Madhya Pradesh High Court directs CBI to probe PACL
and Other Chit Fund scheme
1
HIGH COURT OF MADHYA PRADESH,
BENCH AT GWALIOR.
WRIT PETITION No. 3332 of 2010
(PIL).
Dharmvir Singh and another.
vs.
Union of India and others.
---------------------------------------------------------------------------------------------
DB : HON'BLE SHRI S.K.GANGELE
&
HON'BLE SHRI SHEEL NAGU,JJ.
______________________________________________________________
Shri Prashant Sharma, Advocate
for the petitioners.
Shri Ankur Mody, Assistant
Solicitor General of India for respondent
No. 1
Shri M.P.S.Raghuvanshi,
Additional Advocate General for
respondents/State.
Shri Raju Sharma, Advocate, for
the intervener.
Shri R.N. Singh, Sr. Advocate,
with Shri D.P.S. Bhadoriya, Advocate,
for intervenor, Pariwar Dairy
& Allied Ltd.
...................................................................................................
Whether approved for Reporting :
...................................................................................................
O R D E R
(Passed on this 05th day of July
2011)
Per Hon'ble S.K.Gangele,J :
pers
India Ltd., First Floor,
Rama Tower, Shinde Ki
Chhawai1. Petitioners, who are
citizens of Gwalior city, have filed this Public Interest Litigation
mentioning the facts that thousands of residents of the district have been
fraudulently cheated by various companies and their hard earned money
has been misappropriated. The companies have been growing rapidly in the
district and they have been receiving deposits from the citizens of the
area in the name of various schemes. However, the real purpose of the
Companies is to receive deposits from the citizens and they promised
the persons to give them higher return of interest from 15 % to 20 %.
In order to carry out the afore said activities the 2 companies have
adopted various fictitious methods in the name of selling and purchasing of
cattle, selling and purchasing of plots and selling and purchasing of
other goods. However, in the books of the companies
fictitious entries have been made and in the name of sale
and purchase by way of sham transactions and the companies have been
receiving deposits from the citizens with a promise to give regular
interest or returns on the deposits.
In doing so the companies have
not taken any permission from the Reserve Bank of India and also no
registration is made under the provisions of the Companies Act and
the Banking Regulation Act, 1949 and also the provisions of
the Madhya Pradesh Nikshepakon Ka Hiton Ka Sanrakshan Adhiniyam 2000,
hereafter referred to as the 'Act of 2000' have not been complied with.
This Court vide order dated 17.03.2011 issued certain directions and directed
the State authorities to file specific affidavit that what action
has been taken by them in this regard.
2. District Magistrate, Gwalior,
vide order dated 4th May 2011 passed orders under Section 144 Cr. P.C. In
the aforesaid order the District Magistrate has mentioned that he had
received complaints from various investors against the companies and
directed the related concerned police stations to conduct investigation in
the matter. The Deputy Secretary (Finance) vide letter dated 12.11.2009
also directed to take action against the companies, who have been in
the business of collection of money. The Collector further observed that
in accordance the investigation report received from police department it
has been found that the non-banking finance companies working in the
Gwalior district have not been registered with the Reserve Bank
of India. The companies have also not informed the Competent
Authority under the provisions of the Act of 2000 about their
initiation of business. The companies have also not submitted any
application for registration before the Reserve Bank of India nor the
aforesaid companies have sufficient amount to return the deposits of the
investors. Thereafter, the District Magistrate further observed that
he is satisfied that the companies have played fraud with the public
and they would not be able to return the money which have been collected
by them fraudulently from the public and there would be a law and order
problem in the area. He further mentioned that it is necessary to
take action against the aforesaid companies and ordered to seal the
premises of the companies and also ordered that the following companies be
prohibited from working in the district :-
Sr.No. Address of the Company
Police Station
Circle
1. 27, Mayur Market, Thatipur.
Morar Morar
2. Pramila Plaza,
Thatipur, Gwalior. Morar Morar
3. Garima Kalyan Tower,
Near Basant Talkies, Thatipur. Morar Morar
4. Midland Plaza,
Jhanwar Estate, Morar Morar
5. Shivalaya, Sudamapury,
M.H. Square, Morar. Morar Morar
6. 22, Bhagwan
Colony, Thatipur. Morar Morar
7. Ganga Complex, Mal
Road, Morar. Morar Morar.
8. University Road, Gwalior.
Vishwa Vidyalaya Morar
9. University Road, Gwalior.
Vishwa Vidyalaya Morar
10. Ganesh Plaza, Gole Ka Madir
Gole Ka Mandir Morar
11. 41, Manik VilaslColony,
Near Landmark.Gwalior. Vishwa Vidyalaya Morar
12. Fortune Plaza, Ciity
Centre, Main Road. Vishwa Vidyalaya Morar
13. 11, IDC Plaza, City Centre
Vishwa Vidyalaya Morar
14. 50, Manik Vilas Coloney.
