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Case Name: Dinesh Gupta vs. The State of Uttar Pradesh & Anr. and Rajesh Gupta vs. The State of Uttar Pradesh & Ors.

Case Numbers: Criminal Appeal No(s). of 2024 arising out of S.L.P.(Crl.) No.3343 of 2022 and Criminal Appeal No(s). of 2024 arising out of S.L.P.(Crl.) No.564 of 2023

Date of Judgment: January 11, 2024

Quorum of the Case: The judgment was delivered by a bench comprising Justice Vikram Nath and Justice Rajesh Bindal

FACTS OF THE CASE

On 29.07.2018, Karan Gambhir filed a complaint leading to an FIR. The complaint listed DD Global’s address inaccurately in Noida, although its registered office was in New Delhi. The intent was to falsely establish jurisdiction in Gautam Budh Nagar. The addresses of accused Rajesh Gupta, Dinesh Gupta, and associated companies were misleadingly listed in Gautam Budh Nagar, while their actual addresses were in New Delhi. The true addresses of the accused were revealed during the charge-sheet filing, confirming the complainant’s intent to create false jurisdiction. The Chief Judicial Magistrate issued summons without proper verification of addresses or business locations, showing a lack of due diligence. The complainant claimed to be misled into converting a loan into equity. However, board resolutions from 2011 demonstrated that this was a deliberate decision by the complainant’s company, undermining claims of inducement. The complainant concealed knowledge of the merger between Gulab Buildtech, Verma Buildtech, and BDR Builders, approved by the High Court in 2013. An attempt to recall the merger was dismissed in 2016, which was not  The FIR was registered years after the complainant became aware of the merger and its dismissal, indicating a delay in pursuing the case. The Delhi High Court had appointed an Arbitrator in 2019 to resolve the dispute, which was still pending. The court found the FIR to be malicious prosecution and quashed it, citing an abuse of the judicial process. Karan Gambhir was ordered to pay costs of ₹25 lakhs within four weeks for the benefit of SCBA and SCAORA members.

ISSUES

• Whether the Complaint Established False Jurisdiction
• Whether the Allegations of Inducement into Loan Conversion were Valid
• Whether there was Concealment of Material Facts by the Complainant

LEGAL PROVISIONS

Indian Penal Code, 1860 (IPC):

• Section 420 (Cheating and Dishonestly Inducing Delivery of Property): This section was central to the complainant’s allegations that the accused had induced the complainant to advance a loan by deceitful means. The court ultimately found no evidence of cheating as the decisions were made through company resolutions.
• Section 406 (Criminal Breach of Trust): Allegations were made against the accused for breach of trust in handling the complainant’s investments. The court found these allegations to be unsubstantiated, determining that the dispute was commercial rather than criminal in nature.

Code of Criminal Procedure, 1973 (CrPC):

• Section 482 (Inherent Powers of High Court): This provision allows the High Court to quash FIRs to prevent abuse of the court process. The court invoked this section to quash the FIR, concluding that the complaint was malicious and an abuse of the legal system.
• Companies Act, 1956 and 2013:

• Provisions related to Company Resolutions and Mergers: The case scrutinized the company resolutions regarding the investments and the legal procedures followed during the merger of Gulab Buildtech and Verma Buildtech with BDR Builders. These provisions helped demonstrate the commercial nature of the dispute.

