IN THE HIGH COURT OF BOMBAY AT GOA. CRIMINAL WRIT PETITION NOS. 12, 13, 17 AND 18 OF 2002. CRIMINAL WRIT PETITION NO. 12 OF 2002. Sahibzada Syed Habib-ur-Rehman, r/at A-9, USO Road, Qutub Institutional Area, New Delhi. ... Petitioner. Versus 1. V.S. Dempo & Co. Ltd., ‘Dempo House’, Campal, Panaji. 2. ITC Limited. ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 3. Yogesh Chander Deveshwar, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 4. Anup Singh, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 5. Bishwadev Mitter, ‘Virginia House, 37 J.L. Nehru Road, Kolkata. 6. Saurav Misra, Grasim Industries (Cement Division), Dalamal House, 8th Floor, Nariman Point, Mumbai. 7. Feroze R. Vevaina, Sethana Construction Pvt. Ltd., Grands Building, 3rd Floor, Colaba, Mumbai. 8. Ravi Ramchandran, Taib Capital Corporation Ltd., 9th Floor, Vidyut Chamber, M.G. Road, Bangalore. 9. D. Narain, Monsanto (India) Ltd., Ahura Centre, 5th Floor, Mahakali Caves Road, Andheri (E), Mumbai. 10.Girish Nadkarni, Taib Capital Corporation Ltd., 123 Maker Chambers VI, Nariman Point, Mumbai. 11.State of Goa through P.P., Panaji. ... Respondents. Mr. N. Natarajan, Senior Advocate with Mr. A.D. Bhobe, Advocate for the Petitioner. Mr. Shirish Gupte, Senior Advocate with Mr. M.P. Rao and Mr. M. Tellis, Advocates for the Respondent no. 1. Mr. V.P. Thali, Addl. Advocate General for the Respondent no. 11 State. - 2 - CRIMINAL WRIT PETITION NO. 13 OF 2002. Yogesh Chander Deveshwar, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. ... Petitioner. Versus 1. V.S. Dempo & Co. Ltd., ‘Dempo House’, Campal, Panaji. 2. ITC Limited. ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 3. Sahibzada Syed Habib-ur-Rehman, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 4. Anup Singh, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 5. Bishwadev Mitter, ‘Virginia House, 37 J.L. Nehru Road, Kolkata. 6. Saurav Misra, Grasim Industries (Cement Division), Dalamal House, 8th Floor, Nariman Point, Mumbai. 7. Feroze R. Vevaina, Sethana Construction Pvt. Ltd., Grands Building, 3rd Floor, Colaba, Mumbai. 8. Ravi Ramchandran, Taib Capital Corporation Ltd., 9th Floor, Vidyut Chamber, M.G. Road, Bangalore. 9. D. Narain, Monsanto (India) Ltd., Ahura Centre, 5th Floor, Mahakali Caves Road, Andheri (E), Mumbai. 10.Girish Nadkarni, Taib Capital Corporation Ltd., 123 Maker Chambers VI, Nariman Point, Mumbai. 11.State of Goa through P.P., Panaji. Mr. Amit Dessai with Mr. A.D. Bhobe, Advocates for the Petitioner. Mr. Shirish Gupte, Senior Advocate with Mr. M.P. Rao and Mr. M. Tellis, Advocates for the Respondent no. 1. Mr. V.P. Thali, Addl. Advocate General for the Respondent no. 11 State. - 3 - CRIMINAL WRIT PETITION NO. 17 OF 2002. Anup Singh, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. ... Petitioner. Versus 1. V.S. Dempo & Co. Ltd., ‘Dempo House’, Campal, Panaji. 2. ITC Limited. ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 3. Yogesh Chander Deveshwar, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 4. Sahibzada Syed Habib-ur-Rehman, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 5. Biswadev Mitter, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 6. Saurav Misra, Grasim Industries (Cement Division), Dalamal House, 8th Floor, Nariman Point, Mumbai. 7. Feroze R. Vevaina, Sethana Construction Pvt. Ltd., Grands Building, 3rd Floor, Colaba, Mumbai. 8. Ravi Ramchandran, Taib Capital Corporation Ltd., 9th Floor, Vidyut Chamber, M.G. Road, Bangalore. 9. D. Narain, Monsanto (India) Ltd., Ahura Centre, 5th Floor, Mahakali Caves Road, Andheri (E), Mumbai. 10.Girish Nadkarni, Taib Capital Corporation Ltd., 123 Maker Chambers VI, Nariman Point, Mumbai. 11.State of Goa through P.P., Panaji. Mr. N. Natarajan, Senior Advocate with Mr. A.D. Bhobe, Advocate for the Petitioner. Mr. Shirish Gupte, Senior Advocate with Mr. M.P. Rao and Mr. M. Tellis, Advocates for the Respondent no. 1. Mr. V.P. Thali, Addl. Advocate General for the Respondent no. 11 State. CRIMINAL WRIT PETITION NO. 18 OF 2002. Biswadev Mitter, 8, Earle - 4 - Street, Kolkata. ... Petitioner. Versus 1. V.S. Dempo & Co. Ltd., ‘Dempo House’, Campal, Panaji. 2. ITC Limited. ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 3. Yogesh Chander Deveshwar, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 4. Sahibzada Syed Habib-ur-Rehman, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 5. Anup Singh, ‘Virginia House’, 37 J.L. Nehru Road, Kolkata. 6. Saurav Misra, Grasim Industries (Cement Division), Dalamal House, 8th Floor, Nariman Point, Mumbai. 7. Feroze R. Vevaina, Sethana Construction Pvt. Ltd., Grands Building, 3rd Floor, Colaba, Mumbai. 8. Ravi Ramchandran, Taib Capital Corporation Ltd., 9th Floor, Vidyut Chamber, M.G. Road, Bangalore. 