IN THE HIGH COURT OF KARNATAKA BEFORE THE...

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IN THE HIGH COURT OF KARNATAKA

CIRCUIT BENCH AT DHARWAD

DATED THIS THE 23RD

DAY OF AUGUST, 2012

BEFORE

THE HON’BLE MR. JUSTICE ANAND BYRAREDDY

WRIT PETITION No.64368-64375 OF 2012 (GM-RES)

CONNECTED WITH

WRIT PETITION No.64479-64485/2012(GM-RES)

IN W.P.No.64368-64375/2012

BETWEEN:

1. Coastal Mines and Minerals,

A Partnership Firm,

Registered with the Registrar

of Firms and Societies,

Represented by one of its partners

Petitioner No.2

2. Mr. Prasanna V. Ghotage,

Aged 48 years, Occupation: Business,

Resident of 1088/B, ‘Prerana Hommes’,

Ranade Colony, Hindwadi,

Belgaum-590 011.

3. Mr. K.J.V. Sharma,

Aged 56 years, Occupation: Service,

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Resident of D-7, Ayodhya Co-operative

Housing Society,

Ambaji, Fatorda, Margao-403 602.

4. Mr. Jayesh V. Parab,


Resident of A-102, Sushela Sankul,

Orulem, Vasco – Goa.

5. Mrs. Vibhita Kumari,


Resident of House No.25/A,

Bauxite Road,

Sahyadri Nagar, Belgaum.

6. Mr. Hassan M. Angolkar,

Aged 65 years, Occupation: CEO of

Hira Steel Limited, Resident of 9th Cross,

Bhagyanagar, Tilakwadi, Belgaum,

7. Mr. Imran Shaikh,

Aged about 38 years,

Occupation: Service,

Resident of House No.29, Benawada,

Sanguem – Goa.

8. Shri. Sanjay Shirodkar,

Aged 38 years,

Occupation: Service,

Resident of House No.35,

Guruduwara Road,

Mangor Hill, Vasco – Goa. … PETITIONERS

(Shriyuths. Anoop Chaudhari and June Chaudhari, Senior

Advocates for Shri Sangram S. Kulkarni, Advocates)

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AND:

1. State of Chattisgarh,

Principal Secretary, Home,

Home Secretariat,

Raipur, Chattisgarh.

2. Inspector-in-Charge,

Special Investigation Cell,

Civil Line Police Station,

Raipur, Raipur District, Chhattisgarh.

3. The State of Karnataka,

Through its Principal

Secretariat, Home,

Bangaluru, Karnataka.

4. Hira Steels Limited,

Through Mr. Jagdish Prasad

Agarwal, Director,

Hira Steels Limited,

Having its Registered Office at G-16,

Hira Arcade, Near New Bus Stand,

Pandri, Raipur, Chhatisgarh.

5. Allahabad Bank,

Bhayanagar, Belgaum,

Represented by its General Manager.

6. Axis Bank,

Kalburgi Plaza, 163/20a, Main Road,

Deshpande Nagar, Hubli,

Represented by its Manager.

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7. Axis Bank,

Khanapur Road, Tilakwadi, Belgaum,


8. Axis Bank,

Shop 1, 2, 3, ‘Garden View’ Padre Miranda Road,

Margao, Salcete,


9. Bank of India,

278/2, A-1, Dr. Shama Prasad

Mukherjee Road,

Shahapur, Belgaum – 590 003,

Karnataka.


10. Bank of Maharashtra,

R.P.D. Corner, Tilakwadi,

Belgaum- 590 006,

Karnataka.


11. Canara Bank,

Shop No.3, Plot No.19,

Ground Floor, City Centre,

Patto Plaza, EDC Complex-403 001.

City: Panaji, District: North Goa, Goa.


12. Canara Bank,

J.M. Building, 942, First Floor,

Opposite to New Bus Stand,

Station Road,

Hospet – 583 201. Karnataka.

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13. Canara Bank,

P.B.525, 197 – D/2,

Khanpur Road, Tilakwadi,

Belgaum – 590 006. Karnataka.


14. Canara Bank,

Ghotage Building, Market Road,

Castle Rock,

District: Uttara Kannada-581 121

Karnataka.


15. Canara Bank,

Verna-Goa Verna,

South Goa, Goa,


16. CITI Bank,

Bangalore,


17. Corporation Bank,

Karnataka Law Society, Tilakwadi,

Belgaum, Karnataka,



Sri. Kamakshi Building,

Plot No.30, P.B. Road,

Tilakawadi, Belgaum,


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19. Deutsche Bank,

M.G. Road, Bangalore,


20. Development Credit Bank,

Vasco Citi Centre, Swatantra Path,

Vasco Da Gama, Goa-403 802,


21. Federal Bank,

No.14, Sun Flower Apartments,

Near 3rd

Railway Gate,

Khanapur Road, Tilakwadi,

Belgaum-590 006, Karnataka.


22. HDFC Bank,

4830/28A, Opposite to District Hospital,

Dr. Ambedkar Road,

Belgaum – 590 002,

Karnataka.


23. HDFC Bank,

S-2/3/4, Excel Elite, Caranzalim,

Panjim, Goa.


24. ICICI Bank,

Shop No.G2 & G3, Padmakar Complex,

Ground Floor, Ponda, Goa-403 401.


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25. ICICI Bank,

Sindur Business Centre,

Opp. Passport Office,

Panjim Goa-403 001.


26. IDBI Bank,

Pai Restaurant, At Corner of College &

Samadevi Galli, Belgaum.


27. Indian Bank,

Basavangudi, Bangalore


28. Indusind Bank,

Shop No.123, LandScape Excelsior,

Dayanand Bandodkar Marg,

Panjim, Goa.


29. ING-Vysya,

315, Main Bazar, P B No.41,

Hospet – Karnataka.


30. ING-Vysya,

2893-A, 1st Floor,

Amarcon Complex, Khade Bazar,

Belgaum – 590 002. Karnataka.


31. Karnataka Bank Ltd,

Near Caculo Island, M.G.Road,

PB 374, Panaji, Goa.

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32. Karur Vysya Bank,

C.T.S.No.1835 Sai Ganesh Plaza,

Hans Talkies Road, Belgaum - 590 002.


