Case: Rohan Dukle and Another Vs. The State of Maharashtra and Another

3. The case of the complainant-respondent No.2 as disclosed in the FIR is asNo.2 is the Director/Promoter of the companies by name M/s. Fortune Financial Services (India) Limited and Fortune Credit Capital Limited. Somewhere around July-2013, the petitioners being Promoters, Founders and Directors of Xperitus Insurance Brokers Pvt. Ltd. and Magus Corporate Advisors Pvt. Limited, had approached respondent No.2s company and represented that they are in the business of distribution of insurance products and advisory services in relation to settlement of insurance claims and promised excellent returns on investment and profitability of the Company. After various meetings, the complainant-company decided to purchase 51% shares of M/s. Xperitus Insurance Brokers Pvt. Ltd. and Magus Corporate Advisors Pvt. Ltd. and, accordingly, by the end of the year 2013 invested an amount of Rs.3,00,50,000/- as advance for share purchase and Rs.1,40,00,000/- towards inter-corporate deposit from the accounts of the complainants company. 16 separate Memorandum of Understanding (MOUs) were entered into by the complainant and different shareholders of the petitioners company. That in early 2014, the complainant suspected foul play as the petitioners visits to the complainants company had reduced. There was no communication from the petitioners and after rigorous follow-up, certain details and figures of the petitioners companies were provided which revealed total mismanagement of the petitioners companies. This was contrary to the facts and representations made to the complainant. The complainant found that after parting with huge and substantial amounts, the petitioners company suddenly started making losses. The complainant also found that compliances were not made by the petitioners relating to direct and indirect taxes. The complainants company thereafter decided not to invest further amount in Xperitus Insurance Brokers Pvt. Ltd. The complainant stopped remaining payment and asked the petitioners to return their money already deposited. The shares of the petitioners companies were not to be transferred till permission of the IRDA is not obtained. The petitioners had knowledge that the selling of their shares requires IRDA permission. The complainant further wrote a letter to IRDA and in their reply dated 29th July, 2016, they informed that no request has been received from Xperitus Insurance Brokers Limited regarding change in shareholding. In short, it is the case of the complainant that the petitioners by making false representations and suppression of facts had induced the complainants company to invest an amount of Rs.4,40,50,000/- for purchase of shareholdings of Xperitus Insurance Brokers Pvt. Ltd. and Magus Corporate Advisors Pvt. Ltd. though they were fully aware that their companies were commercially imbalanced.It is the case of the petitioners that in/or around the end of 2012, they were approached by M/s.Fortune Financial Services (India) Ltd. (for short Fortune) through their representatives with a request to consider selling equity shares of Xperitus Insurance Brokers Pvt. Ltd. and Magus Corporate Advisors Pvt. Limited to Fortune. It was represented to the petitioners that Fortune was interested in diversifying into insurance business. It was also informed to the petitioners that Fortune is applying for banking license and hence was acquiring various companies to showthe month of February, 2013, Fortune through Mr. Sudhir Valia and Mr.Vijay Choraria drew out the Terms of Agreement to finalize the entire transaction. Initially, the petitioners had offered only 20% of the stakes of both the companies. However, the complainant-respondent No.2 induced the petitioners to part with 51% of the stake in Xperitus Insurance Brokers Pvt. Ltd. and 49% of the stake Magus Corporate Advisors Pvt. Ltd. to ensure that the said companies can become subsidiaries of Fortune. As against the said shares apart from the consideration aforementioned, Fortune offered its 12,00,000/- shares in stake swap. Due diligence was conducted by the Chartered Accountant appointed by Fortune, valuation of the said companies was revised by them and subsequently MOU and Terms of Agreement were drawn by Fortune. Thereafter, the same were forwarded to the petitioners companies through their email dated 18th July, 2013, to be signed by all the concerned parties. Thereafter 12 MOUs with various shareholders of M/s.Xperitus Insurance Brokers Pvt. Ltd., came to be executed on 22nd July, 2013. Along with the said MOUs, Terms of Agreement was entered into on 23rd July, 2013, between Fortune, Xperitus Insurance Brokers Pvt. Ltd. and Magus Corporate Advisors Pvt. Ltd. and it was decided to conclude the transaction as per the terms and conditions mentionedper the terms and conditions of the Agreement dated 23rd July, 2013, Fortune had inter alia promised and obliged to perform as underAcquisition of shares equivalent to 51% of the said companies equity from other shareholders by paying 50% upfront and supporting to complete the entire transaction within 9 months of date of agreement, that is by 23rd April,12,00,000 shares in Fortune to be allotted toSalaries to 4 key promoters amounting to Rs.150 Lacs perIntroduction of funds as and when required for operations/acquisitions at rate of interest not exceedingAccess to Fortune/its promoters business contacts/ relationships/companies for the growth of theis the case of the petitioners that Fortune, however, failed to deliver on contracted terms, as result of which, the petitioners companies suffered losses. It is the case of the petitioners that in pursuance of the said Agreement, their companies undertook plan of action for next 15 months by way of including all the prospective clients that Fortune/its representatives would bring in for insurance business. Accordingly further plan for expansion of business including distribution of retail insurance products were put in place. The petitioners companies took upon themselves to employ more staff and train them accordingly and further infrastructure was increased, which involved funds being spent by the said companies. It is the specific case of the petitioners that all the business plans were shared with Fortune and its promoters/authorized representatives and all the expansion/increase in infrastructure were carried by their companies keeping Fortune/its