# Niraj Tyagi & Anr v. State of U.P. & Ors

- **Citation:** (2024) 12 ILRA 471
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-12-20
- **Case number:** Criminal Misc. Writ Petition No. 10893 of 2023
- **Bench:** Ashwani Kumar Mishra, Ashutosh Srivastava
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/niraj-tyagi-anr-v-state-of-u-p-ors-51222
- **Pages:** 41

## Headnote

Criminal Law - Quashing of FIR - Article
226 of Constitution of India,1950 - Civil
commercial
dispute
between
housing
finance company and borrower - Loan
secured by mortgage and pledged shares
- Disputes referred to arbitration
-
Borrower initiated criminal proceedings
after failure to obtain relief in arbitration
and DRT proceedings - Allegations of
undervaluation, round-tripping, and fraud
- FIR and ECIR challenged as abuse of
process
-
Interference
in
criminal
proceedings justified where continuation
amounts to abuse of process - Civil
disputes cannot be converted into criminal
prosecution to coerce lender - Parallel
criminal proceedings after invocation of
arbitration not sustainable- Constitution
of India - Article 21 - Right to fair legal
process - Repeated litigation and criminal
proceedings initiated to obstruct lawful
enforcement of security - Held, invocation
of criminal law to subvert due process and
secure leverage in civil dispute violates
Article 21 - Protection of law cannot be
extended
to
malicious
prosecution-
Prevention of Money Laundering Act, 2002
- ECIR registered based on FIRs -
Allegations of undervaluation of shares
and round-tripping - Civil nature of
allegations already under consideration
before arbitration and civil courts - Held,
initiation of ECIR on same facts amounts
to duplication and forum shopping-Held,
dispute is purely civil and governed by
contract
and
arbitration
clauses
-
Suppression
of
material
facts
by
complainant
fatal
-
FIRs
and
ECIR
quashed-petition allowed. (Paras 7, 16,
29, 47, 50, 51, 52, 53, 54, 55,56, and 120)

HELD:
The challenge to the two FIRs as also the ECIR,
impugned herein, is on the ground that no
offences, as alleged therein are made out and
the allegations made therein at best disclose
existence of pure commercial and civil dispute
between the parties, in respect of which
initiation of criminal proceedings is nothing but
an abuse of the process of law. The short
question that arises for our consideration in the
facts of the present case is as to whether
lodging of the impugned
FIRs and the
consequential ECIR is an abuse of the criminal
process? (Para 7)

We have already noticed that sanction of loan to
the borrower is pursuant to various loan
agreements which admittedly contain Arbitration
clause. The informant in the 1 st FIR has made
no disclosure about existence of Arbitration
clause or the steps taken by the borrower to
challenge the action of Indiabulls in Arbitration
proceedings. The proceedings in that regard are
relevant for the controversy raised in the FIR
and would require its narration. (Para 50)

Sanction of loan is a commercial transaction. It
is to be regulated by the terms of loan/contract
and any dispute in respect thereof would require
adjudication in the manner stipulated therein. It
is undisputed that sanction of loan to the
borrower is pursuant to loan agreement wh

## Text

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12 All. Niraj Tyagi & Anr. Vs. State of U.P. & Ors.
471
inducing the minor, it is not necessary to
carry out actual physical removal of a person
of a minor age, it is sufficient if the offender
pursuits a minor or a person of unsound
mind, so as to create willingness to leave
his/her house where he/she was in the
custody of the guardian. If the prosecution
did not adduce any evidence establishing
their allegations that the accused performed
some active role, which can be said to be the
element of persuasion upon the minor or
unsound person to leave her house, then the
Court cannot take the presumption that the
accused committed the offence of kidnapping
only on the basis that such a minor or
unsound person met the accused immediately
after his/her coming out of the keeping of
his/her guardian or just because the accused
helped that person in that process of leaving
her house.

18. The law is very settled that for the
discharge of an accused, it is esential that
upon consideration of the record of the case
and the documents submitted therewith and
after hearing the submissions of the accused
and prosecution in this behalf, the judge
considers that there is no sufficient grounds
for proceeding against the accused. The law
is well settled in Union of India vs.
Prafulla Kumar Samal and Another
(1979) 3 SCC 4 that if the court comes to
the conclusion of strong prima facie case or
strong suspicion, the charges will be framed.
At the stage of framing of charge the court
has the power to sift and weigh the evidence
for the limited purpose of finding out
whether or not a prima facie case is made
out against the accused. However, the court
is not supposed to delve deeply into the
materials of the matter. Thus, at the time of
framing of charge, the court is not supposed
to look into the evidence of the case in detail
and is only to consider whether there is
strong suspicion against the accused.

19. On the basis of material available on
record, it cannot be held that no case is made
out against the accused for charge under
Section 363 IPC as there is strong suspicion
against him in respect of that offence and
accused will have opportunity to prove his
innocence by adducing evidence in defence
as well as pointing out the infirmities in
prosecution case by cross-examination of
prosecution witnesses. Consequently, in my
considered opinion, a prima facie case is
made out for charge under Section 363 IPC
against the revisionist. However, no prima
facie case is made out to put the revisionist
for trial for charge under Sections 366 IPC
and 8 of POCSO Act.

