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CASE NO.:

Appeal (crl.) 688 of 2002

PETITIONER:

A.V. MOHAN RAO & ANR.

Vs.

RESPONDENT:

M.KISHAN RAO AND ANR.

DATE OF JUDGMENT: 16/07/2002

BENCH:

D.P.MOHAPATRA, K.G.BALAKRISHNAN.

JUDGMENT:

D.P.Mohapatra,J.

Leave granted.

The question that arises for determination in

this case is whether on the facts and circumstances

emerging from the averments in the complaint petition and

the materials filed with it a case for quashing the

complaint filed under Section 482 of the Code of Criminal

Procedure (for short 'CrPC') is made out or not.

This appeal filed by the accused persons is

directed against the order dated 1.3.2000 of the High

Court of Andhra Pradesh in Criminal Petition No.3052/99

declining to grant the prayer of the appellants for quashing

the proceedings in CC No.24/99 on the file of the Court of

Sub-Judge, Economic Offences at Hyderabad. The

proceeding was instituted on the complaint petition filed

by respondent No.1. 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 'the Act'), having 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

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they had 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., Jersey, 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., Jersey,

Channel Islands, styled as "Project Overview". The said

company issued a letter dated 30th September, 1994 by the

first accused. The relevant portions of the said "Project

Overview" and the letter are extracted hereunder:

"SPECTRUM POWER

208 MEGAWATT POWER PLANT AT

KAKINADA, ANDHRA PRADESH, INDIA

PROJECT

OVERVIEW"

The letter dated 30.9.94 reads as

follows:

"Re: Private Sector Power Generation

Project in Kakinada, Andhra Pradesh

I am enclosing a high level overview of

the investment opportunity for the

above project. Though I am introducing

to you to this opportunity now, we

have done extensive groundwork for

this project for the last two years.

Today, we have reached the point

where we can now make the foreign

currency investment in the project.

As you are probably aware, this is

clearly the best time for investing in

India's economic future. The economic

liberalization towards a market

economy and the focus to encourage a

"for profit" private investment in

infrastructural industries, such as

power, has presented a unique

opportunity for investors like us. We

seized this opportunity and vigorously

promoted and developed the fast

privately held Joint Venture Power

Company in India.

We have a rare ground floor investment

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opportunity, which would normally be

sold at a premium. However, this

project is being offered to you with the

same high investment returns as the

promoters. For the financial security of

the capital and the investment income

and for tax beneficial treatment, we

have formed an "offshore" entity,

"SPECTRUM INFRASTRUCTURES

LIMITED" to execute and direct our

investment in the power project. This

entity will be the investment vehicle

through which investors will be

participating in this venture."

I will be in touch with you in the next

few weeks to discuss your investment

commitment. The initial investment

funds will have to be made available by

October 20, 1994.

In the meantime, if you have any

questions, please call 382 0056 or

3821727.

Sincerely yours,

Sd/- "

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 Indian Company's share 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 be stated thus :

"From the above material and

conclusive evidence, it is clear that

Accused Nos.1 and 2 grossly

misrepresenting by false

representations, induced most of the

unknown investors outside the country

to invest monies by issuing a circular,

offer documents, and dishonestly

concealing the material facts and those

monies were appropriated into the

account of the Accused persons and

the Accused persons' Companies were

allotted shares and the NRIs were not

given any shares, even though claim is

made that 130 share holders from the

United States of America are the

investors of the said monies. The said

modus operandi and actions of the two

Accused constitute offences under

Section 60, 63, 68 and 68A of the

Companies Act of 1956 and

accordingly this Hon'ble Court is

requested to proceed according to law."

On receipt of the complaint the Special Judge

for Economic Offences, Hyderabad issued summons to the

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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 proceedings 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 on

hand.

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.

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

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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 that section observed that the Parliament

asserted jurisdiction over every citizen of India if such a

citizen commits an offence whether on high seas or

elsewhere.

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.

The Court observed:

"Apart from that in a transaction like

the present one, assuming for the sake

of arguments that all the allegations

made in the complaint are true, it is

doubtful whether it can safely be said

that the alleged offences are committed

wholly outside the territory of India as

one of the elements in the crime is

situated in India i.e. the Company in

which the petitioners are alleged to

have solicited the participation by way

of equity, in view of the judgment of the

Supreme Court in Mobarik Ali Ahmed

vs. State of Bombay (AIR 1957 SC 857),

wherein their Lordships have held that

the corporeal presence of the accused

in the country is not essential to assert

the criminal jurisdiction."

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 Court

observed :

"Unless all the documents relied upon

by the complainant are examined,

which can only be done after

appropriate proof of those documents,

it may not be possible for the court to

come to any conclusion whether the

offences alleged in the complaint are

made out. Apart from that in exercise

of the jurisdiction under Section 482 of

the Code of Criminal Procedure, this

Court would not go into the aspect of

appreciation of evidence or sufficiency

of evidence."

On 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 appeal.

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The main thrust of the arguments of Shri

Dushyant A.Dave, learned senior counsel appearing for the

appellants was that the allegations in the complaint taken

in entirety do not make out the offences as alleged in it;

that the document alleged to have been issued by the

appellants is not a 'prospectus' as defined in Section 2(36)

of the Act; that the ingredients for applicability of Sections

60, 63, 68 and 68-A are not established on the allegations

made in the complaint and the materials produced by the

complainant even prima facie and that the appellants are

citizens of U.S.A. and therefore, a criminal proceeding

instituted against them in the court before the Magistrate

is not maintainable. The offences alleged in the complaint

petition were committed outside India and, therefore, a

Magistrate has no jurisdiction to entertain the complaint

petition.

