DBS Bank India Limited v. State of NCT of Delhi & Anr.

1. This petition has been filed seeking quashing of the supplementary chargesheet dated 12.02.2021, summoning order dated 16.02.2021 arising out of FIR No.189/2019 registered by EOW, Mandir Marg under Section 409/120B IPC and the consequential proceedings arising therefrom.

2. The petitioner is a banking company incorporated under the Companies Act, 2013 having its registered office at Connaught Place, New Delhi, a wholly owned subsidiary of foreign entity i.e., DBS Signing Date:27.03.2023 14:55 Singapore Limited. The Government of India on 25.11.2020, while exercising its powers under Section 45 of the Banking Regulations Act, 1949 directed non-voluntary amalgamation of the petitioner with erstwhile Laxmi Villas Bank (LVB) owing to the precarious financial condition of LVB, in order to safeguard the interests of the customers, depositors, creditors, employees of LVB. The respondent no.1 registered an FIR No.189/2019 on 23.09.2019 at the behest of the complainant/respondent no.2 under Section 409/120B IPC pertaining to misappropriation of certain fixed deposits, deposited with the erstwhile LVB as security against short term loans availed by the group companies of the respondent no.2, RHC Holding Pvt. Ltd. and Ranchem Private Limited. The said fixed deposits were allegedly appropriated by erstwhile LVB upon default in repayment of the outstanding loans by the group companies of respondent no.2.

3. The learned APP for the State however argued in November, 2016 RFL placed an amount of Rs.400 crores in two fixed deposits (FDs) with LVB. These FDs were created by RFL for short term tenor with intention to keep them free from all and any encumbrance. In January 2017, RFL placed an additional amount of about Rs.350 crore in another couple of FDs with LVB. Like with the first 2 FDs, these 2 FDs were also created by RFL for short term tenor with the intention to keep them free from all and any encumbrance. These were short term FDs, and were renewed by RFL from time to time till its maturity dated July, 2017. However, on 31.07.17, RFL was shocked to receive an email from LVB with a statement of accounts qua RFL’s current account. RFL discovered that LVB had credited the proceeds of the FDs to RFL’s current account and subsequently debited from RFL’s current account a cumulative amount of Rs.7,23,71,50,920/- without prior intimation to RFL. It is alleged LVB and the other accused person came to an understanding for onward lending of RFL’s funds and LVB would have made huge gains from such lending since it got the FDs/funds @4.5% interest and they had purportedly lent the money @ 10% interest.

4. During the course of investigation, the complainant company, through Manpreet Singh Suri, its authorised representative, had filed a representation citing Final Report dated 21.03.2020 filed by the EOW in FIR No.189/2019. From this final report it is understood LVB was not been made an accused by the EOW in the Final Report. It is alleged from the documents available with the Final Report, there is evidence to show that LVB has benefitted from the entire fraud and should have been made an accused along with its promoters, and accordingly, further investigation was carried out. Based on review of transactions in deposit loan account statements of RHC and Ranchem, it was noted total interest income of INR 1,15,93,63,273.07 was charged from November, 2016 till February, 2018. It was observed out of total interest of INR 1,15,93,63,273.07; INR 39,30,59,049 was paid by the borrowers to LVB and balance INR 76,63,04,227.07 was recovered from fixed deposit at the time of final set off. Thus it is seen LVB acted on the premise of three companies i.e., RFL, RHC Holding and Ranchem, the group companies under the same promoters and created security against FDs of RFL without ensuring proper authorization by RFL. As has been discussed above, the loans given by LVB to RHC Holding and Ranchem against FDs of RFL were ultimately utilized by RHC Holding and on nonrepayment of the said loans to LVB, the FDs of RFL were adjusted by LVB against the outstanding loan amounts. Hence, it is concluded that the beneficiary of the funds of RFL to the tune of Rs.729.13 crores were actually RHC Holding and in the absence of adequate documentation to support express authorization by RFL in this regard, it is concluded that LVB aided the promoters of RFL to divert funds for their own benefit. In this manner, bank has revoked the FDs to the tune of Rs.729 crores and also benefited with interest to the tune of Rs.115 crores approx.

5. The learned APP further argued from the investigation conducted so far, supplementary chargesheet was prepared against LVB Bank (Now DBS Bank India Limited) and bank officials namely (1) Anjani Kumar Vermam; (2) S.Venkatesh; (3) Pradeep Kumar and (4) Parthsarathi Mukherjee (without arrest) and accused persons Malvinder Mohan Singh, Shivinder Mohan Singh, Sunil Godhwani, Hemant Dhingra, Kavi Arora and company RHC Holding Pvt. Limited, M/s.Ranchem Pvt. Limited as they acted in connivance with each other, being members of a well planned conspiracy and interacted with each other and committed acts of commission and omission in furtherance of the conspiracy to cheat the complainant company, hence, this charge sheet against the accused person, company and Bank under Section 409/120B IPC was prepared by putting their names in column no.11.