20. Accordingly, present revision stands
allowed and the impugned order is set aside.

21. The matter is remanded to learned
court below to decide the application for
discharge afresh in the light of observations
made in this order, hereinabove, after giving
opportunity of hearing to both sides and
decide the same in accordance with law.
----------
(2024) 12 ILRA 471
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 20.12.2024

BEFORE

THE HON'BLE ASHWANI KUMAR MISHRA, J.
THE HON'BLE ASHUTOSH SRIVASTAVA, J.

Criminal Misc. Writ Petition No. 10893 of 2023
Connected With
Criminal Misc. Writ Petition No. 14101 of 2023 &
14053 of 2023

Niraj Tyagi & Anr. ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
472 INDIAN LAW REPORTS ALLAHABAD SERIES
Ashutosh Mishra, Raghav Dwivedi. Sankalp
Narain

Counsel for the Respondents:
G.A., Pawan Kumar Srivastava, Saumitra
Dwivedi, Sikandar B. Kochar, Suresh Singh,
Syed Imran Ibrahim

Criminal Law - Quashing of FIR - Article
226 of Constitution of India,1950 - Civil
commercial
dispute
between
housing
finance company and borrower - Loan
secured by mortgage and pledged shares
- Disputes referred to arbitration
-
Borrower initiated criminal proceedings
after failure to obtain relief in arbitration
and DRT proceedings - Allegations of
undervaluation, round-tripping, and fraud
- FIR and ECIR challenged as abuse of
process
-
Interference
in
criminal
proceedings justified where continuation
amounts to abuse of process - Civil
disputes cannot be converted into criminal
prosecution to coerce lender - Parallel
criminal proceedings after invocation of
arbitration not sustainable- Constitution
of India - Article 21 - Right to fair legal
process - Repeated litigation and criminal
proceedings initiated to obstruct lawful
enforcement of security - Held, invocation
of criminal law to subvert due process and
secure leverage in civil dispute violates
Article 21 - Protection of law cannot be
extended
to
malicious
prosecution-
Prevention of Money Laundering Act, 2002
- ECIR registered based on FIRs -
Allegations of undervaluation of shares
and round-tripping - Civil nature of
allegations already under consideration
before arbitration and civil courts - Held,
initiation of ECIR on same facts amounts
to duplication and forum shopping-Held,
dispute is purely civil and governed by
contract
and
arbitration
clauses
-
Suppression
of
material
facts
by
complainant
fatal
-
FIRs
and
ECIR
quashed-petition allowed. (Paras 7, 16,
29, 47, 50, 51, 52, 53, 54, 55,56, and 120)

HELD:
The challenge to the two FIRs as also the ECIR,
impugned herein, is on the ground that no
offences, as alleged therein are made out and
the allegations made therein at best disclose
existence of pure commercial and civil dispute
between the parties, in respect of which
initiation of criminal proceedings is nothing but
an abuse of the process of law. The short
question that arises for our consideration in the
facts of the present case is as to whether
lodging of the impugned
FIRs and the
consequential ECIR is an abuse of the criminal
process? (Para 7)

We have already noticed that sanction of loan to
the borrower is pursuant to various loan
agreements which admittedly contain Arbitration
clause. The informant in the 1 st FIR has made
no disclosure about existence of Arbitration
clause or the steps taken by the borrower to
challenge the action of Indiabulls in Arbitration
proceedings. The proceedings in that regard are
relevant for the controversy raised in the FIR
and would require its narration. (Para 50)

Sanction of loan is a commercial transaction. It
is to be regulated by the terms of loan/contract
and any dispute in respect thereof would require
adjudication in the manner stipulated therein. It
is undisputed that sanction of loan to the
borrower is pursuant to loan agreement which
contain an Arbitration clause. Even the pledge of
shares of Kadam is in accordance with the
pledge
agreement
dated
6.4.2018
which
contains
clause
20
as
per
which
any
dispute/disagreement/differences between the
lender and pledger and/or confirming party
(defined in the pledge agreement i.e. Indiabulls,
borrower and Kadam) has to be resolved by way
of arbitration. (Para 51)

Interestingly, the informant though is aware
of the Arbitration clause but has made no
reference of it in the complaint. There is
complete suppression in the complaint filed
before
the
Chief
Judicial
Magistrate,
Gautam Budh Nagar with regard to the
terms of loan agreement; existence of
Arbitration clause, therein; invocation of
Arbitration
clause
by
the
borrower;
rejection of application filed by borrower
before the Delhi High Court under Section 9
of the Act of 1996 and many other relevant
facts which have a material bearing on the
issue in question. (Para 52)
12 All. Niraj Tyagi & Anr. Vs. State of U.P. & Ors.
473
Suppression and concealment of material facts
by the borrower while instituting complaint
before the Chief Judicial Magistrate cannot be
viewed
kindly.
The
effect
of
such
misrepresentation would render the proceedings
of borrower tainted. In a recent judgment of
Kusha Duruka v. St. of Odisha, (2024) 4 SCC
432, the Supreme Court of India emphasized
the importance of disclosing correct facts before
a court of law... (Para 54)
Suppression of material facts by the borrower
while invoking criminal proceedings against the
lender assumes greater significance in the facts
of the present case as repeated attempts made
by it to injunct the lender i.e. Indiabulls from
proceeding against the pledged property had
not succeeded. The non-disclosure of material
facts would lead to an inference that criminal
proceedings are maliciously instituted with the
intent to avoid repayment of availed loan
facility; to secure leverage in pending Arbitration
and other proceedings inter-se between the
parties; coerce the lender i.e. Indiabulls to
succumb to the terms dictated by the defaulter
borrower. (Para 56)

