.2013 is cancelled and allowed the first
respondent to leave India after filing undertaking
affidavit and deposit a sum of Rs. 25 lakhs.
19. It is not in dispute that the very same issues
regarding the Look out Notice and the prayer to quash CC
No.162 of 2012 pending on the file of JM III Court, Erode,
which was filed at the instance of another accused (A-2
Paul Rivert) are posted for hearing before the Hon’ble
Supreme Court on 3.4.2013. Admittedly the matter is seized
of by the Hon’ble Supreme Court and only on interim stay of
the proceedings in CC No.162 of 2012 was ordered by the
Apex Court, that too at the instance of A-2 in the above
C.C. No. 162 of 2013, and the prayer to dispense with the
appearance of A-2 was not granted. If the order of the
learned single Judge dated 14.3.2013 is to be implemented
immediately, it may be difficult to secure the presence of
the first respondent in the criminal case.
xxx xxx xxx
22. On the above said background and in the light of the
decision cited supra, we are of the considered view that
the order passed by the learned single Judge in M.P. No.2
of 2013 in W.P. No.2740 of 2013 dated 14.3.2013 is liable to
be set aside, and accordingly set aside. The writ appeal
is allowed. Consequently, the first respondent is entitled
to get refund of the amount deposited by him on 15.3.2013
pursuant to the interim order of the learned single Judge
No costs. Connect M.P. No.1 of 2013 is closed.”
20. Hence, this appeal arising out of SLP(C) No. 13120 of 2013 by
the appellant – Chandran Ratnaswami. S.L.P.(Crl.) Nos. 3273-3274 of
2013 have also been filed by the same appellant (an accused in
Chargesheet CC 162 of 2013) against orders dated 29th January, 2013
and 1st February, 2013 respectively in Criminal O.P. No. 2283 of 2013
and Crl.M.P. No.3 of 2013 in Criminal O.P. No. 2283 of 2013. In
24Page 25
these SLPs, notice has not been issued and they are fresh ones.
21. Criminal Appeals arising out of S.L.P.(Crl.) Nos. 1924-1927 of
2013 have been filed by K.C. Palanisamy [respondent No. 1 in civil
appeal arising out of SLP(C) No. 13120 of 2013] challenging the order
dated 26th February, 2013 in Criminal O.P. Nos. 2283, 2282 and 2166 of
2013 and Civil Appeals arising out of S.L.P.(C) Nos. 11342-11343 of
2013 (D.No.7366/2013) have been filed challenging the order dated 26th
February, 2013 in Writ Petition Nos. 2739 and 2740 of 2013. In these
matters, the appellant – K.C. Palanisamy has challenged the said
High Court’s order by which the accused have been exempted from
filing proper bail application under the Criminal Procedure Code.
22. Contempt Petition (C) No. 166 of 2013 in S.L.P.(Crl.) No. 9853
of 2010 has been filed by the applicant – Chandran Ratnaswami for
wilful and deliberate violation and disobedience of order dated 22nd
November, 2010 by re-opening the closed FIR No. 7 of 2007. In this
contempt petition, notice has not been issued and it is a fresh one.
23. Mr. K.K. Venugopal, learned senior counsel appearing in SLP(C)
No.13120 of 2013 assailed the impugned order passed by the Division
Bench and also the orders passed in criminal proceedings as being
illegal and wholly without jurisdiction. Learned counsel drew our
attention to the entire facts of the case discussed hereinabove and
25Page 26
submitted that respondent No.1 filed a series of complaints which
have either been dismissed or quashed or stayed by the High Court or
this Court. Learned counsel submitted that the criminal courts
including the High Court have completely failed and erred in not
condemning respondent No.1 for approaching the courts to obstruct
the proceedings before the learned Single Judge of the Madras High
Court. Learned counsel submitted that the disputes arose with regard
to the Joint Venture Agreement between the parties have been finally
adjudicated by the Company Law Board and the High Court, but
respondent No.1 instead of complying with the directions of the
Company Law Board and High Court started filing frivolous criminal
cases against the appellant, which were either quashed or stayed by
the High Court. Learned counsel seriously assailed the conduct of
the Superintendent of Police, who directed reinvestigation in a
matter which was finally closed. Learned counsel submitted that the
Division Bench failed to note that the entire efforts of the
respondent in prosecuting the appellant are serious abuse of the
process of the Court. Learned counsel referred the allegations made
in the complaint petition and submitted that the whole object of
filing those complaints are nothing but to pressurize the appellant
and to harass him. Learned counsel then submitted that the whole
procedure in the proceedings initiated against the appellant is
violative of Article 21 of the Constitution of India. It was
contended that the conduct of respondent No.1 is deplorable and the
26Page 27
same is contemptuous amounting to deliberate obstruction of the
judicial proceedings and an abuse of the process of the Court.
