The High Court · 2022

Order

Heard Mr. T.Niranajan Redd-v, learned senior counsel lor Sri T.Nagarjun Reddy, learned counsel for the petitioner and Mr. K.Surender, learned Special Public Prosecutor for Central Bureau of Investigation (CBI) (as his Lordship then was).

2. By filing this petition under Section 482 of the Code of Criminal Procedure, 1 973 (Cr. P. C), petitioner seeks quashing of C.C.No.14 of 2Ol2 pending on the file of Principal Special Judge for CBI Cases, Nampally, Hyderabad, qua, the petitioner.

3. Petitioner in this case is M/s.Vanpic Projects Private Limited, represented by its General Manager Mr. P.K.Ravi.

4. Be it stated that the erstwhile High Court of Andhra Pradesh passed order dated 10.08.2011 in W.P.Nos.794 and 6604 of 2O11 directing the CBI for registration of a case and conduct investigation into allegations of financial misdeeds involving huge amount of government largesse, corporate t I 2 dealings including huge investments as part of quid prcs quo arrangement for the largesse and for the benefit obtained by the investors from the State of Andhra Pradesh and aiso in a1l other aspects.

5. In view of the aforesaid order, CBI, Anti Corruption Bureau (ACB), Hyderabad registered A CASE being RC 19 (A) I 2011-CBl-Hyderabad on 17.O8.2O11 under Sections 120B read with Sections 42O, 4O9 and 477A of the Indian Penai Co<le, 1860 (lPC) and Section 13 (2) read with Section 13 (1) (c) and (d) of the Prevention of Corruption Act, 1988 (briefly, 'the P.C.Act' hereinafter) against Sri Y.S.Jagan Mohan Reddy (Accused No.1) and 73 others.

6. After conclusion of investigation, CBI filed final report under Section 173 Cr.P.C in the form of a charge sheet being C.C.No.9 of 2Ol2 dated 13.08.2012 putting up 14 accused persons to face trial. This included the petitioner as accused No.1O, i.e., M/s.Vanpic Projects Pvt. Ltd., represented by its

Chairmal Sri Nimmagadda Prasad. I 3

7. The Court of Principal Special Judge for CBI Cases, Nampalli, Hyderabad (CBI Court) registered the same as C.C.No.14 of 2Ol2 and took cognizance of the allegations made against the accused persons on 13.09.2012. Insofar the petitioner is concerned, the CBI Court took cognizance of the charge sheet against the petitioner represented by its Chairman Nimmagadda Prasad as accused No.1O for offences under Sections 1208, 42O,4O9,467,468, 47 I and 477A of IPC.

8. Against the aforesaid order dated 13.O9.2OL2 -a,hereby the CBI Court had taken cognizance of the charge sheet filed against the petitioner, the present petition has been filed for quashing of the same insofar petitioner is concerned

9. Mr. T.Niranjan Reddy, learned senior counsel for the petitioner submits that learned CBI Court had erred in taking cognizance against the petitioner without assigning any valid reasons. From a perusal of the cognizance order, it is clearly discernible that there was no application of mind by the CBI Court while taking cognizance of the alleged offences qua the \ 4 petitioner which has vitiated the order of cognizance Petitioner is an artificial person. There is no material on record to justify prosecution of an artificial person like the petitioner. This aspect was completely overlooked by the CBI Court

9.1 Learned senior counsel submits that from a perusal of the final report, statement of witnesses and the connected materials, it is crystal clear that no pima facie case has been made out against the petitioner for any of the alleged offences. Therefore, learned CBI Court fell in error in taking cognizance against the petitioner for alleged offences under Sections 1208,42O,4O9,467,46a,471 and 477A of IPC in a highly mechanical marner de hors the materials on record. 9 .2 According to learned senior counsel, learned Court below had failed to see that the investigating agency had produced only those documents which they believed supported their allegations by suppressing vital exculpatory evidence including the following correspondences between / 5 Government of Ras Al Khaimah (GORAK) and Government of lndia: 1) 2l 3) 4l Irtter from Member of the UAE Supreme Council and Ruler of Ras Al Khaimai to the Prime Minister of tndia; ktter from CEO of RAKIA to the Chief Minister of Andhra Pradesh; l€tter from General legal Counsel of RAKIA to Government of Andhra Pradesh; and RAKIA responses to 58 queries of CBI.

9.3 Learned senior counsel submits that the CBI Court had failed to see that the investigating agency had deliberately rnithheld the above documents which would demor-rstrate that the petitioner had acted within the framework of the concession agreement. Thus the investigating agency had not conducted the investigation in fair manner. However, this aspect of the matter was overlooked by the CBI Court.

