M/S. JERMYN CAPITAL LLC DUBAI versus CENTRAL BUREAU OF INVESTIGATION & ORS. on 9 May 2023

[2023] 6 S.C.R. 565

M/S. JERMYN CAPITAL LLC DUBAI

v.

CENTRAL BUREAU OF INVESTIGATION & ORS.

(Criminal Appeal No. 1434 of 2023)

MAY 09, 2023

[KRISHNA MURARI AND SANJAY KUMAR, JJ.]

Code of Criminal Procedure, 1973 – s.102 – Freeze ordersand bank guarantee in furtherance there of were imposed againstthe appellant company on grounds of necessity of investigation ofan alleged crime initiated against one ‘D’ allegedly connected tothe appellant company – Held: Accused-‘D’ was never an employee/share holder/director or a key managerial person in the appellantcompany – Since ‘D’ was in no way connected to the appellantcompany, the trial faced by him, was in his individual capacity, andnot vicariously on behalf of the appellant company – No criminalproceedings whatsoever are pending against the appellant companypertaining to the dispute at hand – Furthermore, ‘D’ has beendischarged of the alleged offences by the Trial Court – Evenassuming that his discharge is subsequently reversed, and he isconvicted, such a conviction would still have no bearing on theproperties of the appellant company, since it is not alleged to be apart of the crime – The purpose of the freeze order and the bankguarantee in extension of the freeze order, can only be in operationto aid in the investigation against the alleged crime – Since theappellant company is in no way connected to the alleged crime, thefreeze order against its properties is redundant qua the investigation– As the investigation against the appellant company is redundant,hence, the freeze of the appellant company’s assets and the bankguarantee imposed in furtherance thereof also becomes redundant – Therefore, the condition imposed upon the appellant to furnish abank guarantee by the Courts below is not sustainable and is setaside – Orders impugned modified – Appellant permitted to withdrawthe amount along with 4% simple interest.

CRIMINAL APPELLATE JURISDICTION : Criminal AppealNo.1434 of 2023.

From the Judgment and Order dated 16.08.2018 of the High Courtof Gujarat at Ahmedabad in CRLMA No.602 of 2013.

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AMukul Rohatgi, Sr. Adv., Sunil Fernandes, Ms. Nupur Kumar,Divyansh Tiwari, M. Thangathurai, Ms. Priyansha Sharma, Ms. DikshaDadu, Advs. for the Appellant.

Shailesh Madiyal, Rajesh Ranjan, Mukul Singh, PratyushShrivastava, Arvind Kumar Sharma, Rajat Nair, Ms. Swati Ghildiyal,BMs. Devyani Bhat, M/s K J John and Co., Advs. for the Respondents.

The Judgment of the Court was delivered by KRISHNA MURARI, J.

Leave Granted.

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2. The present Appeal is directed against the judgment and finalorder dated 16.08.2018 passed by the High Court of Gujarat atAhmedabad, (hereinafter referred to as “High Court”) in CriminalApplication No. 602 of 2013.

FACTS

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3. The brief facts relevant for the purpose of the present appealare that the appellant company is a Foreign Institutional Investor andwas permitted by Securities and Exchange Board of India (for short‘SEBI’) to buy and sell shares and securities in the Indian Stock Market.However, due to certain litigations, the appellant company had quit tradingEin the Indian markets in 2006. It is important to note that at this point, theappellant company had shares and money in its bank account with ICICIbank.

4. Subsequently, the appellant company was subject to two freezeorders under Section 102 of the Code of Criminal Procedure, 1973. TheFfirst freeze order was imposed against the appellant company on20.10.2006, and the second freeze order was imposed on 17.08.2010.These abovementioned freeze orders, as has been discussed in detailbelow, were levied against the appellant company on grounds of necessityof investigation of an alleged crime. At this point, It must be noted thatthe said investigation of the alleged crime was initiated against oneGDharmesh Doshi, who is in no way related to the appellant company,and he was never an employee/share holder/director or a key managerialperson in the appellant company.

5. In so far as the first freeze order is concerned, vide ordersdated 05.12.2008,14.05.2009,16.11.2009 and 17.08.2010, this Court H

allowed the appellant company to sell the shares in its account, convertit into cash, and repatriate the funds so received with interest and withouta bank guarantee, while the first freeze order was still operational. Interms of the abovementioned orders, the appellant company repatriatedan amount of Rs. 42.51 crores without any bank guarantee.

