Debarring director-defaulters from banks unconstitutional, says Gujarat High Court

Debarring director-defaulters from banks unconstitutional, says Gujarat High Court

In what could be a major blow to the 17-member consortium of banks trying to recover over Rs 8,000 crore loans doled out to Vijay Mallya promoted Kingfisher Airlines, the Gujarat High Court in a sweeping judgment on Tuesday termed the ‘wilful defaulter’ circular of central bank, so far as it applies to the directors and debarring their access to loans from any financial institutions, ‘ultra vires’.

However, the petitioners argument that RBI’s ‘master circular’, signed by an official in the rank of chief general manager has no power, authority and any standing under Sections 21 and 35A of the Banking Regulation Act, 1949, was disallowed by the high court. The petitioners had argued that the said circular was against the RBI Act or the Banking Regulations Act 1949 and gives sweeping powers to banks through “the circular that confers uncanalised, unbridled and untrammeled power upon the banks to decide the future of any borrower and makes the bank a judge in its own cause and also the decision whether the other banks should lend money to the borrower declared as a wilful defaulter”.

“The judgment opens up a debate on defining the role of a company director versus that of entrepreneurs or promoters and Vijay Mallya will surely take cover under the law,” said a legal expert.

Most legal experts were in favour of the judgment in curtailing RBI’s powers, especially when it comes to directors.

According to legal experts, banks have been abusing the powers vested on to them for declaring any borrower ‘wilful’ defaulter even before the court or tribunal makes a judgment.

Banks have acted in a high-handed manner to guard their balance sheets and categorised even genuine borrowers with good track record as wilful defaulters to hasten recoveries, said a senior advocate. “The RBI circular is contradictory, when it comes to independent directors and directors,” he said.

The petitioners argued: “The RBI circular is required to have the phrase “in public interest” or “in interest of depositors” or “in interest of banking policy” and should indicate relevant materials and reasons that the circular was being issued after considering the interest mentioned. Besides, according to the high court, so far as the RBI circular applies to directors –not promoters and entrepreneurs – is arbitrary and unreasonable.

The judgment focussed on constitutional rights of the citizens, more specifically directors, to practice any profession or business. The high court concluded: “The master circular seeks to paint all the directors with the same brush. The provisions in the circular shatter the concept of identity of a company being different and distinct from its directors without providing any safeguards.”

“As rightly pointed out by the judgment, it violates Article 19 (1) of the Constitution of India, 1949, which guarantees the citizen of India to practice any profession, or occupation or to trade and do Business,” said activist Shailesh Mehta.

The RBI master circular has hence been declared partially ultra vires, meaning beyond its powers or jurisdiction. The 162-page judgment comes in the wake of Ionic Castings Pvt Ltd versus Union of India (Special Civil Application no 645 of 2014) and was made available Wednesday. However, As per the judgment, the circular so far as it applies to directors is unconstitutional while it shall continue to apply on promoters and entrepreneurs.

“It’s a path-breaking judgment. It vindicates the rights of directors to take a loan which is not otherwise expressly prohibited by any law in vogue,” said advocate Masoom Shah, who represented Ionic Castings. “The judgment will enlighten those in the financial sector about the interpretation of RBI’s master circular,” he said.



Dispose of case properties under CrPC provisions, HC tells police

Dispose of case properties under CrPC provisions, HC tells police

Expressing “shock” at the volume of articles kept in police custody after being seized as “case property”, the Delhi High Court has issued a slew of directions to ensure that the properties are disposed of according to provisions of the Criminal Procedure Code (CrPC).

“This court is shocked to note the non-compliance of the well-settled principles of law for disposal of the case properties, which has resulted in accumulation of 2,86,741 case properties including 25,547 vehicles. Of these, as many as 2,479 properties are lying in public places outside police stations. The photographs filed by the Delhi Police along with the affidavit dated April 3, 2014, show the shocking state of affairs,” Justice J R Midha noted on Wednesday.

“When the property has no evidentiary value and only the value of the property is to be properly secured for passing of final order under Section 452 CrPC, the necessity of keeping such properties intact by imposing onerous conditions, prohibiting its alienation or transfer would not be necessary in law,” the court said, adding that photographs of case properties with detailed descriptions were admissible as evidence.

The court has now directed the SHOs of all police stations and investigating officers to “file applications and produce the case properties in police custody before the concerned court within one week…”.

The court had taken up the issue on a complaint by Delhi Sikh Gurdwara Management Committee’s President, Manjit Singh, who was not allowed to sell his stolen vehicle, even after it had been recovered, as it was “evidence”.

- See more at: http://indianexpress.com/article/cities/delhi/dispose-of-case-properties-under-crpc-provisions-hc-tells-police/#sthash.jdNO3h7X.dpuf


HC asks Mizoram to appeal against 45 acquittals

HC asks Mizoram to appeal against 45 acquittals

The Aizawl Bench of the Gauhati High Court has asked the Mizoram government to appeal against all cases in which a lower court acquitted 45 people accused of executing a Rs 433 crore ponzi scheme that went bust in late 2008.

The court has also directed the government to submit its plan or steps it has taken taken to repay the thousands of families who lost their deposits in the scheme that has come to be known as chiahpuam, literally meaning “soak to swell”.

The HC’s order comes almost a year after the court registered a writ petition based on a depositors’ union’s letter to the Chief Justice complaining the state “failed to implement” a law that would protect depositors’ interests.