Shri A.K.Ganguly, learned senior counsel

appearing for the complainant-respondent joined the issue

on each of the points urged by Shri Dave and urged that a

strong prima facie case for criminal action against the

appellants has been made out in the case. Shri Ganguly

further contended that the questions raised in the

proceeding on behalf of the appellants cannot be

considered at this stage of the proceeding since they are to

be determined during the hearing of the case. In any view

of the matter, Shri Ganguly contended, that no case for

quashing of the complaint and the proceeding initiated on

its basis under Section 482 of the Cr.P.C. or Article 226 of

the Constitution of India has been made out and,

therefore, the High Court rightly dismissed the petition

filed by the appellants.

The position has to be taken as well settled that

power of quashing a criminal complaint and the

proceeding initiated on its basis under Section 482 of the

Cr.P.C. or Article 226 of the Constitution is to be exercised

very sparingly and with circumspection and that too in the

rarest of rare cases.

This Court in the case of State of Bihar vs.

Murad Ali Khan & Ors. reported in (1988) 4 SCC 655

observed :

"It is trite that jurisdiction under

Section 482 CrPC, which saves the

inherent power of the High Court, to

make such orders as may be necessary

to prevent abuse of the process of any

court or otherwise to secure the ends

of justice, has to be exercised sparingly

and with circumspection. In exercising

that jurisdiction the High Court should

not embark upon an enquiry whether

the allegations in the complaint are

likely to be established by evidence or

not. That is the function of the trial

Magistrate when the evidence comes

before him. Though it is neither

possible nor advisable to lay down any

inflexible rules to regulate that

jurisdiction, one thing, however,

appears clear and it is that when the

High Court is called upon to exercise

this jurisdiction to quash a proceeding

at the stage of the Magistrate taking

cognizance of an offence the High

Court is guided by the allegations,

whether those allegations, set out in

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the complaint or the charge-sheet, do

not in law constitute or spell out any

offence and that resort to criminal

proceedings would, in the

circumstances, amount to an abuse of

the process of the court or not."

A similar view was taken by this Court in the

case of State of Haryana & Ors. vs. Bhajan Lal & Ors.,

1992 Suppl.(1) SCC 335 wherein it was observed thus :

"We also give a note of caution to the

effect that the power of quashing a

criminal proceeding should be

exercised very sparingly and with

circumspection and that too in the

rarest of rare cases; that the court will

not be justified in embarking upon an

enquiry as to the reliability or

genuineness or otherwise of the

allegations made in the FIR or the

complaint and that the extraordinary

or inherent powers do not confer an

arbitrary jurisdiction on the court to

act according to its whim or caprice."

The same view was expressed by this Court in

the case of Mahavir Prasad Gupta & Anr. vs. State of

National Capital Territory of Delhi & Ors., 2000 (8) SCC

115.

In view of the principles of law it is to be

considered whether on the allegations which applicants

made in the complaint and the materials filed by the

complainant a case for exercise of jurisdiction under

Section 482 Cr.P.C. or Article 226 of the Constitution has

been made out. As noted earlier, it is alleged in the

complaint that the accused, appellants herein, have

committed the offences under Sections 60, 63, 68, 68-A

read with Section 621 of the Act.

Section 60 provides that : No prospectus shall

be issued by or on behalf of a company or in relation to an

intended company unless, on or before the date of its

publication, there has been delivered to the Registrar for

registration a copy thereof signed by every person who is

named therein as a director or proposed director of the

company or by his agent authorised in writing, and having

endorsed thereon the documents enumerated in the

section.

The expression 'prospectus' is defined in

Section 2(36) of the Act to mean "any document described

or issued as a prospectus and includes any notice,

circular, advertisement or other document inviting deposits

from the public or inviting offers from the public for the

subscription or purchase of any shares in, or debentures

of, a body corporate".

Section 63 of the Act makes provision regarding

criminal liability for mis-statements in the prospectus. In

sub-section (1) thereof it is laid down that "where a

prospectus issued after the commencement of this Act

includes any untrue statement, every person who

authorised the issue of the prospectus shall be punishable

with imprisonment for a term which may extend to two

years, or with fine which may extend to fifty thousand

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rupees, or with both, unless he proves either that the

statement was immaterial or that he had reasonable

ground to believe, and did up to the time of the issue of the

prospectus believe, that the statement was true."

Section 68 of the Act makes provision regarding

penalty for fraudulently inducing persons to invest money.

It is laid down therein that : "Any person who, either by

knowingly or recklessly making any statement, promise or

forecast which is false, deceptive or misleading, or by any

dishonest concealment of material facts, induces or

attempts to induce another person to enter into, or to offer

to enter into

(a) any agreement for, or with a view to,

acquiring, disposing of, subscribing for, or

underwriting shares or debentures; or

(b) any agreement the purpose or pretended

purpose of which is to secure a profit to

any of the parties from the yield of shares

or debentures, or by reference to

fluctuations in the value of shares or

debentures;

shall be punishable with imprisonment for a term which

may extend to five years, or with fine which may extend to

one lakh rupees, or with both.

Section 68-A of the Act deal with personation

for acquisition, etc., of shares and the action of any person

who makes in a fictitious name an application to a

company for acquiring, or subscribing for, any shares

therein, or otherwise induces a company to allot, or

register any transfer of, shares therein to him, or any other

person in a fictitious name, shall be punishable with

imprisonment for a term which may extend to five years.

Reading of the complaint petition and the

materials produced by the complainant with it in the light

of 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 any

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 in India. [See Central Bank of

India Ltd. vs. Ram Narain, AIR 1955 SC 36, Mobarik Ali

Ahmed vs. The State of Bombay, 1958 SCR 328 and Ajay

Aggarwal vs. Union of India & Ors., (1993) 3 SCC 609].

On consideration of the matter, we are 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. In the result, this appeal being devoid of merit is

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dismissed.