Learned counsel lastly contended that the Division Bench has
erroneously set aside the order of the learned Single Judge on the
ground that the issue was pending in this Court.
24. Mr. Mukul Rohatgi, learned senior counsel appearing in
SLP(Crl.) Nos.1947-48 of 2013 after narrating the entire facts in the
case and the sequence of events submitted that the continuation of
criminal proceedings and the submission of the charge-sheet is the
result of the wrong understanding of the order by Superintendent of
Police, Tiruppur, who directed reinvestigation in a matter which was
closed. Learned counsel, therefore, submitted that the order for
reinvestigation passed by the Superintendent of Police is totally
illegal, void and contemptuous. It was contended that series of
complaints filed by respondent No.1 has either been dismissed or
quashed or stayed by the High Court and that respondent No.1 has the
propensity to abuse the legal process and utilize it as a tool to
wreak vengeance against others involved with the CEPL so that the
appellants’ Company does not pursue the Company Law Board
proceedings. Learned counsel submitted that it has been the modus
operandi of respondent No.1 to file false and bogus complaints and
utilize the same to harass and coerce the appellant. Lastly, learned
counsel submitted that the dispute raised by the respondent is
27Page 28
purely a civil dispute but it has been given the colour of criminal
act with the sole objective to implicate and detain these two
appellants, who are foreigners, in criminal cases and not to allow
them to travel outside India.
25. Mr. C.A. Sundaram, learned senior counsel appearing for one of
the appellants contended that it is a matter of record that every
single complaint filed by respondent No. 1 has been either dismissed
or quashed or stayed by the High Court or this Court and respondent
No. 1 has the propensity to abuse the legal process and utilize it
as a tool to wreak vengeance against others involved with CEPL so
that the appellant’s company does not pursue the Company Law Board
proceedings. Learned counsel contended that it has been the modus
operandi of respondent No. 1 to file false and bogus criminal
complaints and to utilize the same to harass and coerce the
appellant. Respondent No. 1 had malafidely filed a complaint CC
157/07 before the Judicial Magistrate, Perundurai. This was an
ingenious case where respondent No. 1 deliberately and fraudulently
signed and issued a cheque from the CEPL account to his own company,
namely, Cherraan Constructions Limited (CCL) for Rs. 5 crore (when
there was no transaction, liability to the payee or authority to
issue the cheque) and then caused the cheque to be dishonoured.
Promptly, CCL filed a Section 138 NI Act complaint against the
appellant and the other Director of CEPL etc. but did not make
28Page 29
respondent No. 1 an accused. The Madras High Court quashed this
complaint in Criminal O.P. No. 29737 of 2007.
26. Mr. Karthik Sheshadri, learned counsel appearing for the
respondent, on the other hand in support of continuance of criminal
proceedings, submitted that the respondent - complainant made out a
case in the complaint for prosecuting the appellant for cheating and
misappropriation of money. With regard to the filing of FIR being
No.7 of 2007, learned counsel submitted that immediately after the
FIR was lodged, the appellants approached the High Court of Madras
and got an order of stay for further investigation in Criminal O.P.
No. 12695/2007 and Criminal O.P. No.19384 of 2007 and consequently
all further investigation of the crime alleged came to be stayed.