9. D. Narain, Monsanto (India) Ltd., Ahura Centre, 5th Floor, Mahakali Caves Road, Andheri (E), Mumbai. 10.Girish Nadkarni, Taib Capital Corporation Ltd., 123 Maker Chambers VI, Nariman Point, Mumbai. 11.State of Goa through P.P., Panaji. Mr. Amit Dessai with Mr. A.D. Bhobe, Advocates for the Petitioner. Mr. Shirish Gupte, Senior Advocate with Mr. M.P. Rao and Mr. M. Tellis, Advocates for the Respondent no. 1. Mr. V.P. Thali, Addl. Advocate General for the Respondent no. 11 State. Coram : P.V. HARDAS, J. Date : 7th February 2003. - 5 - ORAL JUDGMENT. These Writ Petitions have been filed by some of the original accused in Private Criminal Case No. 39/2001/C, pending on the file of the Judicial Magistrate, First Class, Panaji, challenging the Order, dated 10th September 2001, passed by the learned trial Court, issuing process against the petitioners and the other accused for offences punishable under Sections 120-B, 406, 409, 420 read with Sections 34 and 109 of the Indian Penal Code. 2. The petitioner in Criminal Writ Petition No. 12 of 2002 is original accused no. 3, the petitioner in Criminal Writ Petition No. 13 of 2002 is original accused no. 2, the petitioner in Criminal Writ Petition No. 17 of 2002 is original accused no. 4 and the petitioner in Criminal Writ Petition No. 18 of 2002 is original accused no. 5. With the consent of the counsel for the parties these Petitions are being decided finally at the stage of admission. 3. In order to understand the rival submissions, it will be useful to make a detailed reference to the facts as are disclosed in the complaint filed before the learned trial Court. The petitioners have annexed the copy of the complaint. The relevant paragraphs read - 6 - thus:- "5. The Complainant deployed funds since the year 1992, with the Accused No. 1 and its associates and group companies. The Accused No. 1 always enjoyed a highest rating in the financial sector with rating agencies of repute. Therefore the investments made by the Complainant were always considered safe whilst investing with the Accused No. 1 and its associates and group companies. Apart from the rating, the Accused No. 1 was a company with diverse interest and with a monopoly in tobacco related products, and was internationally recognized as one of the efficiently managed companies. The investments of the Complainant were normally in Inter Corporate Deposits, Bills Discounting Facility and Bills Rediscounting Facility, with the Accused No. 1 and its following associates and group companies: 1. ITC Agro Tech Ltd. 2. ITC Classic Finance Ltd. 3. Sage Investments Ltd. 4. Summit Investments Ltd. 5. Pinnacle Investments Ltd. 6. ITC Agro Tech Finance and Investments Ltd. 7. All India Tobacco Ltd. 8. Trans Global Impex Ltd. 9. VST Investments Ltd. 10.Tobacco Diversification Investments Ltd. The Accused No. 1 was controlling the aforesaid group companies through shareholdings and/or through its nominee Directors on the Board of Directors of the group or associate companies. 6. Accused No. 1 is a Company formed and registered under the Companies Act 1956 having its Registered Office at the address mentioned hereinabove. The Accused No. 2 at all material - 7 - times, is the Whole Time Chairman of the Accused No. 1 and the position is equivalent to that of a Managing Director of a Company under the Companies Act, 1956. Accused Nos. 6 and 7 at the relevant time were the Whole Time Deputy Chairmen of Accused No. 1. The Accused Nos. 6 and 7 were also the in-charge of the Financial Services Division (hereinafter called FSD) at the relevant time when the transactions took place and the default thereof, between the Accused No. 1 and the Complainant. Accused Nos. 3, 4 and 5 besides Accused No. 1, 6 and 7, as Whole-time Directors, constituted the Corporate management Committee of the Accused No. 1. All decisions pertaining to the FSD located at Mumbai, were taken with the knowledge and consent and approval of the Accused Nos. 2 to 7. Accused No. 8 at the relevant time was the head of the FSD at Mumbai of the Accused No. 1. Accused No. 8 was an employee of the Accused No. 1 and also managed the secretarial and legal matters of the FSD of the Accused No. 1. Accused No. 8 was also the Director of ITC Agro Tech Finance and Investments Ltd., (hereinafter called ITC ATF) and VST Investments Ltd., (hereinafter called VST) as a nominee of Accused No. 1. The Accused No. 9 was the in-charge of operations of the FSD at Mumbai of the Accused No. 1 at the relevant time. The Accused No. 9 was also the Executive Director of ITC ATF and a Director of VST as a nominee of Accused No. 1. The Accused No. 10 was an employee of Accused No. 1 and was working with the FSD of the Accused No. 1 at Mumbai since 1995. The Accused No. 10 was assisting the Accused Nos. 8 and 9 in all financial operations/dealings of the Accused No. 1’s FSD at Mumbai and was aware of the transactions between Accused No. 1 and the Complainant and more particularly participated in bringing about the transaction which caused wrongful gain to the Accused No. 1 and wrongful loss to the Complainant. 