representatives dulyis the case of the petitioners that Fortune, however, failed to deliver on contracted terms, as a result of which, their companies started suffering losses. This was repeatedly brought to the notice of Fortune but inspite of this, there was no substantial efforts on the part of Fortune to comply with the terms of the contract. Fortune even after repeated requests failed to reconcile the accounts or came forward to conclude the transaction and left the petitioners and their companies in a haplesspetitioners received a letter dated 27th July, 2016 from IRDA inter alia informing that by an email dated 6th June, 2016 from Fortune informed that they had entered into an MOU with Xperitus Insurance Brokers Pvt. Ltd. in July, 2013 and in connection with the same, IRDA asked Xperitus Insurance Brokers Pvt. Ltd. to furnish information. The petitioners vide letter dated 8th August, 2016, replied to the said letter of IRDA clarifying all the queries raised by IRDA. However, the petitioners were shocked when they received a letter dated 6 th October, 2016 from their banker informing that the Office of EOW, Unit IX has ordered their banker to defreeze the current accounts of the petitioners companies with reference to the subject CR. That is how the petitioners came to know about registration of FIR and they have from time to time given reply to the EOW explaining their position and pointing out that no criminal offence is made out.The writ petition was placed for admission before the Division Bench (Coram :A.S.Oka and Anuja Prabhudessai, JJ.) on 18th January, 2017. On that day, after hearing learned counsel for the petitioners and learned APP, the Court granted ad-interim relief and thereby directed respondent No.1 not to file charge-sheet against the petitioners in the subject crime.

Court's reasoning:
Bare reading of the entire complaint, in our considered opinion, does not make out any offence of criminal breach of trust under Section 406 of the IPC. The complainant nowhere alleges that the petitioners dishonestly misappropriated or converted to their own use the property invested in Xperitus Insurance Brokers Pvt. Ltd. and Magus Corporate Advisors Pvt. Limited. It is also not the case of the complainant that the petitioners used or disposed off their property in violation of any direction of law and/or legal contract.So far as the offence of cheating under Section 420 of the IPC is concerned, the law is fairly well settled in various judgments of the Apexof the above observation makes it abundantly clear that in order to make out the offence of cheating, fraudulent or dishonest intention is required to be shown right at the beginning of theabove averment of the petitioners is not even denied by respondent No.2 either by filing an affidavit-in-reply or in an argument before us. As a matter of fact, the terms of MOUs and Agreement were settled down by Fortune and the same were forwarded to the petitioners companies by email dated 18th July, 2013. Due diligence of the petitioners companies before the subject transaction was conducted by respondent No.2s company through professionally qualified chartered accountants and, only thereafter, respondent No.2 company entered into MOUs with individual shareholder of the petitioners companies and the Agreement was also prepared. These facts unequivocally show that everything including viability of the petitioners companies was in order at the time of the impugned transaction. Had that not been the case, then Fortune, respondent No.2s company would not have entered into MOUs andn is also supported by respondent No.2s contention that the petitioners companies suddenly started suffering losses only after execution ofMOUs. Thus the record shows that the petitioners companies started suffering losses subsequent to the execution of MOUs/Agreement. The version of the parties, as to why the petitioners companies started suffering losses, is contradictory. Thepetitioners version is that the same was due to failure on the part of Fortune in concluding terms of contract.As stated earlier, at the cost of repetition, we must state here that even the complainants case is that subsequent to the execution of MOUs/Agreement, the petitioners visit to Fortune reduced and suddenly petitioners companies started suffering losses. In the facts and circumstances, in our considered view, the FIR does not disclose that the petitioners entered into MOUs/Agreement with respondent No.2 company with fraudulent or dishonest intention. Therefore, the offence under Section 420 of the IPC is not madefind merit in this contention. The MOUs dated 22nd July, 2013 are the part of record and we have perused the same. We have also perused the Terms of Agreement dated 23rd July, 2013, which are quoted at page 8 of the petition. In terms of this MOUs/Agreement, the respective parties were required to discharge their obligations. Both the parties are blaming each other and, therefore, intended transaction viz. acquisition of 51% share in Xperitus Insurance Brokers Pvt. Ltd. and Magus Corporate Advisors Pvt. Limited could not be completed. We are not called upon to go into the question as to which party is at fault. The limited issue pressed before us is whether the offences as alleged in the FIR are made out orin our considered opinion, a mechanism is provided in MOU itself to arbitrate the dispute between the parties. The parties are also at liberty to avail civil proceedings to redress their grievance as permissible under law. However, in the above stated facts, in our considered opinion, the offence being not made out, the FIR could not have been registered and that too, after a delay of 3 ½the case at hand, the allegation made in the subject complaint, even if taken as they are, does not make out ingredients of the criminal offence, though at the most they may attract civil dispute, for which the mechanism is already provided in MOUs and, therefore, on this count also, the complaint needs to be quashed andpetitioners have approached this Court invoking jurisdiction under Article 226 of the Constitution of India and Section 482 of the Cr.PC.. By giving detailed reasons, we have come to the conclusion that the dispute between the parties is predominately of civil nature and offences under Sections 406 and 420 of the IPC are not made out and, therefore, we do not find any merit in the said submission advanced by Mr.Sawant, learned counsel for respondent No.2.