9.4 It is further submitted that the CBI Court had failed to see that the prosecution was making allegations based on the memorandum of understanding (MoU) dated 11.03.2008 entered into between GORAK and Government of Andhra Pradesh whereas the lega1 contract dated 11.O7.2008 had superseded the earlier MoU. The legal contract dated

11.O7.2OO8 was in fact approved by the Council ol Ministers \ \ 6 which fact would falsify the case of the prosecution. Al1 alienations or acquisitions of lands for the VANPIC project was approved by the cabinet which falsifies the main allegation that benefits were granted to the petitioner at the behest of the Chief Minister who was under the influence of his son.

9.5 Learned senior counsel has painstakingly referred to the charge sheet dated 13.08.2012 and submits therefrom that the ailegations in the charge sheet qua the petitioner are based on surmises and conjectures without an iota of truth' There was no charge of conspiracy. Initiation of crirninal proceedings is nothing but an attempt to harass the petitioner. Referring to the decision of the Supreme Court in State of Haryana v. Ch.Bhajan Lall, learned senior counsel submits that the present is a fit case for quashing of the criminal proceedings against the petitioner. No ingredients forming the offences under Sections 1208 read with Sections 42O , 4O9 , 467 , 468, 47 I and 477 A of IPC have been made out against the petitioner. In such circumstances, learned senior ' ntR tggz sc eoq 7 counsel submits that allegations against the petitioner, which who is a juristic person, are false ald baseless. It would be a travesty of justice if the petitioner and those in-charge of managerial positions of the petitioner are compelled to undergo the ordeal of a long drawn criminal trial since the outcome thereof is a foregone conclusion. Therefore, learned senior counsel submits that present is a fit case for quashing the charge sheet filed in C.C.No.14 of 2Ol2 qua th,e petitioner.

10. Learned Special counsel for CBI has referred to the cognizance order dated 13.O9.2012 and submits that an order of cognizance need not be a long and detailed order. Any further reasons in the cognizance order would oniy jeopardize the petitioner. He has also referred to the charge sheet submitted and the circumstances reiied upon by CBL According to learned Special Counsel, the arguments advanced on behalf of the petitioner are virtually its defence in the tria-l. It is settled law that petitioner cannot be exonerated at this stage of the proceedings on the basis of its defence. Therefore, he submits that no case for interlerence is called for at this stage. \ 8

10.1 Learned Special counsel for CBI has referred to the manner in u'hich accused No.3 'q,ho is the Chairman of the petitioner had changed the shareholding of the petitioner company. In this connection he has placed reliance on the decision of the Supreme Court in Sunil Bharati Mittal v. CBI2, more particularly, to paragraph No.40 thereof to contend that the criminal intent of the alter ego of the company i.e. the person or group of persons that guide the business of the company could be imputed to the company/corporation. If the person or group of persons who control the affairs of the company commit an offence with a criminal intent, their criminality can be imputed to the company as well, as they are the alter ego of the compa:ry. He has also referred to the decision of the Supreme Court in Amit Kapoor v. Ramesh Chander3, more particularly to paragraph No. 18 thereof. He submits that norma-lly revisional jurisdiction should be exercised on a question of law. Basically, such a power is reqtrired to be exercised to ensure that justice prevails and that there is no abuse of the criminal process. Merely, an '1zors1 a scc oos '1zotz1 s scc aeo I 9 apprehension or suspicion would be no ground for interference urrder Section 482 Cr.P.C.

10.2 Insofar the allegations against the petitioner uls-a-u6 individual sections of IPC are concerned, he submits that the Court cannot vivisect and look at each one of the sections separately and declare the petitioner as innocent. Tria,l in such a case is implicit. 1i. In his reply submissions, Mr.T.Niranjan Reddy, learned senior counsel, submits that all sections of Cr.P.C. are not attracted in the present case. In this connection he has referred to Section 1O of the Indian Evidence Act, 1872. He further submits that respondent has not replied as to why the vital documents have not been produced. He submits that suppression of a vital document by the investigating agency is a seriorls matter. In this connection he submits that GORAK has got no grievance against accused No.3 (Nimmagadda Prasad) or for that matter, the petitioner, so also the Government of Andhra Pradesh. According to him, since this is a case of documentarlr evidence and each document is valid \ 10 as on date, the prosecution cannot go beyond those documents. The present case fa,lls squarely within the mandate of Clause (7) of Ch.Bhajan Lal (supra) and, therefore, the charge sheet against the petitioner should be quashed.

12. Submissions made by learned counsel for the parties have received the due consideration of the Court. Also perused and considered the decisions cited at the bar.

