Case Title:
Kamla Devi Agarwal & Ors. Versus State of Rajasthan
Date of Order:
20th August 2024
Bench:
Justice Rajendra Prakash Soni
Parties:
Petitioner: Kamla Devi Agarwal & Ors
Respondent: State of Rajasthan
Subject:
These anticipatory bail applications were submitted on behalf of the petitioners in relation to a FIR which was recorded at Police Station Jawahar Nagar, District Sri Ganga Nagar, for offenses under Sections 420, 406, and 120B of the IPC and Section 23 of the Forward Contracts (Regulations) Act. According to the court's interpretation of the FIR filed in December 2019, the complainant, M/s. Ganpati Multi Commodities Business (India) Pvt. Ltd., was involved in commodity market trading and held memberships in both the NCDEX and MCX. These are the main points or highlights of the case. Dr. Jitendra Mittal held the position of managing director at the organization. The corporation offered exchange-related services as an intermediary to its customers, enabling the online trading of commodity contracts on platforms such as NCDEX and MCX. Any buyer or seller may place orders via a broker and these orders were then executed on the exchange's operational system. Prior to placing an order, the exchange mandated that customers post an initial margin deposit via its broker and thereafter collected supplementary margin funds on a daily basis. From its establishment, the firm involved in the complaint has consistently maintained a strong market standing, achieving a revenue of over Rs. 12,556 crores in the financial year 2018-19.
Important Provisions
Indian Penal Code
- Section 420: Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.
- Section 406: Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.
- Section 120B: (1) Whoever is a party to a criminal conspiracy to commit an offence punishable with death, [imprisonment for life] or rigorous imprisonment for a term of two years or upwards, shall, where no express provision is made in this Code for the punishment of such a conspiracy, be punished in the same manner as if he had abetted such offence. (2) Whoever is a party to a criminal conspiracy other than a criminal conspiracy to commit an offence punishable as aforesaid shall be punished with imprisonment of either description for a term not exceeding six months, or with fine or with both.
- Section 415: Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”.
Facts
All six petitioners, as specified in the FIR, are members of the same family and have established six commodities trading accounts with the complainant, both under their own names and the names of their affiliated companies. The precise information about these accounts is stated in the First Information Report.
The accusation upon the petitioners is that they didnt want to regulate their losses and rather only wanted to secure profits. Furthermore, the petitioners had incurred daily financial losses in their trading accounts due to the consecutive periods of consistently low pricing of the seeds that was continued since September 25, 2019.
At the time of the 25th of September in 2019, the market for the trading of castor seeds has seen transactions totaling 700 crores of rupees. The petitioners have placed themselves in a position to purchase Rs. 150 crores worth of property as part of these transactions.
Petitioners failed to comply with the complainant's numerous requests for the provision of the requisite margin monies, notwithstanding all of the petitioners' repeated requests.
Hence, the exchange nullified all the trading transactions of the petitioners in order to compensate for the losses, by adjusting or forfeiting the losses suffered by the petitioners from the margin money of the complaint and his 120 other customers.
By September 30, 2019, the complainant had maintained a substantial margin balance on the exchange, collected from both his own capital and the money of his 120 clients. As of October 15, 2019, the petitioners had purportedly cheated the complainant and his clients of about Rs. 40.04 crore, resulting in the disruption of the complainant's company, substantial harm to his reputation, and the ruin of the complainant's clientele.
Upon being requested to make a deposit or resolve the obligation, the petitioners refused and proceeded to intimidate the complaint. Furthermore, it is said that the petitioners, in an effort to avoid their responsibility, transferred their immovable assets to immediate family members, with the intention of obstructing and undermining any court or arbitrator rulings that may enable the complainant to reclaim the sum from the accused's properties.
The individuals filing the petition have engaged in conduct that is subject to punishment under Sections 420, 406, and 120B of the Indian Penal Code. Additionally, they have made threats to attempt suicide with the intention of leaving a suicide note that implicates the complainant.
Upon reviewing the information, a formal First Information information was filed against the petitioners. The Special Operation Group of Rajasthan Police is now investigating the incident.
Petitioner’s Argument
The learned Senior Advocate, Shri Veenit Jain, together with the learned counsels representing the petitioners, have strongly contended that, based on the facts of the case, none of the elements that make up an offense under Section 420 of the IPC are satisfied.
Consequently, the offense under Section 421 is bailable, which means that the petitioners cannot be arrested even if it is presumed that they have committed this
offense.
Furthermore, they contend that the petitioners have previously participated in the inquiry, rendering custodial questioning superfluous as there are no accusations of evidence manipulation, and no new information is to be obtained from them.
The petitioners claim that they are being threatened with arrest in a fabricated case, although the issue is just a civil legal matter about the recovery of money.
A key contention of the counsels is that the petitioners cannot be held accountable for the Exchange's adjustment or loss of the margin money belonging to the complainant and his customers.
On September 24, 2019, the petitioners sent a text message to each other about their common desire to have their interests in castor seed commodities excluded. At that point in time, the contract prices were not in the lower range that would have allowed the petitioners' individual arguments to be resolved by the complaint.
An email dated September 26, 2019, was received by the complainant, who confirmed that they were instructed to square off their position on the mobile phone. In addition, he had altered the date of the conversation that had taken place and instead requested confirmation of the instructions, something that wasnt required and cant be said to be necessary.
