# CHANDRAN RATNASWAMI v. K.C. PALANISAMY AND OTHERS

- **Citation:** [2013] 17 S.C.R. 853
- **Court:** Supreme Court of India
- **Decided:** 2013-05-09
- **Case number:** Civil Appeal No. 4540 of 2013
- **Bench:** P. Sathasivam, M.Y. Eqbal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/chandran-ratnaswami-v-k-c-palanisamy-and-others-28827
- **Pages:** 47

## Headnote

B
Constitution of India, 1950 - Articles 136 & 142 -
Quashing of criminal proceedings, when warranted - Bar on .
trial when abuse of process of court - Duty and· obligation of C
the criminal court to exercise great deal of caution in issuing
process, particularly when matters are essentially of civil
nature - Held: In the instant case, neither the High Court nor
the Magisterial Court ever applied their mind and considered
the conduct of the complainant and continuance of criminal D
proceedings in respect of the disp1.1tes, which were civil in
. nature and finaily adjudicated by the competent authority i.e .
. c the Company Law Board and the High Court in appeal - The
complainant indulged in repeated harassment of the accused
persons by initiating multiple criminal proceedings in order E
to distract attention from his own misdeeds - The complainant
manipulated and misused the process of Court so as to
deprive the accused party from their basic right to move free
anywhere im~ide or outside the country - It would be unfair if
the accused were to be tried in such criminal proceedings. F
arising out of alleged breach of a Joint Venture Agreement
especially when such disputes have been finally resolved by
the Court of competent jurisdiction - Hence, a/lowjng the
criminal proceedings to continue would be an abuse -of the .
process of the Court and, therefore, for the ends of justice G
such proceedings ought to be quashed - Code of Criminal
Procedure, 1973 - s.482.
Investigation - In Cognizable offence - Power of Police
85.3
H
854
SUPREME COURT REPORTS
[2013) 17 S.C.R.
A
Officers - Held: Is not unlimited - Power during investigation
must be exercised strictly within the limitation prescribed in
CrPC and such power may not result in destroying the
personal freedom of a citizen - Code of Criminal Procedure,
1973.
B
Disputes between the parties with regard to alleged
breach of a Joint Venture Agreement were finally
adjudicated by the Company Law Board which order was
upheld by the High Court in appeal. However, instead of
C
complying with the order of the Company Law Board and
the directions issued by the High Court, the judgmentdebtor in the decision of the Company Law Board i.e.
respondent no.1 in civil appeal arising out of S.L.P (C)
N!>.13120 of 2013 filed a series of criminal complaints
0
against the appella~~ therein.
It is alleged that the criminal cases filed by the said
respondent no.1 were frivolous, which were either
quashed or stayed by the Court; that a purely civil matter
arising out of a company dispute which had attained
E
finality had been given the colour of a criminal act with
the sole objective of avoiding civil liability and
pressurizing and harassing the said appellant; and that
the conduct of said respondent no.1 was contemptuous
amounting to deliberate obstruction of the judicial
F
proceedings and an abuse of the process of the Court.
In the instant appeals, the question which, therefore,
arose for consideration was whether continuance of
criminal proceedings against the said appellant was an
abuse of the process of the Court, and thus liable to be
G quashed.
H
Disposing of the appeals and the contempt petition,
the Court
HELD:1.1. The doctrine of abuse of process of court
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
855
and the remedy of refusal to allow the trial to proceed is
A
well-established and recognized doctrine both by the
English courts and courts in India. There are some
established principles of law which bar the trial when
there appears to be abuse of process of court. [Para 29]
[886-E-F]
B
1.2. An abuse of process justifying the stay of
prosecution could arise in the following circumstances:
(i) where it would be impossible to give the accused a fair
trial; or (ii) where it would amount to misuse/manipulation
C
of process because it offends the court's sense of justice
and propriety to be asked to try the accused in the
circumstances of the particular case. [Para 31] [887-C-E]
1.3. The wholesome power un

## Text

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[2013] 17 S.C.R. 853
. CHANDRAN RATNASWAMI
v.
K.C. PALANISAMY AND OTHERS
(Civil Appeal No. 4540 of 2013)
MAY 09, 2013
[P. SATHASIVAM AND M.Y. EQBAL, JJ.]
B
Constitution of India, 1950 - Articles 136 & 142 -
Quashing of criminal proceedings, when warranted - Bar on .
trial when abuse of process of court - Duty and· obligation of C
the criminal court to exercise great deal of caution in issuing
process, particularly when matters are essentially of civil
nature - Held: In the instant case, neither the High Court nor
the Magisterial Court ever applied their mind and considered
the conduct of the complainant and continuance of criminal D
proceedings in respect of the disp1.1tes, which were civil in
. nature and finaily adjudicated by the competent authority i.e .
. c the Company Law Board and the High Court in appeal - The
complainant indulged in repeated harassment of the accused
persons by initiating multiple criminal proceedings in order E
to distract attention from his own misdeeds - The complainant
manipulated and misused the process of Court so as to
deprive the accused party from their basic right to move free
anywhere im~ide or outside the country - It would be unfair if
the accused were to be tried in such criminal proceedings. F
arising out of alleged breach of a Joint Venture Agreement
especially when such disputes have been finally resolved by
the Court of competent jurisdiction - Hence, a/lowjng the
criminal proceedings to continue would be an abuse -of the .
process of the Court and, therefore, for the ends of justice G
such proceedings ought to be quashed - Code of Criminal
Procedure, 1973 - s.482.
