M/S.Belair Corporation Pvt. Ltd And Others vs State And Others

M.Nirmal Kumar, J

The petitioners in Crl.O.P.Nos.8354, 9335 & 9337 of 2026 are A1, A2 & A3 in C.C.No.3018 of 2017.

Since all three petitions arise out of common judgment in C.C.No.3018 of 2017 passed by the learned Metropolitan Magistrate for exclusive trial of CCB Cases (relating to cheating cases in Chennai) and CBCID Metro Cases, Chennai, this Court by way of common order disposes these petitions.

For the sake of convenience, the petitioners are referred to as accused, as per their ranks in the judgment dated 15.02.2024 in C.C.No.3018 of 2017 passed by the learned Metropolitan Magistrate for exclusive trial of CCB Cases (relating to cheating cases in Chennai) and CBCID Metro Cases, Chennai. The conviction and sentence in C.C.No.3018 of 2017 are as follows:

S.No.

Rank of the Accused

Conviction and Sentence

1

A1 to A3

(i)To undergo six months Rigorous Imprisonment for offence under Section 120(b) IPC.

(ii)To undergo three years Rigorous Imprisonment and to pay a fine of Rs.3,000/- in default to undergo three months Rigorous Imprisonment for offence under Section 409 IPC.

(iii)To undergo three years Rigorous Imprisonment and to pay a fine of Rs.3,000/- in default to undergo three months Rigorous Imp

2

A2

(i)To undergo two years Rigorous Imprisonment and to pay a fine of Rs.3,000/- in default to undergo three months Rigorous Imprisonment for offence under Section 465 IPC.

(ii)To undergo three years Rigorous Imprisonment and to pay a fine of Rs.3,000/- in default to undergo six months Rigorous Imprisonment for offence under Section 467 IPC.

(iii)To undergo three years Rigorous Imprisonment and to pay a fine of Rs.3,000/- in default to undergo three months Rigorous Imprisonment for offence under Section 471 r/w 467 IPC.

3

A1 & A3

(i)To undergo two years Rigorous Imprisonment and to pay a fine of Rs.3,000/- in default to undergo three months Rigorous Imprisonment for offence under Section 465 r/w 109 IPC.

(ii)To undergo three years Rigorous Imprisonment and to pay a fine of Rs.3,000/- in default to undergo six months Rigorous Imprisonment for offence under Section 467 r/w 109 IPC.

(iii)To undergo three years Rigorous Imprisonment and to pay a fine of Rs.3,000/- in default to undergo three months Rigorous Imprisonment for offence under Section 471 r/w 467 r/w 109 IPC.