7. At all material times to the present complaint, the Complainant was - 8 - dealing exclusively with the FSD of Accused No. 1 at Mumbai for the deployment of its funds both with Accused No. 1 as well as with the Associate and Group Companies of Accused No. 1. The Accused No. 1 carried on its Financial Services business in Mumbai through its FSD at its office located at 18th floor, World Trade Centre, Cuffe Parade, Mumbai 400 005. The FSD of Accused No. 1 at Mumbai was inter alia managed at the relevant time by Accused Nos. 8, 9 and 10 under the supervision of Accused Nos. 6 and 7. Apart from the aforesaid Accused, the Complainant also dealt with certain other Senior Managers of Accused No. 1 particularly Mr. Shriram Khattar and Mr. Ajay Srinivasan. 8. The Complainant was at all material times only interested in the deployment of surplus funds with Companies with sound financials. As per the arrangement with Accused No. 1, the FSD of Accused No. 1 rendered itself liable and responsible not only for the deployment of funds of the Complainant with Accused No. 1 and its Associate and Group Companies but also for the return of such deployed funds alongwith accruals. As per the practice that was followed between the Complainant and Accused No. 1 over a large number of years, the Complainant was never required to meet or deal with any of the Managers/Executives of Associate/Group Companies of the Accused No. 1 in which funds of the Complainant were deployed nor was the Complainant ever required to follow up the repayment or the return of its deployed funds with accruals from such Group/Associate Companies. The deployment of funds by the Complainant with Accused No. 1 and or its Associate/Group Companies were always for a short tenor generally not exceeding a period of 90 days. 9. The Complainant was deploying its surplus funds in short term investments with reputed companies for which it had used a financial intermediary in one Shri Gaurang - 9 - Gandhi. In the year 1992 the said Gaurang Gandhi introduced the Complainant to the personnel of the Financial Services Division of the Accused No. 1. The then personnel of Accused No. 1 represented to the Complainant, as under: a) that one of the functions of the financial Services Division was to source out the prospective lenders of the funds such as the Complainant to the Accused No. 1, or its associates and group Companies, for their requirements; b) that the Financial Services Division of the Accused No. 1 would intimate to the Complainant the name of the group companies or associates for whom the funds would be required; c) that all deployment and return on Investments would be made through the Financial Services Division of the Accused No. 1 from its Mumbai Office; d) that the Financial Services Division of the Accused No. 12 would negotiate and determine the rates of the returns/accruals of the deployed funds; e) that the Complainant would never have to meet or was required to meet the personnel and/or officers of the group companies or the associate companies of the Accused No. 1 and all contacts of the Complainant would be with the Financial Services Division of the Accused No. 1; f) that the Complainant was not required to go into the fundamentals/financials, strengths of the group companies or the associate companies; g) that the Complainant had to only look to the Accused No. 1 in the event of any defaults in the return of funds and in such eventuality the Accused No. 1 would be responsible to ensure return of the invested funds to the Complainant. - 10 - The Complainant believed and trusted the above representations and was deploying funds with the Accused No. 1 from the year 1992. The Complainant was led to believe that the representations were true and that the Complainant could rely upon the same. 10. On the basis of the representation set out in paragraph 10 the Complainant deployed funds from time to time with the Accused No. 1 and the associate/group companies. The mode and method of the deployment of Funds was as follows: a) The Financial Services Division of the Accused No. 1 would call the Head Office of the Complainant and enquire if funds were available for deployment. b) Similarly the Complainant would contact the Financial Services Division of the Accused