33. NKGSB Co-Operative Bank Limited,

Congress Road Belgaum.


34. Ratnakar Bank,

Shop No.G-10 & 11, Nizamar Centre,

Ground Floor, Dr. Atmaram Road,

Panaji-Goa – 403 001.


35. Saraswat Bank,

Mushtifund Saunstha Building,

Dr.Dada Vaidya Road,

Panjim, Goa-403 001.


36. Saraswat Bank,

Mahalaxmi Plaza, R.P.D. Cross,

Khanapur Road, Belgaum – 590 006.

Karnataka.


37. State Bank of India,

New Admin.Building,

Karwar Port Complex,

Karwar, Karnataka.


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38. State Bank of India,

Zuarinagare, Vasco Da Gama, Goa.


39. Union Bank of India,

R.P.D. College Compound,

Tilakwadi, Belgaum, Karnataka.


40. Union Bank of India,

Pandurang Plaza, Tisk Usgao,

Ponda Block, North Goa,

Goa 403 406.


41. HDFC Bank,

Malkhed, Gulbarga, Karnataka.


42. Bank of India,

Angol Branch, Belgaum.



Sri Kamakshi Building, Plot No.30,

P.B.No.530, Congress Road,

Tilakawadi, Belgaum, Karnataka.


… RESPONDENTS.

(By Shri P.H.Gotkhindi, Government Pleader for R1-R3,

Shri Ravi B.Naik, Senior Advocate and

Shri K.N.Shukul, Advocate for R4,

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Shri Anoop G.Deshapande, Advocate for R22,R23,R4

Shri Sachin Bichu Associates for R32,

Shri Shafi Ahmed B.Shaikh, Advocate for – R6,R7,R8

and R17,

M/s J.S.Advocates and Legal Consultants - for R24 and

R25.

Writ Petition Nos.64368-64375/2012 are filed under

Articles 226 and 227 of the Constitution of India, quashing FIR

179/2012 Annexure-J filed by Respondent No.4 against the

petitioners in Civil Lines, Police Station, Raipur, Chhattisgarh

and also return all the books, documents and other materials

belonging to the petitioners seized mentioned in Annexure-R.

IN WP 64479-64485/2012

BETWEEN:

1. Upsurge Multitrade Pvt. Ltd.

A Company Registered under

Companies Act,1956

32, Shop No.3, Chintamani Plaza,

Angol Road, Tilakwadi,

Belgaum.

Represented by one of its Director.

2. PVG Exports Pvt Ltd.


Companies Act,1956,

1088/b Prerana Hommes,


Belgaum.


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3. Waterbase Multitrade Pvt.Ltd.,


Companies Act,1956

301, Gouviea Chambers, 3rd

Floor,

Opp.Goa Sahakari Bhandar,

Market Road, Panaji,

Goa.


4. PVG Lifestyle Pvt.Ltd.


Companies Act,

Ganesh Empire, RPD Cross,

Khanapur Road, Tilakwadi,

Belgaum.

Represented by one of its Directors.

5. PVG Logistics Pvt Ltd.


Companies Act,

1088/B, Prerena Hommes,


Belgaum –590 011.

Represented by one of its Directors.

6. Star PVG Exports,

A Partnership Firm registered under

Indian Partnership Act,

201, Anjana Plaza, R.P.D. College Road,

Tilakwadi,

Belgaum.

Represented by one of its partners petitioner 2.

7. Castlerock Minerals and Traders,

A Partnership Firm registered under

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Indian Partnership Act,

1088/B, Prerana Hommes,


Belgaum – 590 011.

Represented by one of its partners petitioner 2.

….PETITIONERS

(By Shri Anoop Chaudhari and June Chaudhari, Senior

Advocates for Shri.Sangram S.Kulkarni, Advocate )

AND:

1. The State of Karnataka,

Through its Principal Secretary, Home,

Home Secretariat,

Bangaluru, Karnataka.

2. State of Chattisgarh,

Principal Secretary, Home,

Home Secretariat,

Raipur, Chattisgarh.

3. Inspector-in-Charge,

Special Investigation Cell,

Civil Line Police Station, Raipur,

Raipur District, Chhattisgarh.

4. Hira Steels Ltd.,

Through Mr.Jagdish Prasad Agarwal,

Director, Hira Steels Ltd.,

Having its Registered Office at G-16,

Hira Arcade, Near New Bus Stand,

Pandri, Raipur, Chhatisgarh.

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5. Saraswat Bank,

Mahalaxmi Plaza, R.P.D.Cross,

Khanapur Road, Belgaum-590 006.

Karnataka.


6. HDFC Bank,

4830/28A, Opp. District Hospital,

Dr.Ambedkar Road, Belgaum-590 002.

Karnataka.


7. Canara Bank,

Shop No.3, Plot No.19,

Ground Floor, City Centre,

Patto Plaza, edc Complex, 403 001,

City: Panaji District: North Goa, Goa.


8. Saraswat Bank,

Mushtifund Saunstha Building,

Dr.Dada Vaidya Road, Panjim,

Goa-403 001.



Karnataka Law Society, Tilakwadi,

Belgaum – Karnataka.


10. HDFC Bank,

CTS No.5854, Congress Road,

Tilakwadi, Belgaum,Karnataka.


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11.Union Bank of India,

R.P.D.College Compound,

Tilakwadi, Belgaum, Karnataka.


12.State Bank of India,

Goaves, Belgaum, Karnataka,


13. Allahabad Bank,

Bhagya Nagar, Belgaum, Karnataka,


14. Bank of India,

Angol Road, Belgaum – 590 006.

Karnataka.


15. IDBI Bank, Pai Restaurant,

At Corner of College & Samadevi Galli,

Belgaum.


16. HDFC Bank,

CTS No.5854, Congress Road,

Tilakwadi, Belgaum,

Karnataka.


17. ICICI Bank,

Shree Krishna Towers,

#14, Khanapur Road,

RPD Cross, Tilakwadi,

Belgaum – 590 006.


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18. HDFC Bank,

Ground Floor, Sesa Ghor,

Patte-403 001, Goa.


