IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Crl.Misc.No.M-818 of 2008 Victim's Association of Syal Group .....Petitioner Vs. State of Punjab and others ....Respondents AND Civil Writ Petition No.16730 of 2007 Jarnail Singh and others .....Petitioners Vs. State of Punjab and others .....Respondents Date of decision: 22.11.2010 CORAM:- HON'BLE MRS.JUSTICE DAYA CHAUDHARY. PRESENT: Mr.Harsh Bunger, Advocate, for the petitioner. Mr.B.S.Sra, Addl.Advocate General, Punjab Mr.Rajiv Kataria, Advocate, Mr.P.S.Goraya, Advocate, Mr.Neeraj Khanna, Advocate. ORDER By this judgment both petitions bearing Crl.Misc.No.M-818 of 2010 (Victim's Association of Syal Group v. State of Punjab and others) and C.W.P.No.16730 of 2007 (Jarnail Singh and others v. State of Punjab and others) shall be disposed of. The facts of the case are being taken from Crl.Misc.No.M- 818 of 2010. The said petition was filed by the petitioner which is a Crl.Misc.No.M-818 of 2008 [2] society registered with Registrar of Societies having its head office at Jalandhar and the petition has been filed through its President. The prayer in the petition is for entrusting the investigation of case FIR No.143 dated 1.9.2007 under Sections 409,406, 420,120-B IPC registered at Police Station Division No.2, Jalandhar City to some independent agency. The petitioner is a Society of members who are depositors/investors in the Syal Group of Companies. Four companies belong to Syal Group of Companies i.e. (i) M/s Modern General Financiers Limited, Jalandhar, (ii) M/s Syal Finance Limited, Jalandhar, (iii) M/s Syal Investment Limited and (iv) M/s Syal Leasing Limited, Jalandhar. The members of the petitioner-Society and others have made huge deposits/investments with these companies. Shri Vinod Syal and his wife smt.Kusum Syal were Directors of Syal group of Companies and they committed suicide on 26th June, 2007. After their death, there were eight other Directors and two sons of Vinod Syal and Smt.Kusum Syal were also Directors. The others were Vikash Nayar, Gagan Kesar, Deepak Kesar and Jatinder Roy, Parveen Kaur and P.P. Sagar were non-working Directores. As per case of the petitioner, all the directors started to embezzle amounts in their own style and some of them filed Company Petition just to cover up embezzlement. FIR No. 165 dated 26.6.2007 under Section 306/506/34 IPC was registered at Police Station Sadar Hoshiarpur. After death of aforesaid Directors, their sons who were made Directors and they Crl.Misc.No.M-818 of 2008 [3] also committed embezzlement and money was not returned to the depositors. FIR No. 143 dated 1.9.2007 under Sections 409/406/420/120-B IPC, P.S. Division No.2, Jalandhar City was registered by one of the investors namely Kewal Krishan Gupta. After the death of Sh.Vinod Syal and Smt.Kusum Syal, the two Directors of the Company namely Shri Varun Syal and Karan Syal filed four winding up petitions bearing Nos. 75 to 78 of 2007 under Section 433 (c),(e) and (f) of the Companies Act, 1956 as voluntary winding up. It was stated in the winding up petition that liabilities of all the four companies were 40.60 crores whereas the assets were Rs.44 crores but in spite of that, the depositors were not returned their amount which clearly shows that the companies were not running in losses. A petition bearing No.Crl.Misc.No. M- 47936 of 2006 was filed before this Court for direction to SSP, Jalandhar to look into the grievances of the petitioner and the following order was passed: “The grievance of the petitioner is that the investigation is not being carried out properly in case FIR No. 143 dated 1.9.2007 under Sections 409/406/420/120-B IPC registered at PS Division No.2, Jalandhar City. A representation, Annexure P1, had been made to the Senior Superintendent of Police, Jalandhar, but no action has been taken so far. The instant petition is disposed of with a Crl.Misc.No.M-818 of 2008 [4] direction to the Senior Superintendent of Police, Jalandhar, to look into the grievance of the petitioner and to do the needful, but in accordance with law in case any substance is found therein.” October 8, 2007 Sd/Arvind Kumar, Judge” In spite of giving directions by the High Court, the case was not investigated by the police and no action was taken. Subsequently, some of the depositors filed representations which are annexed as Annexures P-4 and P-5 but no action was taken. When no action was taken, the petitioners filed the present petition for issuance of directions to investigate the matter by some independent agency. While issuing notice of motion by this Court on 14.1.2008, the following contentions of the learned counsel for the petitioner was noted down: “ This petition has been filed by Victim's Association of Syal Group through its Manager Mohan Lall Mehan on the allegation that the Syal Group of Companies through a novel technique have collected quite a few crores of rupees in the shape of deposits from all sorts of depositors, small or big. The novel technique they had evolved is that they received the deposit against a receipt