Appellants also filed a case for quashing of the FIR before the
Madras High Court. Learned counsel vehemently argued that FIR
No.7/2007 was never closed at any point of time and, therefore, the
direction for the reinvestigation was perfectly justified. Based on
the investigation, charge-sheet was filed. According to the learned
counsel, the Superintendent of Police passed order for the
reinvestigation only because no investigation was ever conducted
because of the stay granted by the High Court. While justifying the
legality and validity of reinvestigation, learned counsel submitted
that even without permission of the Magistrate, Police Officer can
direct further investigation. In support of that, learned counsel
29Page 30
relied upon the decision of this Court in State of Bihar & Another
vs. J.A.C. Saldanna and Others, AIR 1980 SC 326. Lastly, learned
counsel submitted that when the charge-sheet makes out a case then
civil liberty is not the appropriate remedy for the aggrieved
person.
27. In the light of factual situation and having gone through the
entire facts and the sequence of events in the criminal proceedings
before the criminal courts and the orders passed time to time by
such courts, the question that falls for consideration is as to
whether continuance of such criminal proceedings is an abuse of the
process of the Court.
28. Before we embark upon dealing with the issue posed before us,
we would like to discuss the principles laid down by various courts
as to when continuance of criminal proceeding will amount to abuse
of process of the Court.
29. The doctrine of abuse of process of court and the remedy of
refusal to allow the trial to proceed is well-established and
recognized doctrine both by the English courts and courts in India.
There are some established principles of law which bar the trial
when there appears to be abuse of process of court. Lord Morris in
the case of Connelly vs. Director of Public Prosecutions, (1964) 2
30Page 31
All ER 401 (HL) observed: “There can be no doubt that a court which
is endowed with a particular jurisdiction has powers which are
necessary to enable it to act effectively within such jurisdiction.
A court must enjoy such powers in order to enforce its rule of
practice and to suppress any abuse of its process and to defeat any
attempted thwarting of its process”. “The power (which is
inherent in a court’s jurisdiction) to prevent abuse of its process
and to control its own procedure must in a criminal court include a
power to safeguard an accused person from oppression or prejudice.”
In his separate pronouncement, Lord Delvin in the same case observed
that where particular criminal proceedings constitute an abuse of
process, the court is empowered to refuse to allow the indictment to
proceed to trial.
30. In Hui Chi-Ming vs. The Queen [(1992) 1 AC 34 (PC)], the Privy
Council defined the word “abuse of process” as something so unfair
and wrong with the prosecution that the court should not allow a
prosecutor to proceed with what is, in all other respects, a
perfectly supportable case.
31. In the leading case of Bennett vs. Horseferry Road Magistrates’
Court, (1993) 3 All ER 138, on the application of abuse of process,
the court confirms that an abuse of process justifying the stay of
prosecution could arise in the following circumstances:
(i) where it would be impossible to give the accused a fair
31Page 32
trial; or
(ii) where it would amount to misuse/manipulation of process
because it offends the court’s sense of justice and propriety to
be asked to try the accused in the circumstances of the
particular case.
32. In R. vs. Derby Crown Court ex p Brooks, (1985) 80 Cr.App.R.
164, Lord Chief Justice Ormrod stated: “It may be an abuse of
process if either (a) the prosecution has manipulated or misused the
process of the court so as to deprive the defendant of a protection
provided by law or to take unfair advantage of a technicality, or (b)
on the balance of probability the defendant has been, or will be,
prejudiced in the preparation of conduct of his defence by delay on
the part of the prosecution which is unjustifiable.”
33. Lord Justice Neill in R. vs. Beckford, [1996] 1 Cr.App.R. 94:
[1995] R.T.R. 251 observed that: “The jurisdiction to stay can be
exercised in many different circumstances. Nevertheless two main
strands can be detected in the authorities: (a) cases where the
court concludes that the defendant cannot receive a fair trial; (b)
cases where the court concludes that it would be unfair for the
defendant to be tried.” What is unfair and wrong will be for the
court to determine on the individual facts of each case.