13. At the outset, the charge sheet filed by the CBI before the CBI Court may be adverted to.

14. The charge sheet was filed in the form of final report under Section 173 Cr.P.C. on 13.O8.2012. As per the charge sheet, 11 persons have been put up as accused to lace trial including the petitioner as accused No.1O. Petitioner is M/s. VANPIC Projects Private Limited, represented by its Chairman, Sri Nimmagadda Prasad, who is also arrayed as accused No.3 in his individual capacity. Petitioner is a company i.e., an artificial person being represented by its Chairman. As per the charge sheet, two writ petitions were . filed in the then composite High Court of Andhra Pradesh / 11 being W.P.No.794 of 2011 by Sri P.Sankar Rao, MLA and W.P.No.66O4 of 2011 by Sri Yerram Naidu, former M.P. High Court passed order dated 10.08.2011 directing CBI to register a case and conduct thorough investigation into allegations of financial misdeeds involving huge amount of government largesse, corporate dealings including huge investments as part of quid pro quo arrangement for the largesse and for the benefits obtained by the investors from the State of Andhra Pradesh and also in all related aspects.

15. Following the above order of the High Court, CBI, ACB, Hyderabad registered C SC being RC 19 (A)/2O11-CBI- Hyderabad oo |7.OB.2O1 1 under Sections 1208 read with Sections 42O,4O9 and 477A IPC and Section 13 (2) read with Section i3 (1) (c) and (d) of the P.C.Act against Sri Y.S.Jagan Mohan Reddy as accused No.1 and 73 others including the petitioner. As per the allegations made in the FIR, Sri Y.S.Rajasekhar Reddy, who was father ol accused No.1 was sworn in as Chief Minister of Andhra Pradesh on 14.05.20O4. Accused No.1 and his father had adopted several ingenious ways to arrlass illegal wealth rvhich resulted in great public t2 injury. It was alleged that as Chief Minister of Andhra Pradesh from May, 2OO4 to August, 2OO9, Y.S.Rajasekhara Reddy had abused his public office to favour his son, accused No.1. The modus operandi followed by the duo was to dole out public properties, licenses, allotting/granting various projects, Special Economic Zones (SEZs), mining leases, ports, real estate permissions and other benefits to persons of their choice violating established norms and procedures of the Government of Andhra Pradesh for quid pro quo. The beneficiaries, in turn, have given bribes to accused No.l under the guise of purchasing shares in M/s. Jagati Publications Private Limited (accused No.1 1) and other companies floated by accused No. 1 at very high and unsubstantiated premia. Role of accused No.1 was to exercise undue influence over his father and other public servants to ensure that the benefits were conferred on the chosen persons and in the process received illegal gratifications amounting to thousands of crores of rupees. Since May, 2004, accused No.1 started floating number of companies including M/s. Jagati Publications Private Limited (accused No.11) with I 13 the sole objective of laundering the ill gotten wealth obtained by misusing the office of his father.

16. It was further alleged in the FIR that the Government of Andhra Pradesh had awarded VANPIC project in Prakasam and Guntur districts to the companies promoted by accused No.3 -Nimmagadda Prasad. [n this connection, Government of Andhra Pradesh a-llotted more than 15,000 acres of land to the said company vioiating all norms and procedure. Many benefits were granted to accused No. 10 M/s. VANPIC Projects Private Limited in an illegal marner. As a quid pro quo accused No.3 Sri Nimmagadda Prasad made investments in the companies floated by accused No. 1 i.e. accused Nos. 1 1, 12 and 13 at very high premia. Allegation was that such investments were nothing but bribe money paid by beneficiary companies and individuals who got allotment of lands for Special Economic Zones (SEZs), irrigation projects etc. This was kick back money paid to accused No.1 who had exercised his personal influence over his father for personal benelits at the cost of public exchequer. Referring to accused No.11 M/s. Jagati Publications Private Limited, it rvas alleged that 1 14 though the company had accumulated a business loss of Rs.350 crores in four years time but it could get total investment of Rs.1246 crores. The charge sheet gave details of the transactions and thereafter summed up the prosecution case in the lollowing manner:

