Criminal Petition Nos. 9776 and 9778 of 2016. Case: Starship Equity Holding Limited and Ors. Vs State of Karnataka and Ors.. High Court of Karnataka (India)

Case NumberCriminal Petition Nos. 9776 and 9778 of 2016
CounselFor Appellant: K.G. Raghavan, Senior Advocate for Nischal Dev B.R., Advocate and For Respondents: Chetan Desai, Government Pleader
JudgesAnand Byrareddy, J.
IssueCode of Criminal Procedure, 1973 (CrPC) - Sections 100, 93, 99; Indian Evidence Act, 1872 - Section 92; Indian Penal Code 1860, (IPC) - Sections 108A, 109, 120B, 406, 409, 420; Negotiable Instruments Act, 1881 - Section 46
Judgement DateMarch 14, 2017
CourtHigh Court of Karnataka (India)


Anand Byrareddy, J.

  1. These petitions are heard and disposed of together for the sake of convenience.

  2. The facts of the case and the background in which these petitions are filed are said to be as follows:

    Tamilnadu Mercantile Bank is an Indian bank, registered under the Banking Regulation Act, 1949. The shares of the bank are not listed on the stock exchanges and as such are not freely available in the market. It transpires that an intended transfer of a major portion of the share holding in favour of a private group of companies was not permitted by the Reserve Bank of India. The said group of companies had hence agreed to transfer their share holding to another group of which, M/s. Vector Program Pvt. Ltd., a company incorporated under the Companies Act, 1956 and having its registered office at Bangalore, (Hereinafter referred to as 'Vector', for brevity) was said to be an associate. The group comprising Vector and others, however, faced regulatory issues in the transfer of the shares proposed to be acquired. It is relevant that the sale of the shares are said to have been facilitated by a merchant banker, M/s. Corsair Investments LLC, a limited liability company based in New York, USA. (Hereinafter referred to as 'Corsair', for brevity). One of the investors identified by Corsair was the petitioner, in the first of these cases, which is said to be a company incorporated in Mauritius. (Hereinafter referred to as 'Starship', for brevity). It claims to hold 13455 shares of M/s. Tamilnadu Mercantile Bank (Hereinafter referred to as 'TMB', for brevity). The same are said to have been purchased from Vector, arrayed as respondent No. 3 herein. The said shares are said to be held in escrow by M/s. Standard Chartered Bank, Mumbai, (Hereinafter referred to as 'SCB', for brevity, and also represented by the petitioner in the second of these petitions, as its Chief Executive Officer.

    It is said that under an agreement dated 12.5.2007,Vector had agreed to transfer the above mentioned shares to such entities as may be designated by Corsair. And in this regard, in terms of the agreement is said to have placed the shares in escrow with SCB, contingent upon receiving the necessary permissions from the Reserve Bank of India for the transfer to be complete. The agreement was said to be irrevocable, at the instance of Vector. This was especially so as Vector is said to have received the entire sale consideration of Rs. 32.52 crore, as on 15.5.2007 from Starship.

    It then transpires that the transaction was not completed even as late as the year 2011, when Vector chose to terminate the contract and is said to have filed a civil suit in O.S.988/2011 on the file of High of Judicature at Mumbai, seeking delivery of the share certificates which were held in escrow by SCB and also seeking a restraint on the defendants therein from dealing with the said shares in any manner. An interlocutory motion, seeking interim relief in this regard was said to have been denied by the court. As against such Order, Vector is said to have preferred an appeal before a Division Bench of the court, in Appeal No. 468/2011. The Division Bench is said to have directed that the shares would be held in escrow. However, the petitioner is said to have been granted leave to move the learned Single Judge for a variation of the Order in the event of change in circumstances. It is stated that petitioner had accordingly filed an application seeking to vacate the said order and permit transfer of the said shares, under a Notice of Motion No. 178/2015. The Notice of Motion No. 1399/2011, filed by Vector, which was directed to be heard by the Single judge, with expedition was said to have been heard and dismissed holding that Vector was not entitled to the return of shares and that it could not obstruct the petitioner from getting custody of the shares as the beneficial owner.

    Vector is said to have preferred an appeal in Appeal (L) No. 662/2015 against the above Order dated 31.7.2015, and it is stated that there were interim orders passed in the appeal whereby the escrow arrangement with SCB was continued.