Vishwa Vidyalaya Morar
15. Abhaya Plaza Complex,
Ground Floor, Sharda Vihar, City
Centre. Vishwa Vidyalaya Morar
16. 104, Jiwandeep Apartment.
Gole Ka Mandir Morar
17. 4-A, Gurukrupa
Bhawan, Rameshwar Colony, AGMP Road, Gwalior.
Jhansi Road Jhansi Road.
18. Infront of Gurudwara, Phoolbagh Inderganj Jhansi Road
19. Infront of Bharat
Talkies, Shinde Ki Chhawai,
Gwalior Inderganj Jhansi Road
20. Rajeev Plaza,
Jayendraganj, Gwalior.Inderganja Jhansi Road
21. Pay-In Plaza, Shinde
Ki Chhawai Inderganj Jhansi Road
22. First Floor, Rama
Tower, Shinde Ki Chhawai Inderganj Jhansi Road
23. 3, Manik Vilas Colony,
behind Hotel Landmak. Jhansi Road.Jhasni Road.
24. Gudiguda Ka Naka, Lashkar.
Kampoo Jhansi Road.
25. Lalitpur Colony Kampoo
Jhansi Road.
26. Jinsi Nala No.3, Infront
of Janak Hospital, Laska. Kotwali Lashkar
27. Usha Colony Dabra, office
at Padav. Padav Gwalior
28. Jagannath Chamber,
Hotel Saya. Padav, Gwalior
30. Shivaji Towar, Phoolbag Padav Gwaliorr
31. Shriram Market, Hakur
Baba, Dabra Dabra Dabra 5
32. 50 Manik Vilas Colony
Jhansi Road Jhansi Road
33. 50 Manik Vilas Colony
Jhansi Road Jhansi Road
34. 22-A, Bhagwan Colony,
R.K. Puri,Thatipur. Morar / Thaipur Morar
3. Thereafter, the Collector also
seized various properties of the aforesaid Companies vide order dated
15.06.2011, 28.05.2011, 03.06.2011, 23.06.2011, 06.06.2011, 25.06.2011,
and 01.06.2011. Copies of the orders have been supplied by the State in an
application for furnishing information before this Court.
4. Various companies have
challenged the action of the Collector in various writ petitions before
this Court. Thereafter, this Court passed the following order
on 20.05.2011 in Writ Petition No. 3344/11 :- “9. However, in the
meanwhile, it is directed that Collector shall issue an advertisement in
the newspaper and publish an information about Company and also mention
the fact that the persons, who have deposited any amount with the Company,
may submit their application before the Authority and after receiving
the applications, he can depute any person to investigate the matter
further to the effect that the affected persons have made deposits in the
form of cash with an intention to return the money with interest.
10. After going through the
record, we further observe that a further detailed investigation
is required in the matter. For the aforesaid purpose, the Company may
also be provided the photocopies of the documents, which have been seized
by the Authority, so that, it can also submit a proper representation
and reply to the Investigating Authority.”
5. By the aforesaid order the
Court directed the Collector to issue an advertisement in the
newspapers and publish an information about the Companies and
also mention the fact that the persons who have deposited any amount
with the Company may submit their applications before the Authority and
thereafter a person be deputed to investigate the matter. In pursuance to
this the Collector has initiated action and thereafter as per the
information supplied by the respondents Collector received near
about 12357 applications from various investors. The major number of
applications received by the Collector are against Pariwar Dairy &
Allied Ltd., Ganesh Plaza, Gole Ka Mandir. Against this company near about
11,200 persons have submitted their applications to the Collector, details
of the applications are as under :-
Sr. No. Name & Address
of the Company Police Station No.