406. Late Dr.Y.S.Rajasekhar Reddy was the then Chief Minister of Andhra Pradesh from May, 2OO4 ttll his death on O2.O9.2OO9. Sri Y.S.Jagan Mohan Reddy (A. 1) is the son of late Y.S.Rajasekhar Reddy and Sri V.Vijaya Sai Reddy (A.2) has been a long time financial advisor of their family and director of some of the companies floated by Sri Y.S.Jagan Mohan Reddy (A.1) including M/s. Jagati Publications R/t. Ltd. (A. 1 1). 407- During the year 2008, Government of Andhra Pradesh proposed to develop two sea ports :rt Vodarevu and Nizampatnam and port based industrial corridor in Prakasam and Guntur districts ald named it as Vodarevu and Nizampatnam Ports and port based Industrial Corridor, in short called VANPIC Project and awarded the same for development to GovelTlment of Ras Al Khaima (RAK) on Government to Government (G2G) basis avoiding open competitive bidding process. The estimated project cost was Rs. l7,OO0 crores. The principal terms and conditions include that Government of RAK shall contribute not less than 51% of the approved project cost and it shall hold 51olo of the equitl' in the special purpose vehicles (SP\t to be formed for implementation of VANPIC Project.

408. M/s. Matrix Enport Hoidings A/t. Ltd promoted by Sri Nimmagadda Prasad (A.3) and his younger brother Sri Nimrnagadda Prakash (A.9) entered into VANPIC Projcct as an Indian partner with. 49o/o of tJle equity in the proposed special purpose vehicle (SPV) M/s. Vanpic Ports Rrt. Ltd.'

409. On 29.06.2008 the then Chief Minister Dr. Y.S.Rajasekhar Reddy in a special meeting convened decided to a.llot 24000 acres of lands for the development of Industrial Corridor of VANPIC Project. / 15

410. On the basis of a Cabinet Memoriurdum placed by Infrastructure & lnvestment Department (I & I), the Andhra Pradesh State Council of Ministers has approved awarding of entire VANPIC Project or-r Build Ovsn Operate and Transfer (BOOT) basis to the SPV M/s. Vanpic Ports Pvt. Ltd. and to a11ot 4,000 acres of lard, 2OOO acres each, for both the porls on lease basis. The Cabinet also accorded approval for the draft Concession Agreement. Sri Mopidevi Venkata Rzrmana Rao (A.4) ard Dr. Manmohan Singh, IAS (A.7) were the Minister and Secretary of I & I Department respectively at the relevant period. Sri K.V.Brahmananda Reddy, IRAS (A.6) the then Special Secretary of I & I Department and Sri Nimmagadda Prasad (A 3) signed the Concession Agreement on 1 1.07.2008.

411. After the demise of Dr. Y.S.Rajasckhar Reddy in September, 2OO9, Government of Andhra Pradesh observed that the Concession Agreement signed on 11.07.2008 contained many serious deviations from the Cabinet approval ald the spirit of Memoraldum of Understanding (MoU) dated 1 1 .03.2008 entered into between Government of Andhra Pradesh (GoAP) and Government of Ras-Al-Khaima (RAK). The said deviations are discernibly blatalt, and cannot be construed as inadvertent aid are detrimental to the interest of Government of Andhra Pradesh.

412. These deviations include provision for dilution of RAK's share in the SPV from 51%o to 260/o r,vithout knowledge/approval of Government of Andhra Pradesh against the spirit of the concept of Government to Government (G2G) contract. This provision facilitated clandestine entry of a private company viz, M/s.Navayrga Engineering Company Ltd., into VANPIC Project with 65% equity in the SPV, keeping Government of Andhra Pradesh in total oblivion as to dilution of the eguity of RAK and induction of an alien party taking reigns of SPV.

413. The other major deviation is the applicatrility of BOOT concept only to the two ports (4,OOO acres) but not to the industrial corridor of VANPIC Project comprising of 24000 acres, whereby the transfer of industrial corridor assets on completion of the concession period to the Government is not incorporated. This resulted in divesting the Governmcnt of Andhra Pradesh of its legitimate claim on revcnuc sharc and rights over ttle 16 industrial corridor assets concession period. on such completion of

414. On 08.08.2008, Sri K.V.Brahmananda Reddy (.4.6) directed the District Collectors of Prakasam and Guntur Districts to send land alienation proposal for industrial corridor in favour of M/s. Vanpic Projects Pvt. Ltd (A. 10), a private company controlled by Sri Nimrnagadda Prasad (A.3) deceptively using the same acronJ,.rn (VANPIC) instead of M/s. Vanpic Ports Prt. Ltd., the Cabinet approved sPV. 4 15. The Empowered Committee headed by the Chief Commissioner of Land Administration (CCLA) considered the proposals and recommended for alienation of lands in favour of M/s. Vanpic Ports Pvt. Ltd. Sri M.Samuel (A.8), the then Principal Secretaqr, Revenue Department, a member in the Empowered Comrnittee and Sri Dharmana Prasada Rao (A.5), tJ:e then Minister of Revenue Department approved and placed the proposals before the Council of Ministers for alienation of lands in favour of M/s. Vanpic Projects R/t. Ltd.' (A.10) against the specific recommendation of the Empowered Committee to a-lienate la-nd to M/s. Vanpic Ports Pvt. Ltd', the SPV. Basing on cabinet approvals on the proposals of Revenue Department, Government Orders (G.Os) were issued alienating larrds in favour of M/s. Vanpic Projects R.t. Ltd' (A.10). Sri Nimmagadda Prasad (A.3) and his associates directly made the pa5rments to the landowners basing on the G.Os issued by Sri M.Samuel, IAS (A.8) and such payments do not have the approval of the Cabinet.