Investigation - In Cognizable offence - Power of Police
85.3
H
854
SUPREME COURT REPORTS
[2013) 17 S.C.R.
A
Officers - Held: Is not unlimited - Power during investigation
must be exercised strictly within the limitation prescribed in
CrPC and such power may not result in destroying the
personal freedom of a citizen - Code of Criminal Procedure,
1973.
B
Disputes between the parties with regard to alleged
breach of a Joint Venture Agreement were finally
adjudicated by the Company Law Board which order was
upheld by the High Court in appeal. However, instead of
C
complying with the order of the Company Law Board and
the directions issued by the High Court, the judgmentdebtor in the decision of the Company Law Board i.e.
respondent no.1 in civil appeal arising out of S.L.P (C)
N!>.13120 of 2013 filed a series of criminal complaints
0
against the appella~~ therein.
It is alleged that the criminal cases filed by the said
respondent no.1 were frivolous, which were either
quashed or stayed by the Court; that a purely civil matter
arising out of a company dispute which had attained
E
finality had been given the colour of a criminal act with
the sole objective of avoiding civil liability and
pressurizing and harassing the said appellant; and that
the conduct of said respondent no.1 was contemptuous
amounting to deliberate obstruction of the judicial
F
proceedings and an abuse of the process of the Court.
In the instant appeals, the question which, therefore,
arose for consideration was whether continuance of
criminal proceedings against the said appellant was an
abuse of the process of the Court, and thus liable to be
G quashed.
H
Disposing of the appeals and the contempt petition,
the Court
HELD:1.1. The doctrine of abuse of process of court
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
855
and the remedy of refusal to allow the trial to proceed is
A
well-established and recognized doctrine both by the
English courts and courts in India. There are some
established principles of law which bar the trial when
there appears to be abuse of process of court. [Para 29]
[886-E-F]
B
1.2. An abuse of process justifying the stay of
prosecution could arise in the following circumstances:
(i) where it would be impossible to give the accused a fair
trial; or (ii) where it would amount to misuse/manipulation
C
of process because it offends the court's sense of justice
and propriety to be asked to try the accused in the
circumstances of the particular case. [Para 31] [887-C-E]
1.3. The wholesome power under Section 482 Cr.P.C.
entitles the High Court to quash a proceeding when it D
comes to the conclusion that allowing the proceeding to ·~·
continue would be an abuse of the process of the Court
or that the ends of justice require that the proceeding
ought to be quashed. The High Courts have been
invested with inherent powers, both in civil and criminal
E
matters, to achieve a salutary public purpose. A court
proceeding ought not to be permitted to degenerate into
a weapon of harassment or persecution. The ends of
justice are higher than the ends of mere law though
justice must be administered according to laws made by
F
the legislature. [Para 34] [888-B-D]
1.4. Any effort to settle civil disputes and claims,
which do not involve any criminal offence, by applying
pressure through criminal prosecution should be
deprecated and discouraged. It is the duty" and obligation
G
of the cri.minal court to exercise a great deal of caution
in issuing the process, particularly when matters are
essentially of civil nature. [Paras 37, 39) [890-G; 892-B]
H
856
SUPREME COURT REPORTS
[2013] 17 S.C.R.
A
State of Karnataka vs. L. Muniswamy and Others (1977)
2 SCC 699: 1977 (3) SCR 113; State of Haryana and Others
VS. Bhajan Lal and Others 1992 Supp. (1) sec 335: 1990
(3) Suppl. SCR 259; Zandu Pharmaceutical Works Ltd. and
Others vs. Mohd. Sharaful Haque and Another (2005) 1 SCC
B
122: 2004 (5) Suppl. SCR 790; Indian Oil Corpn. v. NEPC
India Ltd. and Others (2006) 6 SCC 736: 2006 (3) Suppl.
SCR 704; lnder Mohan Goswami and Another vs. State of
Uttaranchal and Others (2007) 12 SCC 1: 2007 (10 ) SCR
847; G. Sagar Suri and Another vs. State of U.P. and Others
c (2000) 2 SCC 636: 2000 (1) SCR 417; S. N. Sharma vs.
Bipen Kumar Tiwari and Others AIR 1970 SC 786: 1970 (3)
SCR 946; State of West Bengal and Others vs. Swapan
Kumar Guha and Others AIR 1982 SC 949: 1982 (3) SCR
121; Uma Shankar Gopalika vs, State of Bihar and Another
D (2005) 10 SCC 3;J6 - relied on.
