:1: IN THE HIGH COURT OF JUDICATURE OF BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION NO. 3507 OF 2004 Sharan P. Khanna ... Applicant versus 1. The State of Maharashtra, 2. M/s. JEM Fiscal Ltd., through the Director Mr. Nazir Hakeem. ... Respondents ... Mr. Ramrao Adik, Senior Counsel, with Mr. Peter Lobo, for the Applicant. Mrs. A.S.Pai, A.P.P., for Respondent No. 1. Mr. A.P.H. Ponda, for the Complainant. ... WITH CRIMINAL APPLICATION NO. 3508 OF 2004 Mrs. Bharati S. Khanna ... Applicant versus 1. The State of Maharashtra, 2. M/s. JEM Fiscal Ltd., through the Director Mr. Nazir Hakeem. ... Respondents :2: ... Mr. Peter Lobo for the Applicant. Mrs.A.S. Pai, A.P.P., for Respondent No. 1. Mr. A.P.H. Ponda, for the Complainant. ... WITH CRIMINAL APPLICATION NO. 3509 OF 2004 Tapin S. Khanna ... Applicant versus 1. The State of Maharashtra, 2. M/s. JEM Fiscal Ltd., through the Director Mr. Nazir Hakeem. ... Respondents ... Mr. Peter Lobo for the Applicant. Mrs.A.S. Pai, A.P.P., for Respondent No. 1. Mr. A.P.H. Ponda, for the Complainant. ... CORAM : A.M.KHANWILKAR,J. 24th September 2004 ORAL JUDGMENT : :3: 1. All these three applications are filed under sections 482 and 438 of the Code of Criminal Procedure (hereinafter, for the sake of brevity, referred to as "the Code"). The Applicants in each of these matters have been named as accused in the offence registered with Economic Offences Wing, Greater Mumbai C.B., C.I.D., Mumbai Police, vide F.I.R. No. NECR-14/2004. The said offence has been registered at the instance of Respondent No. 2 herein. Respondent No. 2 initially filed Criminal Complaint No. 145/MASC/2004 before the Additional Chief Metropolitan Magistrate, Court No. 47, at Esplanade, Mumbai, praying for directions under section 156(3) of the Code, requiring the Senior Inspector of Police, Cuffe Parade Police Station, Mumbai, to register an offence and investigate the same. In the written complaint as filed before the Magistrate, Respondent No. 2 alleged that the Applicants herein have committed offence punishable under sections 420, 409, 385 read with section 120-B and 34 of the Indian Penal Code. It is alleged in the complaint as filed that accused Nos. 2 to 4 were the shareholders and directors of accused :4: No.1, private limited company. The said private limited company is known by its name and style as Surya Spices Vyapar Private Limited (hereinafter referred to as "the SSVPL"). According to the Respondent No.2, complainant, the said company is a shell company having paid up capital of Rs. one lakh only consisting of 10,000 equity shares of Rs. 10/- each, which shares were held by accused Nos. 2, 3 and 4 and by Sharan P. Khanna HUF. The said SSVPL submitted offer before the Special Court in respect of Flat No. 14, First Building of the building known as NCP Apartments, Nariman Point, Mumbai admeasuring 3475 sq. ft. (hereinafter referred to as "the said flat"), which was subject matter of attachment in the proceedings before the Special Court; and the offer so made on behalf of SSVPL was accepted by the Special Court vide order dated 14th October 1998 on certain conditions. In substance, the Special Court granted agency to SSVPL to use and occupy the said flat together with the garages/open parking spaces as per the original allotment with an option to purchase the same in its own name or in the name of its nominee/nominees on the terms and conditions :5: stated therein. Some of the relevant terms and conditions have been referred to in para 5 of the complaint. As per the said conditions, SSVPL was required to deposit a sum of Rs.1,01,00,000/- (Rupees One crore and one lakh only) with the custodian as an interest-free deposit and was required to pay Rs. 6 lakhs as an advance rent for the lease period of five years aggregating to Rs. 6 lakhs to the custodian. As mentioned earlier, SSVPL was granted option to purchase the said flat in its own name or in the name of its nominee/nominees provided that the option was to be exercised between 4th and 5th year of the agency period from the date of order, i.e., 14th October 1998. The said order also provided that in the event SSVPL or its nominee/nominees exercising the option to purchase, the purchase price payable for the said flat was Rs.14,209/- per square feet, aggregating to Rs.4,93,75,000/- (Rupees Four crore, Ninety-three lakhs, and Seventy-five thousand only) and that they would be entitled to adjust the deposit amount of Rs.1,01,00,000/- (Rupees One crore, one lakh only) against the said purchase price. In other words, they would be required to pay only balance :6: amount of Rs.3,92,75,000/- (Rupees Three crores, Ninety-two lakhs, and Seventy-five