of applications Amount of policies
(in
Rupees) Amount payable after maturity
1. Samraddhi Jeewan Foods India Ltd. Pramila Plaza, Thatipur,
Gwalior Morar 16 435200/- 664070/-
2. Garima Real
Estate& Allied, Garima Kalayan Towar, Near Basant Talkies,
Thatipur Morar 03 -- --
3. Saksham Dairy &
Allied Ltd. Midland Plaza, Jhanwa Estate, Morar 02
50000 30000 - 63300
4. Royal Son Marketing
and Insurance Services,22, Bhagwan Colony, Thatipur. Morar
01 7000 --
5. SkylarkLand
Developers and Infrastructure India Ltd. Ganga Complex,
Mal Road, Morar Morar 01 6600 9261
6. Jeewan Surabhi &
Allied, 14 Pritam Vihar, University
Road. Vishwa Vidyalaya 20 519800 799500
7. Pariwar Dairy &
Allied Ltd.,Ganesh Plaza, Gole Ka
Mandir. Gole Ka Madir 11200 244704298 402055746
8. JSV Developers India
Ltd. 41 Manik Vilas Colony, Near Landmak,
Gwalior. Vishwa vidyalaya 10 289000 4380007
9. KMJ Land Developers India
Ltd. Vishwa Vidyalaya 12 398500 523000
10. Son India Real Estate, 11, IDC Plaza, City
Centre Vishwa Vidyalaya 135 3637100 6271150
11. BPN Real Estate
& Allied , Abhaya Plaza Complex, Ground Floor, Sharda Vihar
City Cetre. Vishwa Vidyalaya 04 138000 207500
12. Anmol Sahara
Marketing India Ltd 4-A, Gurukrupa Bhawan, Rameshwar Colony,
AGMP Road, Gwlior Jhasi Road 16 330000 518000
13. KBCL Pvt Ltd. Infront
of Gurudwara, Phoolbag Inderganj 03 90000 132000
14. Kim Future Vision, (Kim Infrastructure
& Developers Ltd.) Rajiv Plaza, Jayendraganj, Gwalior. Inderganj 122
3593523 4703350
15. PACL India Ltd.
Pay-In Plaza, Shinde Ki Chhawai. Inderganj 662 18592421 30819769
16. MKD Land
Develop Inderganj 20 56
17. Kamal India Real
Estate & Allied Latd. 3, Manik Vilas Colony, Behind Hotel Landmak. Jhansi Road 01
60000
18. RBN Ltd. Lalitpur
Colony, Lalitpur Colony Kampu 11 142800 397570
19. Sai Prasad Foods
India Ltd., Jinsi Nala No.3, Infront of Janak
Hospital, Lashkar. Kotwali 54 1174320 1754250
20. Sai Prasad Property
Ltd., Jinsi Nalao. 3,Huzrat Pul Kotwali 24 1125000 2434585
21. GCA Marketing
Ltd., Jagannath Chamber, Hotel Saya. Padav 38 553600 828750
22. Simphony Pharma
& Forest Pvt. Ltd., 20, Vatsalya Chamber, Second Floor, 31
Sneh Nagar, Indore. 01
23. BNP Real Estate 01 60000
100000 8 Total - 12357 276500162 453807701
6. As per the afore quoted
details all the investors have claimed that the companies received
Rs.27,65,00,162/- and they have promised to pay on maturity an amount of Rs.45,38,07,701/-.
The applicants have submitted that they have made deposits and received
certificates from the companies mentioning the date of acceptance of
amount and date of maturity. The Companies have been receiving monthly
amount as a recurring deposits also. The details have been supplied by the
State in the application.
7. Thereafter, the police has
registered criminal cases against the Directors of the Companies under
Sections 420 IPC and Sections 4, 5 and 6 of the Prize Chits &
Money Circulation Scheme (Banning) Act, 1978 and Section 45 (1) of
the Reserve Bank of India Act 1934 and Section 3(1) of the Act of 2000. As
per the report submitted by the District Administration the following
criminal cases have been registered against the Board of Directors and
Officers of the companies at various police stations :
S.No. Name of applicants. PIL No.
Crime No. Police Station.
1. Anmol Sahara 3332/10 224/11 Jhansi Road, Gwalior.
2. H.V.N. Dairy 3332/10 60/11 Inderganj, Gwalior
3. Sukhdev Singh & others. 3332/10 256/11 Inderganj, Gwalior
4. Dilip Jain & others 3332/10 268/11 Morar, Gwalior.
5. Ajay Ku. Mishra & others. 3332/10 161/11
University, Gwalior.
6. Shivram Verma and others.3332/10 153/11 University Gwalior.
7. Vijay Laxmi Kuthait & others 3332/10 152/11
University, Gwalior
8. Sun India Real State & others. 3332/10 155/11
University, Gwalior.
9. Gurdeep Singh & others 3332/10 279/11 Padav, Gwalior.
10. S.L. Rathore & others 3332/10 154/11 University, Gwalior.
11. Rakesh Singh Narwariya 3332/10 255/11 Gola
Ka Mandir, Gwalior,
12. Ajay Singh & others 3332/10 254/11 Inderganj, Gwalior.
13. Dinesh Singh & others 3332/10 255/11 Indergaj, Gwalior.
14. M/s Garima Real Estate. 3332/10 308/11 PS Thatipur,
15. M/s Samidh Jeewan Food Ltd. 3332/10 309/11 PS Thatipur
8. During the course of arguments
learned Additional Advocate General informed the Court that
after investigation it has been found that these companies have also
been operating in various districts of the State and also out side the State.