416. The Council of Ministers and the then Chief Secretary of the Government of Andhra Pradesh were unaware of t-he facts as to that ari extent of 24OOO acres of land was sought for the industria-l corridor and that the same was being alienated to M/s. Vanpic Projects Pvt. Ltd, (A. 1O) instead of M/s.Vanpic Ports Pvt. Ltd, the SPV as part of VANPIC Project for the purpose of development.

417. The fact remajns that M/s. Vanpic Projects Pvt. Ltd, is an alien comp.rny controlled by Sri Nimmagadda Prasad (A.3) and that there was no privity of contract between Government of Andhra Pradesh and M/s.Vanpic Projects Pvt. Ltd., for the purpose of enforcing the rights of the Government on the project. 71

418. The Government of Andhra Pradesh at the instance of the then Chief Minister Dr. Y.S.Rajasekhar Reddy, has awarded several projects viz., shipyard at Vodarer'u, Regional Airport at Ongole and ttre appurtenant concessions to the companies controlled by Sri Nimmagadda Prasad (A.3) and his associates without inviting tenders in the guise of G2G floating / agreements.

419. Sri Nimmagadda Prasad (A.3) in furlherance of criminal conspiracy in the guisc of investments paid illegal gratilication of Rs.854.50 crores to Sri Y.S.Jagan Mohan Reddy (A.l ) and his group companies.

420. As a quid-pro-quo to the investments made by Sri Nimrnagadda Prasad (A.3) into the companies of Sri Y.S.Jagan Mohan Reddy (A.1) and his group companies, Sri Y.S.Rajasekhar Reddy, the then Chief Minister of Andhra Pradesh under the influence of Sri Y.S.Jagan Mohan Reddy (A.1) extended many undue favours such as exemptions from land ceiling Act and benefrts in zonitg regulations besides awarding infrastructure projects viz., VANPIC Shipyard and Airport.

17. Thereafter, the roles of the accused have been analysed in the cha-rge sheet. Insofar the petitioner M/ s. Vanpic Projects Rrt. Ltd (A. 1O) represented by Sri Nimmagadda Prasad (A.3) is concerned, the charge sheet mentions as under: M/s. Vanpic Proiects h . Ltd.. (A.10t reoresented bv Sri N dda Prasad lA.3I: M/s. Vanpic Projects Pvt. Ltd (A.10) was originally incorporated on 18.0l.2OO8 with the name and style of 'Matrix Enport Holdings Pvt. Ltd.,' with Sri Nimmagadda Prasad (A.3) and his brother Sri Nimmagadda Prakash (A.9) as the origina-l subscribers. Subsequently, name of 'Matrix Enport Holdings Pvt. Ltd.,'was changed as M/s. Vanpic Projects Pvt. Ltd (A.10) with an evil intention to reap undue benefits under deception. Sri Nimmagadda 18 Prasad (A.3) in furtherance of criminal conspiracy got a clause incorporated in the draft Concession Agreement giving a provision for induction of SPVs by the concessionaire M/s. Vanpic Ports Pvt. Ltd. The said Concession Agreement was got approved by the Council of Ministers under deception. Subsequently, the M / s. Vanpic Ports Pvt. Ltd declared M/s. Vanpic Projccts Rt. Ltd (A.fO) as SPV for execution of industrial corridor works. M/s. Vanpic Projects Pvt. Ltd (A.i0) represented by its Chairman, Sri Nimrnagadda Prasad (A.3) has siphoned out arrd diverted funds of RAKIA for the purposes other than earmarked depriving t}re VANPIC Project of its funds. It has a-lso illegally acquired industrial corridor lands and alienated the same to private parties defeating the interest of t}re VANPIC Project and causing wrongful loss to the Government. By its overt acts M/s. Vanpic Projects Prt. Ltd (A. 1O) represented by its Chairman, Sri Nimmagadda Prasad (A.3) has committed offences u/s. f 20B, 42O, 4O9, 467, 468, 47 r,477-AtPC.