…. RESPONDENTS.

(By Shri P.H.Gotkhindi,Government Pleader - for R1-R3

Shri Anoop G.Deshapande and G.M.Somakkalavar,

Advocates for R6, R10, R16, R18

Shri Ravi B.Naik, Senior Advocate and K.N.Shukul,

Advocates for R4

Shri Shafi Ahmed B Shaikh, Advocate for R17).

Writ Petition Nos.64479-64485/2012 are filed under

Articles 226 and 227 of the Constitution of India, quashing the

notices issued without jurisdiction by the Special Investigation

Cell, Raipur, Chhattisgarh as per Annexure R-6 on behalf of

Respondent Nos.1 and 2 to Respondent No.5 to 18 Banks

under Sections 91 and 102 of Criminal Procedure Code,1973.

These petitions having been heard and reserved on

06.08.2012 and coming on for ‘Pronouncement of Orders’ this

day, the Court delivered the following:

O R D E R

These petitions are heard and decided together since

certain common issues arise.

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2. In first of these petitions, petitioner no.1, M/s

Coastal Mines and Minerals (Hereinafter referred to as

‘CMM’, for brevity) is a registered partnership firm. Petitioner

no.2, Prasanna V Ghotage (Hereinafter referred to as ‘Ghotage’,

for brevity), is one of the partners of CMM. Petitioner no.3

has no connection with CMM. He is the General Manager of a

proprietory concern, of which, Ghotage is the proprietor.

Petitioner no.4 claims that he is not at all associated either with

Petitioner No.1 or 2. Petitioner no.5 is said to be the Export

Manager of a proprietory concern of Ghotage. Petitioner no.6

is said to be the Chief Executive Officer of M/s Hira Steels

Limited (Hereinafter referred to as ‘HSL’, for brevity) of

Raipur, Chhattisgarh. Petitioner no.7 also claims no association

with Petitioner no.1. Petitioner no.8 also claims to have no

connection with petitioner no.1. But, all the petitioners have

joined in filing this petition in the light of a First Information

Report in FIR 179/2012 filed by HSL at Raipur, Chhattisgarh

State, in which they have been named. The present writ

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petitions, therefore, are filed questioning the said First

Information Report and to quash the same, apart from

consequential reliefs.

3. The background to the case is as follows:-

CMM is said to have entered into a contract dated

7.5.2011, with HSL agreeing to sell iron ore fines. The quantity

was 110000 Metric Tonnes. It was agreed that the iron content,

or the Fe content, would be a minimum of 51.50%. HSL had

applied for a ‘No Objection Certificate’ with the Directorate of

Mines and Geology of the State Government of Goa, dated

7.6.2011, to export 41253 Wet Metric Tonnes of processed iron

ore fines to China on the ship M.V.Everbright as a part of the

contract, and had also submitted challans towards payment of

royalty in respect of the above quantity of 41253 Wet Metric

Tonnes to the State Government of Goa. A ‘No Objection

Certificate’ was accordingly issued by the competent officer

dated 8.6.2011.

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It is stated that on 1.7.2011, HSL had in turn entered into

a contract of sale with one Neeraj Sreevastava, of M/s

N.R.Resources (Hereinafter referred to as ‘NRR’, for brevity)

agreeing to sell 41253 Wet Metric Tonnes of iron ore fines.

The bill of lading in respect of the cargo on M.V.Everbright

was also endorsed by HSL in favour NRR and all the

documents for negotiation of a Letter of Credit in respect of the

consignment was submitted to Canara Bank, New Delhi by

NRR. It is claimed that the said consignment was, in turn, sold

by Neeraj Srivatsava to M/s China Railways Materials Import

and Export Private Limited (Hereinafter referred to as ‘China

Railways’, for brevity). This is evidenced by a Letter of Credit

opened by China Railways on Neeraj Srivastava, who was

shown as the beneficiary. The money was duly received by

M/s Canara Bank corresponding to the said Letter of credit.

HSL, however, had raised an objection to the said sale by

Neeraj Sreevatsava in favour of China Railways and had

lodged its protest with Canara Bank, calling upon the bank not

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to release payment under the Letter of Credit, while claiming

that the sale was illegal and filed a First Information Report in

FIR 9/2012 against NRR at Raipur, Chhattisgarh, while

alleging that Neeraj Srivastava was its agent but was not

authorised to sell the iron ore fines at the rate at which it was

sold to China Railways. Consequent upon the FIR, the Civil

Lines Police Station, Raipur, Chhattisgarh issued notices under

Section 91 of the Code of Criminal Procedure, 1973

(Hereinafter referred to as the ‘Cr.PC’, for brevity) to all the

bankers of NRR, freezing the accounts of NRR. Neeraj

Sreevastava was therefore, constrained to approach the High

Court of Delhi, challenging the action of the Raipur Police and

the said High Court is said to have issued notices. It is claimed

that a First Information Report, in FIR 179/2012, is also

similarly lodged against the petitioners in respect of the same

transaction.

It is further stated that Neeraj Srivatsa had also

approached the High Court of Chhattisgarh at Bilaspur,

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questioning FIR 9/2012, as being without jurisdiction and the

matter being purely of a civil nature and has obtained an

interim order against HSL as well as the State of Chhattisgarh

and the Inspector-in-charge of the Civil Line Police Station,

Special Investigation Cell. It is thereafter that HSL has chosen

to file a complaint against petitioner no.2 and others in FIR

179/2012 alleging offences punishable under Sections 420, 468,

471, 120-B and Section 34 of the Indian Penal Code, 1860

(Hereinafter referred to as the ‘IPC', for brevity).

It is stated that pursuant to the filing of FIR 179/2012,

the Chhattisgarh Police had placed several banks, which are

named as respondents 5 to 44, on notice, under Sections 91 and

102 of the Cr.PC, freezing the bank accounts of petitioner no.2,

which are his personal accounts, as well as accounts relating to

CMM.