For example one company, PACL (India) Ltd. has been operating in all over
the country and as per the news report published in 'The Economic Times'
dated 28.06.2011, copy of which has been filed along with
the application, the Company holds deposit of Rs.20,000 crore and it
has been operating in all over the country. Similarly, M/s Pariwar Dairy
& Allied Ltd. has also been operating in other districts of the State
and even there is no mention to the effect that it may be operating out
side the State also. Another company M/s KMJ Land Developers (India) Ltd.
has been operating in near about 200 districts. The
learned Additional Advocate General further submitted that it is
not possible for the District Administration to verify the fact that
these companies have been operating in how many districts. However, from
the documents filed by the Administration and after perusal of the case
diary of the criminal cases, registered against the companies, we
are primarily satisfied that the companies have been
receiving deposits from the investors and in order to bypass
various mandatory provisions of law, they have adopted means and are
involved in some table work to show that they are in the business of sale
and purchase of cattle, sale and purchase of land or sale and purchase of
other materials. In all these writ petitions filed by the companies
against the orders of the Collector, they have denied the fact that they
are receiving deposits from the investors, however, the number of
complaints in only Gwalior district is near about 12000 and as per the
submissions of learned Additional Advocate General the District
Administration has been receiving about 300 complaints per day and the
magnitude of the problem is enormous and the Companies have stated that they
have deposited the money on the promise that they would be paid high
interest or return.
9. After perusal of the complaints and the certificates issued by the
companies, it is clear that primarily the companies have received deposits
with a promise to pay high return on maturity. Looking to the magnitude of
the problem, this Court suggested that the matter may be referred for
investigation by Central Bureau of Investigation because in Gwalior
district alone the amount as per the complaints received by the Collector
is near about Rs.30 crore. It may be 100 crore or more than
that because the District Administration has no information that how
many persons have deposited the amount. Looking to the activities of the
companies in various districts and even though out side of the State, it
may be a tip of an iceberg. The leaned Additional Advocate General has
also not opposed the prayer that matter may be referred
for preliminary investigation to the Central Bureau of Investigation
looking to the magnitude of the problem and the complexity of the issue.
10. Section 58-A of the Companies Act, 1956 prescribes that deposits not
to be invited by the companies without issuing an advertisement. The
provisions are as under :- “58.A Deposits no to be invited without
issuing an advertisement.-
(1) The Central
Government may, in consultation with the Reserve Bank of
India, prescribe the limits up to which, the manner in which and the
conditions subject to which deposits may be invited or accepted by a
company either from the public or from the members.
(2) No company shall invite, or
allow any other person to invite or cause to be invited on its
behalf, any deposit unless -- (a) such deposit is invited or is
caused to be invited in accordance with the rules made under subsection (1),
and (b) a advertisement, including therein a statement showing the
financial position of the company, has been issued by the company in such
form and in such manner as may be prescribed.
(3) (a) Every deposit accepted by
a company at any time before the commencement of the
Companies (Amendment) Act 1974, in accordance with the directions
made by the Reserve Bank of India under Chapter IIIB of the Reserve Bank
of India Act, 1934 (2 of1934), shall, unless renewed in accordance
with clause (b), be repaid in accordance with terms of such deposit.
(b) No deposit referred to in
clause (a) shall be renewed by the company after the expiry of the
term thereof unless the deposit is such that it could have been
accepted if the rules made under sub-section (1) were in force at the time
when the deposit was initially accepted by the company.
(c) Where, before the
commencement of the Companies (Amendment) Act, 1974, any deposit
was received by a company in contravention of any direction made
under Chapter IIIB of the Reserve Bank of India Act, 1934 (2 of 1934),
repayment of such deposit shall be made in full on or before the 1st
day of April 1975, and such repayment shall be without prejudice to any
action that may be taken under the Reserve Bank of India Act, 1934 for
the acceptance of such deposit in contravention of such direction.
4. Where any deposit is accepted
by a company after the commencement of the Companies (Amendment) Act,
1974, in contravention of the rules made under sub-section (1), repayment
of such deposit shall be made by the company within thirty days from
the date of acceptance of such deposit or within such further time, not
exceeding thirty days, as the Central government may, on sufficient
cause being shown by the company, allow.”
11. The Appropriate Government in
exercise of powers conferred under Section 58-A read with section 642 of
the Companies Act, 1956 with consultation of Reserve Bank of India
made rules named as “Companies (Acceptance of Deposits) Rules 1975. No
company can accept any deposits from any person without following the
provisions of the aforesaid Rules.