18. Thus, the allegation against the petitioner is that it was originally incorporated on 18.01.2008 under the name and st14e of 'Matrix Enport Holdings Rrt. Ltd., u,ith accused No.3 Sri Nimmagadda Prasad (A.3) arrd his brother Sri Nimmagadda Prakash (A.9) AS original subscribers. Subsequently, the narne of the company \ ras chalged to Vanpic Projects Private Limited (A. 1O) with the intention to reap undue benefits under deception. Sri Nimmagadda Prasad (A.3) in furtherance of criminal conspiracy got a clause incorporated in the draft concession agreement for induction 19 of SPVs by the concessionaire M/s. Vanpic Ports Pvt. Ltd. The said concession agreement was got approved by the Council of Ministers under deception. Subsequently, M/s. Vanpic Ports Private Limited declared Vanpic Projects Private Limited (A. 1O) as SPV for execution of the industriai corridor works. Accused No.lO i.e. petitioner represented by its Chairman- accused No.3 had siphoned out and diverted funds of RAKIA for purposes other than earmarked depriving the VANPIC project of its funds. It had also illegally acquired industrial corridor lands and alienated the same to private parties defeating the interest of the VANPIC project and causing wrongful loss to the government. Thus by its overt acts accused No.1O represented by its Chairman (A.3) had committed the offences punishable under Sections l2OB, 420, 4O9, 467, 468, 471 and 477-A of IPC.

19. After the charge sheet was filed belore the CBI Court, C.C.No.14 of 2Ol2 was registered. Cognizance was taken on

13.O9.2012, whereafter, direction was issued for serving summons to the accused persons. Cognizance order dated

13.O9.2012 is extracted hereunder: 2o Charge sheet filed in R.C.19(A)/20 1 i (Sri Nimmagadda Prasad and Vanpic Projects) by the Chief Invcstigating Ofhcer, CBI, Hyderabad against A. I to A. 14 a-rld this court taken cognizance on 13.09.2012. t3 9-2012: Perused the charge sheet, relevant documents and office note and also perused the decisions (i) AIR 2007 SC pg.1274, (ii) 1999 Cril.L.J. pg.3696. In the light of above material, the charge sheet is taken on file as follows: Against A1 - Y.S.Jagan Mohan Reddy for the offences U/s. 120-8, 42O,4O9 IPC and U/s. 9 and 12 of P.C Act, 1988. A2 - V.Vijay Sai Reddy for the offences U /s. 12O8,42O & 468 IPC. A3 - Nimmagadda Prasad for the offences U/s.12O-B, 42O, 4O9, 419, 467, 468, 47 1 and 477 -A IPC. A4 - Mopidevi Venkata Ramana Rao for the offences U/s.120-B, 420 & 409 IPC. A5 - Dharmana Prasada Rao for the offences U /s.l2O-8, 420 & 409 IPC. ,4.6 - K.V.Brahmanalda Reddy for tf-re offences U/s. 120- B, 420 & 409 IPC. A7 - Dr. Manmohan Singh for the offences U/s.120-8, 420 & 409tPC. A8 - Mylapalli Samuel for the offences U /s.72O-8, 42O & 409 IPC. .{9 - Nimmagadda Prakash for tJle offences U/s.l2o-B, 42o , 4O9 , 419 , 467 , 468, 47 | and 477-AIPC. AlO - M/s. Vanpic Projects Pvt. Ltd rep by its Chairma:r, Nimmagadda Prasad for the offences U /s.12O-8, 42O, 4O9, 467 , 468, 47 | and 477-A IPC. A11 -M/s. Jatagi Publications Pvt. Ltd rep by it's the then Director, Y.S.Jagan Mohan Reddy for the offences U/s. 120-8, 42O, 468 and471 IPC. 21, Ai2 - M/s. Raghuram Cement Corporation Pvt. Ltd I M/s. Bharathi Cement Corporatron Pvt. Ltd, rep. by it's tJle tJ:en Director, Y.S.Jagan Mohan Reddy for the offences U/s.120-B and 420 IPC. A13 - M/s. Carmel Asia Holdings Pvt. Ltd rep. by its the then Director, Y.S.Jagal Mohan Reddy for the offcnces U/s. 120-8,42O,46a and 471 IPC. A14 -M/s. Silicon Builders Rrt. Ltd, rep. by its the then Director, Y.S.Jagan Mohan Reddy for the offences U/s.120-B and 42O IPC. The offences U/s. l3 (21 r/w 13 (1) (c) (d) of Prevention of Corruption Act, 1988 attributed against A4 to A.8 are concerned, the investigating officer is directed to frle sanction orders contemplated U/S.19 of P-C. Act without which no cognizance can be taken for the said offences against sa.id accused. Offrce is directed to register CC and serve summons to A2, A.5 and A.7 to A.14 for their appearance before this court on 25-9-2012. A.1, A.3, A.4 and A.6 are in judicial custody. Hence inlorm jail authorities. Call on 25-9-2012.