4. Shri Anoop George Chaudhari, Senior Advocate

appearing for the Counsel for the petitioners, contends that FIR

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179/2012 is clearly mischievous and an abuse of process, as it

relates to the very consignment namely, 41,253 Metric Tonnes

of iron ore fines carried on M.V.Everbright, which was also the

subject matter of FIR 9/2012 filed against Neeraj Sreevastava

before the very same Police Station. It is contended that the

registration of FIR 179/2012 and the consequent investigation

by respondent no.2 is illegal and without jurisdiction as no

cause of action has accrued at Raipur. Admittedly, the contract

of sale was executed at Goa. The goods were despatched from

Goa. Further, the contract was clearly a commercial transaction

and the dispute sought to be raised, namely, that the contract

entered into by CMM with HSL contemplated supply of iron

ore fines with a minimum Fe content of a particular grade

whereas the ore supplied was of very poor quality and that the

CMM had managed to sell poor quality ore as being of

contractual specifications, after having received huge

advances, on the basis of a false and forged Quality Analysis

Certificate and therefore, had committed offences as alleged.

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The learned Senior Advocate would submit that these

allegations are, at best, of an alleged breach of contract and

cannot be construed as criminal offences. It is contended that

just as in FIR 9/2012, the intention of the complainant is to

bring relentless pressure on petitioner nos.1 and 2 by freezing

all the bank accounts, including the personal accounts of

petitioner no.2, with the active connivance of the Raipur Police.

The action of the Police, in turn, by issuing notices to the

several bankers under Section 91 and 102 of the Cr.P.C, is

contrary to the scope of those sections and the same being

exercised by the Police, without even the supervision of a court,

indicates an unholy nexus between HSL and the Police, which

has brought financial ruin on petitioners 1 and 2. The primary

requirement in seeking to freeze the bank accounts of

petitioner nos.1 and 2, was to establish a direct nexus between

the accounts frozen and the alleged crime, which is totally

absent. The claim by HSL that a huge advance of Rs.26.50

Crore was paid to CMM, which does not even correspond to the

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quantity that was agreed to be sold, as the said sum exceeds the

contractual rate by more than Rs.2 Crore, is not evidenced by

any document disclosing such payment by HSL and receipt by

CMM or petitioner no.2. It is also evident that the Raipur

Police had no jurisdiction to direct seizure of such bank

accounts outside their jurisdiction.

5. The learned Senior Advocate, who also appears for

the Counsel for the petitioners in the second of these writ

petitions, would submit that apart from the personal bank

accounts of petitioner no.2 and the bank accounts of CMM, the

bank accounts of various other entities, in which petitioner

no.2 is even remotely involved, have also been frozen, which

is, on the face of it, further evidence of the illegal manner in

which the Raipur Police have acted on the very same First

Information Report lodged by HSL and as there is no basis for

seeking such seizure of the bank accounts, when there is no

contractual relationship between HSL and those entities, the

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entire action is clearly illegal and requires to be quashed on

that ground alone.

6. On the other hand, the learned Senior Advocate Shri

Ravi B Naik, appearing for the Counsel for respondent no.4, in

support of statement of objections filed, would contend that the

petitioners have invoked the writ jurisdiction of this court under

Article 226 of the Constitution of India as well as its inherent

power under Section 482 of the Cr.PC. It is stated that this

court could exercise such jurisdiction within the State of

Karnataka and therefore, the First Information Report, which

has been lodged before the Civil Lines Police Station, Raipur,

Chhattisgarh, sought to be questioned, is beyond the territorial

jurisdiction of this court. It is also contended that no cause of

action has arisen in the State of Karnataka and therefore, it is

also one other ground, on which the petitions have to be

rejected. It is also brought to the attention of this court that

petitioner no.4 had filed a petition under Section 482 of the

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Cr.PC, before the High Court of Goa, to quash FIR 283/2011,

which was lodged by a sister concern of HSL. Notices having

been issued in the said petition, a preliminary objection had

been raised as to the jurisdiction of the High Court to quash the

First Information Report registered at Raipur in Chhattisgarh

State. The High Court of Goa had directed petitioner no.4 to

be present before the court. An application for withdrawal of

the petition was filed by petitioner no.4 and it was specifically

stated that in view of an objection raised as to the jurisdiction of

the Goa High Court, the petitioner would approach the High

Court at Bilaspur, Chhattisgarh State. The learned Senior

Advocate would, therefore, contend that petitioner no.4 had

accepted the jurisdiction of the High Court at Bilaspur insofar

as the First Information Report registered at Raipur is

concerned. By the same token of reasoning, the petitioner

cannot maintain this petition before this court, as it is admitted

by petitioner no.4 that it is the High Court at Bilaspur which

may have jurisdiction to consider the grant of relief sought for

26

by the petitioners. On facts, the learned Senior Advocate would

submit that the petition does not narrate the true and correct

facts. The agreement between respondent no.4 and petitioner

no.1 dated 7.5.2011 was for the sale of 1,10,000 Wet Metric

Tonnes of iron ore by petitioner no.1. It was agreed that the Fe

content would be not less than 52% of the said iron ore fines.

In terms of the contract, HSL had paid an amount of Rs.26.50

Crore as advance. This amount was transferred to the bank

account of petitioner no.1. However, petitioner no.1 had

supplied only 41,253 Wet Metric Tonnes of iron ore on the

cargo ship M.V.Everbright. A Quality Certificate dated

28.6.2011 was issued by M/s Geo Chem Laboratory Private

Limited (hereinafter referred to as the ‘Geo Chem’, for brevity)

Goa, certifying that the ore supplied by petitioner no.1 had an

Fe content of 53.69%. However, when the goods reached

China and on an analysis, it was found that the Fe content of

the iron ore was only 41.21%. A copy of such certificate by a

Chinese Governmental Agency is produced. Therefore, it is

27

contended that the petitioners, in connivance with the

employees of Geo-Chem, a certifying Laboratory, particularly,

one K.J.Rao, had defrauded HSL, of huge sums of money and

the consequent losses amount to about Rs.52 Crore.

It is in that background that a written complaint was

filed with the Senior Superintendent of Police, Raipur,

Chhattisgarh and a First Information Report was registered.

The learned Senior Advocate Shri Naik, would also point out

that the main controversy is as regards the quality of the iron

ore and not the quantity and nowhere in the petition have the

petitioners indicated that the iron ore supplied was as per the

contractual specifications nor has the Quality Certificate, issued

by the Chinese Agency, been disputed.