6. The issue posed in front of us therefore is limited to the secondfreeze order. The second freeze order, which was passed by therespondent herein on 17.08.2010, had incapacitated the appellantcompany herein to repatriate an amount of Rs. 38.52 crores, which wasrealized in favour of the appellant company herein pursuant to an orderpassed by the Securities Appellate Tribunal dated 08.05.2006.

7. Aggrieved, the appellant company had approached this Courtfor relief, and vide order dated 12.10.2011, this Court gave liberty to theappellant company to approach the Trial Court for release of the saidamount.

8. Subsequently, the learned Trial Court, after duly taking noticeof the fact that this Court had allowed the appellant company to repatriatean amount of Rs.42.51 crores, vide order dated 02.11.2012, held that theappellant company was entitled to repatriate the amount of Rs. 38.52crores, however, the release of such funds was subject to a bankguarantee equivalent to the amount sought to be withdrawn.

9. Aggrieved by the said imposition of the bank guarantee, theappellant company approached the High Court, however, vide impugnedorder dated 16.08.2018, the High Court reiterated the imposition of theBank Guarantee. The appellant company has therefore, as against theimpugned order and judgment, filed the present Appeal.

ANALYSIS

10. We have heard the learned counsel for the parties, however, itmust be noted that despite notice being served the respondent no.2, ICICIBank, they have chosen not to put in appearance.

11. It is our opinion, that a bare reading of the decisions renderedby the lower Courts, would show that the imposition of the bank guaranteeand the freeze orders passed by the respondent, were solely imposed onthe grounds of criminal proceedings being alive against one DharmeshDoshi, who is alleged to be connected to the appellant company.

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A12. While perusing through the documents on record, it has cometo our notice that the said Dharmesh Doshi, on the basis of whom thecondition of bank guarantee was imposed, has now been discharged ofthe alleged offences by the Trial Court. It is also important to note thatthe said Dharmesh Doshi , who has been discharged of the alleged crime,was never an employee/share holder/director or a key managerial personBin the appellant company.

13. Since the said Dharmesh Doshi was in no way connected tothe appellant company herein, the trial faced by him, was in his individualcapacity, and not vicariously on behalf of the appellant company.

14. In such a circumstance, wherein the appellant company andthe accused Dharmesh Doshi are two separate entities, and the appellantcompany is in no way connected to the concerned Investigation, theoperation of the freeze order against the appellant company, is not legallytenable.

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D15. Further, It must also be noted that the appellant company herein,till date, has not been named in the FIR or the chargesheet in which theabovementioned Dharmesh Doshi is an accused. It must also be notedthat Mr. Shailesh Madiyal, learned counsel appearing for the respondentCBI, on the basis of Instructions, made a statement before us in openCourt stating that no criminal proceedings whatsoever are pending againstEthe appellant company pertaining to the dispute at hand.

D

16. In such a circumstance, even if we were to assume that theaccused Dharmesh Doshi’s discharge is subsequently reversed, and heis convicted, such a conviction would still have no bearing on the propertiesof the appellant company herein, since the appellant company is notFalleged to be a part of the crime.

17. Since the appellant company is not connected to the allegedcrime, and has not found mention in the FIR or the chargesheet, thefreeze order against the appellant company’s properties is redundantqua the investigation, since the appellant company itself is not necessaryGfor the conclusion of the investigation.

18. It has also come to our notice that the operation of the freezeorder has been active for a period of 17 years and has caused hugelosses to the appellant company. The purpose of the freeze order, andthe bank guarantee in extension of the freeze order, can only be in H

M/S. JERMYN CAPITAL LLC DUBAI v. CENTRAL BUREAUOF INVESTIGATION & ORS. [KRISHNA MURARI, J.]

operation to aid in the investigation against the alleged crime. Since theinvestigation against the appellant company, as has been discussed above,is redundant, hence, the freeze of the appellant company’s assets andthe bank guarantee imposed in furtherance of the freeze order alsobecomes redundant.

19. In the light of above mentioned facts and discussions, thecondition imposed upon the appellant to furnish a bank guarantee by theCourts below, is not liable to be sustained and is therefore set aside.

20. The orders impugned herein stand modified to that extent andthe appeal, accordingly, stands allowed.

21. As a consequence, the appellant shall be permitted to withdrawthe aforesaid amount along with 4% simple interest, which shall be payablefrom 08.05.2006 till the date of actual payment.

Divya Pandey

Appeal allowed.

(Assisted by : Roopanshi Virang, LCRA)

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