    In the meanwhile, in separate proceedings at Chennai, between the share holders of TMB and TMB, the Madras High Court, vide order dated 26.11.2015, is said to have directed the Chairman, TMB to conduct its 88th to 93rd Annual General Meetings on 29.1.2016. The petitioner is then said to have moved the Bombay High Court in Appeal No. 662/2015, seeking permission to exercise voting rights in respect of the subject shares at the proposed AGM of TMB. It transpires that Vector had undertaken, at the hearing, that it would not vote on the said shares. However, in violation of the undertaking, it is alleged that Vector had voted at the meeting. This had led the petitioner to seek punishment of Vector for disobedience of the order recording the undertaking given earlier. The High Court had thus summarily dismissed the appeal in view of the admitted breach committed by Vector, by an order dated 9.12.2016. The petitioner contends it was thus entitled to receive the shares from SCB. On a request made to SCB in this regard, it transpires that SCB wanted a certified copy of the Order of the court in order to release the shares.

    It is at this point of time that a criminal complaint dated 16.12.2016 is said to have been filed by Vector alleging offences punishable under Sections 109, 120B, 406, 108A, 420 and 409 of the Indian Penal Code, 1860, (Hereinafter referred to as 'the IPC, for brevity) before the I Additional Chief Metropolitan Magistrate, Bangalore. The petitioner was said to have been arrayed as accused No. 5 therein. And pursuant to a search warrant issued by the court, the Bangalore police are said to have visited the office of SCB at Mumbai, where the shares were kept in custody and had seized the same, as on 21.12.2016.

    It is in the above background that the first of these petitions is filed.

  3. The second of these petitions is filed by the Chief Executive Officer of SCB, Mumbai, also being aggrieved by the registration of the FIR by the Indira Nagar Police, Bangalore, at the instance of Vector. It is seen that the petitioner herein and two other officers of SCB are named as Accused No. 1 to 3 in the said complaint.

  4. The learned Senior Advocate, Shri K.G. Raghavan, appearing for the counsel for the petitioner, in the first of these petitions would seek to point out at the outset that the complaint by Vector is a brazen attempt to nullify the express findings of a learned Single Judge of the Bombay High Court, in Notice of Motion 1399/2011 in Suit No. 988/2011, dated 31.7.2011. And it is an order which has been confirmed in appeal by a Division Bench of the said court, in Appeal No. 662/2015, dated 9.12.2016. It is close on the heels of that final order by the Bombay High Court - confirming the right of the petitioner to the shares in question, that the criminal case filed on 16.12.2016, has been instituted, while grossly suppressing the prolonged proceedings before the Bombay High Court. It is hence emphasized that the mala fides on the part of Vector is writ large.

    It is pointed out that the signatory to the complaint, who represented Vector before the Bombay High Court had been hauled up for gross violation of an undertaking given to that court and had been mulcted with a fine of Rs. 1 lakh.

    Shri Raghavan seeks to highlight the speed at which the criminal proceedings have progressed. It is stated that immediately on registration of the FIR, the same has been transferred to the Criminal Investigation Department as on 17.12.2016 and an Investigation Officer, respondent No. 1 herein, had been named on 19.12.2016. On the very date of appointment, he has filed an application under Section 93 read with Section 100 of the Code of Criminal Procedure, 1973 (hereinafter referred to as 'the Cr.P.C, for brevity) before the Court of I ACMM, Bangalore, seeking permission to search the premises of SCB, Mumbai. It is asserted that it is evident that the application has been filed without even a cursory investigation.

    It is further pointed out that the search warrant only authorized search of the premises and not seizure of any property, and that in fact there were no details provided of the property to be seized. This, it is asserted, is in complete violation of Section 99 CrPC. It is contended that the search and seizure carried out on the premises of SCB, Mumbai as on 21.12.2016 is hence illegal.

    It is contended that the mala fides on the part of Vector in filing the criminal case is also apparent from the circumstance that the allegations which form the basis of the complaint are significantly not stated by Vector in the pending suit before the Bombay High Court.

    It is also pointed out that it is indeed odd and unusual that the complainant and his counsel had accompanied the investigating officer to Mumbai and were even said to be present at the time of search and seizure.

    Shri Raghavan seeks to highlight the following material suppression of facts in the complaint by Vector.

    Not only has the complainant suppressed the series of orders of the Bombay High court, but also the primary circumstance that the complainant has received the entire sale consideration of Rs. 32.52 crore from the petitioner through Corsair and that the beneficial ownership in the shares had passed on to the petitioner as early as in the year 2007.

    Vector's agreement to sell the shares is recorded in a letter dated 12.5.2007 and on receipt of the sale consideration which is admitted, there is no further right in Vector over the shares in question. The obligation and responsibility of obtaining any permission from any authority, for the transfer is with the petitioner and is at the risk of the petitioner.

    That the terms of the above said agreement clearly indicates that Vector was placing the shares in escrow, unconditionally and irrevocably with SCB. These terms had come in...

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