It is further contended that the petitioners claimed that

the offence registered in FIR 283/2011 filed by a sister concern

of HSL, namely, Shivnath Minerals and Chemicals

(Hereinafter referred to as the ‘SMC’ for brevity), is in no way

connected with the First Information Report filed against

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petitioner no.1. The learned Senior Advocate Shri Naik, would

submit that this is a false and incorrect statement. Petitioners 2

and 4 were arraigned as the accused in that case as they had

undertaken to ensure the quality of iron ore supplied under a

contract, which was the subject matter of that complaint, which

is pending investigation. Insofar as the contention that HSL

has duplicated its complaint in FIR 57/2012 brought against

one Neeraj Sreevastava and the First Information Report filed

against the present petitioners and that there are contradictory

claims in the two First Information Reports, firstly, that the iron

ore fines, which is the subject matter of controversy, had been

sold on the high seas to Neeraj Sreevastava when the goods

were on board the ship M.V.Everbright and destined for China

from Goa and at the same time, in FIR 179/2012 against the

petitioners, it has been stated that the iron ore is lying at a

Chinese port, is explained by the learned Senior Advocate by

the circumstance that HSL had entered into a contract of sale

with Neeraj Sreevastava on 16.1.2012 and it is in respect of

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offences committed by the said Sreevastava under that contract,

that FIR 57/2012 was registered on a complaint dated

13.2.2012. In the background that Sreevastava had sold away

iron ore in contravention of the terms of the contract between

HSL and himself and it was the allegation of HSL that the iron

ore had been sold to a Chinese buyer. As on 6.1.2012, the iron

ore was in fact lying idle at China when the subsequent First

Information report, namely, FIR 57/2012 was filed and the iron

ore had been fraudulently sold by Sreevastava, when he was

not specifically authorized to do so. Therefore, it is contended

that the two complaints are in respect of two independent

offences committed by the petitioners on the one hand and

Sreevastava on the other. The two complaints are, therefore,

perfectly maintainable.

It is contended that the petition also draws inaccurate and

incomplete reference to three First information Reports. It is

true that there are three First Information Reports registered

with the Raipur Police Station, namely, FIR 283/2011, FIR

30

179/2012 and FIR 57/2012. FIR 283/2011 is registered on

29.8.2011 in respect of an agreement dated 2.6.2011 between

one Dream Logistics Company (Hereinafter referred to as the

‘DLC’ for brevity) and SMC. Under the agreement, DLC

was to supply SMC 56,450 Dry Metric Tonnes of iron ore fines.

The agreement required an Fe content at 52% and the goods

were supplied on the basis of a Quality Certificate issued by

one Intertek India Private Limited (Hereinafter referred to as

the ‘Intertek’, for brevity), which had duly certified that the Fe

content was 52%. However, when the iron ore reached China, a

Governmental Agency of China had certified that the Fe

content was only 42.02%. Petitioners 2 and 4 were also

involved in that contract as they had guaranteed the quality of

iron ore supplied to SMC. Therefore, FIR 283/2011 is filed

not only against the directors of DLC and Intertek, but also

petitioners 2 and 4.

FIR 57/2012 and FIR 179/2012 are filed in the

circumstances stated hereinabove. Hence, there is no

31

overlapping or duplication of the complaints. They pertain to

three distinct transactions though involving the petitioners

amongst others. The primary complaint of the petitioners that

pursuant to the investigation initiated by the competent Police,

the bank accounts of the petitioners have been frozen and that

the Police did not have the authority to do so and that it is being

done without the supervision of the court, is an incorrect

statement. According to HSL, it has been reliably learnt that a

report under Section 102 of the Cr.PC, has been filed with the

concerned Magistrate in respect of such freezing of the

accounts. Since petitioners 1 and 2 have received huge sums of

money from HSL and the amounts have been promptly

disbursed to various bank accounts of concerns, in which,

petitioner no.2 has a financial and controlling interest and the

fact that there are innumerable bank accounts, either

individually or in association with others by petitioner no.2,

requires the same to be salvaged. For otherwise, the illegal

gains obtained by petitioner no.2 by his acts of fraud, would be

32

irretrievably secreted. Incidentally, petitioner no.2 is said to

have approached the apex court seeking transfer of the case to

a court in the State of Goa, which was dismissed, thereby

affirming the fact that the Police authorities at Raipur had the

requisite jurisdiction to investigate the case as a part of the

cause of action did arise at Raipur. The incidental submission

that the transaction is purely a commercial transaction and the

dispute is of a civil nature etc., is also not significant, as the

transaction, though of a commercial nature, has given rise to

both civil and criminal liability. Hence, the exchange of notices

regarding arbitration proceedings is not material.

It is also brought to the attention of this court that insofar

as FIR 283/2011 where petitioner no.2 is arraigned as an

accused, a non-bailable warrant has been issued, which to this

day, has not been recalled and therefore, the petitioner, who has

not chosen to abide by the law, should not be assisted by this

court by considering the present petitions.

33

7. Respondents 1 and 2 have also filed statement of

objections.

8. The learned Government Pleader Shri Gotkhindi P.H.

appearing for these respondents reiterates the preliminary

objections raised by respondent no.4 as to the maintainability of

the petition. Even on facts, the assertions on behalf of

respondent no.4 are endorsed. It is emphasized that there is no

basis for an allegation of an unholy nexus by the Raipur Police

with respondent no. 4. It is highlighted that the police are

required in law to investigate any and every offence that may be

registered with them and the bona fide performance of its

statutory duties cannot be characterized as being illegal.

The credibility of petitioner No. 2 is questioned in having

named petitioner no.3 as one of the petitioners. The learned

Government Pleader draws attention to an affidavit of the said

petitioner no. 3, who has disowned the present petition and has

34

declared that he has no knowledge of the same having been

filed.

It is contended that in so far as the freezing of the bank

accounts are concerned, it is claimed that it has been done in

accordance with law. It is claimed that petitioner no.1 has

received crores of rupees from respondent no.4, as said to be

evidenced by Annexure- R.7 to the Statement of objections. It

is further stated that such action was necessary to prevent the

said money from being siphoned through various bank accounts

leaving no trace of the same. It is also stated that the

apprehension of respondent no.4 of such mischief is found to

have been confirmed by the conduct of petitioner no.2.

