CASE NO.: Appeal (crl.) 1265-66 of 2004 PETITIONER: Arvind Mohan Johari and Anr. RESPONDENT: State of U.P. and Anr. DATE OF JUDGMENT: 04/05/2005 BENCH: N. Santosh Hegde & D.M. Dharmadhikari & S.B. Sinha JUDGMENT:
JUDGMENT
ORDER
IN
(Criminal Misc. Petition Nos. 47-48 of 2005. )
These applications have been filed for clarification and/or recalling an
order dated 3.11.2004 passed by this Court in Criminal Appeal Nos.1265-66
of 2004 whereby and whereunder the respective applicants were directed to
deposit the money lying in the credit of the Appellants herein.
The said applications have been filed in the following circumstances. The
Appellants floated various groups of companies including one known as `M/s
Century Consultants Ltd.’ Two criminal cases were initiated against them
arising out FIR No. R.C. No. 8(S)/2001 to R.C. No. 12(S) of 2001/CBI,
Lucknow dated 6.7.2001 and R.C. No. 15(S)/2001 to R.C. No. 18(S)/2001/CBI,
Lucknow dated 6.7.2001; one relating to transactions in respect of M/s
Country Inform Tech Pvt. Ltd. and another in relation to M/s Century
Consultants Ltd.. M/s Century Consultants Ltd. has since been directed to
be wound up in a winding up proceeding by the learned Company Judge.
In the aforementioned criminal proceedings, the Appellants prayed for grant
of bail which was rejected whereagainst these appeals were preferred. The
Appellants before us had contended that they would have no objection if the
assets held and possessed by them are sold for payment to the depositors of
M/s Century Consultants and M/s City Cooperative Bank Ltd. It was contended
that the amounts of Rs. 17 Crores and Rs. 13 Crores were lying with the
Bombay Stock Exchange and National Stock Exchange respectively. It was
further urged that the amounts lying with the Stock Exchanges stand
admitted in their written statements filed in Civil Suit No. 312 of 2002.
The Bombay Stock Exchange now contends that the aforementioned two
contentions raised on behalf of the Appellants herein were not correct. In
this behalf, our attention has been drawn by Mr. Dushyant A. Dave, learned
senior counsel appearing on behalf of Bombay Stock Exchange, to the
following statements: :
“(ii) That in the instant case, the Century Consultant Ltd., during the
period from 15th March 2001 to 23rd March 2001 had failed to make payments
to the Exchange towards their settlement obligations in respect of the
Rolling as well as Weekly settlement on the respective pay-in dates. The
said member initially failed to pay its pay-in obligation pertaining to the
Rolling Settlement No. 241/00-01 (Pay-in date was 16th March 2001) and
thereafter had committed defaults in paying its obligations in subsequent
Rolling Settlements as well as Weekly Settlements on the respective Pay-in
dates as under :
Settlement Trading Pay-in Amount (Rs. )
No. date dates
DR-241/00-01 09.03.01 16.03.01 3,70,26,753.00
DR-242/00-01 12.03.01 19.03.01 2,53,13,535.00
DR-243/00-01 13.03.01 20.03.01 2.02,24,601.00
DR.244/00-01 14.03.01 21.03.01 2,67,24,553.00
DR-245/00-01 15.03.01 22.03.01 27,45,540.00
DR-246/00-01 16.03.01 23.03.01 3,03,01,237.00
DR-51/00-01 12.03.01 22.03.01 4,27,89,326.00
(Weekly) to
16.03.01
DR-52/00-01 19.03.01 29.03.01 13,31,602.00
(Weekly) to
23.03.01
xxx xxx xxx
(vi) Though the Century Consultants Ltd. failed to meet its
obligations in the aforesaid settlements, the Exchange being bound
to ensure timely completion of the bona fide transaction of the
members of the Exchange inter se in the aforesaid settlements as
per its Rules, Bye-laws and Regulations of the Exchange. As at the
relevant time, the securities and margin deposits furnished by
Century Consultants Ltd., to avail the trading facility, was
sufficient to meet their liabilities in the aforesaid settlements,
the Exchange completed the Pay-out in the aforesaid Settlements by
utilizing same as provided in its Rules, Bye-laws and Regulations.
As these aforesaid Pay-out was to be made/completed on their
respective Pay-out dates and as the realization/liquidation of the
collateral Securities/guarantees would take some time to receive
the payment, the Exchange fulfilled the above obligations of the
Century Consultants Ltd. initially from the funds of the Exchange.
Thereafter the collateral securities/guarantees provided by the
Century Consultants Ltd. were liquidated in accordance with the
Rules, Bye-laws and regulations of the Exchange and recouped the
same. Accordingly, the Exchange fulfill the Pay-in obligations of
the Century Consultant Ltd., in the aforesaid Settlements amounting
to Rs. 21,06,72,837.00 including the value of short delivery of
shares by the Century Consultants Ltd., in the above Settlements
out of the collateral securities/guarantees provided by the Century
Consultants Ltd. As such, there are no assets of the Century
Consultant Ltd., lying with the Applicant Exchange by way of bank
guarantee, security margin money etc. amounting to Rs. 17 crores as
alleged before this Hon’ble Court. The Exchange respectfully says
and submits that on the other hand Century Consultant Ltd., are
required to pay to the Exchange an amount of approximately Rs.