12. State of Madhya Pradesh has
also enacted an Act named as “The Madhya Pradesh Nikshepakon Ke Hiton
Ka Sanrakshan Adhiniyam, 2000”, hereinafter referred to as the 'Act
of 2000'. This Act also prescribes certain provisions in regard to
acceptance of deposits by the Companies. The definition of the word
'Deposit' has been given in Section 2 (b) of the Act of 2000, which is as
under:- “(b) “Deposit” includes and shall be deemed always to have
included any receipt of money or acceptance of any valuable commodity
by any financial establishment to be returned after a specified
period or otherwise, either in cash or any kind or in the form of a
specified service with or without any benefit in the form of
interest, bonus, profit or any other form, but does not include,
- (i) amounts contributed as capital by the parters of a
firm; (ii) amounts received from a scheduled bank or a cooperative
bank or any other banking company as defined in Clause (c) of Section
5 of the Baking Regulation Act, 1949 (10 of 1949); (iii) any
amount received from -- (a) the Industrial Development Bank of India
(IDBI), (b) a State Financial Corporation, (c) any financial
institution specified in or under Section 6-A of the Industrial Development
Bank of India Act, 1964 (18 of 1964); or (d) any other institution
that may be specified by the Government in this behalf.”
13. Section 45 of the Reserve
Bank of India Act, 1934 prescribes provisions in regard to character and
furnishing of credit information. The provision of Section 45-A and
45- B are as under :- “45-A. Definitions .- In this Chapter, unless
the context otherwise requires .-- (a) “banking company” means a
banking company as defined in section 5 of the “Banking Regulation Act, 1949
and includes the State Bank of India [any subsidiary bank as defined in
the State Bank of India (Subsidiary Banks) Act, 1959, any corresponding
new bank constituted by section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970 and any other
financial institution notified by the Central Government in this
behalf.] (b) “borrower” means any person to whom any credit limit has
been sanctioned by any banking company, whether availed of or not, and
includes -- (i) in the case of a company or corporation, its
subsidiaries; (ii) in the case of a Hindu undivided family, any
member thereof or any firm in which such member is a partner; (iii)
in the case of a firm, any partner thereof or any other firm in which such
partner is a partner, and (iv) in the case of an individual, any firm
in which such individual is a partner, (c) “credit information” means
any information relating to -- (I) the amounts and the nature of
loans or advances and other credit facilities granted by a banking
company to any borrower or class of borrowers; (ii) the nature
of security taken from any borrower [or class of borrowers] for
credit facilities [ granted to him or to such class] (iii) the
guarantee furnished by a banking company for any of its customers [ or any
class of its customers] (iv) the means, antecedents, history
of financial transactions and the credit worthiness of any borrower
or class of borrower; (v) any other information which the Bank may
consider to be relevant for the more orderly regulation of credit or
credit policy. “45-B. Power of Bank to collect credit information
.- The Bank may -- (a) Collect, in such manner as it may think fit,
credit information from banking companies; and (b) furnish such
information to any banking company in accordance with the provisions of
section 45-A.”
14. From the aforesaid provisions it is clear that there is an obligation
on the part of the Financial Company to submit information to the Reserve Bank
of India. In all the cases the companies have not complied with the
aforesaid provisions which is clear from the report received by
the Collector and perusal of the case diaries of various
criminal cases registered against the companies.
15. The Constitution Bench of the
Hon'ble Supreme Court in the case of State of West Bengal and others
vs. Committee For Protection of Democratic Rights, West Bengal and
others, reported in (2010) 3 SCC 571, has held as under, in regard to the
powers of the High Court for issuance of a direction in regard to
investigation by Central Bureau of Investigation to investigate a
cognizable offence :- “68. Thus, having examined the rival
contentions in the context of the Constitutional Scheme, we conclude
as follows : (i) The fundamental rights, enshrined in Part
III of the Constitution, are inherent and cannot be extinguished by
any Constitutional or Statutory provision. Any law that abrogates or
abridges such rights would be violative of the basic structure
doctrine. The actual effect and impact of the law on the rights guaranteed
under Part III has to be taken into account in determining whether or
not it destroys the basic structure. (ii) Article 21 of the Constitution
in its broad perspective seeks to protect the persons of their lives
and personal liberties except according to the procedure established by
law. The said Article in its broad application not only takes within
its fold enforcement of the rights of an accused but also the rights of
the victim. The State has a duty to enforce the human rights of a citizen
providing for fair and impartial investigation against any person accused
of commission of a cognizable offence, which may include its own
officers. In certain situations even a witness to the crime may seek for
and shall be granted protection by the State. (iii) In view of the
constitutional scheme and the jurisdiction conferred on this Court under
Article 32 and on the High Courts under Article 226 of the
Constitution the power of judicial review being an integral part of the
basic structure of the Constitution, no Act of Parliament can exclude
or curtail the powers of the Constitutional Courts with regard to
the enforcement of fundamental rights. As a matter of fact, such a
power is essential to give practicable content to the objectives of
the Constitution embodied in Part III and other parts of the
Constitution. Moreover, in a federal Constitution, the distribution of
legislative powers between the Parliament and the State Legislature
involves limitation on legislative powers and, therefore, this requires an
authority other than the Parliament to ascertain whether such
limitations are transgressed. Judicial review acts as the final arbiter
not only to give effect to the distribution of legislative
powers between the Parliament and the State Legislatures, it is also
necessary to show any transgression by each entity. Therefore,
to borrow the words of Lord Steyn, judicial review is justified by
combination of "the principles of separation of powers, rule of law,
the principle of constitutionality and the reach of judicial review".
