S.K. Goel Vs State of Jharkhand (Jharkhand High Court)
Held that criminal proceedings cannot continue against the directors against whom there is no direct allegations of mala fide and importantly the company is not made an accused.
Facts-
The FIR was lodged by the informant alleging therein that the informant and his wife opened two Demat Trading Accounts through franchisee agents in M/s Bonanza Portfolio Ltd., whose partners/ proprietors are S.K. Goyal, S.P. Goyal, V.K. Agarwal, Shiv Kumar Goyal, and Narendra Singh. The informant used to invest most of my money in Yes Bank Shares’ future and delivery stock. There were two lots each (total no. 8800*4=35200). Bonanza Portfolio Limited sold the shares without giving information to the franchise broker, thereby, committing a breach of trust at the historical lowest price of Rs. 4.95 even though, on that very day, there was a credit balance of Rs. 5,43,150.46.
In that situation, Bonanza company could have sold only those shares whose value equaled the short amount. However, instead of doing that, the company from its office in Delhi sold out all the shares from the informant’s account and from the account of his wife, even when the trading work was done by a local broker. But neither the local broker was informed nor the informant was informed of the difference margin.
On March 6, 2020, mighty share brokers, with the help of operators, caused the fall of Yes Bank shares by 85% for a few seconds, and sold off all shares of both accounts for making wrongful gains. Due to this act of the company, there is less than Rs. 41,78,307.67 in both the accounts. The informant emailed the company but no reply was sent from the company’s end. The informant claimed that the five partners of Bonanza Portfolio, S.K. Goyal, S.P. Goyal, V.K. Agarwal, Shiv Kumar Goyal, and Narendra Singh, under a conspiracy, committed fraud, cheating, and breach of trust by selling all shares of Yes Bank.
Conclusion-
Looking into the FIR, it is crystal clear that the company is not made an accused and the petitioner Nos. 1 to 4 are the Directors of the company and there is no direct allegation or any whisper against the Directors of mala fide. Law is well settled that if a wrong has been done by a company, the representative of the wrong doer can be proceeded with, where the company is made a party, which is lacking in the case in hand. The entire allegation and the mechanism of SEBI with regard to such dispute suggest that this case is civil in nature.
There is no doubt that criminal proceedings and civil proceedings can go on simultaneously if there are allegations of criminality and it is proved both the cases can go simultaneously, however, it is well settled that if the criminality is not made out, the continuation of criminal case will amount to an abuse of the process of law.
FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT
14/ 12.07.2022 Heard Mr. M.S. Mittal, learned senior counsel along with Mr. Salona Mittal, for the petitioners, Mr. Ashish Kumar, A.C. to G.A.-II, for the State and Mr. Shailesh, learned counsel for the O.P. No. 2.
2. This petition has been filed for quashing of the FIR as well as the entire criminal proceeding, arising out of an FIR, in connection with Dhanbad P.S. Case No. 136 of 2020, registered under Sections 420 / 406 / 34 / 120-B of the Indian Penal Code, pending in the court of learned Chief Judicial Magistrate, Dhanbad.
3. The FIR was lodged by the informant alleging therein that the informant and his wife opened two Demat Trading Accounts through franchisee agent Jitendra Agarwalla, Kirana Patti, Jharia in M/s Bonanza Portfolio Ltd., Regd. Office-4353-4C, Madan Mohan Street, Ansari Road, Drayaganj, New Delhi, whose partners / proprietors are S.K.Goyal, S.P. Goyal, V.K. Agarwal, Shiv Kumar Goyal, Narendra Singh. My client ID is R14438 and my wife Kavita Keshri’s client ID is R14418. My wife deposited a sum of Rs. 16,11,500/- between 05.06.2018 to 04.03.2020 in her account and I deposited a sum of Rs. 26,87,999/- in my account from 30.01.2019 to 04.03.2020 for investing in shares. I used to invest most of my money in Yes Bank Shares’ Future and delivery stock. There was to lots each (total no. 8800×4=35200) in client ID- R14418 and R14438 in future on 06.03.2020. Bonanza Portfolio Limited sold the said shares without giving information to the franchise broker, thereby, committing breach of trust at the historical lowest price of Rs. 4.95 even through, on that very day, there was credit balance of Rs. 5,43,150.46. In that situation Bonanza company could have sold only those shares whose value equaled to the short amount but instead of doing that the company from its office at Delhi sold out all shares from my account and from the account of my wife even when the trading work was done by local broker Jitendra Agarwal (who performs the job of share-purchase). But neither the local broker was informed, nor I was informed of difference margin. On 06.03.2020 mighty share brokers with help of operators cause fall of Yes Bank shares by 85% for few seconds, and sold off all shares (35200 in number) of both accounts for making wrongful gains. Due to this act of the company, there is less of Rs. 41,78,307.67 in both the accounts. I mailed to the company in this connection on 11th March and 12th March. But no reply was sent from Company’s end. It is my claim that the five partners of Bonanza Portfolio S.K. Goyal, S.P. Goyal, V.K. Agarwal, Shiv Kumar Goyal, Narendra Singh under a conspiracy committed fraud and cheating and breach of trust by selling all shares of Yes Bank of my account and my wife’s account.
4. Mr. M.S. Mittal, learned senior counsel appearing for the petitioners submits that the petitioner Nos. 1 to 4 are the Directors of the Company namely M/s Bonanza Portfolio Ltd., a Company incorporated under the Companies Act, 1956, having its registered office at 4553/4C, Madan Mohan Street, Ansari Road, Darya Ganj, New Delhi. He submits that the said company is a registered Stock Broker with Securities and Exchange Board of India (SEBI) and a Trading Member of National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange of India (BSE) and providing stock broking services to its Clients all over India. He further submits that the accused No. 5 in the FIR, Narendra Singh was an employee of the company and has left employment of the company on 30.06.2020. He further submits that the company has not been made an accused in the FIR and there are no specific allegations against the Directors. He also submits that there are almost 650 employees working all over India in the aforesaid company.
5. Learned senior counsel has elaborated his arguments by way of submitting that in the FIR it has been mentioned that two lots of Yes Bank Futures, had been bought by the O.P. No. 2 and his wife on a future contract through M/s Bonanza Portfolio Ltd. were allegedly sold by the accused at a price of Rs. 4.95 per share, thereby causing a loss of nearly Rs. 41 lacs to the informant and his wife. By way of placing further paragraphs of the FIR, he submits that there is no allegation against the petitioners and the entire story is concocted one. He further submits that the O.P. No. 2 voluntarily opened his trading account with the trading member M/s Bonanza Portfolio Ltd. and had opened a Demat Trading Account, vide Client ID No. R14438, for which he had signed / executed a Member Client Agreement dated 19.01.2019, which stipulates the certain conditions of trade. He further submits that another Demat Trading Account with M/s Bonanza Portfolio Ltd., vide Client ID No. R14418 belonging to his wife Kavita Keshri was opened and she has also signed the Member Client Agreement. He further submits that after opening the Trading Account, the informant was provided to Back office’s Information / Data (Online Portal) of the O.P. No. 2, and for the same, the informant was provided with Log-in-ID and Password through the Welcome letter. He further submits that the informant was regularly accessing his account on online portal by using his Log-in ID and Password, as provided by the company. He further submits that O.P. No. 2 and his wife have created their purchase positions of Yes Bank Future in their respective Codes on 19.02.2020, and details thereof are given as under:-