Upon elaborate consideration of the issues
raised in this matter, we have no hesitation in
holding that initiation of criminal proceedings at
the instance of borrower are instituted on the
strength of suppression and concealment of
relevant facts, with unexplained delay and
malicious intent to thwart legitimate steps taken
by Indiabulls to recover the financial assistance
extended to the borrower. Such proceedings are
also intended to create leverage in ongoing
civil/arbitration proceedings inter se between
the parties. The criminal proceedings are,
therefore, clearly an abuse of the process of law
and deserve to be quashed. (Para 120)

Petition allowed. (E-14)

List of Cases cited:

1. Madhu Limaye Vs The St. of Mah., 1977 (4)
SCC 551

2. The St. of Har.& ors. Vs Bhajan Lal & ors.,
1990 SCR Suppl. (3) 259

3. St. of Telangana Vs Habib Abdullah Jeelani &
ors., (2017) 2 SCC 779
4. Neeharika Infrastructure Pvt. Ltd. Vs St. of
Mah. & ors., (2021) 19 SCC 401

5. M.S. Sheriff & anr. Vs St. of Madras, AIR 1954
SC 397

6. P. Swaroopa Rani Vs M. Hari Narayan @ Hari
Babu, 2008 (5) SCC 765

7. Syed Askari Hadi Ali Augustine Imam Vs St.
(Delhi Administration), 2009 (5) SCC 528

8. Sardool Singh Vs Nasib Kaur, 1987 Suppl. SCC
146

9. K. Virupaksha Vs St. of Karn., (2020) 4 SCC
440

10. M.N. Ojha Vs Alok Kumar Srivastav, (2009) 9
SCC 682

11. Mitesh Kumar J. Sha Vs St. of Karn. (2022)
14 SCC 572

12. Vijay Kumar Ghai Vs St. of W.B., (2022) 7
SCC 124

13. Sarabjit Kaur Vs St. of Pun., 2023 (5) SCC
360

14. Lalit Chaturvedi & ors. Vs St. of U.P., 2024
SCC OnLine SC 171

15. Priyanka Srivastava Vs St. of U.P., (2015) 6
SCC 287

16. Gagan Banga Vs Samit Mandal, (2024) 5
SCC 432

17. Kusha Duruka Vs St. of Odisha, (2024) 4
SCC 432

18. K.D. Sharma Vs Steel Authority of India &
ors., 2008 (12) SCC 481

(Delivered by Hon'ble Ashwani Kumar
Mishra, J.)

1. Heard Sri Mukul Rohatgi, Sri
Rakesh Dwivedi as well as Sri Anoop
Trivedi, learned Senior Advocates assisted
474 INDIAN LAW REPORTS ALLAHABAD SERIES
by Sri Raghav Dwivedi, Sri Ankit Banati,
Sri Eklavya Dwivedi, Mrs. Devanshi
Singh, Sri
Rishi
Agarwala
and Sri
Kartikeya Saran, Advocates; Sri Vikram
Chaudhari,
learned
Senior
Advocate
assisted by Sri Jatin Sehgal, Ms. Devna
Soni, Sri Shivashish Dwivedi, Sri Ashish
Garg, Sri T. Islam, Sri Adhirath Singh, Sri
Raymon Singh and Ms. Yashi Bajpai,
Advocates, for the petitioners; Sri Manish
Goel, learned Additional Advocate General
assisted by Sri Suresh Singh, Advocate, for
the
Yamuna
Expressway
Industrial
Development Authority (YEIDA), Sri J. K.
Upadhya, learned AGA for the State; Sri
Sikandar B. Kochar as well as Sri Zoheb
Hossain (through VC), learned Advocates
for the Enforcement Directorate (ED); Sri
Vinay Saran, learned Senior Advocate
assisted by Sri Prashant Kumar, Sri Sarvesh
Kumar Tiwari, Sri Saumitra Dwivedi and
Sri Devesh Srivastava, Advocates for the
complainant/intervener and Sri Syed Imran
Ibrahim, learned Advocate for the private
respondent.

2. These three writ petitions have been
heard together and are being disposed of by
this common judgment. Criminal Misc. Writ
Petition No. 10893 of 2023 (Niraj Tyagi and
another Vs. State of U.P. and 3 others) is
taken as the lead case. These petitions
alongwith Writ Petition Nos. 11837 of 2023
& 11838 of 2023 were placed before this
Court pursuant to an order of nomination
passed by the Hon'ble Chief Justice on
4.3.2024. The other two petitions i.e.
Criminal Misc. Writ Petition Nos. 11837 of
2023 and 11838 of 2023 have been allowed
by this Court on 15.4.2024 and the First
Information
Report,
dated
22.7.2023,
registered as Case Crime No. 611 of 2023,
under Sections 420, 120-B IPC read with
Section 82 of the Registration Act, 1908,
Police Station - Kavi Nagar, District -
Ghaziabad has been quashed. The remaining
three writ petitions are now being disposed of
by this composite judgment.

