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Synopsis

The Supreme Court has on January 11, 2024 said that "it is high time to check with firmness litigation initiated and laced with concealment, falsehood, and forum hunting".

The court imposed a Rs 25 lakh cost on the promoter of Delhi-based company D D Global's promoter Karan Gambhir for lodging an FIR in Uttar Pradesh's Gautam Budh Nagar for cheating and other offences on the basis of "false and frivolous complaint with non-disclosure of necessary facts". 

A bench of Justices Vikram Nath and Rajesh Bindal said, "Unscrupulous litigants should not be allowed to go scot-free. They should be put to strict terms and conditions including costs.... Even State actions or conduct of government servants being party to such malicious litigation should be seriously reprimanded".

The matter arose out of civil and commercial nature of transactions related to extension of short-term loans of Rs 5,16,00,000 to Gulab Buildtech and Rs 11,29,50,000 to Verma Buildtech respectively, which were subsequently converted into debt equity allegedly promising high returns from real estate business.

Dealing with appeals filed by Dinesh Gupta and Rajesh Gupta, promoters of the companies, named in the FIR, a bench of Justices Vikram Nath and Rajesh Bindal set aside the Allahabad High Court's order and quashed all proceedings including summons issued against them.

"Though the complainant had invested crores of rupees in equity of the two companies based at New Delhi, knowing well their place of business yet in those cases, incomplete addresses showing them at Sector 20, Gautam Budh Nagar, was deliberately mentioned. It is sufficiently clear that the idea was to falsely create jurisdiction in Gautam Budh Nagar which did not actually lie there," the bench said.

The court noted there was a complete lack of application of mind while taking cognisance and issuing summons by the Chief Judicial Magistrate.

It came across as "ill design" of the complainant since even as per his case, the short-term loan was advanced in the year 2010 for a period of one year, however, when the same was not returned, no steps were taken by the complainant to recover it until the FIR in question was registered on July 29, 2018 i.e. eight years and seven months later.

Further, the complainant came to know about the merger of the Gulab Buildtech and Verma Buildtech with another company BDR in the year 2013 itself. However, even after dismissal of the application filed for recall of the merger order passed by the high court on March 15, 2016, no steps were taken to recover the amount, except getting the FIR registered more than two years later, the bench noted.

"The entire factual matrix and the time lines clearly reflects that the complainant deliberately and unnecessarily has caused substantial delay and had been waiting for opportune moment for initiating false and frivolous litigation," the bench said.

"The FIR in question, if proceeded further, will result in absolute abuse of process of court. It is a clear case of malicious prosecution. Hence, the same is required to be quashed," the bench added.

The court also said that the registration of FIR at Noida despite having registered offices of companies in question at Delhi showed a "wishful forum shopping" by the complainant, casting serious doubts on their bona fides. It also recorded a "deliberate and mischievous attempt on the part of the complainant to maliciously initiate criminal proceedings for ulterior motives".

"The complainant used judicial mechanisms to raise his grievances. A criminal complaint was filed and FIR was registered against appellants despite the commercial nature of dispute. Such ill intended acts of abuse of power and of legal machinery seriously affect the public trust in judicial functioning. Thus, we find ourselves constrained to impose cost on complainant with a view to curb others from such acts leading to abuse of judicial remedies," the bench said.

Case Title: DINESH GUPTA VERSUS THE STATE OF UTTAR PRADESH & ANR. AND CONNECTED MATTER