34. This Court in State of Karnataka vs. L. Muniswamy and Others,
32Page 33
(1977) 2 SCC 699 observed that the wholesome power under Section 482
Cr.P.C. entitles the High Court to quash a proceeding when it comes
to the conclusion that allowing the proceeding to continue would be
an abuse of the process of the Court or that the ends of justice
require that the proceeding ought to be quashed. The High Courts
have been invested with inherent powers, both in civil and criminal
matters, to achieve a salutary public purpose. A court proceeding
ought not to be permitted to degenerate into a weapon of harassment
or persecution. The Court observed in this case that ends of justice
are higher than the ends of mere law though justice must be
administered according to laws made by the legislature. It was
held in this case (at p.703 of SCC):
“7. …..
In the exercise of this wholesome power, the High Court is
entitled to quash a proceeding if it comes to the conclusion that allowing the proceeding to continue would be an
abuse of the process of the Court or that the ends of justice require that the proceeding ought to be quashed. The
saving of the High Court's inherent powers, both in civil
and criminal matters, is designed to achieve a salutary
public purpose which is that a court proceeding ought not
to be permitted to degenerate into a weapon of harassment
or persecution. In a criminal case, the veiled object behind a lame prosecution, the very nature of the material
on which the structure of the prosecution rests and the
like would justify the High Court in quashing the proceeding in the interest of justice. The ends of justice are
higher than the ends of mere law though justice has got to
be administered according to laws made by the legislature.
The compelling necessity for making these observations is
that without a proper realisation of the object and purpose of the provision which seeks to save the inherent
powers of the High Court to do justice, between the State
33Page 34
and its subjects, it would be impossible to appreciate the
width and contours of that salient jurisdiction.”
This case has been followed in a large number of subsequent cases of
this Court and other courts.
35. In State of Haryana and Others vs. Bhajan Lal and Others, 1992
Supp.(1) SCC 335, this Court in the backdrop of interpretation of
various relevant provisions of Cr.P.C. under Chapter XIV and of the
principles of law enunciated by this Court in a series of decisions
relating to the exercise of the extraordinary power under Article
226 of the Constitution of India or the inherent powers under Section 482 Cr.P.C. gave the following categories of cases by way of illustration wherein such power could be exercised either to prevent
abuse of the process of the court or otherwise to secure the ends of
justice. Thus, this Court made it clear that it may not be possible
to lay down any precise, clearly defined and sufficiently channelised
and inflexible guidelines or rigid formulae and to give an exhaustive list to myriad kinds of cases wherein such power should be exercised: (SCC pp. 378-79, para 102)
“102. (1) ………
(2) …..
(3) ……
(4) …..
(5) …..
(6)…..
(7) Where a criminal proceeding is manifestly attended
with mala fide and/or where the proceeding is maliciously
instituted with an ulterior motive for wreaking vengeance
34Page 35
on the accused and with a view to spite him due to private
and personal grudge.”
36. This Court in Zandu Pharmaceutical Works Ltd. and Others vs.
Mohd. Sharaful Haque and Another, (2005) 1 SCC 122 observed thus:
(SCC p. 128, para 8)
“8. … It would be an abuse of process of the court to allow any action which would result in injustice and prevent
promotion of justice. In exercise of the powers, court
would be justified to quash any proceeding if it finds
that initiation/continuance of it amounts to abuse of the
process of court or quashing of these proceedings would
otherwise serve the ends of justice. When no offence is
disclosed by the complaint, the court may examine the
question of fact. When a complaint is sought to be
quashed, it is permissible to look into the materials to
assess what the complainant has alleged and whether any
offence is made out even if the allegations are accepted
in toto.”
37. In Indian Oil Corpn. v. NEPC India Ltd. and Others, (2006) 6
SCC 736 this Court again cautioned about a growing tendency in business circles to convert purely civil disputes into criminal cases.
The Court noticed the prevalent impression that civil law remedies
are time consuming and do not adequately protect the interests of
lenders/creditors. The Court further observed that: (SCC p. 749,
para 13)
“13. … Any effort to settle civil disputes and claims,
which do not involve any criminal offence, by applying
pressure through criminal prosecution should be deprecated
and discouraged.”