The counsels contend that the complainant had the ability to avert the losses by resolving the petitioners' positions on September 24, 2019. They further assert that the petitioners cannot be held responsible for the losses suffered by the complainant after that date, which led to the total exhaustion of the petitioners' margin funds.
The second contention presented by the lawyers is that the complainant's trades of castor seed contracts were conducted without proper instructions or authorization, rendering them unauthorized. Consequently, the petitioners cannot be held accountable for the outcomes resulting from those trading operations.
The third contention is that the complainant had a duty to promptly resolve the petitioners' unsettled positions upon seeing a deficit in margin funds, which he neglected to do. The counsels argue that the petitioners cannot be held responsible for the damages incurred by the complainant as a result of his own negligent actions.
The fourth contention is that prior to the submission of the current First Information Report (FIR), many civil lawsuits and claims had already been initiated between the parties, and arbitration procedures had begun to settle the disagreement.
The appeal against the decision issued by the arbitrator has been contested in the appropriate court. The attorneys contend that the complainant's commercial losses cannot be recouped by criminal actions, and the current FIR has been intentionally filed to apply unlawful pressure on the petitioners, therefore constituting an abuse of the criminal law procedure.
The fifth and last contention is that the petitioners' transfer of possessions cannot be classified as a criminal act. The properties of the petitioners were not registered as collateral with the complainant or the Exchange, nor are they the focal point of the dispute in this case.
Consequently, the petitioners are seeking an anticipatory parole order to protect their personal liberty.
Respondent’s Argument
The Public Prosecutor, along with Shri Moti Singh, the learned counsel for the complainant, has vehemently opposed the arguments put forward by the counsels of the petitioners. A contention was made that the petitioners were obligated to comply with the terms and conditions of the Commodity Trading Account Contract, which they had not fulfilled.
Following the emergence of the disagreement between the parties, it was presented to an arbitrator. Both the arbitrator and the Appellate Arbitral Tribunal rendered a verdict against the petitioners, therefore granting an award that has the same legal authority as a civil court decision.
The petitioners were obligated to pay an amount of up to Rs. 37.75 crores to the complainant, along with a yearly interest rate of 10%. Consequently, with the establishment of the parties' civil rights, it is now necessary to hold the petitioners responsible for the criminal offences that arose from their acts and administer the corresponding penalty.
Furthermore, it was said that the petitioners had the ability to engage in internet-based trading for their account, and if they had desired, they could have terminated their positions online, since all prior transactions had been carried out online by the petitioners themselves.
During the period from November 30, 2019, to December 3, 2019, the petitioners transferred 15 of their immovable properties to their immediate family members with the purpose of preventing the implementation of any order issued by the arbitrator or civil court against them, as well as impeding the process of recovering the assets.
Undoubtedly, this action was carried out with the explicit aim of deceiving the complaint.
Furthermore, it has been contended that the petitioners are the subjects of serious allegations. After considering the information gathered up to this point, the investigating officer has grounds to suspect that the petitioners are accountable for the aforementioned crimes.
The learned Public Prosecutor vehemently contended that the inquiry cannot be brought to a logical conclusion, particularly in relation to the proceeds of the crime, without the conduct of custodial interrogation of the petitioners. Custodial interrogation is deemed necessary due to the severity and characteristics of the offense. Finally, it was strenuously advised that the petitioners not be granted the privilege of anticipatory parole.
Court’s Analysis
The present court had analysed the case of of Bhadresh Bipinbhai Sheth vs. State of Gujarat (2016) 1 SCC 152, wherein the the Hon'ble Supreme Court established the criteria for granting anticipatory bail.
The Court stressed the significance of taking into account the character and seriousness of the charge, the applicant's previous criminal record, and the potential for the applicant to evade legal consequences or commit the same crime again.
The court had also highlighted the need of analyze and determine as to whether the allegations that were made had any merit or were simply made to out down the applicant. The need to analyze the potential chances of granting the anticipatory bail was also underscored, keeping in mind the magnitude of the case.
Furthermore, the Court emphasized the importance of striking a balance between a reasonable inquiry and avoiding unwarranted imprisonment, as well as the suspicion of witness manipulation or intimidation against the complainant and the prosecution's credibility.
Upon applying this principle to the current case, after considering the arguments from both parties and examining the case diary and evidence, it became clear that the petitioners were obligated by the conditions of the commodities trading agreement.
The court found no merit in the contentions that were put forward by the petitioner's and stated that the instructions that were given to end their employment, were not legally legitimate.
Their conduct demonstrates a deliberate attempt to bypass their responsibilities. The petitioners may have independently engaged in activities that would have undermined their claims as a result of their access to internet commerce.
Additionally, the petitioners appear to contradict their current stance and acknowledge their responsibility in their communications. The contention that this matter is only a civil matter was rejected, since the evidence suggests a potential criminal crime of cheating.
The petitioners' conduct, which included transferring possessions to relatives, clearly demonstrates a deliberate intention to perpetrate fraud. Considering the gravity of the offense and the continuing inquiry, the court determined that there were no valid reasons to provide anticipatory bail and rejected the requests.
The court acknowledged that the remarks made were based on initial evidence and did not constitute a decision on the actual facts of the case.