Case of the prosecution is that the defacto complainant/the respondents 2 and 3 approached by A2 in the year 2004 during opening of share trading company viz., M/s.Belair Enterprises Private Limited/A1, which subsequently changed as M/s.Belair Corporation Private Limited. A2 represented that they are sub agents of Kantilal Chhaganlal Securities Private Limited, a share broking agency in Mumbai. The defacto complainant is running a company in the name of M/s.Lexint Co. Steels Private Limited. A1 as authorised agent of Kantilal Chhaganlal Securities Private Limited started business in Chennai. The defacto complainant, along with his auditor Sivakumar, met A2, who requested the defacto complainant to open share trading account and assured A2 will manage all share market transactions and regularly provide statements of accounts. Believing the representation, defacto complainant executed a power of attorney authorising A1 to open and operate the share trading account and to carry on business on his behalf. Subsequently, A2 requested defacto complainant also to open share trading account in the name of defacto complainant's wife. Accordingly, the complainant's wife executed a power of attorney favouring A1 Company. After sometime, A2 informed defacto complainant that substantial investments required for share trading business and promised he would arrange loan from A1 company. Believing the same, the defacto complainant and his wife executed several documents at the instance of A2. After September 2006, no statement of account submitted by A2. Hence, the defacto complainant during March 2008 requested to stop all trading business in his name and his wife's name, contacted the main broker Kantilal Chhaganlal Securities Private Limited and collected details of share trading business account and found that the value of the shares held by the defacto complainant and his wife was Rs.1.52 Crores. Using off market option and misusing the power of attorney, A2 transferred an amount of Rs.19 lakhs to his wife's (A3) account, on the same day, A3 transferred the amount to the account of A2. To facilitate these transactions, two forged letters dated 22.07.2008 (Exs.P18 & P19) created. Finding that the accused committed offence of cheating and misappropriation using forged documents, a complaint lodged and case in Crime No.438 of 2012 for offence under Sections 406, 408, 418 & 420 registered by the Central Crime Branch on 17.08.2012, thereafter, the case closed as civil in nature and closure report filed. Challenging the closure report, defacto complainant filed protest petition and it was pending. In the meanwhile, a complaint sent to the Director General of Police on 21.08.2013. On the orders of the Director General of Police, the case entrusted to CBCID and a fresh case in Crime No.3 of 2013 for offence under Sections 406, 408, 418 & 420 IPC registered and charge sheet filed in C.C.No.3546 of 2014. Challenging the same, the accused filed quash application before this Court in Crl.O.P.No.15122 of 2015, and charge sheet quashed by order dated 23.10.2017. Aggrieved over the same, it was taken on appeal to the Hon'ble Apex Court in Crl.A.No.1563 of 2021. The Hon'ble Apex Court finding that the trial already commenced, set aside the quashing order and directed the trial to proceed. During trial, PW1 to PW10 examined and Exs.P1 to P50 marked. On conclusion of trial, the trial Court convicted A1 to A3, against which, all three individuals preferred appeal before lower appellate Court in Crl.A.Nos.190, 191 & 192 of 2024. During the pendency of appeals, the issue between A1 to A3 and defacto complainant resolved and joint memorandum of understanding along with the Joint Memorandum of Compromise filed. Since the lower appellate Court not entertained the same, present petitions filed.

Learned Senior Counsel appearing for the accused submitted that when it is found that the transaction between the accused and defacto complainant is based on the authorisation given by the defacto complainant and his wife (PW1 & PW2), the conviction of the trial Court is improper. Both PW1 & PW2 admitted that they availed loan from A1 company and thereafter executed power of attorney authorising A1 Company to purchase shares in their name and for their benefit by investing in stock market. He further submitted that the shares purchased provided as security against the loan and in the event of default of loan by PW1 & PW2, the shares held by A1 were to be utilised for recovery of outstanding loan. PW1 & PW2 admitted that their shares were held as security for the loan advanced, hence, the transfer of shares was in accordance with the terms of the loan agreement. He further submitted that the total worth of the shares held was Rs.1,55,85,350/- and the shares initially invested was to the extent of Rs.56,00,000/-.

Learned Senior Counsel further submitted that PW1 & PW2 took diametrically opposite and contrary stand which the trial Court failed to consider. The allegation is that the signature of PW2 forged and a sum of Rs.19,37,320/- transferred to the account of A3 and in turn, re-transferred to the account of A2. The original letters (Exs.P18 & P19) forwarded to the office of Kantilal Chhaganlal Securities Private Limited at Mumbai and the amount transferred only after verification of Exs.P18 & P19. In this case, Exs.P18 & P19 are projected as forged letters. The originals of Exs.P18 & P19 not collected during investigation by the 1st respondent Police. Added to it, during earlier investigation by Central Crime Branch, the Forensic Expert gave studied Exs.P18 & P19 photostat copies gave a report that no examination can be conducted on photostat documents and no conclusive opinion given. On the contrary, the trial Court on its own found Exs.P18 and P19 are forged, but invoking Section 73 of the Indian Evidence Act and convicting the accused for the offence of forgery, is improper. The Hon'ble Apex Court time and again held that it is not appropriate for the Courts by itself coming to such conclusion in the absence of forensic report. Further, no reason or explanation given by the trial Court as to how the trial Court arrived at such conclusion holding two letters (Exs.P18 & P19) as forged.

