Case: A.V. Mohan Rao  Vs. M. Kishan Rao

The appellants and the respondent No.1 are stated to be Directors of a Company - M/s Spectrum Power Generation Limited (hereinafter referred to as "the Power Company") incorporated under the Indian Companies Act, 1956 (for short ‘thehaving its registered office at Secundrabad, in the State of Andhra Pradesh. The respondent No.1 filed the complaint alleging offences under Sections 60, 63,68, 68-A read with Section 621 of the Act, against the appellants, alleging inter alia that the accused persons by making false, deceptive and misleading statements and by suppressing relevant facts induced various persons to pay them money for purchase of shares of the Power Company; raised millions of Dollars from Non-Resident Indians (NRIs); siphoned off those funds into bogus companies exclusively owned by them in off-shore companies and purchased shares of the Power Company in India in the names of bogus off-shore companies owned/controlled by them. The matter came to the notice of the complainant when some of the prospective NRI investors made correspondence with the Power Company demanding share certificates for which they has paid substantial amounts to the appellants. The off-shore companies through which the appellants purchased the shares of the Power Company in Hyderabad are - M/s Spectrum Technologies, USA, M/s Spectrum Infrastructures Ltd., Jersy, Channel Islands and M/s Spectrum Infrastructures Ltd. at Mauritius. In this process the original investors who were promised shares in Power Company were never allotted any shares. On the other hand shares were allotted to off-shore companies which have nothing to do with the Power Companies and which are exclusively owned and controlled by the accused persons. It was specifically alleged in the complaint petition that the accused persons have in effect committed fraud on the power Company in whose name they collected money, invested that in their own companies and those companies in turn applied and got shares at the instance of the accused persons with the result that all these overseas investors are left high and dry. These acts, it is alleged by the complainant, constitute offences under Sections 68 and 68-A of the Act. It is further alleged in the complaint petition that the appellants issued a document in the name of the Spectrum Infrastructures Ltd., Jersy, Channel Islands, styled as "Project Overview". The said company issued a letter dated 30th September, 1994 by the first accused.The complainant further alleged that the Managing Director of the Power Company received a letter dated 26.6.1997 said to have been sent in the name of Spectrum NRI Investors the substance of which is that the NRIs are anxiously waiting for the Indianshare offer and public issue. The said letter was received by some persons claiming to be NRI investors of the Power Company. In the background of the above mentioned facts on which the complaint in question came to be filed the gist of which may beOn receipt of the complaint the Special Judge for Economic Offences, Hyderabad issued summons to the accused persons on 13.4.1999 requiring them to appear in person before the Court on the date fixed therein. On receipt of the same the accused persons filed the petition dated 28.6.1994 under Section 482 CrPC in the High Court of Andhra Pradesh with the prayer to quash the proceedings in CC No. 24/99 and pending disposal of the petition to stay all further proceeding including appearance of the petitioners before the Court. The main grounds of challenge against the proceeding was that the complaint does not make out any of the offences alleged by the complainant and as such it is bad in law and not maintainable; that the Act has no application to the transactions alleged in the complaint as the petitioners are the citizens of USA and they are the Directors of the overseas company which has been incorporated and functioning abroad and that the offer for investment was made to NRIs in USA; that the investing companies headed by the petitioners have taken necessary RBI permission to invest in the Power Company and accordingly have made the investment, and therefore they have not violated any law of the land; that even otherwise the investing companies did invest all the monies collected by them in the Power Company and as such the Power Company does not stand to lose anything; that the complainant who is not a mere shareholder but is the Vice-Chairman and Managing Director of the Power Company is in no way aggrieved by any of the alleged acts by the petitioner, and therefore, the complaint has been filed with an oblique motive. The further ground taken by the petitioners was that Section 60 of the Act is not at all attracted because the section requires registration of the prospectus before it is issued by the existing Company or an intended company. In view of the fact that the Companies involved herein are not Companies coming within the purview of the Companies Act and as there has been no prospectus issued by them as defined in Section 60 of the Act, the section has no applicability to the facts of the case on6. In the counter affidavit filed on behalf of the complainant respondent no.1 herein, the allegations and averments made in the petition filed under section 482 Cr. P.C. were denied. It was contended that in view of the specific allegations made in the complaint petition a clear prima facie case under Sections 60, 68, 68-A read with Section 621 of the Act has been made out. It was further contended by the complainant that the questions raised by the accused persons in the quashing petition can be considered only at the trial of the case after evidence is placed in the case. The complainant submitted that in the context of the facts and circumstances of the case the power under section 482 Cr. P.C. could not be exercised to quash the complaint petition and to terminate the proceeding at the preliminary stage.7. The High Court in its order construing the provisions of Section 4(2)(n) and Section 188 of the Cr. P.C. held that the authority of the State to exercise its jurisdiction effects the rights of persons or entities either by legislation or execution decree or by judgment of the Court, within its territory is undisputed, subject of course to certain exceptions recognized by the international law like in respect of members of the diplomatic missions, international institutions etc. The High Court noting that the problem of exercise of jurisdiction either civil or criminal over the persons or entities situate outside the territorial limits of the country is a very complicated area, took note of the observations in the case of Macleod vs. A.G. for New South Wales (1891) A.C. 455 (1) and Huntington vs. Attrill (1893) A.C. 150(2) that "All crime is local. The jurisdiction over the crime belongs to the country where the crime is committed". The High Court referring to the section observed that the Parliament asserted jurisdiction over every citizen of India is such a citizen commits an offence whether on high seas or elsewhere.8. Regarding the claim of the accused persons that they are citizens of USA, different stands have been taken by them in the petition; at one place the statement is made that petitioners are the Directors in the company and residents of USA while at another place it is stated that the petitioners are citizens of USA. The High Court took the view that this fact has to be ascertained from the evidence to be led by the parties at the trial of the case.On the submissions made on behalf of the accused persons that even accepting the allegations contained in the complaint to be true the averments did not constitute the offences alleged therein, the High CourtOn the discussions and the findings noted above, the High Court declined to quash the complaint petition and to drop the case against the accused persons. The said order is under challenge in this

Court's reasoning:
23. Reading of the complaint petition and the materials produced by the complainant with it in the light or provisions in the aforementioned sections it cannot be said that the allegations made in the complaint taken in entirety do not make out, even prima facie, any of the offences alleged in the complaint petition. We refrain from discussing the merits of the case further since may observation in that regard may effect one party or the other. The allegations made are serious in nature and relate to the power company registered under the Act having its head office in this country. Whether the appellants were or were not citizens of India at the time of commission of the offences alleged and whether the offences alleged were or were not committed in this country, are questions to be considered on the basis of the evidence to be placed before the Court at the trial of the case. The questions raised are of involved nature, determination of which requires enquiry into facts. Such questions cannot be considered at the preliminary stage for the purpose of quashing the complaint and the proceeding initiated on its basis. It is relevant to note here that from Sections 4 and 188 of the Criminal Procedure Code it is clear that even if the offence is committed by a citizen of India outside the country the same is subject to the jurisdiction of courts inare of the view that in the context of the facts and circumstances of the case, the High Court was right in declining to quash the complaint petition and the proceedings initiated on its basis.