Chandran Ratnaswami vs K.C. Palanisamy & Ors

2. Since common questions of law are involved, these appeals have been heard together and are being disposed of by this common judgment. However, for the sake of convenience, the factual matrix giving rise to these cases as alleged in the civil appeal arising out of SLP(C) No. 13120 of 2013 is set out hereinafter.

3. The appellant – Chandran Ratnaswami, alleged to have settled in Canada since 1974, is an officer of Hamblin Watsa Investment Counsel, a wholly-owned subsidiary of Fairfax Financial Holdings Limited (in short, “Fairfax”) which is based in Canada and has also made investments in India worth more than USD 1 billion. The said appellant is also a Director on the Boards of various renowned companies including ORE Holdings Limited (in short, “ORE”), a Fairfax Group company, based in Mauritius, and has to travel to India on business commitments. The said holding company, ORE on 30th January, 2004 entered into a Joint Venture Agreement (JVA) with CG Holdings Private Limited (respondent No. 1 – K.C. Palanisamy’s company) and N. Athappan (a Singapore citizen) for constructing and developing a hotel property, a shopping complex and an IT Park of the properties owned by Cherraan Properties Limited (CPL) and Vasantha Mills Limited (VML) (respondent No.1’s companies). ORE invested Rs.75 crores and got 45% in Cheran Enterprises Private Limited (CEPL). N. Athappan invested Rs. 4 crores and got 10% in CEPL. It is alleged that as CPL and VML have immovable assets, respondent No. 1 transferred shares of CPL and VML to CEPL instead of bringing money and got 45% share holding in CEPL. Respondent No. 1 is alleged to have swindled the said Rs. 75 crores that was deposited in the bank account contrary to the JVA and transferred the immovable assets of CPL and VML, subsidiaries of CEPL. Thereupon, ORE filed Company Petition No. 76 of 2005 before the Company Law Board, Additional Principal Bench, Chennai (in short, “the CLB”) on account of the alleged acts of oppression and mismanagement indulged in by respondent No. 1. The Company Law Board by order dated 13th August, 2008 directed respondent No. 1, CG Holdings Private Limited and CEPL to return the investment of ORE and N. Athappan amounting to Rs. 79 crores with 8% interest within one year, failing which the land of VML was to be transferred to ORE and N. Athappan. It was directed that once the aforementioned amount is paid, respondent No. 1 would take control of CEPL and its subsidiaries. The Company Law Board held as under:

4. Cross appeals were filed by the parties before the High Court of Judicature at Madras and the High Court vide order dated 5th August, 2011 confirmed the order dated 13th August, 2008 passed by the CLB, in the following terms:

8. Respondent No. 1 then filed another similar complaint before Judicial Magistrate, Kangayam suppressing the fact of filing earlier complaints and the order dated 13th March, 2007 passed by the Magistrate Perundurai, whereupon the Crime Branch, Erode was directed to register an FIR. Accordingly, FIR No. 7 of 2007 was registered by Police Station DCB, Erode under Sections 120-B, 420, 169, 408, 409 IPC, but the case was said to have been closed on 20th May, 2009 and the police filed the Closure Report. Meanwhile, Criminal O.P. Nos. 12695 and 19384 of 2007 had been filed for quashing the FIR by the persons shown as accused in the said FIR, in which the High Court vide order dated 8th February, 2010 frowned upon the conduct of respondent No. 1 in the following terms:

9. The respondent then preferred Special Leave Petition in the Supreme Court being SLP (Crl.) No. 9853 of 2010 against the order dated 8th February, 2010, which was dismissed by this Court on 22nd November, 2010 with liberty to pursue protest petition, if any, said to be pending on the file of the Judicial Magistrate, Kangayem. It is alleged that no protest petition was pending on that day.