In the roughly two years the ponzi scheme was operational, collectors took crores of Rupees from depositors – including government officials, businessmen, professionals, faith-based organisations and pensioners– and circulated it among them, paying huge amounts of interests to some depositors by using the money invested by other depositors before the scheme eventually went bust.

Police eventually seized 46 land titles, 42 vehicles, 59 bank passbooks, valuables worth Rs 10 lakhs and about Rs 7 crores in cash which were connected with the scam. A total of 45 people were arrested and charged under the Indian Penal Code.

Affidavits filed in the HC by the Chief Secretary and the Director General of Police put the total amount of money involved in the scam at a little over Rs 433.80 crores although the police was able to recover only Rs 12.13 crores after auctioning off the seized materials on the orders of a lower court.

The amount has since been transferred to the Deputy Commissioner on the directions of the lower court, which last October also acquitted all 45 accused.

The depositors’ union then wrote to the CJ, and the HC eventually took up the case and asked the government what steps it was taking to pay back the recovered amount to the depositors and why it had not challenged the acquittal of the 45 accused.

Another depositors’ body meanwhile curiously asked the HC to dismiss the petition saying they were happy with the lower court’s decision. The HC has since turned down the submission.

The state government replied to the HC saying the cases registered against the 45 accused were criminal cases and therefore the provisions of a law to protect the interests of depositors – called the Mizoram Protection of Interests of Depositors (in Financial establishments) Act 2002 – did not apply.

The government’s reply also included a submission by the public prosecutor, who gave several reasons for not challenging the acquittals, including that the depositors “all [took] the risks to get good returns” and that “if someone is to blame for this, they are all to blame.”

The HC slammed the government’s reply as “wholly inadequate”, and the government has since told the HC the money has been handed over to the Deputy Commissioner.

- See more at: http://indianexpress.com/article/india/india-others/hc-asks-mizoram-to-appeal-against-45-acquittals/#sthash.AoQ3ZOCr.dpuf


Mining baron Reddy’s ex-lawyer visited CBI director 54 times

Mining baron Reddy’s ex-lawyer visited CBI director 54 times

NEW DELHI: One of the frequent visitors to the residence of CBI director Ranjit Sinha was a former counsel for the main accused in the Karnataka mining scandal, former BJP minister Gali Janardhana Reddy. This is despite the fact that the Hyderabad-based advocate, K Raghavacharyulu, had himself been raided by the IT department and subjected to CBI investigation because of his alleged proximity to Reddy.

A scrutiny of entry and exit logs shows that Raghavacharyulu visited Sinha’s residence at least 54 times in a span of 11 months – from September 25, 2013 to August 12, 2014, a few days before the register ends.

Raghavacharyulu, when contacted by TOI, confirmed that he had been a frequent visitor at Sinha’s residence, even as he added that it was not always to meet the CBI director. “I am a family friend,” Raghavacharyulu said. “At times I met his wife or his daughter, who is my spiritual disciple. His son Rudraksha Sinha is a lawyer who had worked in my chamber before he went abroad for doing LLM.”



Bombay high court says CBI application to drop Ashok Chavan’s name from Adarsh scam erroneous

Bombay high court says CBI application to drop Ashok Chavan’s name from Adarsh scam erroneous

The Bombay high court on Monday said CBI’s ( Central Bureau of Investigation) application seeking deletion of former chief minister Ashok Chavan‘s name from the Adarsh Housing Society scam was erroneous.

CBI had filed the application in April under section 169 of the Criminal Procedure Code. It wanted Chavan’s name dropped as an accused in the scam as the governor had refused to grant sanction to prosecute the former CM.

Justice ML Tahilyani said such an application could only be made before the chargesheet is filed, and not after.

CBI had chargesheeted 13 people, including Chavan, in the case. The trial court is yet to take cognisance of it saying the high court is seized of the matter. Apart from the main chargesheet, CBI has also filed an additional chargesheet related to benami transactions.

Hiten Venegaonkar, the CBI counsel, however, submitted that there are high court judgments which had allowed such applications.

Amit Desai, Chavan’s counsel, said CBI could not prosecute the former CM as the governor had not granted sanction for doing that.

Following CBI’s application, HC had stayed trial against Chavan in August this year. The judge had, however, clarified that the trial court was free to go ahead with the trial against the other 12 accused.

Former journalist Ketan Tirodkar had filed an application seeking permission to intervene and oppose dropping Chavan’s name. Justice Tahilyani said he would consider it on Sept 22, the next date of hearing.

Chavan and the others have been booked under IPC section 120 (b) for criminal conspiracy and various charges of corruption under Prevention of Corruption (PC) Act.

Hiten Venegaonkar said under IPC, governor’s sanction was required to prosecute Chavan as he was a sitting MLA as well as the chief minister and revenue minister of the state when the alleged offence was committed.

As Chavan was the chief minister, law stipulates that the state give prior sanction to prosecute him in a criminal case. Chavan had stepped down as the CM after his name had been linked to the controversy towards the end of 2010.

CBI had accused Chavan of approving additional FSI ( floor space index) to Adarsh Society in exchange of two flats for his relatives. He has also been charged with illegally approving, as revenue minister, allotment of 40% of the flats to civilians even though the society was meant for Kargil war widows and defence personnel.

Chavan had moved the high court questioning CBI’s authority to probe the case. His petition is pending.