(iv) If the federal structure is violated by any legislative action,
the Constitution takes care to protect the federal structure by ensuring
that Courts act as guardians and interpreters of the Constitution and
provide remedy under Articles 32 and 226, whenever there is an
attempted violation. In the circumstances, any direction by the
Supreme Court or the High Court in exercise of power under Article 32 or
226 to uphold the Constitution and maintain the rule of law cannot be
termed as violating the federal structure. (v) Restriction on the
Parliament by the Constitution and restriction on the Executive
by the Parliament under an enactment, do not amount to restriction on
the power of the Judiciary under Articles 32 and 226 of
the Constitution. (vi) If in terms of Entry 2 of List II of
The Seventh Schedule on the one hand and Entry 2A and Entry 80 of
List I on the other, an investigation by another agency is
permissible subject to grant of consent by the State concerned, there
is no reason as to why, in an exceptional situation, court would be
precluded from exercising the same power which the Union could
exercise in terms of the provisions of the Statute. In our opinion,
exercise of such power by the constitutional courts would not violate
the doctrine of separation of powers. In fact, if in such a situation
the court fails to grant relief, it would be failing in its constitutional
duty. (vii) When the Special Police Act itself provides that subject
to the consent by the State, the CBI can take up investigation in relation
to the crime which was otherwise within the jurisdiction of the State
Police, the court can also exercise its constitutional power of judicial
review and direct the CBI to take up the investigation within the jurisdiction
of the State. The power of the High Court under Article 226 of the
Constitution cannot be taken away, curtailed or diluted by Section 6
of the Special Police Act. Irrespective of there being any statutory
provision acting as a restriction on the powers of the Courts,
the restriction imposed by Section 6 of the Special Police Act on the
powers of the Union, cannot be read as restriction on the powers of
the Constitutional Courts. Therefore, exercise of power of judicial
review by the High Court, in our opinion, would not amount to
infringement of either the doctrine of separation of power or the
federal structure.
69. In the final analysis, our
answer to the question referred is that a direction by the High Court,
in exercise of its jurisdiction under Article 226 of
the Constitution, to the CBI to investigate a cognizable offence
alleged to have been committed within the territory of a State without the
consent of that State will neither impinge upon the federal structure of
the Constitution nor violate the doctrine of separation of power and
shall be valid in law. Being the protectors of civil liberties of the
citizens, this Court and the High Courts have not only the power and
jurisdiction but also an obligation to protect the fundamental rights, guaranteed
by Part III in general and under Article 21 of the Constitution in
particular, zealously and vigilantly.
70. Before parting with the case,
we deem it necessary to emphasise that despite wide powers conferred
by Articles 32 and 226 of the Constitution, while passing any order,
the Courts must bear in mind certain selfimposed limitations on the
exercise of these Constitutional powers. The very plenitude of the
power under the said Articles requires great caution in its exercise.
In so far as the question of issuing a direction to the CBI to conduct
investigation in a case is concerned, although no inflexible guidelines
can be laid down to decide whether or not such power should
be exercised but time and again it has been reiterated that such an
order is not to be passed as a matter of routine or merely because a party
has levelled some allegations against the local police. This
extra-ordinary power must be exercised sparingly, cautiously and in
exceptional situations where it becomes necessary to
provide credibility and instill confidence in investigations or where
the incident may have national and international ramifications or where
such an order may be necessary for doing complete justice and enforcing
the fundamental rights. Otherwise the CBI would be flooded with a
large number of cases and with limited resources, may find it difficult to
properly investigate even serious cases and in the process lose
its credibility and purpose with unsatisfactory investigations.