13. Curiously enough, on 2nd January, 2012, respondent No. 6 - Superintendent of Police, Tiruppur allegedly in collusion with respondent No. 1 and relying upon the order dated 22nd November, 2010 reopened FIR No. 7 of 2007 and ordered re-investigation. Charge-sheet being CC 162 of 2012 ultimately came to be filed by respondent No. 5 - Dy. Superintendent of Police, District Crime Records Bureau, Erode before the Judicial Magistrate, Erode-III on 11th September, 2012 inter alia against Paul Rivett, Chandran Rathnaswami, Ramasamy Athappan, Nandakumar Athappan, M/s. Fairfax Financial Holdings Limited, M/s. Hamin Watsa Investment Council, Odyssey America Reinsurance Corporation and ORE Holdings Limited showing them respectively as accused Nos. 2, 3, 4, 6, 8, 9, 11 and 12 for committing offences under Sections 120-B, 420, 409 read with 109 IPC.

14. On the basis of aforesaid chargesheet, the Judicial Magistrate on 12th September, 2012 issued summons returnable on 12th October, 2012. On 26th September, 2012, the Dy. Superintendent of Police filed a report stating that he searched for the accused in Chennai and Mumbai but could not ascertain their whereabouts and accordingly prayed for issuance of Non- Bailable Warrants (NBWs) which were issued by the Judicial Magistrate, Erode on 27th September, 2012. Based upon the NBWs, the Superintendent of Police issued a Look-Out Circular on 9th January, 2013 against the appellant. Unaware of all this, the appellant landed in India and was detained by the immigration authorities. He filed a writ petition being W.P. No. 1764 of 2013 and on 22nd January, 2013 the High Court passed an interim order restraining appellant’s detention and directed to post the writ petition on 29th January, 2013. SLP filed against this order was disposed of on 24th January, 2013 observing that the High Court had itself posted the matter on 29th January, 2013. On 29th January, 2013, the High Court directed the appellant to surrender before the trial court and pray for recall of NBWs vide order passed in Criminal O.P. No. 2283 of 2013 filed by him for quashing the chargesheet i.e. CC 162 of 2012. Crl.M.P. No. 3 of 2013 was also filed in Criminal O.P. No. 2283 of 2013 alleging fraud committed by the opposite party. On the same day, Crl.M.Ps. No. 3 in Criminal O.P. No. 2166 of 2013 filed by Ramasamy Athappan & N. Athappan and Criminal O.P. No.2282 of 2013 filed by Paul Rivett also came up before the High Court and they were also directed to surrender before the Judicial Magistrate No. III, Erode. Finally on 1st February, 2013 the High Court directed in respect of the appellant (petitioner in Criminal O.P. No. 2283 of 2013), Ramasamy Athappan & N. Athappan (petitioners in Criminal O.P. No. 2166 of 2013) and Paul Rivett (petitioner in Criminal O.P. No. 2282 of 2013) as under:

17. On 11th March, 2013, this Court granted stay of chargesheet i.e. CC 162 of 2012 by an order passed in SLP(Crl.) Nos. 1947-1948 of 2013 which have been filed by Paul Rivett, an other accused in the chargesheet CC 162 of 2012, challenging the orders dated 29th January and 1st February, 2013 respectively in Criminal O.P. No. 2282 of 2013 and Crl.M.P. No.3 of 2013 in Criminal O.P. No. 2282 of 2013. Paul Rivett is Law Officer in the Fairfax Group and is a Canadian citizen and he has also been made an accused in the chargesheet CC 162 of 2012. NBWs as well as the Look Out Notice were issued against Paul Rivett also.

20. Hence, this appeal arising out of SLP(C) No. 13120 of 2013 by the appellant – Chandran Ratnaswami. S.L.P.(Crl.) Nos. 3273-3274 of 2013 have also been filed by the same appellant (an accused in Chargesheet CC 162 of 2013) against orders dated 29th January, 2013 and 1st February, 2013 respectively in Criminal O.P. No. 2283 of 2013 and Crl.M.P. No.3 of 2013 in Criminal O.P. No. 2283 of 2013. In these SLPs, notice has not been issued and they are fresh ones.