He further submitted that the trial Court failed to consider that A2 in this case sent a legal notice on 16.07.2010 calling PW1 & PW2 to settle the outstanding dues to the tune of Rs.2,26,09,835/-. The accused filed a civil suit in C.S.No.224 of 2012 before this Court on 19.09.2011, thereafter, as a counterblast, to wriggle out of the misdeeds and default in repayment, a complaint lodged by the defacto complainant. Further the trial Court failed to consider the admitted fact that the defacto complainant's wife engaged the accused in share trading business and availed loan from A1 company. It is not in dispute that when the loan agreement executed by the defacto complainant with A1, the defacto complainant and his wife borrowed Rs.75 lakhs and Rs.3 Crores respectively which is not seriously disputed, further there are loan agreement and irrecoverable power of attorney executed by the defacto complainant and his wife. The demat account of the defacto complainant and his wife maintained by Kantilal Chhaganlal Securities Private Limited, Mumbai, Principal Broker and the accused are only sub brokers. He further submitted that PW1 & PW2 involved in share trading from the year 2004 to 2008 and closed the account with the Principal Broker in the year 2009. Thus, after filing of civil suit in 2012, the complaint lodged primarily on the ground that A2 in a fraudulent manner transferred Rs.19,37,000/- to the account of A3 who in turn re-transferred to A2. This transfer is based on the forged letters (Exs.P18 & P19).

He further submitted that when the protest petition was pending in Crime No.438 of 2012 before the competent Court, without any authority and awaiting judicial order, the Director General of Police by proceedings dated 21.08.2013 directing the CBCID to register a case based on the representation of the defacto complainant and a case in Crime No.3 of 2013 registered by the 1st respondent Police, is improper and has no sanction of law. In a haste and for obvious reasons, CBCID registered a case and filed charge sheet. The trial Court completely glossed over these facts and failed to consider that the dispute which is predominantly civil in nature given a criminal colour. After the conviction, the accused filed appeals before the lower appellate Court. Be it may, during the pendency of the appeals, the issue between the and the respondents 2 and 3 resolved and compromise arrived at between them. Hence, he sought quashing of the proceedings.

Learned Government Advocate (Crl. Side) appearing for the 1st respondent Police in all these petitions submitted that in the year 2004, A2 approached the defacto complainant to open a share trading account in A1 Company, namely M/s.Belair Enterprises Private Limited (subsequently renamed M/s.Belair Corporation Private Limited) representing that A1 to A3 were sub-agents of Kantilal Chhaganlal Securities Private Limited, a share broking agency in Mumbai. The defacto complainant, who is running M/s.Lexint Co. Steels Private Limited and his wife were induced to execute power of attorney in favour of A1 to operate their share trading accounts. A2 assured to manage all share transactions and also arranged loans from A1 Company, pursuant to which, several documents executed by the defacto complainant and his wife, but periodic statements not furnished from September 2006. During March 2008, defacto complainant found that shares worth about Rs.1.52 Crores held in their accounts, by misusing the power of attorney, A2 transferred Rs.19 lakhs to A3, who in turn re-transferred the amount to A2 all by using forged letters dated 22.07.2008 (Exs. P18 and P19).

On the complaint of defacto complainant, a case in Crime No.438 of 2012 registered by the Central Crime Branch for offence under Sections 406, 408, 418, and 420 IPC. The case later closed as civil in nature, against which, protest petition filed and kept pending. In the meanwhile, on a complaint to the Director General of Police dated 21.08.2013, on his orders fresh case in Crime No.3 of 2013 registered by CBCID, charge sheet filed in C.C.No.3546 of 2014. During trial, PW1 to PW10 examined and Exs.P1 to P50 marked. On conclusion of trial, the trial Court convicted the accused, against which, Crl.A.Nos.190, 191, and 192 of 2024 filed before the lower appellate Court. During the pendency of appeals, the parties arrived at settlement and filed joint memorandum of compromise. Hence, this Court may pass appropriate orders.