20. The cognizance order, as extracted above, will be dealt with a little later. 2L. Chapter XIV Cr.P.C deals with conditions requisite for initiation of proceedings. Cognizance of offence by Magistrates is provided for in Section 190 Cr.P.C. Sub-Section (1) says that any Magistrate of the first class arrd any Magistrate of the second class specially empowered in this beha-lf under Sub-Section (21 rnay lake cognizance of any offence (a) upon 22 receiving a complaint of facts which constitute such offence; (b) upon a police rcport of such facts; (c) upon information received from any person other than a police officer or upon his common knowledge, that such offence has been committed. Sub-Section (21 says that Chief Judicial Magistrate may empower any Magistrate of the second class to take cognizance under Sub-Section (1) of such offences as are within his competence to enquire into or try. 22 . Chapter XV deals with complaints to Magistrates. Section 200 Cr.P.C. provides for examination of complainant. Section 2O2 Cr.P.C deals with postponement of issue of process. As per Sub-Section (1) any Magistrate on receipt of a complaint of an offence of which he is authorized to take cognizance or which has been made over to him under Section 192 Cr.P.C. may, if he thinks fit, postpone the issue of process against the accused and either enquire into the case himself or direct an investigation to be made by a police officer or by such other person as he thinks fit for the purpose of deciding whether or not there is sufficient ground for proceedings. In terms of Sub-Section (2), in an enquiry under - Sub-Section (1), the Magistrate may if he thinks fit take evidence of witnesses on oath.

23. Chapter XVI dea-ls with commencement of proceedings before Magistrates. Under this chapter, Section 2O4 Cr.P.C provides for issue of process. As per Sub-Section (1), if in the opinion of a Magistrate taking cognizance ol an offence there is sufficient ground for proceeding, and the case appears to be (a) a summons case, he shall issue his summons for the attendance of the accused, or (b) if the case appears to be a warrant case, he may issue a warrant, or, if he thinks fit, a summons, for causing the accused to be brought or to appear at a certain time before such Magistrate or some other Magistrate having j urisdiction.

24. In the case of Smt. Nagav/wa v. Veeranna Shivalingappa Konjalgia Supreme Court examined the scope of enquiry under Section 2O2 Cr.P.C. It was held that the scope of such enquiry is extremely limited; Iimited only to the ascertainment of the truth or falsehood of the allegations made in the o (rgu e) : scc u:e 24 complaint i.e. (i) on the materials placed by the complainant before the Court, (ii) for the limited purpose of finding out wlrether a prima facie case for issue of process has been made out; and (iii) for deciding the question purely from the point of view of the complainant without at all adverting to any defence that the accused may have. It is true that in coming to a decision as to whether the process should be issued or not, the Magistrate can take into consideration inherent improbabilities appearing on the face of the complaint or in the evidence ied by the complainalt ln support of the allegations but there appears to be a very thin line of demarcation between a probability of conviction of the accused and establishment of a pima facie case against him. The Magistrate has been given an undoubted discretion in the matter and the discretion has to be judicially exercised by hirn. Once the Magistrate has exercised his discretion it is not for the High Court to substitute its own discrdtion for that of the Magistrate or to examine the case on merits with a view to find out whether or not the allegations in the complaint, if proved, would ultimately end in conviction of the accused 25 Such considerations are totally foreign to the scope ald ambit of an inquiry under Section 2O2 Cr.P.C which culminates into an order under Section 2O4 Cr.P.C. By way of illustration the Court held that in the foilowing cases an order ol the Magistrate issuing process against the accused can be quashed or set aside. It was held as under: 5 xxx xxx xxx x)o( xxx xxx (l) Where the allegations made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does net disclose the essential ingredients of an offence which is alleged against the accused; (2) where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a conclusion that there is suflicient ground for proceeding against the accused; (3) where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible; and . (4) where the complaint suffers from fundamental Iegal defects, such as, rvant of sanction, or absence of a complaint by legally competent authority and the tike.

