SC upholds HC order, rejects appeal against IIFL top execs

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Mar 27 2013, 05:45am hrs
The Supreme Court has dismissed appeals filed by GHCL Employees Stock Option Trust against India Infoline, its managing director, Nirmal Bhanwarlal Jain, former company secretary Nimish Ramesh Mehta and its directors in a cheating case. Upholding the Delhi High Courts judgment that gave a clean chit to the officials, but allowed trial court to proceed against the company, a Bench of Justices P Sathasivam and MY Eqbal said trial courts cannot issue summons to accused without prima facie material to establish guilt.

...summoning of accused in a criminal case is a serious matter. Hence, criminal law cannot be set into motion as a matter of course. The order of magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto, it said.

GHCL had filed a criminal case against India Infoline, its MD, company secretary and three directors for allegedly defrauding it of over R25 lakh in a deal on sale of shares. On the basis of the complaint, a trial court issued summons to the top executives, who approached the high court, which quashed the magistrates summoning order. GHCL said IIFL, in June 2008, sold off 8,76,668 shares in the open market even after the trust in May 2008 had informed the brokers that, under the Sebi regulations, there was no provision permitting the sale of shares of ESOS trust to clear the dues of other entities.

This, according to the petition, had led to a huge monetory loss as the shares were kept with the accused for dematting purpose and the accused had no lien on the shares. The trustees, in September 2007, had opened a Demat account with IIFL, which was to buy shares on the trusts behalf and transfer the same into its account free of any lien.