CONTENTIONS OF THE APPELLANT

The appellants contended that the FIR was registered based on misleading statements by the complainant. The addresses provided for the company and the accused individuals were deliberately incorrect, falsely indicating they were based in Noida to create jurisdiction in Gautam Budh Nagar, which was not applicable. The actual business addresses and residences of the accused were in New Delhi, not Noida. This misrepresentation was argued to be a deliberate attempt to manipulate jurisdiction. The appellants argued that the transaction in question was purely commercial, not criminal. They provided evidence in the form of company resolutions dated 25.03.2011 and 26.08.2011, showing that the complainant had knowingly decided to invest in the equity of Gulab Buildtech and Verma Buildtech. This decision was documented and undisputed, contradicting the claim that the appellants had induced the complainant to advance a loan that was later converted into equity. The appellants emphasized that this was a business decision taken by the complainant’s board, not a case of cheating or criminal breach of trust. The appellants contended that the complainant had concealed critical information from the court. This included the complainant’s prior knowledge of the merger of Gulab Buildtech and Verma Buildtech with BDR, which had been legally processed and approved by the High Court. The complainant had neither raised objections during the merger proceedings nor disclosed the filing and dismissal of an application for the recall of the merger order. The appellants argued that these omissions were intentional, aimed at giving a criminal color to what was essentially a commercial dispute. This concealment was presented as evidence of the complainant’s malicious intent and abuse of the judicial process. The appellants highlighted the significant delay in filing the FIR—more than eight years after the initial loan transaction and over two years after the dismissal of the application for recall of the merger order. This delay, coupled with the complainant’s knowledge of the merger and the commercial nature of the dispute, was argued to indicate malicious intent. The appellants contended that the complainant had waited for an opportune moment to initiate false and frivolous litigation, further demonstrating abuse of the legal system.

CONTENTIONS OF THE RESPONDENT

The respondent argued that the appellants were attempting to evade jurisdiction by falsely claiming their addresses were in New Delhi when their businesses were allegedly operating out of Noida. The complainant’s FIR was filed based on information that the companies were located in Noida, which was consistent with their registration documents and the addresses provided for service of process. This misrepresentation of address and jurisdiction was crucial for filing the case in Gautam Budh Nagar. The respondent contended that the investments made by the complainant were originally loans, not equity. The appellants reportedly induced the complainant into providing loans, which they later converted into equity without proper authorization. This conversion, according to the respondent, constituted criminal breach of trust and cheating, and the appellants used forged documents to appropriate the complainant’s shares in the merged companies. The respondent argued that the appellants deliberately concealed material facts from the court, such as their knowledge of the merger and the complainant’s status as a major shareholder. The appellants allegedly did not disclose the process of merger adequately, which led to the complainant’s loss of shares. The complainant filed the FIR only after discovering the fraudulent activities and non-disclosures by the appellants, which undermined the integrity of the legal process.

COURT’S ANALYSIS AND JUDGEMENT

The court critically examined the jurisdictional aspects raised by both parties. It noted discrepancies in the addresses provided in the FIR versus the actual registered addresses of the companies involved. The court found that the complainant had misrepresented the jurisdiction by stating the companies were based in Noida when their registered offices were in New Delhi. This misrepresentation was deemed deliberate, aiming to falsely establish jurisdiction in Gautam Budh Nagar, Uttar Pradesh. The court analyzed the nature of the transactions between the parties. It considered the complainant’s contention that the investments were initially loans and were later converted into equity without proper authorization. The court reviewed documentary evidence, including resolutions passed by the companies involved, which indicated that the conversion was a legitimate business decision rather than a fraudulent act as alleged by the complainant.

Addressing the criminal allegations of cheating and criminal breach of trust, the court found insufficient evidence to substantiate these claims. It emphasized that the investments made by the complainant were based on resolutions passed by the companies, which were not disputed. The court also noted that the complainant failed to timely pursue legal remedies after becoming aware of the alleged wrongdoing, waiting several years before filing the FIR.  Regarding the allegations of non-disclosure and misrepresentation by the appellants, the court observed that the complainant had knowledge of the merger of Gulab Buildtech and Verma Buildtech with BDR Builders but did not raise objections during the merger process. The court criticized the complainant for not disclosing these crucial details in the FIR, highlighting a lack of transparency and full disclosure.

Concluding on the abuse of legal process, the court found that the FIR and subsequent criminal proceedings were malicious and aimed at harassing the appellants. It noted that the complainant’s actions undermined the trust in judicial processes and imposed unnecessary burdens on the appellants. Therefore, the court concluded that the FIR was an abuse of the legal system and quashed all proceedings against the appellants. As a deterrent measure, the court imposed costs of ₹25 lakhs on the respondent for misusing the legal system and initiating frivolous litigation. The costs were directed to be deposited with the court and subsequently utilized for the development and benefit of legal associations.

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Judgement Reviewed by- Shruti Gattani

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