IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 19.10.2011 CORAM THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.Nos.29495 to 29497 of 2010 and Connected Miscellaneous Petitions K.C.Palaniswamy ...Petitioner in all the WPs Vs. 1.The State of Tamil Nadu, Represented by the Home Secretary, Secretariat, Chennai. 2.The Deputy Superintendent of Police, Economic Offence Wing -2, EOW-2 Head Quarters, Chennai - 600 040. 3.The Director General of Police, State of Tamil Nadu, Post Box No.601,Dr.Radhakrishnan Salai, Chennai - 600 004. 4.The Union of India, Rep. By its Secretary, Department of Telecommunication, Sanchar Bhavan, 20, Ashoka Road, New Delhi. 5.The Union of India, Rep. By its Secretary, Ministry of Finance North Block, New Delhi (amended as per order dated 24.06.2011 by KCJ in M.P.No.1/2011) 6.Central Bureau of Investigation, Represented by its Superintendent of Police, Economic Offence Wing, Rajaji Bhavan, Chennai - 600 009. 7.Reserve Bank of India, Fort Glacis, Chennai. Rep. By its General Manager ...Respondents in all WPs https://hcservices.ecourts.gov.in/hcservices/ W.P.No.29495 of 2010 preferred under Article 226 of the Constitution of India praying for the issue of a writ of mandamus, directing the 2nd respondent to transfer all the investigations of FIR Nos.4 and 5 of 2009 to the 6th respondent herein and to appoint officers in whose integrity, independence and competence this Hon'ble Court has confidence for supervising the said investigations order and pass such further orders thereby render justice. W.P.No.29496 of 2010 preferred under Article 226 of the Constitution of India praying for the issue of a writ of mandamus, directing the 7th respondent to conduct the investigation and further report on the letter dated 19th December 2008 issued by it under the RTI Act, 2005 against all the concerned persons. W.P.No.29497 of 2010 preferred under Article 226 of the Constitution of India praying for the issue of a writ of mandamus, directing the respondent Nos.4,5,6 and 7 to take steps to recover the amounts siphoned off from the company DAIL by initiating appropriate action against all the persons so found involved in the siphoning. For Petitioner : Mr.H.Karthik Seshadri (in all WPs) For Respondents : Mr.RM.Muthukumar,G.A for R1 to R3 Mr.Philip Aravindan Jesudoss for R4 and R5 Mr.N.Chandrasekaran,Spl.P.P. For R6 (in all WPs) M/s.Vijay Narayanan Sr.Advocate for Mr.A.R.Karunakaran, for the Intervenor C O M M O N O R D E R All the three writ petitions came to be posted on being specially ordered by the Hon'ble Chief Justice vide order dated 21.06.2011. 2. The petitioner is one and the same in all the writ petitions. In the first writ petition (W.P.No.29495/2010), the petitioner seeks for a direction to the Deputy Superintendent of Police, Economic Offence Wing-2, Chennai to transfer the investigation pending in FIR Nos.4 and 5 of 2009 to the Central Bureau of Investigation, represented by its Superintendent of Police, Economic Offence Wing, Chennai shown as 6th respondent and to appoint officers in whose integrity, independence and competence this Court may have confidence for supervising the said investigation. https://hcservices.ecourts.gov.in/hcservices/ 3.In the second writ petition (W.P.No.29496/2010), the petitioner seeks for a direction to the Reserve Bank of India, Chennai to conduct the investigation and further report on the letter dated 19th December 2008 issued by it under the RTI Act, 2005 against all the persons concerned. 4. In the third writ petition (W.P.No.29497/2010), the petitioner seeks for a direction to respondents 4 to 7 to take steps to recover the amounts siphoned off from the company Data Access India Ltd (for short DAIL) by initiating appropriate action against all the persons so found involved in the siphoning of the funds. Though the petitioner initially described 5th respondent, the Union of India being represented by Ministry of Defence, subsequently, he filed an application to amend the cause title to make it as Union of India represented by Ministry of Finance and that application was ordered on 24.06.2011. 5. Heard the arguments of Mr.H.Karthik Seshadri for M/s.Iyer and Thomas, counsel for the petitioner, Mr.RM.Muthukumar, learned Government Advocate takes notice for respondents 1 to 3, Mr.Philip Aravindan Jesudoss, learned counsel for respondents 4 and 5, Mr.N.Chandrasekaran, learned Special Public Prosecutor for 6th respondent and Mr.Vijay Narayan, learned Senior counsel appearing for Mr.A.R.Karunakaran, counsel for the intervener in W.P.No.29497 of 2010. 6. When these writ petitions came up for admission on 23.12.2010, notice was directed to be served on the respondents and private notice was also permitted. Respondents were also served privately and proof of service was filed along with affidavit of service. 