which is different from normal FDR/debenture receipt. They issued a Pass-Book like document as a token of Crl.Misc.No.M-818 of 2008 [5] money received by them and later entered all the transactions like interest paid or part payment of the principal amount paid.” Meanwhile, proceedings were also stayed. Replies by respondents have been filed which are on record. During the pendency of the present petition, the respondents were also directed to place on record status report and respondent No.1 was also directed to make investigation with regard to the fact whether the Directors of the Company have purchased properties out of the funds of the depositors and details of properties of the Directors of the four Companies were to be mentioned in the status report. Respondent No.1 was also directed to investigate whether any property has been sold by the Directors to the close relatives to divert the funds of investors/depositors including the details of the properties to be collected and the source of purchase. Report by way of additional Affidavit of DSP City-I, Jalandhar was also filed on behalf of respondent No.1, which is also on record. All details with regard to purchase of properties, source of income and other particulars were placed on record in the form of additional Affidavit which is also on record. Learned counsel for the petitioner submits that huge amount in crores of rupees were deposited by the depositors in Syal Group of Companies and after the death of two Directors namely, Shri Vinod Syal and Smt.Kusum Syal, a novel technique was evolved by the Directors by receiving deposit against a receipt which Crl.Misc.No.M-818 of 2008 [6] was different from normal FDR/Debenture receipt and a passbook like document was issued as a token of money received by them and the same was entered in the passbook. Assurance was given to the depositors that a passbook system is being adopted as per RBI regulations by maintaining a separate parallel account of the deposits which were never reflected in their regular Accounts Books and no prescribed percentage security was paid to RBI and nothing was paid to Income-tax Department also. During that period crores of rupees were collected from the depositors against the system of passbook receipts and the same was not included in the liabilities. It is also submitted by the learned counsel for the petitioner that Syal Group Companies were registered with RBI as Non- Banking Finance Companies and as per Rules of RBI, they cannot issue passbooks as the passbooks are issued by a banking company i.e. the banks authorised by the Reserve Bank of India. In this manner, these companies also cheated and defrauded the RBI also. The depositors were cheated who are mainly elderly persons, house-wives, small/medium traders, senior citizens, retired persons and many others. Learned counsel for the petitioner further submits that in a similarly situated circumstance, where crores of rupees were collected by the Company, the matter came up before Hon'ble Judge of Jammu and Kashmir High Court, which was disposed of with a direction to publish a notice in the local newspapers and all depositors to submit their claim before the Registrar (Vigilance). Crl.Misc.No.M-818 of 2008 [7] Learned counsel for the private respondents submits that the petitioner association has no locus standi under any provisions of law to maintain the present petition as the investigation has already been conducted by the Punjab Police. Moreover, a company petition under Section 433 (c), (e) and (f) of Companies Act, 1956 for winding up of M/s Syal Leasing Limited Company and other four companies for surrendering their assets to the High Court of Punjab and Haryana was filed so that the properties can be sold and money could be repaid to the investors. On the petition filed by the respondents, the Hon'ble High Court appointed Hon'ble Mr.Justice N.K.Kapoor, a retired Judge of this Court, as a Provisional Liquidator to take control over the assets of the four companies and to sell properties for making payment to the investors. The members of the petitioner's society can file their claims before the Provisional Liquidator. Learned counsel for the respondents further submits that in the detailed investigation conducted by the police, no cognizable offence was made out. Learned counsel for the respondents also submits that there is no violation of the guidelines issued by RBI as alleged by the Bank, as Reserve Bank of India had approved the certificate of the registration to the aforesaid companies under Section 451 A of the Reserve Bank Of India Act, 1934 to carry on business on Non-Banking Financial Institution and only after receipt of the certificate of registration, the respondents company has started to accept public deposits from various depositors and started investing the same. The company is also Crl.Misc.No.M-818 of 2008 [8] maintaining regular accounts and the balance-sheet was also filed with the Income-tax Department. It has also been mentioned by the learned counsel for the respondents that the