Connelly vs. Director of Public Prosecutions (1964) 2 All
ER 401 (HL); Hui Chi-Ming vs. The Queen (1992) 1 AC 34
(PC); Bennett vs. Horseferry Road Magistrates' Court (1993)
3 All ER 138; R. vs. Derby Crown Court exp Brooks (1985)
E
80 Cr. App. R. 164; R. vs. Beckford, (1996) 1 Cr.App.R. 94:
1995 R.T.R. 251 - referred to.
2.1. In the instant case, the dispute arising out of
Joint Venture Agreement has been fully and finally settled
F
by the Company Law Board and also the High Court and
several directions were issued for compliance including
the return of the amount by respondent No.1 to the
appellant and to become the. sole owner of those
companies. [Para 50] [896-G]
G
. 2.2. In order to justify the action of the Superintendent
· of Police in directing the investigation, it was submitted
that on the instruction of Inspector General of Police such
reinvestigation was directed by the Superintendent of
Police.' However, no such letter of instruction has been
H produced before this Court. The power of Police Officers
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
857
in the field of investigation of a cognizable offence is not
unlimited. Hence, the power during the investigation
must be· exercisei;f strictly within the limitation prescribed
in the Code of Crimina~ Procedure and such power may
not result in destroying the personal freedom of a citizen.
[Para 51] [897-B-C]
2.3. After the dispute was finally settled by the
Company Law Board and the High Court in appeal, the
respondent approached the Economic Offences Wing,
who refused to entertain the complaint. The respondent
then moved the. complaint before the Judicial Magistrate,
Perundurai .for initiating criminal action against the
appellant for breach of contract, which was dismissed by
the Magistrate holding the same as nothing but to take
. vengeance, The Magistrate further held that if the
conditions of the agreement are violated the respondent
has to seek remedy under the Contract Act or the
Company Law instead of filing criminal case.
Suppressing the said complaint and the order passed by
A
B
c
D
the Magistrate, the respondent tried again by filing a
complaint befo·re the Judicial Magistrate, Kangayam for · E
initiating criminal action against the appellants for the
breach of contract and conspiracy. Although the FIR was
registered, but a closure report as a mistake of fact was
prepared. The High Court wliile passing the order
observed that the Court would frown upon the conduct
F
of the complainant in indulging in repeated harassment
of the petitioners-appellants. Irrespective of the dispute
with regard to the closure of the case, a fresh life was
given to the criminal case at the instance of
Superintendent of Police, who directed re-investigation
and in course oUhe said criminal proceeding irrespective
of FIR No.7/2007 the appellants were harassed and on
technicalities various orders for surrender, arrest and
their detention had been, passed. In the three writ
petitions filed by respondent No.1, though not against the
H.
858
SUPREME COURT REPORTS
[2013) 17 S.C.R
A
appellant but against the C.B.I. in respect of different
transactions, the High Court dismissing all those writ
petitions observed that the modus operandi of the writ
petitioner (respondent No.1) was to defraud the person
or entity and thereafter approach the Courts with multiple
B
proceedings in order to distract attention from his own
misdeeds. [Para 52] [897~0-H; 898-A-C]
2.4. Neither the High Court nor the Magisterial Court
have ever applied their mind and considered the conduct
C of the respondent and continuance of criminal
proceedings in respect of the disputes, which are civil in
nature and finally adjudicated by the competent authority
i.e. the Company Law Board and the High Court in appeal.
[Para 53] [898-D]
'
D
2.5. The complainant has manipulated and misused
the process of Court so as to deprive the appellants from
their basic right io move free anywhere inside or outside
the country. Moreover, it would be unfair if the appellants
are to be tried in such criminal proceedings arising out
E of alleged breach of a Joint Venture Agreement
especially when such disputes have been finally resolved
by the Court of competent jurisdiction. Hence, allowing
the criminal proceedings arising out of FIR No.7 of 2007
to continue would be an abuse of the process of the
F
Court and, therefore, for the ends of justice such
pro~eedings ought to be quashed. Since the High Court
failed to look into this aspect of the matter while passing
the impugned order, the same could not be sustained in
law. [Para 54] [898-E-G]
G
State of Bihar & Another vs. J.A. C. Saldanna and Others
AIR 1980 SC 326: 1980 (2) SCR 16 - cited.
Case Law Reference:
H
1980 (2) SCR 16
cited
Para 26
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
859
(1964) 2 All ER 401 (HL)
referred to
Para 29
A
(1992) 1 AC 34 (PC
referred to
Para 30
(1993) 3 All ER 138
referred to
Para 31
(1985) 80 Cr. App. R. 164
referred to
Para 32
B
(1996) 1 Cr. App. R. 94
referred to
Para 33
1977 (3) SCR 113
relied on
Para 34
1990 (3) Suppl. SCR 259
relied on
Para 35 c
2004 (5) Suppl. SCR 790
relied on
Para 36
2006 (3) Suppl. SCR 704
relied on
Para 37
2007 (10) SCR 847
relied on
Para 38
2000 (1) SCR 417
relied on
Para 39 ; D
1970 (3) SCR 946
relied on
Para 40
1982 (3) SCR 121
relied on
Para 41
(2005) 1 o sec 336
relied on
Para 42
E
CIVIL/CRIMINAL APPELLATE JURISDICTION : Civil
Appeal No. 4540 of 2013.
From the Judgment & Order dated 22.03.2013 of the High
Court of Judicature at Madras in Writ Appeal No. 517 of 2013.
F
WITH
Crl. A. Nos. 736-737, 731-733 and 734-735 of 2013 and C.A.
Nos. 4537-4538 of 2013 and Contempt Petition (C) No. 166
of 2013 in SLP (Crl.) No. 9853 of 2010.