47. Instead of complying with the order of the Company Law Board and the directions and observations made by the Madras High Court in the aforementioned Company Appeals, respondent No.1 started filing several criminal complaints against the appellant. The first complaint was filed by the respondent before the Economic Offences Wing, Chennai, alleging that ORE invested only Rs. 75 crores and for not bringing Rs. 300 crores in Joint Venture Company. The petition filed in the High Court seeking direction to EOW to take action on the complaint was, however, withdrawn. Respondent No.1 then filed a second complaint before the Judicial Magistrate, Perundurai which was dismissed after examining respondent No.1 and his two witnesses. The respondent then filed another complaint before the Judicial Magistrate, Kangeyam without disclosing the dismissal of the earlier complaint filed before the Judicial Magistrate, Perundurai. The said complaint finally came to be registered as FIR No.7 of 2007. The appellant moved the High Court for quashing the said FIR. In the said petition, the High Court, after noticing the similar complaint filed earlier by respondent No.1 in the court of Judicial Magistrate, Perundurai, finally observed that the second criminal proceeding initiated by respondent No.1 has no merit. The court further passed a stringent remark against the conduct of respondent No.1 for filing cases on the same issue.

52. As noticed above, after the dispute was finally settled by the Company Law Board and the Madras High Court in appeal, the respondent approached the Economic Offences Wing, who refused to entertain the complaint. The respondent then moved the complaint before the Judicial Magistrate, Perundurai for initiating criminal action against the appellant for breach of contract, which was dismissed by the Magistrate holding the same as nothing but to take vengeance. The Magistrate further held that if the conditions of the agreement are violated the respondent has to seek remedy under the Contract Act or the Company Law instead of filing criminal case. Suppressing the said complaint and the order passed by the Magistrate, the respondent tried again by filing a complaint before the Judicial Magistrate, Kangayam for initiating criminal action against the appellants for the breach of contract and conspiracy. Although the FIR was registered, but a closure report as a mistake of fact was prepared. The High Court while passing the order observed that the Court would frown upon the conduct of the complainant in indulging in repeated harassment of the petitioners-appellants. Irrespective of the dispute with regard to the closure of the case, a fresh life was given to the criminal case at the instance of Superintendent of Police, who directed re-investigation and in course of the said criminal proceeding irrespective of FIR No.7/2007 the appellants were harassed and on technicalities various orders for surrender, arrest and their detention had been passed. As noticed above, in the three writ petitions filed by respondent No.1, though not against the appellant but against the C.B.I. in respect of different transactions, the High Court dismissing all those writ petitions observed that the modus operandi of the writ petitioner (respondent No.1) was to defraud the person or entity and thereafter approach the Courts with multiple proceedings in order to distract attention from his own misdeeds.

14. Hence, for the reasons as aforesaid, this petition is dismissed under Section 203 of Cr. P.C.”

Consequently, connected miscellaneous petitions are closed.”

19. Challenging the above order of the Single Judge, respondent No. 1 filed a writ appeal being W.A. No. 517 of 2013 which was allowed by a Division Bench of the High Court vide order dated 22nd March, 2013 setting aside the order dated 14th March, 2013 passed by the Single Judge and observing:

18. On a perusal of the prayer made in the writ petition, it is evident that the first respondent has challenged the Look-out Notice issued on 9.1.2013 and consequently prayed for payment of compensation. The learned Single Judge in the above miscellaneous petition has held that the Loo-out Notice dated 9.1.2013 is cancelled and allowed the first respondent to leave India after filing undertaking affidavit and deposit a sum of Rs. 25 lakhs.

22. On the above said background and in the light of the decision cited supra, we are of the considered view that the order passed by the learned single Judge in M.P. No.2 of 2013 in W.P. No.2740 of 2013 dated 14.3.2013 is liable to be set aside, and accordingly set aside. The writ appeal is allowed. Consequently, the first respondent is entitled to get refund of the amount deposited by him on 15.3.2013 pursuant to the interim order of the learned single Judge No costs. Connect M.P. No.1 of 2013 is closed.”