35Page 36
38. In the case of Inder Mohan Goswami and Another vs. State of Uttaranchal and Others, (2007) 12 SCC 1, this Court after considering
series of decisions observed:
“46. The court must ensure that criminal prosecution
is not used as an instrument of harassment or for seeking
private vendetta or with an ulterior motive to pressurise
the accused. On analysis of the aforementioned cases, we
are of the opinion that it is neither possible nor desirable to lay down an inflexible rule that would govern the
exercise of inherent jurisdiction. Inherent jurisdiction
of the High Courts under Section 482 CrPC though wide has
to be exercised sparingly, carefully and with caution and
only when it is justified by the tests specifically laid
down in the statute itself and in the aforementioned
cases. In view of the settled legal position, the impugned
judgment cannot be sustained.
xxx xxx xxx
50. Civilised countries have recognised that liberty is
the most precious of all the human rights. The American
Declaration of Independence, 1776, French Declaration of
the Rights of Men and the Citizen, 1789, Universal Declaration of Human Rights and the International Covenant of
Civil and Political Rights, 1966 all speak with one voice—
liberty is the natural and inalienable right of every human being. Similarly, Article 21 of our Constitution proclaims that no one shall be deprived of his liberty except
in accordance with procedure prescribed by law.
51. The issuance of non-bailable warrants involves interference with personal liberty. Arrest and imprisonment
means deprivation of the most precious right of an individual. Therefore, the courts have to be extremely careful
before issuing non-bailable warrants.
52. Just as liberty is precious for an individual so is
the interest of the society in maintaining law and order.
Both are extremely important for the survival of a
civilised society. Sometimes in the larger interest of the
public and the State it becomes absolutely imperative to
36Page 37
curtail freedom of an individual for a certain period,
only then the non-bailable warrants should be issued.”
39. In G. Sagar Suri and Another vs. State of U.P. and Others,
(2000) 2 SCC 636, this Court observed that it is the duty and obligation of the criminal court to exercise a great deal of caution in
issuing the process, particularly when matters are essentially of
civil nature.
40. In the case of S.N. Sharma vs. Bipen Kumar Tiwari and Others,
AIR 1970 SC 786 (at p.789), this Court has stated thus:
“7. ….. It appears to us that, though the Code of
Criminal Procedure gives to the police unfettered power to
investigate all cases where they suspect that a cognizable
offence has been committed, in appropriate cases an
aggrieved person can always seek a remedy by invoking the
power of the High Court under Article 226 of the
Constitution under which, if the High Court could be
convinced that the power of investigation has been
exercised by a police officer mala fide, the High Court
can always issue a writ of mandamus restraining the police
officer from misusing his legal powers. The fact that the
Code does not contain any other provision giving power to
a Magistrate to stop investigation by the police cannot be
a ground for holding that such a power must be read in
Section 159 of the Code.”
41. In the case of State of West Bengal and Others vs. Swapan Kumar
Guha and Others, AIR 1982 SC 949 while examining the power of a
police officer in the field of investigation of a cognizable offence,
Chandrachud, C.J. has affirmed the view expressed by Mathew, J. and
37Page 38
observed as follows: (at p.958 of AIR)
“22. …. There is no such thing like unfettered discretion
in the realm of powers defined by statutes and indeed,
unlimited discretion in that sphere can become a ruthless
destroyer of personal freedom. The power to investigate
into cognizable offences must, therefore, be exercised
strictly on the condition on which it is granted by the
Code. ….”
42. In the case of Uma Shankar Gopalika vs. State of Bihar and
Another, (2005) 10 SCC 336, this Court has held as under:
“6. Now the question to be examined by us is as to
whether on the facts disclosed in the petition of
complaint any criminal offence whatsoever is made out much
less offences under Sections 420/120-B IPC. The only
allegation in the complaint petition against the accused
persons is that they assured the complainant that when
they receive the insurance claim amounting to Rs 4,20,000,
they would pay a sum of Rs 2,60,000 to the complainant out
of that but the same has never been paid. Apart from that
there is no other allegation in the petition of complaint.