G
Subramonium Prasad, AAG, E.C. Agrawala, Mahalakshmi
Balaji & Co., M. Yogesh Kanna, A. Santha Kumaran, Sasi Kala,
Senthil Jagadessan for the appearing parties.
H
860
SUPREME COURT REPORTS
[2013] 17 S.C.R.
A
The Judgment of the Court was delivered by
M.Y. EQBAL, J. 1. Leave granted.
2. Since common questions of law are involved, these
appeals have been heard together and are being disposed of
B
by this common judgment. However, for the sake of
convenien.ce, the factual matrix giving rise to these cases as
alleged in the civil appeal arising out of SLP(C) No. 13120 of
2013 is set out hereinafter.
c
3. The appellant - Chand ran Ratnaswami, alleged to have
settled in Canada since 1974, is an officer of Hamblin Watsa
Investment Counsel, a wholly-owned subsidiary of Fairfax
Financial Holdings Limited (in short, "Fairfax") which is based
in Canada and has also made investments in India worth more
0
than USO 1 billion. The said appellant is also a Director ori the
Boards of various renowned companies including ORE
Holdings Limited (in short, "ORE"), a Fairfax Group company,
based in Mauritius, and has to travel to India on business
commitments. The said holding. company, ORE on 30th
•E
January, 2004 entered into a Joint Venture Agreement (JVA)
with CG Holdings Private Limited (respondent No. 1 - K.C.
Palanisamy's company) and N. Athappan (a Singapore citizen)
for constructing and developing a hotel property, a shopping
complex and an IT Park of the properties owned by Cherraan
F
Properties Limited (CPL) and Vasantha Mills Limited (VML)
(respondent No.1's companies). ORE invested Rs.75 crores
and got 45% in Cheran Enterprises Private Limited (CEPL).
N. Athappan invested Rs. 4 crores and got 10% in CEPL. Jt is
alleged that as CPL and VML have immovable assets,
respondent No. 1 transferred shares of CPL and VML to CEPL
G instead of bringing money and got 45% share holding in CEPL.
Respondent No. 1 is alleged to have swindled the said Rs. 75 ·
crores that was deposited in the bank account contrary to the
JVA and transferred the immovable assets of CPL and VML, .
subsidiaries of CEPL. Thereupon, ORE filed Company Petition
H No. 76 of 2005 before the Company Law Board, Additional
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
861
[M.Y. EQBAL, J.]
Principal Bench, Chennai (in short, "the CLB") on account of
A
the alleged acts of oppression and mismanagement indulged
in by respondent No. 1. The Company Law Board by order
dated 13th August, 2008 directed respondent No. 1, CG
Holdings Private Limited and CEP-1... to return the investment of
ORE and N. Athappan amounting to Rs. 79 crores with· 8%
B
interest within one year, failing which the land of VML was to
be transferred to ORE and N. Athappan. It was directed that
once the aforementioned amount is paid, respondent No. 1
would take control of CEPL and its subsidiaries. The Company
Law Board held as under: ·
c
"17. In view of the foregoing conclusions and in exercise
of the powers under Sections 397 & 398 read with Section
402.and with a view to bringing to an end the grievances
. -of CG Holdings, KCP, ORE and Athappan, the following
order is passed:
D .
CEPL shail return a sum of Rs. 75 crores and Rs. 4 crores
, invested by ORE and Athappan respectively, together with
simple interest at the rate of 8% per annum from the date
of investment till the date of repayment within a period of E
12 months in one or more instalments, commencing from
01.11.2008. While makir19 the payment CEPL, CG
Holdings and KCP shall ensure that at least 25% of the
amount due is paid in every quarter. CEPL CG Holdings
and KCP are at liberty to make use of the fixed deposit . F
held by CEPL with the SBI, Erode Main Branch, free of
any liens or encumbrances lowards refund of the
investments of ORE and Athappan. VML shall not alienate
or sell any of its immoveable properties till full payment is
made to ORE, in terms of this order.Jn the event of any
failure to make the repayment within the specified time,
G
CEPL CG Holdings, KCP and VML will duly convey the
immovable properties of VML, namely, 17.15 acres of land
in favour of ORE and 7.80 acres of land in favour of
Athappan by executing and registering necessary deeds
H
A
B
c
D
E
F
G
H
862
SUPREME COURT REPORTS
[2013] 17 S.C.R.
of conveyance in strict compliance with all applicable laws,
as consideration for reduction of capital and surrender·of
the shares of ORE and Athappan, upon which ORE as well
as Athappan will deliver the share certificates and blank
transfer forms in respect of their holdings in CEPL and the
subsidiaries, if any, in favour of CG Holdings and KCP.
CEPL is consequently authorized to reduce its share
capital and in the meantime, operation of the impugned
agreements is suspended, to expedite and ensure due
completion of the modalities of exit by ORE and Athappan,
thereby, bringing to an end the acts complained of in the
present proceedings. CEPL shall ensure necessary
statutory compliances till the whole process, in accordance
with the aforesaid directions, is properly completed. The
parties are at liberty to apply in the event of any difficulty
in implementation of the smooth exist of ORE and
Athappan from CEPL."