No. 1 from its Head Office at Panaji and enquire if its surplus funds could be invested through the FSD of Accused No. 1. c) The Complainant would inform the Financial Services Division of the Accused No. 1 of the quantum and tenor of the deployment and the Financial Services Division of the Accused No. 1 would inform the name of the entity and the details relating to the deployment of funds. d) The Financial Services Division would thereafter forward the documents with regard to the deployed funds to the Complainant. e) On the date of maturity the Complainant would either, depending upon its requirements renew the deployment of the funds or alternatively receive the deployed funds with the accruals through the Financial Services Division of the Accused No. 1. 11. The Complainant says that pursuant to the aforesaid representations the Complainant deployed its funds for short term - 11 - investments with the Accused No. 1 and its Associate/Group Companies. All deployment was through the FSD of Accused No. 1. 12. In June 1995, the Accused Nos. 7 and 8 informed the Complainant that the Accused No. 1 was restructuring its Financial Services and that the Complainant was being invited to participate in the financial arrangement for restructuring activity of the Accused No. 1 and was informed as follows: a) That the Accused No. 1 pursuant to a Report of a Consultant M/s. McKinsey & Co. was planning for restructuring its entire Financial Services business. b) That the Financial Services business then carried on by the Accused No. 1 and the other Non Banking Finance Companies in the Group were overlapping resulting in unwarranted competition and lack cohesiveness, leading to uneconomical cost of operations. c) As a result, the said Consultant advised restructuring whereby the Group Companies carrying on financial services business were to be under the umbrella of ITC Classic Finance Ltd. (hereinafter called ITC Classic). d) That such Group Company or Associate Company which was carrying on financial services business would be de-linked from such Group Company or Associate Company which carried on manufacturing activity. e) That in view of the recommendations of the Consultant, steps were being initiated to de-link ITC ATF from ITC Agrotech Limited, (hereinafter called ITC AT) a Company manufacturing refined cooking oil. f) That ITC AT was holding 100% equity of ITC ATF and that Accused Nos. 8 and 9 acting for and on behalf of the Accused No. 1 were directed to initiate steps by the Accused No. 1 - 12 - to de-link ITC ATF from ITC AT and to bring in the same under the effective control of ITC Classic. g) For this purpose, ITC Classic Finance Ltd., required funding for a specific period of time to acquire the entire equity shares of ITC ATF from ITC AT. h) Accused Nos. 8 and 9 at the behest of Accused No. 1 were therefore sourcing out parties who had long standing relationship with the group and with whom they had trust and more particularly with the FSD of Accused No. 1 who could be approached for the deployment of funds as the financial arrangement in purchasing the equity shares of this closely held Company from ITC AT and holding the same for a period of 18 months on their behalf. i) In that light, Accused Nos. 8 and 9 approached the Complainant with a request for funding a sum of Rs. 5 crores by way of Preference Shares in ITC ATF and for the purchase of Equity Shares in ITC ATF from ITC AT in the value of approximately Rs. 3.57 crores. Both these deployments, it was represented, were for a short period ranging from 12 to 18 months. j) In so far as the deployment of the funds in the Equity Shares were concerned Accused Nos. 8 and 9 represented that the Complainant would be purchasing 17 lakhs equity shares of ITC ATF from ITC AT @ Rs. 21/- per share aggregating to Rs. 3.57 crores, to match the funding requested in the financial arrangement, as per plans envisaged. k) It was represented that the financial arrangement of deployment of Funds in Equity of ITC ATF would be for a short period of 18 months from November 1995, i.e., approximately until May 1997, and the period would commence from the date of deployment of funds. l) It was represented further that at the end of 18 months period, as per - 13 - the arrangement a nominee of Accused No. 1 which would be ITC Classic Finance Ltd., or a subsidiary of the Accused No. 1 would buy back the 17 lakhs shares from the Complainant at a pre-determined premium. m) It was also stated that for the Complainant agreeing to deploy Rs. 3.57 crores in the purchase of equity shares from ITC AT, the Accused No. 1 would assure a pre-tax accrual of 31% or post-tax accrual of 19% for the sums deployed by the Complainant