3. Two FIR's as well as consequential
ECIR registered by Enforcement Directorate
(in short 'ED') are under challenge in these
three writ petitions. The 1st FIR under
challenge is in Case Crime No. 427 of 2023,
dated 9.4.2023, lodged pursuant to a direction
issued by the Chief Judicial Magistrate, under
Section 156(3) Cr.P.C., dated 7.4.2023 under
Sections 420, 467, 468, 471, 120B, 323, 504,
506 IPC, Police Station Indirapuram, District
Ghaziabad (hereinafter referred to as the ' 1st
FIR'). The order of the Chief Judicial
Magistrate,
dated
7.4.2023,
passed
in
Complaint Case No. 457 of 2023 filed by
Amit Walia in his capacity as the authorized
representative of M/s Shipra Estate Private
Limited, is also under challenge.

4. The 2nd FIR under challenge in
these proceedings is in Case Crime No. 197
of 2023, dated 15.4.2023, under Sections
420, 467, 468, 471 and 120-B IPC, Police
Station Beta-2, District Greater NOIDA
(hereinafter referred to as the '2nd FIR'),
lodged
at
the
instance
of
Yamuna
Expressway
Industrial
Development
Authority (hereinafter referred to as the
YEIDA). The 2nd FIR specifically refers to
and relies upon the 1st FIR.

5. The petitioners have also challenged
the consequential proceedings initiated by
ED pursuant to 2nd FIR as ECIR/HIUI/06/2023. The ED has also subsumed the
1st FIR in its investigation undertaken vide
aforesaid ECIR.

6. The order of Chief Judicial
Magistrate dated 07.04.2023 as well as the
FIR lodged pursuant thereto are the subject
matter of challenge in Criminal Misc. Writ
12 All. Niraj Tyagi & Anr. Vs. State of U.P. & Ors.
475
Petition No. 14101 of 2023, while the 2nd
FIR as well as ECIR registered by ED,
therein, are assailed in Criminal Misc. Writ
Petition Nos. 10893 of 2023 & 14053 of
2023. The petitioners in these writs had
initially sought a declaration that Section
420 IPC be declared as manifestly arbitrary
and ultravires Article 14 and 21 of the
Constitution of India but this prayer has
been given up, by the petitioners, at the
time of hearing of the matter. The prayers
in the writs are thus confined to quashing
of the above referred two FIRs and the
consequential ECIR.

7. The challenge to the two FIRs as
also the ECIR, impugned herein, is on the
ground that no offences, as alleged therein
are made out and the allegations made
therein at best disclose existence of pure
commercial and civil dispute between the
parties, in respect of which initiation of
criminal proceedings is nothing but an
abuse of the process of law. The short
question that arises for our consideration in
the facts of the present case is as to whether
lodging of the impugned FIRs and the
consequential ECIR is an abuse of the
criminal process?

8. In order to appreciate the controversy
raised in these petitions narration of background
facts would be necessary. Indiabulls Housing
Finance Limited is a non-banking financial
institution registered under the provisions of
Indian Companies Act, 1956 (hereinafter
referred to as 'Indiabulls'). It claims to be one of
the largest premier housing finance company and
is regulated by Reserve Bank of India. It is
accorded 'AA' rating by CRISIL and ICRA.
'Indiabulls' is petitioner no. 2 in the leading writ
petition no. 10893 of 2023, while petitioner no. 1
Niraj Tyagi is its President, Legal.

9. Indiabulls sanctioned loan facility of
Rs.2478 crores to M/s Shipra Group of
Companies;
comprising
various
group
companies including M/s Shipra Estate Limited;
M/s Shipra Leasing Private Limited, M/s Shipra
Hotels Limited etc. (hereinafter collectively
referred to as 'borrowers') between the years
2017 to 2020. 16 loans were sanctioned pursuant
to which loan agreements were executed
between Indiabulls and the borrowers. The
dispute, herein, pertains to 14 out of these 16
loan agreements through which a loan of
Rs.1686.10 crores is alleged to have been
disbursed to borrowers.

10. The loan sanction agreements vide
which loan amount was released to borrowers
envisaged creation of securities, twice the value
of the sanctioned loan, in favour of Indiabulls.
Such security cover was to continue during
subsistence of loan by way of charge over
properties mortgaged in favour of Indiabulls in a
manner that value of mortgaged properties
would at all times be sufficient to maintain two
times the value of combined dues of the
borrowers. In order to secure the loan availed
from Indiabulls the borrowers have mortgaged
following properties:-

"A.
Mortgage
of
plot
admeasuring 73 acres at Sector 128,
NOIDA, UP owned by Kadam Developers
Private Limited i.e. in short 'Kadam' (a
group company of borrower) by executing
a mortgaged deed dated 25.01.2018;

B. Mortgage of Plot No. 9 at
Vaibhav Khand, Indrapuram (Shipra Mall)
Ghaziabad by executing a mortgage deed
dated 08.02.2018;

C. Plot No.10/3 at Vaibhav
Khand, Indrapuram Ghaziabad;

D. Land at Dera Bassi;

E. Plot Nos. GH-1C & GH-1B at
Sector 43, Noida vide mortgage deeds
dated 28.02.2018."
476 INDIAN LAW REPORTS ALLAHABAD SERIES

11. The borrowers also executed 22
pledge agreements whereunder shares of
various group companies were pledged in
favour of Indiabulls. It included 100%
shares of Kadam (98% owned by Shipra
Estate Limited and 1% each by its
promoters, namely Mohit Singh and Bindu
Singh)
vide
pledge
agreement
dated
06.04.2018. Kadam also mortgaged its sole
property i.e. 73 acres of land leased to it by
Yamuna
Expressway
Industrial
Development Authority, Gautam Budh
Nagar, an authority created under the U.P.
Industrial Area Development Act, 1976
(hereinafter referred to as 'YEIDA') in
favour of Indiabulls.