6. The learned senior counsel for petitioner argues the LVB was amalgamated through a non-voluntary scheme of amalgamation, sanctioned by the Central Government, however later, the impugned supplementary chargesheet was filed to implead the petitioner as an accused. It is alleged the learned ACMM without any application of mind, took on record the impugned chargesheet and vide impugned summoning order dated 16.02.2021 had issued summons dated 09.04.2021 to the petitioner.

7. It was argued the impugned FIR was only against certain officers of the LVB, but the LVB itself was never made an accused. It is alleged only pursuant to sanction of mandatory scheme of amalgamation, the respondent no.1 at the behest of respondent no.2 vide an impugned supplementary chargesheet, seek to implead the petitioner as an accused by applying the principle of alter-go.

8. Reference was made to summoning order annexure-P[2] to say no reasoning is given to summon the petitioner. The notification dated 25.11.2020 is annexed at annexure P[5] and it talks about amalgamation of the LVB with the DBS Bank India Ltd. and clause 3(3) of the notification read as under: ―3. Transfer of assets and liabilities and general effect thereof.- (1)-(2) xxxxxxx (3) If on the appointed date, any cause of action, suit, decrees, recovery certificates, appeals or other proceedings of whatever nature is pending by or against the transferor bank before any court or tribunal or any other authority (including for the avoidance of doubt, an arbitral tribunal), the same shall not abate, be discontinued or be ill any way prejudicially affected, but shall, subject to the other provisions of this Scheme, be prosecuted and enforced by or against the transferee bank: Provided that where a contravention of any of the provision of any statute or of any rule, regulation, direction or order made thereunder has been committed by or any proceeding for a criminal offence has been instituted against, a director or secretary, manager, officer or other employee of the transferor bank before the appointed date, such director, secretary, manager, officer or other employee shall, without prejudice to the application of section 6 of the General Clauses Act, 1897 (10 of 1897), be liable to be proceeded against under such law and punished accordingly, as if the transferor bank, being a banking company had not been dissolved.‖

9. It is argued only civil liability was transferred and there was no clause qua criminal proceedings if to be continued against the transferee company though such proceeding may continue against the erstwhile employees of LVB. It is argued criminal proceedings cannot be transferred by way of a contract or by a statute. References were made to Nicholas Piramal India Ltd. vs. S.Sundaranayagam in CRL.M.C.5392/2005 decided on 23.08.2007; Mcleod Russel India Limited vs. Regional Provident Fund Commissioner, Jalpaiguri and Others (2014) 15 SCC 263; M.Abbas Haji vs. T.N.Channakeshava (2019) 9 SCC 606; and Sham Sunder and Others vs. State of Haryana (1989) 4 SCC 630. It was argued aforesaid judgments squarely cover the case of the petitioner.

10. Heard.

11. Admittedly, LVB Bank was amalgamated with DBS Bank by RBI. It was argued by respondent since the amalgamation had come into effect from 27.11.2020, DBS Bank is used interchangeably with LVB, as allegedly there is no provision of abatement of criminal proceedings against DBS Bank, merely on account of amalgamation.

12. In Brooke Bond Lipton India Ltd. vs. State of Assam 2004 LawSuit (Guwahati) 405, the Court held: ―(22) On analysis of the submissions made and on perusal of the various decisions as quoted above, we hold as below:

(i) a criminal proceedings shall not abate ipso facto on merger or amalgamation of a company; (ii) the question against whom the prosecution would continue shall depend upon the terms and conditions of merger/ amalgamation; (iii) a pending criminal prosecution cannot be thrown overboard by subsequent dissolution/amalgamation or merger of a firm. We, therefore, hold that the petitioner company is not entitled to the benefit of abatement of proceedings against it on the ground of the amalgamation. (25) In the result, we hereby quash the charges against the said company. The trial shall, however, proceed against the other accused persons. Send down the records.‖

13. Similarly in Speed Line Agencies vs. T.Stanes and Company Limited (2010) 6 SCC 257, the Court held: ―33. As per Clause 1.[7] of the Scheme, all assets vest in the transferee company. As per Clause 6, any suit, petition, appeal or other proceedings in respect of any matter shall not abate or be discontinued and shall not be prejudicially affected by reason of the transfer of the said assets/liabilities of the Transferor Company or of anything contained in the scheme but the proceedings may be continued, prosecuted and enforced by or against the transferee company in the same manner and to the same extent as it would be or might have been continued prosecuted and enforced by or against the Transferor company as if the scheme has not been made. In view of the same, by virtue of the provisions in the Scheme of Amalgamation and operation of Order 21 rule 16 of C.P.C., the decree holder is deemed to execute the decree.‖

14. Further in LA Reine C.Black & Decker Manu. Co. (1975) 1 SCR 411, the Supreme Court of Canada held as under: ―……such as criminal responsibility, must be regarded as severed from the amalgamating companies and outside the amalgamated company. What happens to these vestigial remnants? Are they extinguished and if so, by what authority? Do they continue in a state of ethereal suspension? Such metaphysical abstractions are not, in my view, a necessary concomitant of the legislation. The effect of the statute, on a proper construction, is to have the amalgamating companies continue without subtraction in the amalgamated company, with all their strengths and their weaknesses, their perfections and imperfections, and their sins, if sinners they be. Letters patent of amalgamation do not give absolution.‖