as a consideration for the financial arrangement to enable the Accused No. 1 to implement the restructuring plans. n) The Accused Nos. 8 and 9 on behalf of FSD of Accused No. 1 reiterated that the proposal and the basis of deployment of the sum of Rs. 3.57 crores was purely a financial arrangement and it never meant to treat the deployment of funds as an investment in equity of a closely held Company in the Group of the Accused No. 1 and the Complainant would never be considered as a Shareholder of ITC ATF. 13. Believing the representation to be true and more particularly on the representation that the deployment of funds of the Accused No. 1 would be for a short period of 18 months and the fact that the Accused No. 1 would as in the past ensure repayment of the deployed funds with its accruals as agreed, the Complainant’s Vice President Finance agreed to recommend its Management to deploy the sum of Rs. 3.57 crores in the purchase of shares of ITC ATF. The Accused Nos. 8 and 9 were informed that as the proposal was not the normal type of investment made by the Complainant, i.e., in Inter Corporate Deposits, Bill Discounting or Bill Rediscounting, the Accused Nos. 8 and 9 were required to assure the Management of the Complainant at Panaji, Goa, that the funds to be deployed by the Complainant were sought by the Accused No. 1 who would - 14 - be liable to return the deployed funds to the Complainant with the accruals after the period of 18 months as represented. The Accused Nos. 8 and 9 accordingly visited Panaji, Goa, on 12.09.95 and reiterated and confirmed the terms of the deployment as above, that the same was only a short term financial arrangement to enable the Accused No. 1 to implement its restructuring plans. The Accused Nos. 8, 9 and 10 personally met the then Vice Chairman & Managing Director of the Complainant, i.e., late Vasudeva V. Dempo in making their representations. The representations of the Accused No. 1 were discussed by the Management and on the basis of the above representations and the assurances by the Accused Nos. 8 and 9 representing the Accused No. 1, the Complainant forwarded its cheque for Rs. 3.57 crores drawn on the Bank of India, at Churchgate Branch, Mumbai, dated 08.11.95. 14. On 06.12.95, the Accused No. 10, on behalf of the Financial Services Division of the Accused No. 1, faxed a copy of the draft terms of agreement to the Complainant. The draft agreement reflected the representations made to the Complainant by the Accused No. 1. The Complainant was informed that a formal agreement incorporating the terms of the Agreement be drawn up and sent to the Accused No. 1. The Complainant forwarded a draft agreement clearly setting out the terms of the Agreement between the parties and forwarded the same to the Accused No. 1. The Accused No. 1 thereafter got the Agreement typed on a stamp paper dated 23.05.96 and forwarded the same to the Complainant. 15. As aforesaid, the Complainant received an Agreement on a stamp paper of Rs. 100/-, purchased by the Accused No. 1 in the name of VST Investments Ltd., (hereinafter referred to as VST) duly executed by the Accused No. 8 as an authorised signatory of VST. The Agreement incorporated all the terms and conditions as agreed upon by and - 15 - between the Complainant and the Accused No. 1. However, the Complainant found that instead of naming ITC Classic Finance Ltd., or a subsidiary of the Accused No. 1, as was represented, the Accused No. 1 named VST as the entity to buy back the equity shares held by the Complainant. As VST was unacceptable as the named entity, the FSD of Accused No. 1 was informed of the same and the Complainant withheld sending the Agreement on a stamp paper to the Accused. The Complainant also protested against the same. The Complainant called upon the Accused Nos. 8 and 9 to name an entity as was agreed in the discussions/representations to buy back the 17 lakhs equity shares held by the Complainant. 16. In the meanwhile, the Complainant in March 1996, received transfer documents and Share Certificates for 17 lakhs Equity Shares of ITC ATF from ITC AT. After completing the Transfer Deeds, the Complainant handed over the duly completed transfer documents and the Share Certificates to the FSD of Accused No. 1. The FSD of the Accused No. 1 duly got the 17 lakhs shares registered with ITC ATF in the Complainant’s name. 17. The Accused Nos. 8, 9 and 10 in response to the protest of the Complainant as above, assured the Complainant that they would in due course of time arrange for the nomination of an entity as agreed and as per the representation. The said personnel of the FSD of Accused No. 1 informed the Complainant that they would need time to complete