thousand only) within a period of 31 days from the exercise of the option to purchase the said flat. One of the condition also provides that SSVPL or its nominee/nominees would be required to give at least three months prior notice to Divine Holding Private Limited, which company was the original owner of the said flat, in case they intended to exercise the option to purchase the said flat. It is further provided in the said order that in case SSVPL did not exercise the said option to purchase the said flat as per the specified conditions, the deposit of Rs.1,01,00,000/- (Rupees One crore, One lakh only) would stand forfeited. The complaint further alleges that in terms of the said order, SSVPL deposited the requisite amount of Rs.1,01,00,000/- (Rupees One crore, One lakh only) with the custodian and also paid advance rent of Rs. 6 lakhs to the custodian, consequent to which it was put in possession of the said flat, along with the garages/open parking spaces. It is the case of the Respondent No. 2 Complainant that some time in the year 2000, the Complainant was looking for :7: a flat in Mumbai, preferably in Nariman Point area; and that in and around May 2000, the accused No. 2 approached the Complainant and offered to sell the said flat to the Complainant. It is alleged that during the negotiations, accused No. 2 along with accused Nos. 3 and 4 represented to the Complainant and two other directors, namely, Mrs. Zohra Nazeer Hakeem and Mr. Nafeez Nazir Hakeem of M/s. Jem Fiscal Ltd., who also participated in the negotiations, as under : "a) that his company SSVPL, the company owned and fully controlled by accused Nos. 2 to 4 with Sharan P. Khanna HUF was entitled to purchase the said flat No. 14 in the NCPA apartments by the said order dated 14th October, 1998 of the Special Court, at Exhibit "B" annexed hereto. b) That the accused Nos. 2 to 4 along with Shri Sharan P. Khanna HUF owned the entire shareholding of SSVPL and SSVPL was, therefore, owned and fully controlled by the accused. c) That SSVPL could transfer the ownership of the said flat to the Complainant by transferring the entire shareholdings of SSVPL to the complainant or its company as per the said order. d) The accused No. 2 stated that the transfer of ownership of the said flat to the complainant or his company would be :8: effected by selling/transferring all the shareholdings of all the accused i.e. accused Nos. 2 to 4 and of the Sharan P. Khanna HUF in SSVPL to the complainant or to his company. e) The balance amount of Rs. 3 crores 92 lakhs 75 thousand payable under the said order dated 14th October 1998, of the Honourable Special Court to purchase the said flat would be paid by the accused. f) That the SSVPL would duly exercise its option to purchase the said flat No. 14 in the NCPA Apartments in accordance with the said order dated 14th October 1998 before the expiry period of the agency granted to them by the Honourable Special Court i.e., before 13th October, 2003; but within a reasonable time after the Memorandum of Understanding between the Complainant and the accused was executed. g) In order to exercise the said option to purchase the said flat as per the said order dated 14th October, 1998, the accused would take necessary steps to inform DHPL as stated in the said order. h) After finalising the consideration to be paid by the complainant to the accused, an appropriate Memorandum of Understanding would be drawn up and executed by the parties." It is then alleged that pursuant to the negotiations, it was finally agreed between the complainant and accused Nos. 2, 3 and 4 that the complainant would acquire the said flat by acquiring all the shares of accused Nos. 2, 3 and 4 and those of Sharan P. Khanna HUF in SSVPL :9: by a total consideration of Rs.5,22,50,000/- (Rupees Five crores, Twenty-two lakhs, and Fifty thousand only). It is also alleged that it was further agreed that out of the said amount of the consideration, the complainant would pay Rs. 90 lakhs directly to SSVPL as and by way of inter corporate deposit and the balance amount of Rs. 4,32,50,000/- (Rupees Four crores, Thirty-two lakhs, and Fifty thousand only) was to be paid to the four accused and Sharan P. Khanna HUF. It is further alleged that the complainant, at the time of execution of the MOU, has paid Rs.1,10,00,000 (Rupees One Crore, Ten lakhs only) to the accused as earnest money out of the said consideration. It is stated that the MOU was executed between the SSVPL, accused Nos. 2, 3 and 4 and Sharan P. Khanna HUF in SSVPL and M/s. Jem Fiscal Ltd. and Mrs. Zohra Nazeer Hakeem, one of the directors of Jem Fiscal Ltd. on 25th January 2001. It is alleged that