12. The mortgage of plot nos. GH-1B
& GH-1C, Sector 43, Noida in favour of
Indiabulls was pursuant to permission/NOC
granted by Noida Authority on 23.2.2018.
It transpires that the borrowers failed to
clear dues of Noida in respect of these two
plots to the tune of Rs.38 crores each,
which swelled to Rs.219 crores each, as of
31.7.2020. On account of this default the
Noida
Authority
revoked
its
permission/NOC for creation of mortgage
in favour of Indiabulls vide letters/orders
dated 2nd & 4th September, 2020.

13. In terms of the loan agreement,
Indiabulls
issued
a
cure
notice
on
20.10.2020 calling upon the borrowers to
cure the impaired security (mortgaged plot
no. GH-1B & 1C, Sector 43, NOIDA)
within 15 days of the notice. The borrowers
apparently took no steps to regularize the
impaired
securities.
Consequently,
Indiabulls issued loan recall notices on
5.11.2020 and 15.12.2020, recalling the
entire outstanding loan and demanded
repayment of Rs.1763.61 crores within 7
days from the receipt of notice. Notice was
also issued by Indiabulls under Section 95
of the Insolvency and Bankruptcy Code,
2016 to the personal guarantor of loan
agreements Mr. Mohit Singh.

14. On failure of borrowers to respond
and clear the dues in terms of the notices
issued as per loan agreements Indiabulls
proceeded to issue loan recall notice to the
borrowers. On 14.1.2021 a notice was also
issued invoking provisions of Section 176
of the Contract Act in respect of the
pledged shares of Kadam.

15. The amount demanded under the
loan recall notices from the borrowers to
the tune of Rs. 1763 crores approximately
has not been paid. It is alleged by the
petitioners that after October, 2020, the
borrowers have not paid a single rupee
towards repayment of loan and have
initiated 43 separate and distinct legal
proceedings against Indiabulls and its
transferees to avoid repayment of loan
availed by it. It is the case of the petitioners
that institution of criminal action vide
impugned FIRs and ECIR is malicious and
is with an intent to gain leverage in the
ongoing civil/arbitration proceedings.

16. Various steps have been taken by
Indiabulls
towards
enforcement
of
securities furnished by borrowers in lieu of
the loan amount availed by them. Towards
this end, Indiabulls has invoked the
provisions of the SARFAESI Act and one
of the pledged property i.e. M/s Shipra
Mall established over plot no.9, Vaibhav
Khand, Indirapuram, Ghaziabad, owned by
Group Company M/s Shipra Hotel Private
Limited was transferred to M/s Himri
Estate Private Limited. A first information
report in Case Crime No. 611 of 2023 was
lodged pursuant to impugned 1st FIR, at
the instance of M/s Shipra Hotel Private
Limited,
through
its
authorized
12 All. Niraj Tyagi & Anr. Vs. State of U.P. & Ors.
477
representative. It came to be challenged
before this Court in Writ Petition No.
11837 of 2023 and 11838 of 2023. These
two writ petitions have been allowed by
this Court on 15.4.2024 after holding that
lodging of FIR in respect of loan
transaction is an abuse of criminal process
when issues raised therein are already
engaging the attention of Debt Recovery
Tribunal
under
the
SARFAESI
Act.
Operative portion of the judgment, in this
regard, is reproduced hereinafter:-

"22. We have carefully perused
the allegations made in the impugned First
Information Report which are in respect of
transfer of secured asset in favour of
auction
purchaser
by
the
secured
creditor/finance
company
under
the
SARFAESI
Act.
Allegations
that
proceedings
have
not
been
lawfully
undertaken or that the secured asset is
undervalued are aspects which can only be
examined in pending proceedings before
the Debt Recovery Tribunal. The defaulter
company has already approached the
Supreme Court twice and such proceedings
were withdrawn with liberty to approach
the Debt Recovery Tribunal. The defaulter
company has already approached the DRT,
Lucknow where the matter is pending.
Question as to whether the auction
purchaser has exceeded its possession
beyond the property transferred in auction
purchase is also open for examination
before the DRT, Lucknow. Such issues are
otherwise civil in nature and cannot be
allowed to be raised by lodging an First
Information
Report.
Vague
and
unsubstantiated ancillary allegations made
of encroachment, beyond the transferred
secured asset, or alleged irregularity in
conduct of auction etc. cannot be allowed
to be raised by lodging an FIR and thereby
vest jurisdiction in the police regarding
civil issues which are required to be
adjudicated exclusively by the DRT or the
civil court. The tendency of the defaulter to
invoke criminal proceedings for resisting
coercive action under the SARFAESI Act
has to be curbed. The Parliamentary vision
of
vesting
exclusive
jurisdiction
in
specialized tribunal viz DRT, in respect of
banking transactions relating to loan, debt
etc.
has
to
be
respected.
Criminal
proceedings cannot be pressed into action
at the instance of defaulter to scuttle
proceedings under the SARFAESI Act on
issues exclusively triable by DRT.