liabilities of the four companies comes to Rs.40.60 crores, whereas the assets of all the companies and stock on hire comes to Rs.44 crores. The possession of the assets of the companies has been taken over by the Provisional Liquidator appointed by the High Court. M/s Syal Leasing Limited and its subsidiaries Companies filed company petition in the High Court seeking winding up of the companies and in one such CA No.528 of 2007 in Company Petition No. 75 of 2007, the Hon'ble Company Judge has ordered for appointment of a Provisional Liquidator so as to take over moveable/immovable assets of the company vide order dated 1.11.2007 and Hon'ble Mr.Justice N.K.Kapoor (Retd.) was appointed as Provisional Liquidator of the Companies. A public notice has also been published in the newspaper by the Provisional Liquidator wherein it was mentioned that the creditors who have claims against the company may submit their claims along with documentary evidence or any other proof in support of their claim. The borrowers of the company were also directed to pay their installments of money payable to the company by sending the amount by means of a Bank Draft or a cheque drawn in favour of Provisional Liquidator at the address given in the notice. Heard the arguments of learned counsel for the parties. The present petition i.e. Crl.Misc.M-No.818 of 2008 has Crl.Misc.No.M-818 of 2008 [9] been filed under Section 482 Cr.P.C. for entrusting the investigation of the case to some independent agency whereas C.W.P.No. 16730 of 2007 has been filed by 78 petitioners who had deposited money with M/s Syal Group of companies for issuance of directions to the respondents to take necessary action against the companies. As per case of the petitioner, there were eight Directors of the companies and the problem arose when two Directors of Syal Group of Companies namely, Shri Vinod Syal and his wife Smt.Kusum Syal died on 26.6.2007. As per case of the petitioners, the remaining Directors of the Companies started disposing of the properties of the Companies in their own style and method and they started to embezzle the amount by committing fraud. It is also the allegation against the Directors that they adopted a scheme by issuing a passbook by receiving deposit against receipt which was contrary to the norms fixed by the Reserve Bank of India. Meanwhile, the Directors of the Companies filed four winding up company petitions No. 75 to 78 of 2007 under Section 433(c), (e) and (f) of the Companies Act, 1956, as voluntary winding up. In company petition No. 75 of 2007, an applicaton under Section 450 of the Companies Act 1956 was also moved for appointment of Provisional Liquidator vide order dated 1st November, 2007. The Hon'ble Company Judge appointed Justice N.K.Kapoor, a former Judge of this Court, as Provisional Liquidator specifying the following powers, functions and responsibilities to him: “A) immediately take over all assets and properties of (a) Crl.Misc.No.M-818 of 2008 [10] Syal Leasing Ltd. having its Regd. Office at SCF 37, Urban Estate, Phase-I, Jalandhar and having its Corporate Office at Property No. 195, Adarsh Nagar, Opposite Chick Chick Dhaba Crossing, Mahabir Market, Jalandhar City. (b) M/s Syal Finance Pvt. Ltd. SCF No. 37, Urban Estate, Phase-I, Jalandhar , (c) M/s Syal Investment Ltd. SCF No. 37, Urban Estate, Phase-I, Jalandhar and (d) M/s Modern General Finance Ltd. SCF No. 37, Urban Estate, Phase-I, Jalandhar as also branches at various places in Punjab and Himachal Pradesh which are as under: i) Moga; Opposite Bus Stand, Moga ii) Nakodar: Near Bus Stand, Nakodar, iii)Simla: adjoining Hotel D' Park, Simla iv)Manali: Also near Hanuman Mandir, Manali v) Lohian Khas: Main Bazar, Lohian Khas, District Kapurthala. He shall prepare inventory of all the assets and properties both movable and immovable and a separate list (details) of liabilities. For the purpose of taking over the assets and properties of the company, Provisional Liquidator is also entitled to seek assistance of the police at Jalandhar and all other places where the company has its Branches, properties and assets. It is pertinent to mention that all such police agencies will assist the Crl.Misc.No.M-818 of 2008 [11] Provisional Liquidator in discharge of his duties and respond to his request, as if they are directed to do so by this Court. He is further entitled to seek assistance of not more than two persons of his choice who may help him intake over the properties and assets. B) take into his custody the entire record of the company at its corporate office, other offices including Branch offices and keep it in the safe custody at its Corporate (Head ) Office at Jalandhar. The record includes all computers and other electronic equipments, CD's and in all forms wherever available. C) ascertain and verify the names and particulars of investors contained in list Annexure P-7 to the Company Petition No. 75 of 2007 with the record of the Company. D) engage services of Chartered Accountant and two more Accountants. If he considers and finds that the