4. Cross appeals were filed by the parties before the High
Court of Judicature at Madras and the High Court vide order
dated 5th August, 2011 confirmed the order dated 13th August,
2008 passed by the CLB, in the following terms:
"54. On analysis of various aspects, Company Law Board
concluded that it was no longer possible for the parties to
carry out joint venture business of CEPL as per the terms
of JVA. Only to have smooth exit of ORE and Athappan,
the Company Law Board passed the order directing CEPL
to repay Rs. 75 Crores and Rs. 4 Crores invested by ORE
Holdings and Athappan respectively. By perusal of the
order of Company Law Board, in our considered view,
Company Law Board has elaborately gone into the issues
arisen between the parties even though those objections
were filed under Sections 397 and 398 of the Companies
Act. As demonstrated infra, there are commonality of
issues raised in both the Company Petitions, O.S. No.90
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
863
[M.Y. EQBAL, J.]
of 2007 and the petition filed before l.C.C. seeking for
A
arbitration.
55. Criminal Cases:- The learned counsel for appellants
Mr. Karthik Seshadri contended that the purport of the
criminal proceedings are different and initiating of criminal
B
complaints does not amount to waiver of arbitration. Of
course, a party does not waive his right to invoke
arbitration by filing criminal complaints: But what is relevant
is the allegations in the plethora of criminal complaints filed
at the instance of the appellants/father of KCP/
C
respondents. Both parties have made serious allegations
of cheating, forgery, falsification of records, etc., against
one another. Even before the arbitral Tribunal, the same
allegations are made. The Honourable Supreme Court and
the Madras High Court have held that the arbitration is not
the appropriate forum if allegations of fraud,
D
misappropriation and complicated facts are involved.
xxx
xxx
xxx
84. By a careful reading of the order of Company Law
E
Board in C.P. Nos.65 and 76 of 2005, it is clear that the
alleged breach of Clause 9.2 has been elaborately dealt
with. Company Law Board dealt with not only the issues
pertaining to the oppression and mismanagement of
CEPL aQ.d also the larger issues arising between the
parties. Only to ensure smooth exit of ORE and Athappan,
F
the order dated 13.8.2008 came to be passed by the
Company Law Board. It is pertinent to note that KCP had
not challenged the said order of Company Law Board.
xxx
xxx
xxx
112. As pointed out earlier, several criminal cases have
been filed and number of quash petitions also came to be
filed. Of course a party does not waive his right to invoke
G
the arbitration of the dispute by filing of criminal complaints.
H
A
B
c
D
E
F
G
H
864
SUPREME COURT Ri::PORTS
(2013] 17 S.C.R.
When a party deliberately chooses not to adopt a particular
course of action, the arbitration agreement becomes
inoperative and as the parties have waived or abandoned
the arbitration clause, by invoking the jurisdiction of Civil
Court, the doctrine of wavier applies. The appellants had
the option to go before ICC even in 2005 but the appellants
chose to file C.P. No.65 of 2005 and also stoutly defended
C.P. No.76 of 2005 filed by ORE Holdings. Even in C.P.
No.76 of 2005, the appellants have not sought for reference
to arbitration. By agitating t~e matter before the Company
law Board for nearly two years, and filing the Civil Suit in
O.S. No.90 of 2007 before District Munsif's Court,
Kangeyam, by their conduct the appellants must be
deemed to have given a go bye to the arbitration clause.
113 .. The parties have been engaged in pitched battle
before the Company Law Bd"ard and orders were passed
by the Company Law Board on 13.8.2008. When the
matter was pending before the Company Law Board, the
Company Law Board has passed interim orders at various .
stages. The learned counsel for plaintiffs would submit that
even settlements/proposals have been made disclosing
parties intentions and discovery process has been utilized.
We find much force in the contention of the respondents
that Athappans and Ore have spent consideration time
and. money before the Company Law Board. In so far as
O.S. No.90 of 2007 pending before District Munsifs Court,
Kangeyam, the suit is ready ripe for trial and the
respondents are diligently defending the same. Having
initiated proceedings before various forums, cannot now
seek to invoke arbitration as an additional remedy.
)()()(
xxx
xxx
120. Company Appeal Nos. 21,25 to 27 and 29 of 2009:-
The gist of order in C.P. Nos.65 and 76 of 2005 dated
13.8.2008 is that:-
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
865
[M.Y. EQBAL, J.]
CEPL, KCP and C.G.Holdings were io return Rs. 75
A
Crores to ORE and Rs. 4 Crores to Athappan. The money
was to be paid within a period of one year starting
1.11 .. 2008 with 25 percent of the same, being paid every
year.
B
CEPL; KCP and C.G.Holdings were to utilize Rs. 20
Crores maintained in the fixed deposit at State Bank of
India, Erode to pay ORE and Athappan. In the event of
failure to pay the money the property of VMC situated in
Coimbatore is to be transferred to ORE and Athappan in
the proportion of 17.15 acres and 7.80 acres respectively.
C
Until.then VML was refrained from dealing with the property.
On ·receipt of money, ORE and Athappan were to
surrender their shares in CEPL and CEPL shall
accordingly be permitted to reduce its share capital.
D
The parties were given liberty to approach Company Law
Board for limited purpose of overcoming difficulties in
implementation of the said order.
xxx
xxx
xxx
145. As per Order of Company Law Board amount
invested by ORE has to be refunded which of course, must
E
be in accordance with applicable laws: be it compliance
with FEMA or other Regulations, ORE, being a foreign
F
investor- an entity of.foreign origin , as per FEMA, cannot
own immovable property in India. Compliance of FEMA or
other applicable regulations cannot be bypassed. By the
order' dated 3.8.2009, Company Law Board modified its
earlier order directing VML to execute the sale deed
G
conveying Immovable properties of 17.15 acres to the
nominee of ORE and thereby modified its earlier order.