23. For the reasons recorded
above, these two petitions succeed and are
allowed. The First Information Report,
dated 22.07.2023, registered in Case Crime
No.611 of 2023, under Sections 420, 120-B
of IPC and Section 82 of Registration Act,
1908, Police Station - Kavi Nagar, District
- Ghaziabad is quashed."

17. In addition to above, Indiabulls
invoked the pledge of shares exercising its
authority under the pledge agreement. The
borrowers and Kadam filed four separate
petitions under Section 9 of the Arbitration
and
Conciliation
Act,
1996
seeking
restraint against its transfer. An order of
status-quo was initially passed with respect
to transfer of pledged shares.

18. Meanwhile, the cheques earlier
issued by borrowers for an aggregate value
of Rs. 75,03,86,792/- to Indiabulls got
dishonoured. Application was filed by
Indiabulls in Section 9 proceedings for
vacating the status-quo order. The matter in
between was carried in appeal where the
order of learned Single Judge directing
status-quo in respect of transfer of shares
was suspended. Indiabulls, however, stated
before the Appellate Court that invocation
of pledge of shares will be undertaken in a
478 INDIAN LAW REPORTS ALLAHABAD SERIES
completely transparent manner, on a fair
evaluation of the shares and that the same
would also be placed before the learned
Single Judge. The Division Bench of Delhi
High Court noted this stand of the
Indiabulls and observed that any invocation
of pledge would be open to challenge
before the Court.

19.
During
the
pendency
of
application under Section 9 of the Act of
1996 before learned Single Judge of Delhi
High Court a notice for sale of pledged
shares of Kadam was issued by Indiabulls
on 16.4.2021. An application was filed by
Kadam in pending petition under Section 9
of the Act of 1996 for interim relief.
Petitions were also filed under Section 11
of the Act of 1996 for appointment of
Arbitrator. An arbitrator was also appointed
on 22.4.2021.

20. The order dated 22.4.2021 was
unsuccessfully challenged in appeal before
the Division Bench of Delhi High Court.
Matter was then taken to Supreme Court by
Indiabulls. A statement was made on behalf
of Indiabulls that till the matters are
disposed of by the Court no action would
be taken to precipitate the transfer of
shares. The matters were revived before
learned Single Judge in proceedings under
section 9 of the Act of 1996 under orders of
the Supreme Court dated 06.05.2021.
Learned Single Judge of Delhi High Court
disposed of the application under Section 9
of the Act of 1996 vide judgment dated
20.5.2021.
The
Court
prima
facie
concluded that element of default had
occurred as the security in respect of the
mortgaged
properties
was
impaired.
Learned Single Judge relied upon the
statement made on behalf of Indiabulls that
shares would be transferred in a fair and
transparent
manner
and
noted
that
Indiabulls has disclosed the purchaser and
also the amount at which the sale is being
done. Offer given by Indiabulls to the
borrower to redeem the pledged shares on a
payment of Rs.900 crores and the inability
to avail such offer by borrower was
specifically noticed. The Court ultimately
rejected section 9 petition after recording
its prima facie findings in the matter.

21. Indiabulls and DLF in between had
entered into an agreement on 20.4.2021 to
sell pledged shares for a consideration of
Rs.900 crores. Rs. 750 crores was to be
paid by DLF while Indiabulls had to infuse
approximately Rs.150 crores in Kadam so
as to enable it to repay the loans of M/s
Shipra Estate Limited. Mutually settled
Share Sale Agreement was to be formalized
between the parties within 21 days subject
to fulfillment of conditions. Rs.100 crores
was paid by DLF to Indiabulls. DLF,
however, terminated the agreement and
demanded refund of Rs.100 crores which
was allowed.

22. Fresh agreement was discussed
between the parties and a No Objection
Certificate for the sale of property of
Kadam to DLF was issued by Indiabulls on
26.5.2021 for consideration of Rs.900
crores. An agreement to sale was thereafter
entered into between the parties on
30.5.2021. As per it, DLF agreed to
purchase the sale property for Rs.1,250/-
crores with shares of Kadam valued at Rs.
900 crores and remaining Rs. 350 crores
was to be paid by way of allotment of
plots/built up floors in the real estate
project to be developed by DLF on the said
property of Kadam.

23. Indiabulls, however, sent a legal
notice terminating this agreement dated
30.5.2021 as also the No Objection
12 All. Niraj Tyagi & Anr. Vs. State of U.P. & Ors.
479
Certificate vide its communication dated
26.6.2021 on the ground of alleged default
in honouring the terms of agreement by
borrower and DLF.

24. It is worth noticing that the
aforesaid twin attempt of transfer of
pledged shares of Kadam was with the
consent of the borrower and its value was
fixed at Rs. 900 crores. The agreement
dated 30.5.2021 was signed by Mohit
Singh also in his capacity as promoter of
borrower company as well as shareholder
of Kadam.