clause 13 of the MOU provides for the obligations of the parties. Clause 13 of the said MOU reads thus : "The Vendors and the Company hereby jointly and severally warrant to the :10: purchasers who are for this purpose contracting for themselves and/or their nominees or assigns and to the intent that the provisions of this clause shall continue to have full force and effect notwithstanding the completion of the purchase of the said shares as provided in this Agreement. a) The Company has been granted agency, as per the Order of the Special Court (Trial of Offences relating to Transactions in Securities) dated 14th October 1998, for a period of five years, to use and occupy Flat No. 14 on the 1st floor in the Apsara Building, N.C.P.A. Complex, Nariman Point, Mumbai 400 021 together with one covered car parking space No.61 in the basement and an open car parking space No. 178 in the compound of the Apsara Building (the Flat and both car parking spaces are hereinafter collectively referred to as "the said Flat"). The Company has deposited a sum of Rs.1,01,00,000/- (Rupees One crore, One lakh only) with the Custodian as interest free security deposit in respect of the said Flat and advance rent of the duration of the five years lease period aggregating to a sum of Rs.6,00,000/- (Rupees six lakhs only). The Company has an option to purchase the said Flat in its own name or in the name/s of its nominee/s at any time between 14th October 2001 to 13th October 2003 at a total purchase price of Rs.4,93,75,000/- (Rupees four crores ninety three lakhs seventy five thousand only). The amount of interest free security deposit of Rs.1,01,00,000/- (Rupees One crore one lakh only) shall be adjusted towards the purchase price and the Company and/or its nominee/s and/or assign/s shall become the owner of the said Flat on payment of the balance consideration of Rs.3,92,75,000/- (Rupees Three crores, Ninety-two lakhs, and Seventy-five thousand only). :11: b) The said Flat No. 14 is lying vacant and the Company has not agreed to sell, transfer, lease, encumber, charge, give on leave & licence basis or in any manner created any third party right or interest in the said Flat No. 14 or any part or portion thereof and the Company is in use and occupation free from all encumbrances, read with Clause 13(a) above. c) The Company has not received any notice under Section 434 of the Companies Act, 1956, and there are no circumstances or occasions that may give rise to any such notice being issued. d) The Company has no subsidiaries." It is alleged in para 10 of the complaint that because of the assurances and representations made by accused Nos. 2, 3 and 4, in particular, in clause 13(a) and (b), the complainant was led to believe that the said accused would positively exercise the option given to them in respect of the said flat and, in turn, sell the same to the complainant. It is alleged that the accused No. 1 SSVPL was a shell company of accused Nos. 2, 3 and 4 having its paid up capital of Rs. one lakh only. It is alleged that the complainant was lured by the assurances given by accused Nos. 2, 3 and 4 and in consequence thereof, decided to purchase the said flat for consideration of :12: Rs.4,32,50,000/- (Rupees Four crores, Thirty-two lakhs, and Fifty thousand only) as the aggregate price of 10,000 shares of SSVPL, so as to get the said flat automatically, being the property of SSVPL. It is alleged that as per the MOU, the complainant deposited Rs. 90 lakhs as inter corporate deposit and Rs.1,10,00,000 (Rupees One crore, Ten lakhs only) as earnest money. The balance consideration of Rs.3,22,52,000/- (Rupees Three crores, Twenty-two lakhs, and Fifty-two thousand only) was to be paid on or before March 7, 2001, the date and time being the essence of the agreement. In para 11 of the complaint, it is alleged that though the value of shares of SSVPL was not worth beyond Rs. 1 lakh, it was only because of the representations and promises made by accused Nos. 2 to 4 that they were going to positively exercise the option given to them under the order of the Special Court to purchase the said flat within the stipulated period, the Complainant believing the said representations and promises of the said accused entered into MOU with the accused with the understanding that with the purchase of SSVPL, he would also get possession of the said flat. In the same para, :13: it is further alleged that as per the MOU, the complainant had pledged one lakh shares of different companies of the then market value of Rs.6,50,00,000/- (Rupees Six crores, and Fifty lakhs only) as mentioned in the second schedule of MOU. In para 12 of the complaint, it is alleged