7. The case of the petitioner was that he was a resident of Coimbatore and former Member of Legislative Assembly of the State of Tamil Nadu. He is also the Managing Director of a company viz., Cheran Enterprises Private Limited (CEPL). The said company was formed for the purpose of establishing a joint venture between CG Holdings Private Limited, ORE Holdings Limited, Mauritius and one Nandakumar 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. 8. It was further stated the DAIL was promoted by one Siddharth Ray (who is the intervener in W.P.No.29497 of 2010) and one Purva Rakesh through SPA Enterprises Pvt. Limited which later entered into a tie up with Pacific Century Cyber Works Group of Hong Kong (PCCW) in June 2000. The said Siddharth Ray was an employee of the PCCW and he was described as 'trojan horse' of the company to carry on business in India in a sector of business that had restrictions in foreign direct investment. This was in complete violation of the policy adopted in the Telecom Sector and the arrangement was made to circumvent the https://hcservices.ecourts.gov.in/hcservices/ policy. PCCW group had established a Mauritius based entity called Pacific Convergence (Mauritius) Limited (PCML) and they had 49% holding in DAIL and also nominated directors on the Board of Directors of DAIL. 9. In August 2000, SPA Enterprises and PCML jointly floated a company known as PNI. PNI had acquired 51% of shares in DAIL and PCML was holding 49% of shares in DAIL. In October 2003, SPA acquired 25% stake of PCML in PNI. Thus, the shareholding in PNI was76% : 24% between SPA and PCML. In November 2003, SPA acquired 25% of shares of the company. As a result, the shareholding of PNI, PCML and SPA became 51% : 24% : 25%. Thus while the company remained as a subsidiary of PNI, SPA, holding 75% of PNI, a controlling stake, and with a direct holding 25% of DAIL, SPA is a predominant player of DAIL. The entire management of DAIL was controlled and operated by SPA. Siddharth Ray and PCCW group embarked on a systematic siphoning off funds from DAIL in clear violation of Foreign Exchange Management Act (FEMA) and RBI Regualations, thereby causing huge loss to DAIL and it was made to face imminent liquidation. In order to get over the situation, DAIL came out with a public issue to defraud the public shareholders. However, one day before the issuance, pubic issue was withdrawn. The intervener approached the company for a "bailout plan" and assured that liability of DAIL will not be exceeding Rs.300 Crores and made a number of representations. An agreement came to be executed in May 2004 by which CEPL agreed to acquire controlling interest of DAIL which was later done through a wholly owned subsidiary of CEPL namely Cheran Holdings Private Limited (CHPL) and KCP Associates Holdings Private Limited (KCPAHPL) for regulatory reasons. 10. The two companies (CHPL and (KCPAHPL) were made to part with about Rs.33 Crores in acquiring the controlling interest in DAIL and agreed to arrange an investment of Rs.75 Crores for its revival. The two companies arranged through their joint venture partners ORE's parent company Odyssey America Reinsurance Corporation, USA to provide the sum as capital on the strength of the undertaking given by the Indian Joint Venture Partner. But the intervener and his associates tampered with the foreign remittance instructions and attempted to appropriate the entire amount. Thereafter, collusively a winding up petition was filed in the High Court at Delhi and DAIL was ordered to be wound up. 11. The petitioner had preferred a complaint on 09.03.2005 with the CBI for the misappropriation of US$ 17 million. The complaint related to defrauding the petitioner approximately Rs.108 Crores, defrauding of M/s.Canara Bank and Syndicate Bank, public sector undertakings, Income Tax Department, diversion of funds from India to abroad in violation of FEMA and nexus between various public servants of public sector banks. Even when the complaints were pending, the Police belonging to State of Tamilnadu tried to close the investigation at the behest of the intervener. Therefore, the petitioner filed Crl.O.P.No.31375 of 2006, seeking for transfer of investigation of Crime No.23 of 2005 to the CBI. Crl.O.P.Nos.7005 and 7017 of 2005 were also filed before this Court to direct the https://hcservices.ecourts.gov.in/hcservices/ investigating agencies to register a compliant on the basis of the complaints dated 01.03.2005 and 09.03.2005. This Court dismissed both the petitions by stating that the nature of investigation is bound to take time as it involves several charges. The State Police were directed to complete the investigation within six months. But instead of completing the investigation, the Police have filed false criminal cases against the petitioner and he was directed to appear in different Courts at Chennai, Nagercoil and Dindigul. The petitioner filed one more petition in Crl.O.P.No.17191 of 2008 for further investigation of Crime No.23 of 2005 through the CBI. That petition was disposed of by an order dated 30.07.2009 with a direction to complete the investigation within a time frame. 