25. Indiabulls then entered into a
Share Sale Purchase Agreement with
Creative Souls Technology Limited and
M3M India Pvt. Limited for sale of pledged
shares for a consideration of Rs.900 crores.
Out of the aforesaid sum approximately
Rs.750 crores was to be paid to Indiabulls
by M3M and remaining Rs.150 crores
(approx) was to be utilized to repay loans
availed by Kadam from the borrower. On
3.7.2021, Rs.749.77 crores was transferred
to Indiabulls. It also transpires that Rs.750
crores was earlier transferred by Indiabulls
to M3M and, therefore, funds for the
transfer of shares was ultimately provided
by Indiabulls.

26. DLF Home Developers Limited
has invoked the arbitration clause under its
agreement to sale dated 30.5.2021 and filed
a petition under Section 9 of the Act of
1996 before the Delhi High Court. By a
detailed judgment learned Single Judge of
Delhi High Court has disposed of the
matter vide following orders passed on
8.11.2021:-

"116. In the facts of the present
case, this Court is of the view that the
balance of convenience lies in favour of
DLF. DLF is a developer and intends to
develop the Sale Property. The entire
transaction between the parties as recorded
in the ATS is premised on the basis that
DLF would use the Sale Property for
development of its real estate project.
Insofar
as
Indiabulls
is
concerned,
concededly, it is a money lender and its
interest is essentially to recover the loans
along with interest as claimed by it. Thus,
as far as Indiabulls is concerned, it can
always be compensated in terms of money.
There is no dispute that Kadam is a part of
the
Shipra
Group
of
entities
and
admittedly,
had
mortgaged
the
Sale
Property with Indiabulls to secure the
repayment obligations of the

Borrowers. The Borrowers claim
that Indiabulls had agreed to accept the
consideration payable by DLF under the
ATS as full and final settlement of its
claims.
Plainly,
if
Kadam
and
the
Borrowers prevail in their case that the
dues owed to Indiabulls were fully settled,
they would stand discharged of their
liability
on
Indiabulls
receiving
the
consideration as provided under the ATS.
However, if they fail in this case, the
Borrowers would continue to be liable to
discharge their dues. Insofar as Kadam is
concerned, Kadam is not one of the
Borrowers and its liability is limited to the
collateral provided by it for securing the
debts owed to Indiabulls, that is, the Sale
Property.

117. As noted above, in terms of
Clause 10 of the ATS, the parties had
agreed that the Sale Property is a 'special
property' and damages would not be an
adequate remedy. Thus, if DLF prevails in
its case that it is entitled to specific
performance of the ATS, the damages it
would suffer in the event the Sale Property
is alienated, cannot be compensated in
monetary terms. This Court is of the view
480 INDIAN LAW REPORTS ALLAHABAD SERIES
that in these facts, the balance of
convenience is, plainly, in favour of grant
of an interim injunction restraining the
parties from creating any third party rights.

118. In view of the above, this
Court considers it apposite to direct that
status quo as to the title and possession be
maintained in respect of the Sale Property
till
the
conclusion
of
the
arbitral
proceedings. It is so directed.

119. The parties are at liberty to
approach the Arbitral Tribunal as and
when
the
Arbitral
Tribunal
enters
reference,
to
seek
any
variation,
modification or vacation of the aforesaid
order and/or seek any further relief as
advised.

120. It is further clarified that all
rights and contentions of the parties are
reserved and nothing stated in this order
shall be construed as a final expression of
opinion on the merits of the disputes. The
findings and observations made in this
order are solely for the purposes of the
present application and would not preclude
the parties from advancing their respective
contentions as may be advised, before the
Arbitral Tribunal.

121. The petition is disposed in
the
aforesaid
terms.
The
pending
application is also disposed of."

27. We may note that though Kadam
is a group company of the borrower but it
has not availed any loan from Indiabulls. It
has a separate and distinct entity as a
juristic person. It has only pledged its
shares and mortgaged 73 acre land as a
collateral for the loan availed by the
borrower which is its holding company.

28. As stated Indiabulls has transferred
100% pledged shares of Kadam on
1.7.2021 to M/s Creative Souls Technology
India Private Limited, rechristened as Final
Step Developer Private Limited. The
transferee Company is the subsidiary
company of M/s M3M India Private
Limited (Petitioner No. 1 in Writ Petition
No. 14053 of 2023). On 1.7.2023, M/s
M3M India Private Limited has purchased
the entire equity share holding of Kadam
from Indiabulls. It is this part of the
transaction which is the subject matter of
the two FIRs under challenge in these
petitions.

29. At this stage, we may note that the
loan agreement pursuant to which 100%
shares of Kadam were pledged in favour of
Indiabulls contained an arbitration clause.
This clause has already been invoked by
the borrowers and various proceedings
therein are already undertaken. Mr. Justice
Vikramjit Sen, a retired Judge of the
Supreme Court, has already been appointed
an arbitrator in the matter.

30. In the arbitration proceedings
instituted by M/s DLF Limited also Mr.
Justice Vikramjit Sen has been appointed
an arbitrator and the proceedings are
pending before the learned arbitrator. The
Arbitrator has already passed an order of
status-quo in respect of the 73 acre
mortgaged
land
of
Kadam.
These
proceedings and the orders passed therein
are, however, not referred to in the two
FIRs or the complaint of borrower.