Attention is drawn to Annexure-R.8 to indicate the trail of

disbursements of such funds from the accounts of petitioners 1

and 2 to various accounts. It is asserted that it is only because

a direct nexus is discernible between the offence complained of

and the bank accounts that such action has been undertaken. It

is also contended that reports in this regard have been submitted

35

to the competent court at Raipur, dated 3.7.2012, copies of

which are produced at Annexure-R.9.

9. By way of reply, the Senior Advocate Shri Chaudhari

would contend that in so far as the matters being without the

jurisdiction of this court is concerned, having regard to the

circumstance that the bank accounts, both current and savings

accounts, of the petitioners 1 and 2 held in accounts with banks

in and around Belgaum, have been frozen with out any prima

facie material of the alleged amount of Rs. 26.50 crore having

been paid in advance to petitioner no.1, the funds available in

the accounts of the Petitioners 1 & 2 cannot even be claimed as

the proceeds received from HSL. A perusal of Annexures-R.7

and R.8 does not disclose the receipt of Rs.26.50 crore from

HSL at all. It is hence futile to draw attention to transactions

carried on by the petitioners in their usual course of business as

surreptitious and fraudulent money transfers to the detriment of

HSL. It is hence asserted that the action of the Raipur police

36

being ex-facie illegal and the effect being felt in Karnataka by

petitioner no.1 and 2 are entitled to invoke the jurisdiction of

this court. This issue, it is contended, is no longer res integra.

Majithya’s case (2000 (7) SCC 640 ) is cited in support of the

proposition.

It is contended that in so far as the reference to Petitioner

no.4 having conceded before the High Court at Goa , as to the

High Court at Bilaspur having jurisdiction in respect of the

proceedings that were under challenge therein is with reference

to FIR 283/2011 and not FIR 179/2012 with which the present

petitioners are concerned.

In so far as the affidavit of petitioner no.3 disowning the

petition is concerned, the learned Senior Advocate would

request this court to initiate criminal contempt proceedings

against the concerned respondents. It is alleged that the

affidavit was obtained under duress and draws attention to an

affidavit filed by petitioner no.3 now before this court dated

27.7.2012.

37

It is contended that there is no basis for the claim that

petitioner has been paid an advance of Rs.26.50 crore under the

contract in question. Only a sum of Rs.7 crore has been paid,

which is far below the value of ore already supplied. It is

reiterated that it is HSL which has committed a breach of

contract in respect of which the petitioner no.1 had already

issued a notice invoking the arbitration clause in terms of the

contract.

It is contended that the alleged compliance with Section

102 Cr.PC by the Raipur police as per Annexure-R.9 is not in

accordance with law. Section 102 (3) Cr. PC requires the

police to forthwith report the seizure of property to the

Magistrate having jurisdiction. In this case the property

concerned are bank accounts of Petitioner no.2 in Belgaum,

Goa and Bangalore. The so called compliance before the Court

in Raipur, Chattisgarh on 3.7.2011 was hence, neither done

forthwith nor within the territorial jurisdiction of the Court.

38

10. In the second of these petitions, the petitioners are

seven in number, five of whom are private limited companies

and two are partnership firms. It is their case that the two

partnership firms are represented by Ghotage. It is the case of

the petitioners that in respect of the very contract between

CMM and HSL, pursuant to FIR 179/2012 before the Raipur

Police, the said Police have proceeded to initiate the

proceedings insofar as these petitioners are concerned under

Sections 91 and 102 of the Cr.PC. It is contended that the

petitioners are independent legal entities and therefore, have

no connection with the commercial transaction between HSL

and CMM and hence, the memo issued by the Raipur Police to

the various banks, in which the petitioners hold accounts to

freeze those accounts is wholly illegal and without jurisdiction.

The petitioners have furnished the details of the accounts and

the banks in which each of the petitioners are operating the

accounts at Annexure-C to the writ petition. The mere fact that

Ghotage, as an individual, may have an interest in these

39

companies or firms does not justify the Raipur Police in taking

an extreme step of freezing the bank accounts of the

petitioners, unless a direct nexus is established insofar as the

commission of the offence alleged and the monies of the

petitioners held in their bank accounts is established. The claim

of the Raipur Police that the investigations have revealed that

monies paid by HSL under the contract was on a fraudulent

inducement of an assured supply of iron ore fines as per the

contractual specifications and that such advances paid have

been disbursed by Ghotage in the accounts of the petitioners

etc., is not borne out by any material produced on record. It is

also denied that such action is not justified with reference to

yet another FIR in 283/2011 said to have been initiated by

SMC, with which, the petitioners have no business transaction.

A reference to the same in the notices and memos issued by

the Raipur Police is therefore irrelevant. The petitioners plead

that on account of such illegal action by the Raipur Police, the

business of the petitioners may be brought to a total halt and

40

may result in financial ruin. When the dispute raised by HSL is

purely of a commercial nature and in the absence of any direct

involvement of the petitioners in that transaction, on mere

allegations of monies being routed into the accounts of these

petitioners, such extreme action being taken against the entities,

which are not within the jurisdiction of the criminal courts at

Raipur and which entities however are within the jurisdiction

of this court, warrants the interference of this court in order to

protect the rights of these petitioners.

11. Objections have been filed on behalf of HSL. The

jurisdiction of this court to entertain the writ petition is raised

on the ground that the Raipur Police is not amenable to the

jurisdiction of this court and that the claim of the petitioners

that since the bank accounts held in banks within the

jurisdiction of this court are sought to be frozen, does not

extend such jurisdiction to bank accounts that are outside the

State of Karnataka. While reiterating the particulars of the

41

various contracts and events, as narrated in the first of these

petitions, it is asserted that the action taken by the Police is in

accordance with law and it is reiterated that since Ghotage has

routed the monies received by him by playing fraud on CMM,

the action taken against the petitioners was warranted. In the

face of the admitted circumstance that Ghotage holds an

interest in all the petitioner-entities is sufficient nexus to enable

the Police authorities to have taken action.