that consequent to execution of the MOU and upon payment of Rs. 2 crores, the complainant was handed over the keys of the said flat and was put in possession by accused Nos. 2 to 4. It is alleged that because of the MOU, no other document in respect of the said flat was executed between the complainant and the accused. It is alleged in para 13 of the complaint that after the complaint was put in possession of the said flat, the complainant repeatedly reminded the accused to exercise option to purchase the said flat as per the condition specified in the Special Court order. It is alleged that till mid-December 2002, the accused did not exercise their option as promised by them. In para 14 of the complaint, it is alleged that as per the MOU dated 25th January 2001, the transaction of purchase of shares of SSVPL was to be completed by 7th March 2001, but since the accused did not :14: exercise the option to purchase the said flat as per the promise, the complainant did not complete the transaction as per the said MOU. It is alleged that as the complainant had earnest desire to purchase the said flat and was already put in possession of the same, and since the Respondent had carried out very extensive interior decoration, he did not want to loose the opportunity of purchasing the said flat. It is alleged that the complainant, therefore, again approached the accused to confirm whether they really intended to exercise the option and complete the transaction as per the MOU. It is alleged that the accused Nos. 2 to 4 once again assured of their intention to exercise their option provided the complainant was to pay them some more amount. As the complainant was ready to pay the balance amount of Rs.3,22,50,000/- (Rupees Three crores, Twenty-two lakhs, and Fifty thousand only), the supplementary agreement dated 13th December 2002 was executed between M/s. Jem Fiscal Ltd., Mrs. Zohra Hakeem as its director, and the accused as per the terms and conditions stated therein. As per this supplementary agreement, the price of the consideration of sale :15: of SSVPL was stated to be Rs.5,22,50,000/- (Rupees Five crores, Twenty-two lakhs, and Fifth thousand only) out of which the complainant had already paid Rs. 2 crores to the accused. The remaining amount of Rs.3,22,50,000/- (Rupees Three crores, Twenty-two lakhs, and Fifth thousand only) was paid by the complainant by 12 different cheques of different dates issued in different names of the respective accused and Sharan P. Khanna HUF. It is also alleged in the same para 14 that there was, however, express understanding/agreement between the complainant and the accused that the said cheques would not be deposited by the accused before exercising the option as per the MOU or without an express written consent of the complainant. In para 15 of the complaint, it is alleged that all the accused, right since inception of negotiations and execution of the MOU, had no intention to exercise the option as stated in the Special Court order and hence did not exercise the option to purchase the said flat; and thus all the accused have cheated the complainant by making false representations and promises from time to time to the complainant and making him to believe :16: that the accused would exercise the option to purchase the flat on payment of Rs.3,22,50,000 (Rupees Three crores, Twenty-two lakhs, and Fifty thousand only) from the complainant as per the supplementary agreement. It is further alleged that the complainant believing the accused had complied with the terms of the said agreement towards consideration, but ultimately, the accused never exercised the said option nor returned the amount of money paid to each of them by cheques as per the details provided in Exhibit E to the complaint, totally amounting to Rs.2,02,72,250/- (Rupees Two crores, Two lakhs, Seventy-two thousand, Two hundred, and fifty only), though demanded by the complainant orally from the accused for number of times and thus all the accused in furtherance of their common intention have cheated the complainant for the amount of Rs.2,02,72,250/-. It is then alleged that all the accused dishonestly induced the complainant to part with the said amount of Rs.2,02,72,250/- and thereby cheated him and have committed offence under section 420 read with section 34 of the Indian Penal Code. It is further alleged that considering all the :17: circumstances, it clearly shows that all the accused had conspired together to cheat the complainant and thus committed offence under section 420 read with section 120-B of the Indian Penal Code. It is then alleged that although the complainant orally demanded from the accused Nos. 2 to 4, they