12. The intervener at that stage filed a Special Leave Petition before the Supreme Court in SLP (Crl) MP.No.17905 of 2005, challenging the direction issued by this Court. The petitioner also filed SLP No.8549 of 2009. However, both the petitions were dismissed as withdrawn vide order dated 13.11.2009. In the meanwhile, the second respondent viz., Deputy Superintendent of Police, EOW, Chennai -2, registered a criminal case in FIR Nos.4 and 5 of 2009 on 08.10.2009. The two FIR's though registered has not been investigated properly. The petitioner under the RTI Act, sought information from the Reserve Bank of India on his letter dated 12.08.2007 to which the Reserve Bank of India had replied that it had received instructions from the Government of India, Ministry of Finance to conduct an investigation into the losses suffered by Canara Bank and Syndicate Bank consortium in the account connected with the DAIL. Therefore, since the investigation have not been conducted properly, it is a fit case where this Court can direct for transfer of investigating agency and for a direction to the RBI to initiate action against all concerned persons. 13. The petitioner also filed various letters received by him viz., the leader of the opposition dated 15.09.2007, Ministry of Panchayat Raj dated 09.09.2007, Ministry of State for Communication and Information Technology dated September 2007, Finance Ministry addressed to the Minister of Panchayat Raj dated 17.09.2007 for contending that he was informed that the Ministry is looking into the complaint. He had also enclosed a report on the Global Financial Integrity Report on India released during November 2010 for establishing that there is large scale Illicit financial flows and India should do more to stop the existing loss. 14. A common counter affidavit was filed by the second respondent. In the counter affidavit, it was stated that he was the Investigating Officer in Crime No.23 of 2005 and the investigation discloses that the averments made by the petitioner was not correct and a draft final report was submitted for perusal by the Supervisor to be filed in the Court. In the meanwhile, the petitioner filed Crl.O.P.No.17191 of 2008 for reinvestigation and transfer of the case to the CBI. But this Court only ordered for re-investigation of the case by the Special Economic Offences Wing and to submit a final https://hcservices.ecourts.gov.in/hcservices/ report after giving sufficient opportunity to the complainant to furnish his evidence. It was stated in the counter affidavit that investigation was started and is pending for the examination of the witnesses and collection of the evidence. 15. It was further stated that a leading independent management consultants viz., Price Water Coopers conducted a due diligence at the instance of the petitioner. The independent consultants have not indicated any siphoning of funds by DAIL or by anybody. The petitioner himself purchased the controlling interest of DAIL by way of shares from SPA company controlled by the intervener at the rate of Rs.4/- per share, which is below the face value of Rs.10/- and far below the offer price of Rs.17 to 20. The petitioner paid only Rs.33 crores whereas the face value was Rs.82.5 crores and the offer price was Rs.140.25 crores to Rs.164 Crores with a pre condition to procure an unsecured loan of Rs.75 Crores at a current borrowing rate of interest @ 11.5% as per the agreement dated 01.07.2004 between the petitioner and the intervener. The loan was received from ABN AMRO Bank, Chennai Branch account on 19.08.2004 on behalf of DAIL. The petitioner was the sole signatory of the account and using this power, diverted 17 million U.S.$ (equivalent to Rs.78.45 Crores) to Cheran Holdings Private Limited on the very same day. Under the new management of the company by the petitioner, the debts of the company was increased from Rs.300 crores to 540 crores by September of the same year and all post-dated cheques issued by the previous administration was not honored by the new management. It was because of this reason, the Pacific Convergence Corporation Ltd., filed a winding up petition to wind up the DAIL at the High Court of Delhi. On this petition, the Delhi High Court ordered winding up of the company and with a further direction to re-transfer the amount received from ABN Amro Bank. This order of the Delhi High Court was not complied with by the petitioner till date. The petitioner gave new complaint