The Raipur Police represented by the Government

Pleader has reiterated similar objections.

12. The above narrative was not really necessary in view

of the circumstance that the challenge in the present

proceedings is primarily against the action of the Raipur Police,

who, it is alleged, have in the course of their investigation

pursuant to FIR 179/2012, over-reached their authority in

seeking to freeze the bank accounts of the several petitioners,

not only in the banks within the State of Karnataka, but

42

elsewhere as well. Insofar as the factual matrix and the points

on which the parties are at issue are concerned, are incidental.

Though elaborate arguments have been canvassed on the very

competence of the Raipur Police to have entertained the First

Information Report and to have initiated proceedings as well

as other preliminary objections on various other aspects, such

as the investigation by the Raipur Police in respect of the

dispute being without jurisdiction, on the ground that the

contract between CMM and HSL, for the supply of iron ore

fines dated 7.5.2011, having been entered into at Goa and the

goods in question having been shipped from Goa and that no

cause of action had arisen within the jurisdiction of the State of

Chhattisgarh or that the matter being of a purely civil in nature

as it pertained to an alleged breach of contract and no criminal

offence could be made out on the basis of the averments in the

complaint; nor the primary allegation that a huge advance of

over Rs.26 Crore had been paid to CMM by HSL and in order

to recover the same, the various bank accounts of the several

43

petitioners being frozen, was not even evidenced by any

document of such payment having been made in the first

instance; nor that pursuant to the supply of goods by CMM,

HSL having transacted with one Neeraj Sreevastava of the very

goods and thereby absolving CMM of all liability insofar as the

goods are concerned; nor the controversy as regards the goods

not conforming to the contractual specifications and the alleged

fraud having been committed by the production of a false

Quality Analysis Certificate in respect of the goods by CMM;

nor the circumstance that even if there was an alleged fraud

committed by CMM and Ghotage, it did not justify the

freezing of the bank accounts of other entities, merely on some

remote relationship being found between the several entities

and Ghotage etc., and notwithstanding the elaborate arguments

canvassed by the learned Senior Advocates referred to

hereinabove, this court is all too aware of the limited scope of

inquiry in these proceedings and therefore, would restrict the

consideration of these petitions to certain elementary aspects.

44

The following view of the apex Court in the case of State

of Bihar vs. J.A.C. Saldanha, 1981 SCC 554, is a guideline :-

“25. There is a clear-cut and well demarcated

sphere of activity in the field of crime detection and crime

punishment. Investigation of an offence is the field

exclusively reserved for the executive through the police

department the superintendence over which vests in the

State Government. The executive which is charged with a

duty to keep vigilance over law and order situation is

obliged to prevent crime and if an offence is alleged to

have been committed it is its bounden duty to investigate

into the offence and bring the offender to book. Once it

investigates and finds an offence having been committed it

is its duty to collect evidence for the purpose of proving

the offence. Once that is completed and the investigating

officer submits report to the Court requesting the Court to

take cognizance of the offence under Section 190 of the

Code its duty comes to an end. On a cognizance of the

offence being taken by the Court the police function of

investigation comes to an end subject to the provision

contained in Section 173(8), there commences the

adjudicatory function of the judiciary to determine

whether an offence has been committed and if so, whether

by the person or persons charged with the crime by the

police in its report to the Court, and to award adequate

punishment according to law for the offence proved to the

45

satisfaction of the Court. There is thus a well defined and

well demarcated function in the field of crime detection

and its subsequent adjudication between the police and the

Magistrate. This had been recognised way back in King

Emperor v. Khwaja Nazir Ahmad, AIR 1944 PC 18

where the Privy Council observed as under:

“In India, as has been shown, there is a statutory

right on the part of the police to investigate the

circumstances of an alleged cognizable crime without

requiring any authority from the judicial authorities and it

would, as their Lordships think, be an unfortunate result if

it should be held possible to interfere with those statutory

rights by an exercise of the inherent jurisdiction of the

Court. The functions of the judiciary and the police are

complementary, not overlapping, and the combination of

individual liberty with a due observance of law and order is

only to be obtained by leaving each to exercise its own

function, always, of course, subject to the right of the Court

to intervene in an appropriate case when moved under

Section 491 of the Criminal Procedure Code to give

directions in the nature of habeas corpus. In such a case

as the present, however, the Court’s functions begin when a

charge is preferred before it, and not until then.

26. This view of the Judicial Committee clearly

demarcates the functions of the executive and the judiciary

in the field of detection of crime and its subsequent trial

46

and it would appear that the power of the police to

investigate into a cognizable offence is ordinarily not to be

interfered with by the judiciary.”

Further, having regard to the stage of the proceedings,

the following words of caution, as expressed by the apex court

in the case of State of Bihar vs. P.P.Sharma, 1992 Suppl.(1)

SCC 22, is also kept in view:-

“68. Another crucial question is whether the High

Court, in exercise of its extraordinary jurisdiction under

Article 226 of the Constitution, would interfere and quash

the charge-sheet. The High Court found that the

documents relied on by the respondents/accused were not

denied by the State by filing the counter-affidavit.

Therefore, they must be deemed to have been admitted.

