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Synopsis

The Supreme Court has set aside the Bombay High Court's single judge bench order of 2022 which quashed the criminal proceedings related to fraudulent activities allegedly committed in the Initial Public Offering of the shares of Yes Bank Ltd and Infrastructure Development Finance Company Ltd (IDFC) in 2005.

A bench of Justices B R Gavai and K V Vishwanathan, however, granted interim stay for four weeks on further proceedings in the court of Special Judge (CBI), Greater Mumbai and remitted the matter to the high court for consideration afresh by a division bench.

The CBI had registered FIRs in the case against Yes Bank Ltd on February 20, 2006 and IDFC on February 21, 2006 on complaints by the SEBI.

On September 29, 2007, the CBI filed a charge sheet in IDFC case initially against 22 persons under various provisions of the IPC, the Prevention of Corruption Act and the Companies Act and subsequently a supplementary charge sheet against 21 other accused.

On October 19, 2007, the agency filed a similar charge sheet in Yes Bank case initially against 16 accused for the same offences and and subsequently a supplementary charge sheet against nine other accused.

In March, 2008, the Special Court took cognizance against the accused in both the cases.

Meanwhile, the respondent accused approached the SEBI, which passed a consent order on December 7, 2009 on payment of Rs 2,05,18,968 being the unjust profit made by them and Rs 20,51,897 being a percentage of the disgorged amount towards settlement charges. 

In 2018, the respondent accused approached the Bombay High Court for quashing the charge sheet, related to cornering of the shares meant for the retail investors in the IPO. The division bench, however, dismissed the plea.

The respondent accused filed a special leave petition before the top court which was on January 7, 2020 allowed to be withdrawn with liberty to raise the question on effect of the SEBI's consent order before the high court.

In fresh writ petitions filed in 2020, the respondent accused prayed for quashing the criminal proceedings.

The bench noted that in the fresh petitions filed, it was clear from the prayers that there was no challenge to the FIR and charge sheet as was made in the first proceeding. However, there was a challenge to the cognizance orders.

Under the Rules of the high court, applications for quashing of an FIR and charge sheet are outside the jurisdiction of single judge and are to be heard by the division bench, it said.

CBI counsel Alabhaya Dhamija contended that ordinarily when the matter was permitted to be withdrawn with liberty to file a fresh petition, the matter should have been placed before the division bench. 

He alleged that the respondent resorted to a clever device by deleting the prayers for quashing of FIR and charge sheet and incorporated fresh prayers challenging the cognizance orders which were not expressly challenged in the first round.

"This was in order to have the matter heard by the Single Judge in view of Rule 18(4) of Part 1 Chapter I of the High Court Rules," he said.

On merits, he submitted that mere settlement before the SEBI on the adjudication side would not absolve a party from the criminal proceedings. On the facts of the present case the allegations are of such a nature which warrant the criminal trial to proceed, irrespective of the outcome of the adjudication proceedings, he added.

Senior advocate Siddharth Dave, for the respondent accused, contended that after the petition for special leave was withdrawn, prayers were incorporated challenging the cognizance orders and there was nothing sinister in deleting the prayer for challenging the FIR and charge sheet. 

He urged the court to dismiss the appeals filed by the CBI.

After hearing the parties and considering the facts of the case, the bench concluded that, given the previous division bench's order and the Supreme Court's permission to file a fresh petition, the current case in its second round should have been heard by the division bench.

"We are refraining from pronouncing on the aspect whether there was any clever manipulation of the prayers to clutch at jurisdiction since anything said would prejudice the case of the parties. We say nothing more on this at this stage," the bench said.

It also refrained from commenting on the contentions of the parties with regard to the merits of the matter.

The bench while remanding the matter to the division bench for consideration afresh without being influenced by the single judge order, asked it to decide it expeditiously and in any event not later than in three months since the FIR was registered in 2006.

Case Title: CBI BS And FC Mumbai Vs Manojdev Gokulchand Seksaria And Anr