The Order of the 'company Law Board modifying its earlier
order directing VML to convey the properties to 'norriinee
of ORE' is to be modified to the effect that any .such
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[2013) 17 S.C.R.
conveyance should be subject to applicable laws and
regulations and with required approval/permission to be
obtained by ORE from the competent authorities. The
Order of the Company Law Board in C.A. No.155 of 2008
is to be modified to that extent.
146 ..... Company A"ppeal Nos. 21 and 29 of 2009
preferred by ORE and Company Appeals Nos. 25 and 26
of 2009 preferred by N. Athappan and R. Athappan are
allowed. Company appeal No.27 of 2009 is disposed of
modifying the order of Company Law Board dated
3.8.2009 in C.A. No.155 of 2008 to the effect that the
conveyance of immovable properties to nominee of ORE
is subject to all applicable laws and regulations and if need
be, with necessary approval/permission to be obtained by
ORE from the competent authorities."
5. ORE and N. Athappan filed execution petitions before
the CLB in December 2011 and the same are stated to be
pending as on date.
E
6. While the proceedings before the CLB were pending,
respondent No. 1 started filing multiple criminal complaints. On ·
27th February, 2006, respondent No. ·1 filed a complaint before
the Economic Offences Wing, Chennai (EOW) against ORE,
Fairfax, Prem Watsa, Ramaswamy Athappan, Chandran
Ratnaswami (appellant herein), Paul Rivett, M/s. Odyssey
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America Reinsurance Corporation and N. Athappan making
them accused Nos. 1 to 8 inter alia on the following allegations:
"Through this strategic acquisition accused No. 1, through
Accused No. 7 and Accused No. 4 through Accused No.
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8 acquired substantial ownership and management rights
in VML and CPL also. The complainant states that the sole
objective of the sacrifice made by the complainant of his
highly valuable prime immovable propertfes is the
assurance of the Accused No. 3, 4, 5 & 6 that about Rs.
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375 crores would be brought into the JV Company as
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
867
[M.Y. EQBAL, J.]
investment and loans and projects worth thousands of A
crores would be commenced.
The complainant states that, as per the joint venture
agreement dated 30.1.2004, Mis. Odyssey America
Reinsurance Corporation, the 7th accused herein which is
a subsidiary company of the Fair Fax Group and the
Accused No. 2 had agreed to extend a Corporate
Guarantee in favour of the lender for arranging· the
syndicated credit facility of US$ 65 Million (approximately
B
Rs. 300 crores) to the JV company. In confirmatio~ ofthe c
said fact the Accused No. 2, 3 c;ind 4 and 8 while signing
the JV agreement, cleverly included in-the same, a model
draft of the Irrevocable Corporate Guarantee Agreement
to be furnished by the 7th accused in favour of the lender
and even signed the said draft so as to make believe the
0
complainant in no uncertain terms about their intention to
honouf"their commitments. Thus, the joint venture business
could commence only upon the 1st accused arranging for
the syndicated credit facility of US$ 65 million, on the
strength of the Corporate Guarantee to be given by the 7th
accused.
xxx
xxx
xxx
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F
..... On the one hand the accused had miserably failed to
organize the funds even after the complainant had parted
with the ownership rights over valuable properties held by
him through VML and CPL and on the other hand they
defrauded ·and cheated the complainant by not organizing
the promised funds, upon the receipt of which alone, the
complainant woul.d be able to commence the projects
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worth thousand of crores .
... , From the above, it is therefore evident that the
consideration of entering into the JV agreement was the
promise and assurance that the accused 2 to 6 shall also
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[2013] 17 S.C.R.
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arrange for a loan of Rs. 300 crores in addition to the share
investment of Rs. 75 crores as stipulated under the JV.
agreement.
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Thus the accused have induced the comp1ainant to
enter into an agreement under the guise of a joint venture
agreement which was conceived in pursuance of a
criminal conspiracy with an intention of cheating. In addition
to the above, the accused 4 and 8 have also obtained a
gratification, amounting to approximately Rs. 37.40 er.
from the complainant, by getting the shares of the
conipanie!! allotted to them to a discounted rate, as
consideration for facilitating the joint venture and for
arranging the term loan thereby making wrongful gains to
themselves while causing wrongful loss to the complainant.
Moreover after receiving the said consideration in the form
of shares at a discounted value, the accused 4 and 8 have
now joined hands with M/s ORE Holdings Ltd. for gaining
an illegal majority in the JV company and have thus
defrauded the complainant of several crorf?S of rupees.
Therefore, the accused Nos. 1 to 7 have committed
various offences under section 120-B, read with sections
· 409, 420, 405, 471 and 389. among other provisions of
the Indian Penal Code, which amount to the offences of
. Criminal Conspiracy, Cheating, Criminal Breach of Trust,
making False Representation and Promises and Extortion
by putting the fear of accusation of offences against the
complainant among others, and have induced the
complainant to part with the shares of his company and
the control over the valuable immovable properties owned
by him through VML and CPL on the strength of the false
promises ani;:l assurances made by the accused."
