Kanumuru Indira Priyadarshini Vs e Superintendent of Police (Madras High Court)
The Madras High Court considered petitions seeking quashing of the FIR registered in Crime No. RCBD1/2021/E/0002 for offences under Sections 120-B read with Sections 420, 467, 468 and 471 of the Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. The petitioners, arrayed as Accused Nos. 2 to 8, had been implicated in their capacity as Directors of M/s. Ind Barath Power Gencom Limited, the first accused company.
According to the prosecution, the company faced financial difficulties after TANGEDCO allegedly failed to make payments due to it. Proceedings before the NCLT were followed by an appeal before the NCLAT, where a compromise was recorded. Subsequently, the company’s account was declared a Non-Performing Asset and insolvency proceedings were initiated. A forensic audit conducted by M/s. BDO India LLP covering the period from 28.05.2012 to 28.05.2017 allegedly revealed diversion of funds and manipulation of accounts, following which the company’s account was classified as “Fraud” by the State Bank of India’s Fraud Identification Committee, leading to registration of the FIR.
The petitioners contended that A5, A7 and A8 were Independent Directors or former Directors who were not involved in the day-to-day affairs of the company and that there were no specific allegations against them. It was submitted that the company’s financial distress arose due to non-payment of dues by purchasers of electricity and that proceedings under the Insolvency and Bankruptcy Code were initiated thereafter. The petitioners further submitted that the company’s fraud classification was subsequently withdrawn after issuance of a Standard Operating Procedure and compliance with principles of natural justice. They relied on the subsequent proceedings before the Fraud Identification Committee, which exonerated A5 and A7 as Independent Directors and A8 on the ground that he had resigned before the period to which the allegations related. They argued that, since the FIR was based on the forensic audit report and fraud classification, the withdrawal of the fraud classification and their exoneration removed the basis for continuation of the criminal proceedings. They also contended that there was no dishonest intention attracting Section 420 IPC, no allegations supporting offences under Sections 467, 468 and 471 IPC, and that the Prevention of Corruption Act provisions were inapplicable to them.