existing employees of the company who were maintaining the accounts, are dependable and efficient, he may continue with their services on such remuneration as may be commensurate to their work load etc. He is also at liberty to continue services of such other employees of the company as may be deemed necessary for effective and smooth discharge of his duties. E) open bank accounts in his name as a Provisional Crl.Misc.No.M-818 of 2008 [12] Liquidator of the company in one or two banks preferably, the banks where the company is already having its account as may be deemed appropriate and convenient. F) engage advocate(s) to represent him in this Court and/or any other Court/Courts wherever required. G) service notices upon the borrowers of the company who are required to pay any instalment or money of the company and recover the money of the company from such borrowers. He is further authorized to take all possible steps to recover the money of the company from such borrowers. H) issue a public notice asking all the borrowers of the company to pay their instalments or moneys payable to the company to the Provisional Liquidator or deposit the same in a notified account to be opened by the Provisional Liquidator for the purposes in a Bank. I) seek any assistance, help or clarifications from the Reserve Bank of India for the purposes of implementation of directions contained in this order. Mr. Suri, learned Sr. Counsel appearing for the Reserve Bank of India is required to ensure such help to the Provisional Liquidator from the Reserve Bank of India.” In compliance of the directions issued by the Hon'ble Company Judge, the Provisional Liquidator published a public Crl.Misc.No.M-818 of 2008 [13] notice in the newspaper wherein it was specifically mentioned that the creditors who have claims against the Company may submit their claims along with documentary evidence or any other proof in support of its claim and general public was also at liberty to give any other information, which may help the Provisional Liquidator. The borrowers of the Company were also directed to pay their instalments of money payable to the company by sending the amount by means of a bank draft or a cheque drawn in favour of Provisional Liquidator. The contention of the learned counsel for the petitioners in both the petitions are that the petitioners have been cheated as they have invested earnings of their life and not only the interest but the principal amount has also been duped. The Directors of the companies have adopted their own methods to dispose of the properties of the companies in different manner and all the assets have been disposed of by one way or the other. However, the main grievance of the petitioners is that they would be satisfied if the amount deposited by them is returned with interest, as agreed by the companies. Learned counsel for the petitioners are of the view that if the same directions are issued as were issued in the judgment of the Jammu and Kashmir High Court, they would be satisfied. As per directions issued by Hon'ble the Company Judge in the company petition while appointing Provisional Liquidator, the interest of the creditors and investors are kept in view. The Official Liquidator is engrossed in various activities to manage the Crl.Misc.No.M-818 of 2008 [14] properties and assets of the companies keeping in view the interest of public at large where inventory of all the assets and properties of both movable and immovable is to be prepared after taking over the assets and properties of the company. The entire record of the company was to be taken into custody and names and particulars of the investors are to be ascertained and verified by him. Since the provisional liquidator has seized of the matter, directions for preparation of inventory of all assets and properties both moveable and immovable, including separate list of all liabilities, have been issued. Official Liquidator has also been directed to hand over the assets and properties of the Companies even by taking assistance of the police. As per order of the Hon'ble Company Judge dated 1st November, 2007 while appointing a retired Judge of this Court as Provisional Liquidator, a direction was also issued and powers, functions and responsibilities of the Provisional Liquidator were specified. In compliance of the order dated 1st November, 2007, a public notice has also been published and Company has been directed to place on record the list of immovable properties acquired from the date of incorporation and sole, if any, thereafter. Moreover, the victim association is also party before the Provisional Liquidator. It would not be proper to hand over the investigation to some other independent agency at this stage as the matter has been seized by the Official Liquidator. However, it is also mentioned that in any case, if the petitioners are aggrieved in any manner, they may approach the High Court for their grievance. Crl.Misc.No.M-818 of 2008 [15] The petitions are disposed of accordingly. (DAYA CHAUDHARY) JUDGE November 22, 2010. raghav