On that premise the High Court found that no prima facie

case was made out on merits and chances of ultimate

conviction is “bleak”. The court is not passive spectator

in the drama of illegalities and injustice. The inherent

power of the court under Article 226 of the Constitution of

India is permitted to be resorted to. When the documents

relied on by the respondents “demonstrate that no prima

facie offence is made out on the face value of those

materials, then the criminal prosecution should not be

allowed to continue and so it should be quashed”, and “in

47

such a situation and circumstances the petitioners who

had got a right under the Constitution for the protection of

their liberty have rightly approached this Court and this

Court in these circumstances has no option but to grant

the relief by quashing the FIR and both the charge-

sheets”. Accordingly it quashed them. If this decision is

upheld, in my considered view startling and disastrous

consequence would ensue. Quashing the charge-sheet

even before cognizance is taken by a criminal court

amounts to “killing a stillborn child”. Till the criminal

court takes cognizance of the offence there is no criminal

proceedings pending. I am not allowing the appeals on

the ground that alternative remedies provided by the Code

as a bar. It may be relevant in an appropriate case. My

view is that entertaining the writ petitions against charge-

sheet and considering the matter on merit in the guise of

prima facie evidence to stand an accused for trial amounts

to pre-trial of a criminal trial under Article 226 or 227

even before the competent Magistrate or the Sessions

Court takes cognizance of the offence. Once the

proceedings are entertained the further proceedings get

stayed. Expeditious trial of a criminal case is the cardinal

rule. Delay feeds injustice to social order and

entertaining writ petitions would encourage to delay the

trial by diverse tricks. It is not to suggest that under no

circumstances a writ petition should be entertained. As

was rightly done by Rajasthan High Court in this case at

the instance of the directors of the company, wisdom lies

48

to keep the hands back and relegate the accused to pursue

the remedy under the Code. In several cases this Court

quashed the criminal proceedings on the sole ground of

delay. In a case FIR filed in 1954 for violation of the

provisions of the Customs Act and Foreign Exchange

Regulation Act was challenged in the Allahabad High

Court. It was deliberately kept pending in the High Court

and in this Court till 1990. The accusation was violation

of law by named persons in the name of non-existing firm.

The FIR was quashed in the year 1990 by another Bench

of which I was a member solely on the ground of delay.

He achieved his object of avoiding punishment. This

would show that an accused with a view to delay the trial,

resorts to writ proceedings, raises several contentions

including one on merit as vehemently persisted by Sri Jain

to consider this case on merits and have the proceedings

kept pending. The result would be that the people would

lose faith in the efficacy of rule of law. Documents relied

on by the respondents are subject to proof at the trial and

relevancy. If proved to be true and relevant then they may

serve as a defence for the respondents at the trial. The

State quite legitimately and in my view rightly did not

choose to file the counter-affidavit denying or

contradicting the version of the respondents, in those

documents. The commission of offence cannot be decided

on affidavit evidence. The High Court has taken short

course “in annihilating the still born prosecution” by

going into the merits on the plea of proof of prima facie

49

case and adverted to those facts and gave findings on

merits. Grossest error of law has been committed by the

High Court in making pre-trial of a criminal case in

exercising its extraordinary jurisdiction under Article 226.

After the charge-sheet was filed, the FIR no longer

remains sheet-anchor. The charge-sheet and the evidence

placed in support thereof form the base to take or refuse to

take cognizance by the competent court. It is not the case

that no offence has been made out in the charge-sheets

and the first information report. It is, therefore, not

necessary to consider all the decisions dealing with the

scope of the power of the High Court either under Section

482 CrPC or Article 226 of the Constitution to quash the

first information report.”

Therefore, this court does not choose to address the rival

contentions, on factual aspects of the matter. It is evident that

this court has entertained the present petitions on the primary

grievance of the petitioners that the Raipur Police have

compelled the several banks, where the petitioners hold bank

accounts within the jurisdiction of this court, to freeze the

operation of the accounts. The entertainment of the writ

petitions has been questioned by the respondents on the

50

question of jurisdiction and it is particularly sought to be

canvassed that even according to the petitioners, the contractual

relationship was created in the State of Goa and the transaction

has taken place in the State of Goa and that the cause of action,

if any, would be only in that State and therefore, the mere fact

that there are banks, in which accounts are held by the

petitioners within the jurisdiction of this court, would hardly

afford jurisdiction in respect of the transaction or in respect of

the proceedings initiated by the Raipur Police, who are outside

the jurisdiction of this court. This aspect of the matter is no

longer res integra, since Clause (2) of Article 226 of the

Constitution of India clearly would afford jurisdiction to this

court. If it is an admitted fact that the bank accounts of the

petitioners held by them in banks within the jurisdiction of this

court are involved, it could then be said that the cause of action

for the petitioners has arisen partly within the jurisdiction of

this court. This is affirmed in several decisions of the apex

Court.

51

The next question then would be whether this court can

exercise its power in the ends of justice and to prevent abuse

of power by the Raipur Police in granting relief, even partially

in favour of the petitioners. This would require this court to

address the controversy whether there is a direct nexus

established insofar as the alleged advances paid by HSL to

CMM and whether the said advances were received by CMM

and Ghotage and the same are sought to be secreted by

disbursing such advance amounts in the various bank accounts

that are sought to be frozen. It is not in dispute that the Police

are yet to submit a final report to the jurisdictional court and

even if it can be held by this court that the Raipur Police have

over-reached their authority and are actively conniving with

HSL, in proceeding against the several petitioners, without

any semblance of a relationship being established as between

the several petitioners and CMM or Ghotage and the

transactions concerned, it would be premature for this court to

adjudicate on the factual aspects of the matter.

52

Having regard to the several disputed issues between the

parties and the transactions as well as the parties being spread

over several States and the proceedings having been initiated

before the Raipur Police in Chhattisgarh State and if those

proceedings are the main concern, when a part of the cause of

action that affords jurisdiction to this court, being only a fall

out of the said proceedings, this court will have to remind

itself that a partial cause of action arising within the territorial

jurisdiction of this court cannot be considered to be a

determinative factor compelling it to decide the issues on merits

and therefore, on the doctrine of forum conveniens, (See:

Kusum Ingots and Alloys Limited vs. Union of India,(2004)6

SCC 254; Bhagat Singh Bugga vs. Dewan Jagbir Sawhney,

AIR 1941 Cal.670; Madanlal Jalan vs. Madanlal, AIR 1949

Cal.495; Bharat Coking Coal Limited vs. Jharia Talkies and

Cold Storage (P) Limited, 1997 CWN 122; S.S.Jain and

Company vs. Union of India, (1994)1 CHN 445, and New

Horizons Limited vs. Union of India, AIR 1994 Del.126.), it is

53

more appropriate for the petitioners to invoke the jurisdiction

of such other High Court, which would be competent to address

all aspects of the matter, if at all, vis-à-vis the Raipur Police and

its actions, given the nascent stage of the pending proceedings.

Consequently, both these petitions are dismissed. The

interim orders granted earlier stand dissolved.

Sd/-

JUDGE

nv

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