7. Since the Economic Offences Wing refused to take any
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
869
[M.Y. EQBAL, J.]
action, the Respondent No.1 filed Criminal O.P. No. 9791 of
A
2006 before the High Court seeking direction to EOW to take
action, which petition was later withdrawn. Thereafter, he filed
a similar private complaint (Criminal M.P. No. 6096 of 2006)
for offences under Sections 406, 406 r/w 109, 420, 467 r/w 420
IPC before the Judicial Magistrate, Perundurai which was
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dismissed on 13th March, 2007 holding the same to wreak
vengeance and observing as under:
"7. On a careful consideration of the aforesaid complaint,
depositions, and Exhibits it is unbelievable to state that the
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respondents have cheated and committed breach of trust,
the complainant who is a former member of the Legislative
assembly, a former member of the parliament and running
business houses which have properties worth of the more
than 100 crores of Rupees. Because, no documents were
filed to show that the shares of Rs. 10/- face value of the
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Cheran Properties were sold in the market for Rs.60/- and
the shares of Rs.10/- face value of the Vasanthi Mills were
sold at Rs.105/-. It is not believable that the shares of Rs.
10/- face value was transferred to the same value of.
Nandakumar and paid about Rs. 22 crores as
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commission, as the complainant himself has admitted in
the complaint that some of the respondents and ihe
complainant have started a Joint Venture Company. The
memorandum of understanding/Joint venture agreement is
not submitted for the perusal of the court. In the
f
memorandum of understanding the details to the
investment of each of the parties, the shares allotted to
each of lhem, the relief to the parties when the conditions
are violated, and the court which has jurisdiction to
entertain such matter. The failure to file the memorandum
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of understanding in the court, and tlie failure to give the
reaspns for not filing the same is not acceptable.
8. It is clearly seen from the deposition of the petitioner
and the complaint that the respondents have arranged for ab·out
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· [2013) 17 S.C.R
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17 million American Dollars through a firm Odyssey. It is also
seen that the said sum is with the Cheran Holdings Private
Limited and the affidavit filed in the Hon'ble High Court at Delhi
confirms the same, while examining details, it is seen that a
sum of 17 million American Dollars have come to Cheran
B
Holdings Limited in which the complainant is a share holder.
Hence the petitioner complainant might not have sustained any
loss. There is no explanation in the complaint as to whether
after the receipt of 17 million American Dollars, it was invested
in the business. In the first meeting of the petitioner with the
c respondents, it was agreed that foreign investments are to be
made accordingly the same has been done. It is seen from the
deposition of the petitioner that 17 million American Dollars, it
is not believable that the respondents have cheated the
petitioner/complainant.
D
9. It is seen that on orders of Hon'ble High Court, Delhi in
C.P. No.292/2004, a sum of Rs. 78 crores has to be dep~ited
and Cheran Enterprises and Cheran Holdings Limited have' not
deposited in the Bank Accounts. The reasons adduced by the
. complainant was hold an important post in the Cheran Group
E
of Comp!Jnies for not depositing the sum into the Bank, do not
seem to be accepted. Moreover, Chandran Ratnaswami has
obtained powers from the petitioner for the conduct of the case
and as such, he has to face the consequences of the orders
of the court. On that aspect also, the petition would sustain.
F
xxx
xxx
xxx
12. The petitioner on 23.9.2005 sent an e-mail to the State
Bank of India to give Bank guarantee to BSNL, that when he
approached the Bank, he came to know that Chandra•
G Ratnaswami and Athappan Ramaswamy have sent
independent letters to the Bank requiring that the request of the
petitioner should not be accepted. It cannot be considered by
the Court as a criminal act. It can be considered as an act of
safe guard in the trade. The proceedings between the petitioner ,
H and respondents are of civil nature relating to contract Act and
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
871
[M.Y. EQBAL, J.]
Company Law. If the conditions therefore are violated, the
A
petitioner has to seek remedy under Contract Act or Company
Law. Instead the filing of this case terming the respondents as
accused the court considers that it cannot be accepted .
. 13. On world level, the foreign investments made! in each
country enhance the economy and it is a day to day commercial
activities. The petitioner and the respondents and some others,
with an intention to establish a joint venture company having
done so, have to take steps for the developmental activities,
B
and one party should not, with intention to wreak vengeance
C
against the other should not, term them as accused and
approach the court, and this court cannot accept it. Because,
the petitioner has not handed over any property to the
respondents under section 406 IPC. Hence there is no
ingredient for breach of trust. In the circumstances that the
respondents have arranged for 17 million American Dollars, that
D
·-Chandran Ratnaswamy himself has agreed to the Rs.78 crores
case in the Hon'ble High Court, Delhi that the petitioner has not
mentioned in the complaint that date, time and place where he
was cheated, that like wise, the Respondent cheated the·
petitioner and thereby he sustained loss, and that there are no
E
ingredients for sections 420, 467 read with 420 are found in
the complaint or depositions. Therefore. no prima facie case
to show that the respondents with criminal intention indulged
in criminal activities is found in the complaint. or depositions
or documents.
14. Hence, for the reasons as aforesaid, this petition is
dismissed under Section 203 of Cr. P.C."