did not return the said amount of Rs.2,02,72,250/- to the complainant and thereby committed offence of criminal breach of trust under section 409 read with section 34 of the Indian Penal Code. In para 18 of the complaint, it is alleged that at the time of execution of the supplementary agreement dated 123th December 2002, there was an express representation and clear understanding between the complainant and all the accused that the 12 cheques amounting to Rs.3,22,50,000/- (Rupees Three crores, Twenty-two lakhs, and Fifth thousand only) will not be deposited by the accused, unless an express written consent was given by the complainant and such consent was to be given only upon the accused were to exercise the option of purchase of the said flat in the manner stated in the order of the Special Court, before lodging the cheques for encashment. It is alleged that as :18: the accused never exercised the option in terms of the order of the Special Court, the complainant had no reason to give consent to deposit the said cheques for encashment. It is then alleged that the accused, however, taking disadvantage of the situation that they were in custody of the duly signed cheques of the complainant intentionally presented four cheques amounting to Rs.1,54,08,750/- (Rupees One crore, Fifty-four lakhs, Eight thousand, Seven hundred, and Fifty only) for realisation some time in the third week of July 2003 in their bank. It is then alleged that as the cheques were presented by the accused without fulfilling their obligations, the complainant did not make arrangements for realisation in his account as a consequence of which the four cheques had bounced for want of sufficient funds. It is alleged that taking disadvantage, the accused have intentionally filed criminal proceedings against the complainant, his company M/s. Jem Fiscal Limited and its Directors, Zohra Hakeem and Nazeer Hakeem, under section 138 of the Negotiable Instruments Act. It is, therefore, alleged that all the accused have conspired to :19: put in fear of an injury to the complainant, his company and its other directors, with a view to extort the said amount of bounced cheques from the complainant, his company and its other directors, and thereby committed the offence of conspiracy of putting a person in fear of injury to commit extortion and thus have committed offence under section 385 read with section 120-B of the Indian Penal Code. On the above basis, it is alleged that offences of conspiracy to cheat and of cheating under section 420 read with section 120-B and of conspiracy of putting the complainant, his company and its other directors in fear of causing injury with a view to extort under section 385 read with section 120-B of the Indian Penal Code have been committed by the accused in the course of the said transaction. It is alleged that in pursuance of the same conspiracy and in the course of the same transaction, all the accused have committed offence of criminal breach of trust in furtherance of their common intention and committed offence under section 409 read with sections 34 and 120-B of the Indian Penal Code. On the above basis, Respondent No.2 Complainant :20: prayed for the following relief in the said complaint. "a) that Your Worship be pleased to direct under section 156(3) of the Cr.P.C. the Senior Inspector of Police, Cuffe Parade Police Station, Mumbai to register an offence and investigate the aforesaid matter. b) such other order or orders as this Honourable Court may deem fit and necessary be passed in this matter." 2. The complaint was filed in the Court of the Additional Chief Metropolitan Magistrate, on which the following order came to be passed on 13th May 2004, which reads thus : " Sr. P.I., Cuffe Parade P.Stn. to investigate the complaint u/s. 156(3) of Cr.P.Code. To register a case treating the complaint as the F.I.R. and investigate into the same." On the basis of the above order, the complaint came to be registered as F.I.R. bearing No.MECR-10/2004. The accused persons and the concerned Magistrate were informed abut the compliance of the directions referred to above. :21: It appears that later on, the Senior Inspector of Cuffe Parade Police Station made an application to the concerned Magistrate to transfer the investigation to the Economic Offences Wing of the C.B., C.I.D., Greater Bombay, for the reasons stated in his application. The Magistrate by order dated 22nd July 2004 was pleased to allow the said application to transfer the investigation of the complaint, which was registered as F.I.R. in the Cuffe Parade Police Station, to the Economic Offences Wing of the Crime Branch, C.I.D., and has been accordingly now