with old allegation and filed Crl.O.P.No.31375 of 2006 for transferring the case to CBI. The petitioner also filed two petitions in Crl.O.P.Nos.7005 and 7017 of 2005. The CrL.O.Ps were disposed of by a common order rejecting the request of transfer to CBI and a direction was issued to the State Investigating Agency to expedite the investigation. The allegation made by the petitioner was investigated by EOW II in Cr.No.23 of 2005 and the petitioner has been filing case after case. A final report was submitted to the Chief Metropolitan Magistrate. The petitioner is blocking the judicial process by filing such writ petition. His appeal to Supreme Court in SLP was withdrawn on his own accord. The petitioner further filed complaints and those complaints were also registered in Cr.Nos.4 and 5 of 2009 on 08.09.2009 and they were investigated by the second respondent. Therefore, it was stated that there are no fresh circumstances warranting any transfer of investigating agency. 16. The intervener in his application for impleadment in M.P.No.2 of 2011 submitted that the petitioner was guilty of making false allegations which has got no foundational backing. The Delhi High Court by a judgment dated 18.11.2005 directed the writ https://hcservices.ecourts.gov.in/hcservices/ petitioner's companies M/s.Cheran Holdings, KCP Associates Holding Pvt. Ltd., Cheran Enterprises Pvt. Ltd., Sporting Pastime India Ltd., to remit 78.5 Crores which had been received in the account of DAIL but had been transferred out on the same day in favour of his own companies. The Delhi High Court made a prima facie finding against the petitioner and rejected the defence taken by him. The money was not even remitted back even after the order of the Delhi High Court. Hence, a contempt petition was filed by the Canara Bank in CCP.No.31 of 2005. It is only to create a false defence in the contempt petition, he has been filing such cases. He had also filed appeals before the Division Bench of the Delhi High Court challenging the order of winding up dated 18.11.2005. Those appeals were dismissed by the Division Bench by an order dated 20.11.2009 and the Division Bench specifically noted that the order of the Company Judge does not call for any interference. The petitioner's request to keep the contempt petition in abeyance was also rejected. 17. It was also stated that the Delhi High Court very recently on 20.01.2011 in the Company Petition No.292 of 2004 and other applications recorded the following findings:- "it is apparent from the facts stated above that CEPL, SPIL, KCPHAL and CHPL have all been dragging prolonging the matter and trying to stall the implementation of the directions given in paras 70 to 72 in the order/judgment dated 08.11.2005. In terms of the directions issued in the said order/judgment money i.e. Rs.78.45 Crores must come into the bank account in Canara Bank. Inspite of more than 5 years, this has not happened. The said companies cannot be permitted and allowed to stall compliance of the directions issued.... ...numerous litigation have come up and have been filed by severl parties to keep control and retain hold of the money. It is stated on behalf of Mr.KC Palanisamy that CEPL is the holding company of Cherran Properties Pvt. Ltd., which in turn is a holding company of SPIL. Similarly, CHPL is a subsidiary of CEPL and KCPAHL is a subsidiary of CHPL. Prima facie, it does appear that all the companies were fully aware and conscious of the transfer of the money in ABN-AMRO bank and the claim of Canara Bank..." 18. Therefore, it was contended that it is the petitioner who is the perpetrator of many illegalities in the process of purchase by him of DAIL in July 2004. There has been several criminal cases lodged against the petitioner and the some of the cases against the petitioner, is set out in para 7, which is as follows:- "...A charge sheet was apparently filed before the Hon'ble Judicial Magistrate No.1 at Coimbatore u/s 467 https://hcservices.ecourts.gov.in/hcservices/ (forgery of valuable security), 468 (forgery for purpose of cheating), 471 (using as genuine a forged document), 472 (making or posessing counterfeit seal with intent to commit forgery) of the Indian Penal Code. The said charge sheet notes that Mr.K.C.Palaniswamy (the writ petitioner) joined with common intention of committing forgery of valued security and using them as genuine knowing them as forged documents and falsiied the accounts of Cheran Chit Funds Pvt. Ltd and thereafter used the said forged documents as genuine for the claim petition that the writ petitioner filed against the complainant himself. The said matter was quashed in view of S.195(1)9d) of Cr.P.C by the High Court of Madras. The Supreme Court however, allowed the appeal agaisnt the quashing order and directed that the trial against the writ petitioner be proceeded with in accordance with law." 