18.14 crores towards their liabilities on account of non-payment of
arbitration awards obtained by other members/clients, arbitration
fees, debit balance with Clearing House, Transaction Guarantee Fund
(TGF) etc. as per Rules, Bye-laws and Regulations of the Exchange.
The Exchange has also from time to time apprised SEBI about default
of Century Consultants Ltd. in making Pay-in obligations in the
aforesaid settlements and completion of settlements as stated
herein above.”
It is urged that the Appellants herein were aware of the said proceedings
as in relation thereto show cause notices had been served upon M/s Century
Consultants Ltd. Mr. Dave would further contend that in the said suit even
no written statement was filed by the Bombay Stock Exchange, as alleged by
the Appellants.
Mr. J.L. Gupta, learned Senior Counsel appearing on behalf of the National
Stock Exchange, would submit that although written statement had been filed
by the National Stock Exchange in the aforementioned suit but it had
categorically been contended therein :
“The Defendant No. 1 traded on the Defendant No. 3 and had cleared
all its settlement dues up to Settlement No. W 2001045 (pay in date
March 13, 2001). It is submitted that the Defendant No. 1 did not
pay subsequent settlement and other obligations to Defendant No. 3
and National Securities Clearing Corporation of India Ltd. (NSCCL),
a subsidiary company of Defendant No. 3 amounting Rs.
18,94,80,836.52. Out of the said sum, an amount of Rs.
10,80,74,719.54 was adjusted against from the security deposits,
bank guarantee invocation amounts, sale of securities and release
of margins and other amounts lying to the credit of Defendant No. 1
still leaving a balance liability of Rs. 8,14,06,116.98 due from
Defendant No. 1 to Defendant No. 3 and NSCCL. Therefore, it is
clear from the above that the claim of the Plaintiff in para 8 of
the plaint that the Defendant No. 1 paid Rs. 30 crores towards
purchase of shares and that Rs. 30 crores is lying with the
Defendant No. 3 is completely false. Thus, the very basis of the
claim of the Plaintiff is false and there is no cause of action in
favour of the Plaintiff.”
In the counter affidavit filed by the Appellants to the said applications,
the said contentions raised in the said applications were denied and
disputed, Mr. Swaraj Kaushal and Mr. D.K. Gupta, learned counsel appearing
on behalf of the Appellants would contend that the question as to whether
the respective Stock Exchanges were entitled to debit the amounts of Rs. 21
Crores and 17 Crores respectively towards their purported claim should be
directed to be scrutinized by us by a Chartered Accountant. According to
the learned counsel, the Bombay Stock Exchange and National Stock Exchange
have raised frivolous pleas in support of the applications and in that view
of the matter, it would be proper to determine the dispute between the
parties.
It is not in dispute that this Court passed the aforementioned order dated
3.11.2004 granting bail to the Appellants herein relying on or on the basis
of the representation made by them that all endeavours would be made to
disburse to the claimants realise as much amount as possible from the
personal and other assets of the Appellants by putting them on sale or
otherwise. It was with that end in view, this Court directed :
“The National Stock Exchange and the Bombay Stock Exchange are
directed to deposit the money lying in the credit of the
Company/Appellants as early as possible subject to the
determination of the pending enquiry by SEBI. If any enquiry is
pending, SEBI shall dispose of the same as expeditiously as
possible.”
This Court directed release of the Appellants herein on bail on the
conditions mentioned therein and issued several directives in exercise of
its jurisdiction under Article 142 of the Constitution of India to do
complete justice to all the parties. While considering application for
grant of bail in a criminal case, this Court ordinarily cannot determine a
dispute between the parties wherefor forums have been created under the
statutes.
It appears that the recoveries have been directed to be made by the Stock
Exchanges in exercise of their power conferred upon them under the bye-laws
governing the parties. Furthermore, several arbitration awards are said to
have been passed in favour of the clients/investors and the members of the
Stock Exchanges. The parties, therefore, must get their disputes determined
in an appropriate forum.
The fact, however, remains that no amount as such is admittedly payable by
the applicants Stock Exchanges. In their respective applications, as
indicated hereinbefore, the Applicants had stated that they, in fact, would
be entitled to realize a huge amount from the Appellants. In that view of
the matter, we are of the opinion that the Appellants misled this Court in
passing the said order dated 3.11.2004 by raising contention to the effect
that a sum of Rs. 17 Crores and 13 Crores are admittedly lying with the
Bombay Stock Exchange and National Stock Exchange in the shape of bank
guarantee money and securities margin money etc.
It is true that the prayers made by the Applicants herein in their
applications are confined to the directions issued against them but we are
of the opinion, having regard to the peculiar facts and circumstances of
this case, that if a substantial sum lying with them are not available for
disbursement to the claimants, the very purpose for enlarging the
Appellants herein on bail would not be subserved and in that view of the
matter the order dated 3.4.2004 granting bail to the Appellants herein
should be recalled. Accordingly, the Appellants, Arvind Mohan Johari and
Anand Krishna Johari are hereby directed to surrender before the Trial
Court within one week from date whereupon they may be taken into custody.
If and when the disputes between the Stock Exchanges and the Appellants are
adjudicated upon by a competent forum and/or court of law, as a result
whereof the Appellants would be in a position to repay the outstanding dues
of the claimants, namely, M/s City Cooperative Bank Ltd. and M/s Century
Consultants Ltd., they may apply for grant of bail afresh.
These applications are disposed of with the aforementioned observations and
directions.