It was pointed out on behalf of the complainant that the
accused fraudulently persuaded the complainant to agree so
that the accused persons may take steps for moving the
Consumer Forum in relation to the claim of Rs 4,20,000. It
is well settled that every 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 very inception. If the
intention to cheat has developed later on, the same cannot
amount to cheating. In the present case it has nowhere
been stated that at the very inception there was any
intention on behalf of the accused persons to cheat which
is a condition precedent for an offence under Section 420
IPC.
7. In our view petition of complaint does 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
38Page 39
constituted suit. In our opinion, in view of these facts
allowing the police investigation to continue would amount
to an abuse of the process of court and to prevent the
same it was just and expedient for the High Court to quash
the same by exercising the powers under Section 482 CrPC
which it has erroneously refused.”
43. Coming back to the instant case from the affidavits filed by the
parties, the facts which come into light are that the appellantChandran Ratnaswami settled in Canada since 1974. He is holding
executive posts in various companies based in Canada and has made
investment in India worth more than 1 billion USD. He is also a
Director on the Board of various renowned companies including ORE
Holdings Limited based in Mauritius. The said company ORE entered
into a Joint Venture Agreement (JVA) with C.G. Holdings Private
Limited (respondent No.1 – K.C. Palanisamy’s Company) and N. Athappan
for constructing and developing a hotel property, shopping complex
etc. owned by Cherraan Properties Limited (CPL) and Vasantha Mills
Limited (VML). ORE invested Rs.75 crores and got 45% in Cheran
Enterprises Private Limited (CEPL). Athappan invested Rs. 4 crores
and got 10%.
44. Disputes arose between the parties when respondent No.1 alleged
to have transferred shares of CPL and VML to CEPL instead of bringing
money and got 45% shareholdings in CEPL. Respondent No.1 allegedly
swindled the said 75 crores deposited by the appellant Company ORE
and transferred the immovable assets of CPL and VML, subsidiaries of
39Page 40
CEPL.
Consequently, ORE filed Company Petition before the Company Law
Board on account of alleged acts of oppression and mismanagement
indulged by respondent No.1. The matter before the Company Law Board
was hotly contested and finally the Company Law Board by order dated
13th August, 2008 directed respondent No.1, CG Holdings and CEPL to
return the investment of appellant Company ORE and Athappan with 8%
interest. On payment of money it was directed that respondent K.C.
Palanisamy will take control of CEPL and its subsidiaries.
Clarification Petition was also disposed of by Company Law Board on
13th August, 2008.
45. Both the parties moved the Madras High Court by filing appeals
and those Company Appeals were finally disposed of on 5th August,
2011 and the order passed by the Company Law Board was confirmed.
The Division Bench of the Madras High Court while confirming
the view taken by the Company Law Board held that both parties
cannot jointly run the business and, therefore, to ensure smooth
exit of ORE and Athappan, the Company Law Board passed the order.
The said order of the Division Bench passed in appeals, however, was
not challenged by respondent No.1 K.C. Palanisamy.
46. The appellant filed execution case, which is pending. It
further appears that a suit was also filed being O.S.No.90 of 2007
40Page 41
before the District Munsiff Court.
47. Instead of complying with the order of the Company Law Board
and the directions and observations made by the Madras High Court in
the aforementioned Company Appeals, respondent No.1 started filing
several criminal complaints against the appellant. The first
complaint was filed by the respondent before the Economic Offences
Wing, Chennai, alleging that ORE invested only Rs. 75 crores and for
not bringing Rs. 300 crores in Joint Venture Company. The petition
filed in the High Court seeking direction to EOW to take action on
the complaint was, however, withdrawn. Respondent No.1 then filed a
second complaint before the Judicial Magistrate, Perundurai which
was dismissed after examining respondent No.1 and his two witnesses.