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 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) Coimabtore City Crime Branch Cr.No.26/2003 u/s 406 IPC" 20. It was stated that the modus operandi of the petitioner was https://hcservices.ecourts.gov.in/hcservices/ to defraud a person or an entity and thereafter approach the courts with multiple petitions in order to distract attention from his own misdeeds. It was also claimed that the petitioner has earlier filed a writ petition in W.P.No.49987 of 2006 for taking action on his representation dated 22.11.2006 to monitor the investigation by EOW. That writ petition was dismissed as withdrawn on 25.01.2007. The petitioner's Crl.O.P.No.31375 of 2006, Crl.O.P.No.7005 of 2005 and 7017 of 2005 were all dismissed on 22.02.2007. Crl.O.P.12754 of 2007 was dismissed by this Court on 08.02.2008. The petitioner also filed a writ petition in W.P.No.39412 of 2008 through an Advocate praying for formation of Committee for non-recovery of monies in DAIL and that writ petition is yet to be disposed of. The writ petitions in W.P.Nos.13820 and 13821 of 2007 instituted by SPIL (one of the petitioner company) seeking for a direction against the Income Tax authorities from refunding amounts relating to tax to any other entity, despite the I.T.Authorities have refunded the amount to Canara Bank is pending. W.P.No.32444 of 2006 was filed by CEPL, one of the petitioner company for refund of the amount from the I.T. Authorities, wherein this Court ordered that the amount will not be refunded to any party until further orders. The petitioner's Crl.O.P.No.12631 of 2007 against the Director General of Police was dismissed on 11.02.2008. Cr.O.P.No.17191 of 2008 was dismissed in all respects except for reinvestigation of Crime No.23 of 2005. 21. It was further stated that the petitioner had not disclosed the pendency of an FIR registered against him in FIR No.323 of 2005 by the Delhi Police. He has also not disclosed that the CBI is investigating the complaint filed by the Canara bank wherein the petitioner is arrayed as an accused in respect of the same transaction. The petitioner has also committed several frauds and FIR has been lodged against him in Chennai in Cr.No.246 of 2008 for forgery and cheating, Crime No.87 of 2008 at Central Crime Branch, Chennai for misappropriation and Cr.No.54 of 2008 at Central Crime Branch for forgery and cheating. The petitioner was arrested by the Chennai police and was detained in judicial remand for several times. The last of the complaint mentioned above in Cr.No.54 of 2008 at Central Crime Branch was given by one Ramasamy Athappan for forgery and cheating. 22. It will be interesting to note that the application filed by the said Ramasamy Athappan before this Court in the original side came to be considered by a learned Judge of this Court reported in 2009 3 MLJ 84 [Ramasamy Athappan and another v. Secretariat of the Court, International Chamber of Commerce, France and others], wherein, very same petitioner was arrayed as 6th defendant in the suit and he had filed similar cases against several other persons which are set out in paragraph 45 of the said judgment. This is only referred to show that allegation made by the respondents against the petitioner and others that his modus operandi of filing criminal case indiscriminately against other persons in order to intimidate them is not without basis. https://hcservices.ecourts.gov.in/hcservices/ 23. The petitioner has filed a reply affidavit refuting some of the allegations and once again reiterated that the earlier direction issued by this Court was not followed and the complaint is still being investigated by the Deputy Superintendent of Police and not by Superintendent of Police. It was stated that the allegations made by the intervener, who himself is an accused in the FIR should not be taken seriously by this Court. 24. Mr.Karthik Seshadri, learned counsel for the petitioner placed reliance on the judgment of the Supreme Court reported in 1998 AIR SCW 645 [Vineet Narain and others v. Union of India and another] to contend that inertia of investigating agencies to investigate into offences involving persons holding high offices issuance of mandamus directing agencies to perform would have become futile. Therefore, the Court must keep the issue pending and monitor the investigation by calling the agencies to report the progress of investigation, which will ensure continuance of the investigation. Therefore, he pleaded that this Court must not only direct the CBI to conduct the investigation by transferring the case to CBI but also continuously monitor the investigation to unearth the large scale siphoning of funds from this country by the accused named in the FIR. 25. The