Considering the submissions and on perusal of the materials, it is seen that the dispute between the accused and defacto complainant arises out of a share broking business. It is not in dispute that PW1 and PW2 opened share trading account with A1 Company, managed by A2 and A3 who functioned as sub-broker of Kantilal Chhaganlal Securities Private Limited, Mumbai. The share trading transactions carried out through demat account maintained at the Mumbai office. PW1 and PW2 executed power of attorney authorising A1 to carry out share trading business and also availed loan from A1. The loan agreements marked as exhibits in this case. The finding of the trial Court is that the default clause in the loan agreement was misinterpreted and the accused in haste with ulterior motive transferred and misappropriated amounts. The allegation of forgery pertains to Exs.P18 and P19, which are admittedly photostat copies. Earlier, Forensic Expert opined that no conclusive opinion could be given on the said photostat documents. Admittedly, originals available with the Principal at Mumbai, no steps taken to collect the originals of Exs.P18 & P19 and sent it for forensic examination. In such circumstances, the trial Court, without giving reason arriving at a finding Exs.P18 & P19 forged and convicting the accused, is not proper. In view of the above, the conviction for forgery is not sustainable. After executing power of attorney authorising A1 Company to handle the account, to do share trading business, then making allegation of misappropriation and cheating is not also sustainable.

It is seen that A1 filed a civil suit in C.S.No.424 of 2012 against the defacto complainant and his wife to pay Rs.2,74,60,403/- with interest of Rs.1,98,23,969/-. This suit now compromised and a memo of understanding filed in C.S.No.424 of 2024. Recording the same, the suit decree as settled out of Court in terms of memorandum of understanding. Scanned reproduction of the judgment dated 11.02.2026 in C.S.No.424 of 2026 is as follows:

During the pendency of the appeals, the issue between the accused and defacto complainant resolved and a memorandum of understanding dated 16.10.2021 entered between the accused and defacto complainant (PW1 & PW2) along with Joint Memorandum of Compromise produced before the lower appellate Court. But the lower appellate Court not entertained the same. Scanned reproduction of the Memorandum of Understanding dated 16.10.2021 is as follows:

Added to it, the accused and the defacto complainant filed Joint Compromise Affidavit and Joint Memorandum of Compromise before this Court as well. It is to be seen that the dispute between accused and defacto complainant is predominantly having civil flavour.

Under such circumstances, no useful purpose will be served in keeping the criminal appeals filed before the lower appellate Court pending, even though, the offences involved are not compoundable in nature. In the light of the guidelines given by the Hon'ble Supreme Court reported in 2017 9 SCC 641- (Parbathbhai Aahir @ Parbathbhai Vs. State of Gujrath), and after exercising due caution as advised by the Hon'ble Suprme Court in The State of Madhya Pradesh v. Dhruv Gurjar and Another reported in (2019) 2 MLJ Crl (10), this Court in exercise of its inherent power is inclined to set aside the conviction of the trial Court.

In view of the above, invoking inherent powers, to secure ends of justice, this Court records the compromise, compounds the offences, allows the appeals in Crl.A.Nos.190, 191, and 192 of 2024 pending on the file of the XXII Additional Judge, City Civil Court, Chennai and consequently, set asides the judgment of conviction dated 15.02.2024 in C.C.No.3018 of 2017 passed by the learned Metropolitan Magistrate for exclusive trial of CCB Cases (relating to cheating cases in Chennai) and CBCID Metro Cases, Chennai, discharges accused/A1 to A3 from all charges. Fine amount paid by the accused are ordered to be returned.

In the result, Criminal Original Petitions are allowed.