The respondent then filed another complaint before the Judicial
Magistrate, Kangeyam without disclosing the dismissal of the earlier
complaint filed before the Judicial Magistrate, Perundurai. The
said complaint finally came to be registered as FIR No.7 of 2007.
The appellant moved the High Court for quashing the said FIR. In
the said petition, the High Court, after noticing the similar
complaint filed earlier by respondent No.1 in the court of Judicial
Magistrate, Perundurai, finally observed that the second criminal
proceeding initiated by respondent No.1 has no merit. The court
further passed a stringent remark against the conduct of respondent
No.1 for filing cases on the same issue.
41Page 42
48. Respondent No.1 then moved this Court by filing SLP(Crl.)
No.9853 of 2010 alleging the pendency of the protest petition and
non-closure of the criminal case. This Court refused to interfere
with the order but observed that if any protest petition is pending
the same shall be disposed of in accordance with law.
49. Curiously enough, on the report of Superintendent of Police,
Tiruppur, the criminal case in FIR No.7 of 2007 was directed to be
reopened for re-investigation. On this FIR, the Magistrate before
whom the criminal case was pending passed various orders which were
time to time challenged by the aggrieved party before the High Court
and before this Court. Simultaneously, the appellant also filed
counter criminal cases against the respondent which were also
proceeded and are pending in those criminal courts.
50. In a nutshell, the dispute arising out of Joint Venture
Agreement has been fully and finally settled by the Company Law Board
and also the High Court and several directions were issued for
compliance including the return of the amount by respondent No.1 to
the appellant and to become the sole owner of those companies.
51. It is pertinent to mention here that in course of arguments the
action of Superintendent of Police was challenged by the learned
42Page 43
counsel appearing for the appellant. In order to justify the action
of the Superintendent of Police in directing the investigation, Mr.
P.S. Narsimhan, learned senior counsel submitted that on the
instruction of Inspector General of Police such reinvestigation was
directed by the Superintendent of Police. However, no such letter of
instruction has been produced before us by the learned counsel. At
this juncture, we reiterate that the power of Police Officers in the
field of investigation of a cognizable offence is not unlimited.
Hence, the power during the investigation must be exercised strictly
within the limitation prescribed in the Code of Criminal Procedure
and such power may not result in destroying the personal freedom of
a citizen.
52. As noticed above, after the dispute was finally settled by the
Company Law Board and the Madras High Court in appeal, the
respondent approached the Economic Offences Wing, who refused to
entertain the complaint.
The respondent then moved the complaint
before the Judicial Magistrate, Perundurai for initiating criminal
action against the appellant for breach of contract, which was
dismissed by the Magistrate holding the same as nothing but to take
vengeance. The Magistrate further held that if the conditions of the
agreement are violated the respondent has to seek remedy under the
Contract Act or the Company Law instead of filing criminal case.
Suppressing the said complaint and the order passed by the
43Page 44
Magistrate, the respondent tried again by filing a complaint before
the Judicial Magistrate, Kangayam for initiating criminal action
against the appellants for the breach of contract and conspiracy.
Although the FIR was registered, but a closure report as a mistake
of fact was prepared.
The High Court while passing the order
observed that the Court would frown upon the conduct of the
complainant in indulging in repeated harassment of the petitioners appellants.
Irrespective of the dispute with regard to the closure
of the case, a fresh life was given to the criminal case at the
instance of Superintendent of Police, who directed re-investigation and in course of the said criminal proceeding irrespective of FIRNo.7/2007 the appellants were harassed and on technicalities various orders for surrender, arrest and their detention had been passed.
As noticed above, in the three writ petitions filed by respondent
No.1, though not against the appellant but against the C.B.I. in
respect of different transactions, the High Court dismissing all
those writ petitions observed that the modus operandi of the writ
petitioner (respondent No.1) was to defraud the person or entity and
thereafter approach the Courts with multiple proceedings in order to
distract attention from his own misdeeds.
53. Neither the High Court nor the Magisterial Court have ever
applied their mind and considered the conduct of the respondent and
continuance of criminal proceedings in respect of the disputes,
44Page 45
which are civil in nature and finally adjudicated by the competent
authority i.e. the Company Law Board and the High Court in appeal.