(5) …..

(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.”

44. Disputes arose between the parties when respondent No.1 alleged to have transferred shares of CPL and VML to CEPL instead of bringing money and got 45% shareholdings in CEPL. Respondent No.1 allegedly swindled the said 75 crores deposited by the appellant Company ORE and transferred the immovable assets of CPL and VML, subsidiaries of CEPL.

Consequently, ORE filed Company Petition before the Company Law Board on account of alleged acts of oppression and mismanagement indulged by respondent No.1. The matter before the Company Law Board was hotly contested and finally the Company Law Board by order dated 13th August, 2008 directed respondent No.1, CG Holdings and CEPL to return the investment of appellant Company ORE and Athappan with 8% interest. On payment of money it was directed that respondent K.C. Palanisamy will take control of CEPL and its subsidiaries. Clarification Petition was also disposed of by Company Law Board on 13th August, 2008.

45. Both the parties moved the Madras High Court by filing appeals and those Company Appeals were finally disposed of on 5th August, 2011 and the order passed by the Company Law Board was confirmed.

46. The appellant filed execution case, which is pending. It further appears that a suit was also filed being O.S.No.90 of 2007 before the District Munsiff Court.

48. Respondent No.1 then moved this Court by filing SLP(Crl.) No.9853 of 2010 alleging the pendency of the protest petition and non-closure of the criminal case. This Court refused to interfere with the order but observed that if any protest petition is pending the same shall be disposed of in accordance with law.

55. For the reasons aforesaid, the appeals arising out of SLP (C) No.13120 of 2013, SLP (Crl.) Nos.3273-3274 of 2013 and SLP (Crl.) Nos.1947- 1948 of 2013 are allowed, whereas the appeals arising out of SLP (Crl.) Nos.1924-1926 of 2013 and SLP (C) Nos.11342-11343 of 2013 are dismissed. There shall be no order as to costs.

56. Although we do not appreciate the action of a senior Superintendent of Police, but in view of the order passed in these appeals, we do not want to proceed any further in Contempt Petition (C) No.166 of 2013, which stands disposed of.

PETITION FOR SPECIAL LEAVE TO APPEAL (CIVIL) NO.13120/2013 |CHANDRAN RATNASWAMI |.. |Appellant(s) | | | Versus | | |K.C. PALANISAMY & ORS |.. |Respondent(s) | WITH CRIMINAL APPEAL NOs.736-737 OF 2013 @ SLP(CRL.)NOs. 3273-3274/2013 CRIMINAL APPEAL NOs.731-733 OF 2013 @ SLP(CRL.)NOs.1924-1926/2013 CIVIL APPEAL NO.4537-4538 OF 2013 @ SLP(C)NOs.11342-11343/2013 CRIMINAL APPEAL NO.734-735 OF 2013 @ SLP(CRL.)NOs.1947-1948/2013 CONTEMPT PETITION(CIVIL) NO.. 166/2013 IN SLP(CRL.)NO.9853 OF 2010 DATE : 09/05/2013 These matters were called on for pronouncement of judgment today.

Hon'ble Mr. Justice M.Y. Eqbal pronounced the judgment of the Bench comprising Hon'ble Mr. Justice P. Sathasivam and His Lordship.

Leave granted.

The appeals arising out of SLP (C) No.13120 of 2013, SLP (Crl.) Nos.3273-3274 of 2013 and SLP (Crl.) Nos.1947-1948 of 2013 are allowed, whereas the appeals arising out of SLP (Crl.) Nos.1924-1926 of 2013 and SLP (C) Nos.11342-11343 of 2013 are dismissed. There shall be no order as to costs.

Although we do not appreciate the action of a senior Superintendent of Police, but in view of the order passed in these appeals, we do not want to proceed any further in Contempt Petition (C) No.166 of 2013, which stands disposed of.

[ Signed reportable judgment is placed on the file ]