F
8. Respondent No. 1 then filed another similar complaint
before Judicial Magistrate, Kangayam suppressing the
G
fact of filing earlier complaints and the order dated 13th
March, 2007 passed by the Magistrate Penmdurai,
whereupon the Crime Branch, Erode was directed to
register an FIR. Accordingly, FIR No. 7 of 2007 was
registered by Police Station DCB, Erode under Sections
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[2013) 17 S.C.R.
120-B, 420, 169, 408, 409 IPC, but the case was said to
have been closed on 20th May, 2009 and the police filed
the Closure Report. Meanwhile, Criminal O.P. Nos. 12695
and 19384 of 2007 had been filed for quashing the FIR
by the persons shown as accused in the said FIR, in which
the High Court vide order dated 8th February, 2010
frowned upon the conduct of respondent No. 1 in the
following terms:
"3. It is brought to the notice of this court by the learned
Senior Counsel Mr. Habibullah Basha, appearing for the
accused/petitioners 1 to 3 in Crl.O.P. No.12695 that the
"P facto complainant, on the very same allegations
preferred a complaint in C.C. No.1096 of 2006 on the file
of the learned District Munsif-cum-Judicial Magistrate
Court at Perundurai and the said court was pleasQ~ to
pass an order of dismissal under Section 203 Cr.P.C. It
is impressed upon this court that such dismissal came
about after consideration of the complaint and the
statement of the witnesses and on finding no ground to
proceed thereon.
~ ,-:,ough in view of the submission made by the learned
Governmeilt lldvocate (Crl.side) nothing survives for
consideration in the matter, this Court would frown upon
the conduct of the defacto complainant in indulging in
repeated harassment of the petitioners. The criminal
original petitions shall stand closed. Consequently,
connected miscellaneous petitions are closed."
9. The respondent then preferred Special Leave Petition
•n the Supreme Court being SLP (Crl.) No. 9853 of 2010
against the order dated 8th February, 2010, which was
ois.,·•~sed by this Court on 22nd November, 2010 with
liberty to pursue protest petition, if any, said to be pending
on the file of the Judicial Magistrate, Kangayem. It is
alleged that no protest petition was pending on that day.
CHANDRAN RATNASWAMI v. K.C. PALANISAMY
873
[M.Y. EQBAL, J.]
1 O. Though in different context, respondent No.1, K.C.
Palanisamy, filed three writ petitions against the State of
Tdmil Nadu, Superintendent of Police, Economic Offences
Wing, Chennai, Director General of Police, State of Tamil
Nadu, Union of India, Central Bureau of Investigation and
Reserve Bank of India, in which respondent No.1 prayed
A
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for issuance of writ of mandamus directing the
respondents in writ petitions for investigation as also for
transfer of investigation and FIR making allegations against
another Company, DAIL. In the said writ petitions, the
contention of the writ petitioner was that he was the c
resident of Coimbatore and former Member of Legislative
Assembly of the State of Tamil Nadu and Managing
Director of the Company viz. CEPL. The said Company
was formed for the purpose of sharing a Joint Venture
between the CG Holdings Private Limited, ORE Holdings
Limited, Mauritius and one N. Athappan. As part of the
Joint Venture business CEPL looked for acquiring a
Telecom Company called DAIL which was a Delhi based
Company involved in the business of International Long
Distance Telephony Services and Internet Services. In
those writ petitions, a common counter affidavit was filed
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by the respondents refuting all the averments made in the
three writ petitions and stated that more than nine cases
were pending against the respondent No.1, writ petitioner.
In the order dated 19th October, 2011 passed by the
Madras High Court in those three writ petitions, the
numbers of cases pending against the writ petitioner were
mentioned in para 19 of the order, extracted hereunder:
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"19. The cases pending against the petitioner in various
provisions of IPC including Section 420 IPC, there were
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as many as 9 cases in Coimbatore alone. They are as
follows:-
"a)
Coimbatore City Crime Branch
Cr. No.37/99 u/s. 420 IPC.
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(2013) 17 S.C.R.
A
b)
Coimbatore City Crime Branch
Cr. No.17/2000 u/s. 420 IPC.
c)
Coimbatore City Crime Branch
Cr. No.62/2000 u/s. 420 IPC.
B
d)
Coimbatore City Crime Branch
Cr. No.18/2001 Li/s. 420 IPC.
e)
Coimbatore City Crime Branch
c
Cr. No.25/2001 u/s. 420 IPC.
f)
Coimbatore City Crime Branch
Cr. No.29/2001 u/s. 384 IPC.
g)
Coimbatore City Crime Branch
D
Cr. No.20/2002 u/s. 467, 468,471
472 and 477(A), IPC.
fl)
Coimbatore Economic Offences Wing
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Cr. No.03/2001 u/s. 408 IPC.
i)
Coimbatore City Crime Branch
Cr. No.26/2003 u/s.406 IPC."
11. In para 20 of the order dated 19th October, 2011, the
F
Court observed that the modus operandi of the writ petitioner
was to defraud a person or entity and thereafter approach the
Courts with multiple petitions in order to distract attention from
his own misdeeds.
12. The High Court dismissing all the afore-mentioned
G three writ petitions observed as under:-
"28. However, this Court is not inclined to accept the
request made by the petitioner.