71. In Secretary, Minor
Irrigation and Rural Engineering Services, U.P. and Ors. v. Sahngoo
Ram Arya and Anr.31, this Court had said that an order directing an
enquiry by the CBI should be passed only when the High Court, after
considering the material on record, comes to a conclusion that such
material does disclose a prima facie case calling for an
investigation by the CBI or any other similar agency. We
respectfully concur with these observations.” The Hon'ble
Supreme Court further in the case of Babu Bhai Jamnadas Patel vs. State of
Gujrat and others, reported in (2009) 9 SCC 610, has held, as
under, in regard to powers of the High Court of judicial review
and supervision of certain class of cases to ensure that rights
of the citizens are fully protected :- “46. The courts, and in
particular the High Courts and the Supreme court, are the sentinels of
justice and have been vested with extraordinary powers of judicial
review and supervision to ensure that the rights of the citizens are duly
protected. The courts have to maintain a constant vigil against the
inaction of the authorities in discharging their duties
and obligations in the interest of the citizens for whom they exist.
This Court, as also the High Courts, have had to issue appropriate writs
and directions from time to time to ensure that the authorities
performed at least such duties as they were required to perform under
the various statutes and orders passed by the administration. As for
example, in the instant case, the High Court had to repeatedly intervene
and pass orders to ensure that the investigation was being
conducted diligently. Periodical status reports were required in that
regard. In fact, the High Court had to direct the Additional Public
Prosecutor to ask the investigating officer to incorporate the details of
the action taken by him from the date of receipt of the letter (sic
order) dated 5.12.2008. There is little doubt that only after the
High Court began monitoring the progress of the investigation that the
investigating authorities began to deal with the matter with some amount
of seriousness.”
17. The Hon'ble Supreme Court
further in the case of Secretary, Minor Irrigation & Rural Engineering
Services, U.P. and others vs. Sahngoo Ram Arya and another, reported
(2002) 5 SCC 521, has held, as under, in regard to circumstances under
which the High Court can direct an enquiry by the Central Bureau of
Investigation :- “5. While none can dispute the power of the
High Court under Article 226 to direct an inquiry by the CBI, the
said power can be exercised only in cases where there is sufficient
material to come to a prima facie conclusion that there is a need for such
inquiry. It is not sufficient to have such material in the pleadings.
On the contrary, there is a need for the High Court on consideration of
such pleadings to come to the conclusion that the material before it
is sufficient to direct such an inquiry by the CBI. This is a
requirement which is clearly deducible from the judgment of this Court in
the case of Common Cause, (1999) 6 SCC 667. This Court in the said
judgment at paragraph 174 of the report has held thus: (SCC p 750,
para 174) "174. The other direction, namely, the direction to
CBI to investigate "any other offence" is wholly erroneous and
cannot be sustained. Obviously, direction for investigation can be given only
if an offence is, prima facie, found to have been committed or a
person's involvement is prima facie established, but a direction to CBI to
investigate whether any person has committed an offence or not
cannot be legally given. Such a direction would be contrary to the concept
and philosophy of "LIFE" and "LIBERTY"
guaranteed to a person under Article 21 of the Constitution. This
direction is in complete negation of various decisions of this Court in
which the concept of "LIFE" has been explained in a manner which
has infused "LIFE" into the letters of Article 21".
It is seen from the above decision of this Court that the right to
life under Article 21 includes the right of a person to live without being
hounded by the Police or the CBI to find out whether he has committed
any offence or is living as a law-abiding citizen. Therefore, it is clear
that a decision to direct an inquiry by the CBI against a person can only
be done if the High Court after considering the material on record
comes to a conclusion that such material does disclose a prima facie case
calling for an investigation by the CBI or any other similar
agency, and the same cannot be done as a matter of routine or merely
because a party makes some such allegations. In the instant case, we see
that the High Court without coming to a definite conclusion
that there is a prima facie case established to direct
an inquiry has proceeded on the basis of 'ifs' and 'buts' and thought
it appropriate that the inquiry should be made by the CBI. With respect,
we think that this is not what is required by the law as laid down by
this Court in the case of Common Cause (supra).”
18. The Constitution Bench of the
Hon'ble Supreme Court in its earlier judgment has specifically observed
that the High Court has to keep in mind the directions issued by
this Court in Secretary, Minor Irrigation & Rural Engineering
Services,U.P. and others vs. Sahngoo Ram Arya and another (supra) in the
event of ordering investigation by Central Bureau of Investigation.
19. After considering the above
principle of law laid down by the Hon'ble Supreme Court, we have to
consider the facts of the case and the question that whether enquiry
by the Central Bureau of Investigation can be ordered or not at all ?