31. We shall refer to the proceedings
of
arbitration,
a
little
later,
while
considering petitioners' argument that
invocation of criminal proceedings vide
impugned FIRs are intended to overreach
and preempt such civil proceedings.

32. It is in the above backdrop and
after the borrowers failed to obtain any
protection in respect of transfer of pledged
12 All. Niraj Tyagi & Anr. Vs. State of U.P. & Ors.
481
shares before the Delhi High Court that the
1st FIR came to be lodged pursuant to the
order of the Chief Judicial Magistrate,
dated 7.4.2023, as Case Crime No. 427 of
2023. This complaint contains assertion to
the effect that M/s Shipra Group is engaged
in real estate activity through its various
group companies and needed finance for its
four upcoming housing and commercial
projects. The Directors of Indiabulls
contacted M/s Shipra Group and offered to
provide loan of Rs. 1939 crore on
concessional rates and to secure such
transaction properties worth Rs. 6 thousand
crore was kept as security in favour of
Indiabulls by the borrowers i.e. M/s Shipra
Group of Companies.

33.
The
complaint
alleges
that
substantial part of the loan amount
disbursed was however unauthorizedly
recalled by Indiabulls, from borrowers i.e.
M/s Shipra Group of Companies and
therefore the entire sanctioned loan amount
was not given to the borrowers M/s Shipra
Group. Signatures were also obtained from
the Managing Director of M/s Shipra Estate
Limited, namely Sri Mohit Singh. It is
alleged that in collusion with various
petitioner companies Indiabulls played
fraud and only disbursed Rs. 866.88 crore
to Shipra Group while balance amount was
arbitrarily retained by it.

34. It is also alleged that loan of Rs.
1686 crore was actually forced upon Shipra
Group by Indiabulls and the securities were
liquidated notwithstanding the fact that no
outstanding loan existed against Shipra
Group.

35. It is also alleged that properties of
Shipra Group consisting of 73 acres land has
been transferred to M/s M3M Group on a
kickback taken by Indiabulls. Grievance is
also raised with regard to transfer of M/s
Shipra Mall. It is further alleged that 73 acre
land is valued at Rs. 4 thousand crore but has
been transferred to M/s M3M Private Limited
on payment of kickback of Rs. 300 crore. M/s
M3M Private Limited is also alleged to have
taken possession of 73 acre land in Sector
128 NOIDA. It is further complained that
various documents have been forged to dupe
M/s Shipra Group of its prime properties and
that an appropriate report be lodged in the
matter so as to unearth the fraud.

36. It is also alleged that the pledged
shares of Kadam was agreed upon to be
purchased by M/s DLF for Rs. 1250 crores
but eventually it has been transferred to M/s
Final Step Developer Private Limited for Rs.
900 crores only. The Mall belonging to
Shipra Group has also been unauthorizedly
encroached upon by Indiabulls. The FIR
allegations further are that as against
sanctioned loan of Rs. 1939 crores only Rs.
1256.6 crores has been paid to the borrower
and Rs. 683 crore has not been disbursed to
the borrower company despite the fact that
Rs. 163 crore was paid till March, 2023 to
Indiabulls.

37. The 2nd FIR is lodged by YEIDA in
furtherance of the 1st FIR. The contents of
the subsequent FIR is (i) that the transfer of
shares of Kadam pledged with Indiabulls in
favour of Creative Souls Technology India
Private Limited was without the consent of
YEIDA (the informant authority); (ii) nonpayment of transfer charges has resulted in
financial loss caused to the public authority to
the extent of Rs. 200 crore; (iii) the contents
of the FIR in Case Crime No. 427 of 2023 is
also referred to and relied upon in the
subsequent FIR.

38. On the basis of the above two FIRs
proceedings have been initiated by the
482 INDIAN LAW REPORTS ALLAHABAD SERIES
Enforcement
Directorate,
pursuant
to
ECIR//HIU-I/06/2023,
and
in
the
consequential investigation so undertaken
the ED has found following facts:-

"(a) that there was undervaluation
by Indiabulls of the value of shares of
Kadam while transferring it to the M/s
Creative
Souls
Technology
Private
Limited/Final
Step
Developer
Private
Limited; (b) purchase of shares of Kadam
was funded by Indiabulls through loan and
thus there was round tripping; (c) the
valuation reports were back dated and thus
forged."

39. In the counter affidavit filed by the
Enforcement Directorate following facts
are alleged have come to the knowledge of
the Enforcement Directorate in respect of
the present transaction:-

"i. Indiabulls used the forged
documents in the form of valuation report
which formed the basis of valuation of shares
of Kadam.

ii. The valuation of land owned by
Kadam and subsequently that of shares of
Kadam was deliberately lowered/reduced
which caused loss to public money and
YEIDA.

iii. The valuation reports were
backdated by the valuers at the instance of
Indiabulls.

iv. The two valuers who submitted
the report were not the registered valuers.

v. The reports submitted by the
valuers were for internal purpose only and the
same could not be used for any legal
proceeding leave apart for taking away the
right of property from any borrower as done
by Indiabulls in the present case.

vi. The report was never placed
before the board of Indiabulls which passed
resolution with regard to sale of shares.

vii. M3M group was assured that
it will get the shares of Kadam though
Indiabulls was in negotiating with DLF for
sale of shares of Kadam."

40.