54. We are of the definite opinion that the complainant has
manipulated and misused the process of Court so as to deprive the appellants from their basic right to move free anywhere inside or outside the country.
Moreover, it would be unfair if the appellants
are to be tried in such criminal proceedings arising out of alleged
breach of a Joint Venture Agreement specially when such disputes have been finally resolved by the Court of competent jurisdiction.
Hence, allowing the criminal proceedings arising out of FIR No.7 of 2007 to continue would be an abuse of the process of the Court and, therefore, for the ends of justice such proceedings ought to be quashed.
Since the High Court failed to look into this aspect of
the matter while passing the impugned order, in our opinion, the
same could not be sustained in law.
45Page 46
55. For the reasons aforesaid, the appeals arising out of SLP (C)
No.13120 of 2013, SLP (Crl.) Nos.3273-3274 of 2013 and SLP (Crl.)
Nos.1947-1948 of 2013 are allowed, whereas the appeals arising out of
SLP (Crl.) Nos.1924-1926 of 2013 and SLP (C) Nos.11342-11343 of 2013
are dismissed. There shall be no order as to costs.
56. Although we do not appreciate the action of a senior
Superintendent of Police, but in view of the order passed in these
appeals, we do not want to proceed any further in Contempt Petition
(C) No.166 of 2013, which stands disposed of.
……………………………..J.
(P. Sathasivam)
……………………………..J.
(M.Y. Eqbal)
New Delhi,
May 09, 2013.
46Page 47
ITEM NO. IE COURT NO.2 SECTION XII
(FOR JUDGMENT)
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
CIVIL APPEAL NO.4540 OF 2013 @
PETITION FOR SPECIAL LEAVE TO APPEAL (CIVIL) NO.13120/2013
CHANDRAN RATNASWAMI .. Appellant(s)
Versus
K.C. PALANISAMY & ORS .. Respondent(s)
WITH
CRIMINAL APPEAL NOs.736-737 OF 2013 @ SLP(CRL.)NOs. 3273-3274/2013
CRIMINAL APPEAL NOs.731-733 OF 2013 @ SLP(CRL.)NOs.1924-1926/2013
CIVIL APPEAL NO.4537-4538 OF 2013 @ SLP(C)NOs.11342-11343/2013
CRIMINAL APPEAL NO.734-735 OF 2013 @ SLP(CRL.)NOs.1947-1948/2013
CONTEMPT PETITION(CIVIL) NO.. 166/2013 IN SLP(CRL.)NO.9853 OF 2010
DATE : 09/05/2013 These matters were called on for
pronouncement of judgment today.
For Appellant(s) Mr. E.C. Agrawala,Adv.
For Respondent(s) M/s. Mahalakshmi Balaji & Co.
Mr. Subramonium Prasad,AAG
Mr. M.Yogesh Kanna,Adv.
Mr. A.Santha Kumaran,Adv.
Ms. Sasi Kala,Adv.
Mr. Senthil Jagadessan,Adv.
--- ...2/-
-2-
47Page 48
Hon'ble Mr. Justice M.Y. Eqbal pronounced the
judgment of the Bench comprising Hon'ble Mr. Justice P.
Sathasivam and His Lordship.
Leave granted.
The appeals arising out of SLP (C) No.13120 of
2013, SLP (Crl.) Nos.3273-3274 of 2013 and SLP (Crl.)
Nos.1947-1948 of 2013 are allowed, whereas the appeals
arising out of SLP (Crl.) Nos.1924-1926 of 2013 and SLP
(C) Nos.11342-11343 of 2013 are dismissed. There shall
be no order as to costs.
Although we do not appreciate the action of a
senior Superintendent of Police, but in view of the
order passed in these appeals, we do not want to
proceed any further in Contempt Petition (C) No.166 of
2013, which stands disposed of.
[ Madhu Bala ]
Sr.PA
[ Savita Sainani ]
Court Master
[ Signed reportable judgment is placed on the file ]
48