It is also a fact as contended by the leaned Additional Advocate General
that the State has not opposed the enquiry by the Central Bureau of
Investigation. Contrary to this, the learned Additional Advocate General
has contended that looking to the magnitude of the issue that certain
companies are operating in various States and districts, it would be
proper to order for CBI enquiry because a District Magistrate or the
police of various districts in the State are not in a position to conduct
the investigation. We have perused the documents supplied along with
the application for furnishing information and found that the companies
have accepted the deposits from the investors and they have assured the
depositors higher interest / return shall be paid to them and certificates
have also been issued to the depositors and after order of this Court
near about 12000 depositors have made complaints to the Collector that
actually they have made deposits with the companies. We have also perused
the newspaper report published in 'The Economic Times' dated 28.06.2011.
We are of the opinion, that the information collected by the District
Administration, Gwalior is a tip of the iceberg because the District
Administration is not in a position to collect the information from other
centers or areas of the operation of the companies. If version of the
District Administration be accepted then certainly it is a
serious matter because, in our opinion, if such types of activities
be permitted, it would be against the interest of national economy
and banking system and rather it may collapse the banking system also. It
may also harmful to the national economy. We are not making any comments
the effect that whether a case is made out for registration of a
particular offence against the companies, however, we are making only
primary observations in order to order an enquiry by the CBI. We are also
making it clear that we are not ordering to register an FIR or
registration of an offence or offences against the companies, but, we are
simply issuing a direction looking to the complexity of the issue to
the effect of the action that CBI shall enquire into the matter.
This order would confine only in
regard to the companies which have been operating out side of the State.
The agency is at liberty to come out on a conclusion that whether the
companies have been doing their business in accordance with law or the
activities of the companies amounts to commission of offence. This would
be the sole discretion of the Investigating Agency. We further observe that
Investigating Agency shall not be influenced by any observation or
observations made in this order or the investigation conducted by the
District Administration or local police authorities, because the actions
are under challenge before the Courts. We further observe that
our observations be not read against any company where the matter is
sub-judice before the Court. As per the news item published in 'The
Economic Times' dated 28.06.2011, the dispute is pending before Hon'ble
the Supreme Court against P.A.C.L. (India) Ltd. In the aforesaid news item
the newspaper has reported as under :- “From his office and 279 more
across India, PACL runs an operation that the Securities and
Exchange Board of India (Sebi) deems illegal because it considers it
a collective investment scheme in the garb of a real estate company. But
the final word has not been said yet about what kind of an animal
PACL actually is. This dispute will be settled by the Supreme Court,
where the case has laid for eight years.”
20. Learned Senior Counsel, Mr.
R.N. Singh, appearing on behalf of intervenor, Pariwar Dairy & Allied Ltd.
has contended that it is obligatory on part of the Court to hear the
petitioners and affected persons before passing any order in regard to
C.B.I. Investigation. In our opinion, the aforesaid argument could not be
accepted because we have not directed the investigating agency to register
any offence against any company. We have simply directed
the investigating agency to submit a preliminary investigation report
to this Court in order to facilitate the Court for further action in the
matter. It is well settled principle of law that a person against whom an
investigation is pending for required has no right of pre-hearing because
he may be innocent or may be guilty. Same principle could be
applied in this case also because we have not ordered registration of
offence against any company. We have simply ordered investigation in the
matter looking to magnitude of the problem and the complexity of issues
involved in the matter. We further observe that the observations made
in this order shall not be read or affect the adjudication
of criminal cases which are pending before various criminal courts.
We further observe that we have not expressed any opinion about the order
of the Collector to issue orders under Section 144 Cr.P.C. or about the
merits of the order issued by the Collector. We further observe that we
have not expressed any opinion about the power of the Collector in
regard to seizure of the property of the companies or merits of the
seizures. Because, it can only be adjudicated after hearing the affected
companies or the persons in appropriate proceedings. This order shall also
not affect the investigation conducted by police administration of
district Gwalior or any other district.
21. By this order looking to the
magnitude of the problem and the fact that District Administration and
Police Authorities have no capacity to investigate it properly,
we deem it fit in the interest of justice and in the interest of thousands
of citizens and in the interest of national economy that CBI be directed
to conduct a primary investigation about activities of the companies
mentioned in para 2 at page 3 of this order, having operation out side
of the State. The investigating authority be at liberty to reach its
own conclusions. A copy of this order be sent to the Director of CBI with
a request to take appropriate action in the matter and inform the Court
about the action taken within a period of three months.
Ordered accordingly.
(S.K.Gangele)
(Sheel Nagu)
Judge
Judge
05/07/2011
05/07/2011