25. The word 'cognizance' though finds place in the Cr.P.C, however, is not a defined expression. In Chief Enforcement Officer v. Videocon International Limiteds Supreme Court held that the expression 'cognizance' has not been delined in ' lzoosy z scc csz 26 the Cr.P.C, but the said u.'ord is indefinite import. However, It has no esoteric or mystic significance in criminal lar,r,. It merely means 'become aware of' and u,hen used with reference to a Court or a Judge, it connotes 'to take notice ol judicially'. It indicates the point when a Court or a Magi ave$ takes judicial notice of an offence with a vieu, to init proceedings 1n respect of such offence said to h committed by someone. Thus it connotes that judicial noticq is taken note of an offence after application of mind. It wa held as follows:

20. Taking cognizance' does not involve any formal action of any kind. It occurs as soon as a Magistrate applies his mind to the suspected commission of an offence. Cognizance is taken prior to commencement of criminal proceedings. Taking of cognizance is thus a sine quq non or condition precedent for holding a valid trial- Cognizance is taken of an offence and not of an offender. Whether or not a Magistrate has taken cognizance of an olfence depends on the facts and circumstalces of each case and no rule of universal application can be laid down as to when a Magistrate can be said to have taken cognizarce.

26. In Mehmood Ul Rehman v. Khazir Mohammad6 Supreme Court referred to various case laws and thereafter observed that cognizance of an offence on complaint is taken for the purpose of issuing process to the accused. Since it is a " 1zors1 rz scc azo 27 process of taking judicial notice of certain facts which constitute an offence, there has to be application of mind as to whether the allegations in the complaint, when considered along with statements recorded or the inquiry conducted thereon, would constitute violation of law so as to call a person to appear before the criminal Court. It is not a mechanical process or a matter of course. To set in motion the process of criminai law against a person is a serious matter. Thus, reiterating what has been held by the Supreme Court, taking of cognizance presupposes application of mind as to whether a person should be summoned as an accused or not which is certainly not a mechalical process. 27 . This position was reiterated by a constitution Bench of the Supreme Court in Sarah Mathew v. Institute of Cardio Vascular DiseasesT. It has been held as follows: It is now necessary to see what the words 31. 'taking cognizance' mean. Cognizance is an act'of the court. The term 'cognizance' has not been defrned in the Cr.P.C. To understand what this term means we will have to have a look at certain provisions of the Cr.P.C. Chapter XIV of the Code deals with 'Conditions requisite for initiation of proceedings'. Section 190 thereof empowers a Magistrate to take cognizance upon (a) receiving a complaint of facts which constitute such offence; 'eoulzsccaz (b) a police rcport of such facts; (c) inlorrnation received from any person other than a police officer, or upon his orvn knorvledge, that such oflence has been committed. Chapter XV relates to 'Complaints to Magistrates'. Section 200 thereof provides for examination of the complainallt and the witnesses on oath. Section 201 provides for the procedure which a Magistrate who is not competent to take cognizance has to follow. Section 202 provides for postponement of issue of process. He may, if he thinks ht, and shall in a case vvhere the accused is residing at a place beyond the area in which he exercises his jurisdiction, postpone the issue of process against t-he accused and either inquire into the case himself or direct an investigation to be made by a police oflicer for the purpose of deciding whether there is sufficient ground for proceeding. Chapter XVI relates to commencement of proceedings before the Magistrate. Section 204 provides for issue of process. Under this section if the Magistrate is of the opinion that there is sufficient ground for proceeding and the case appears to be a summons case, he shall issue summons for the attendance of the accused. In a warrant case, he may issue a wa-rrant. Thus, after initiation of proceedings detailed in Chapter XIV, comes the stage of commencement of proceedings covered by Chapter XVT )o(x )o(x )o(x )o(x xxx

34. Thus, a Magistrate tales cognizance when he applies his mind or takes judicial notice of an offence with a view to initiating proceedings in respect of offence which is said to have been committed. This is the special connotation acquired by the term 'cognizance'and it has to be given the same meaning wherever it appears in Chapter XXXU. It bears repetition to state that taking cognizance is entirely an act of the Magistrate. Taking cogrizance may be delayed because of several reasons. It may be delay-ed because of systemic reasons. It may be delayed because of the Magistrate's personal reasons.

28. Again in S.R.Sukumar v. S.Sunaad Raghurams Supreme Court held that cognizance has a reference to the application '1zors1s scc sos 29 of judicial mind by the Magistrate in connection with the commission of an offence. It was held as follows: 1,2. "Cognizance" therefore has a reference to the application of judicial mind by the Magistrate in connection with the commission of al offence ard not merely to a Magistrate learning that some offence had been committed. Only upon examination of the complainant, the Magistrate will proceed to apply thc judiciat mind whether to take cognizance of the offence or not. Under Section 200 Cr.P.C., when the complainant is examined, the Magistrate cannot be said to have ipso facto taken the cognizance, when the Magistrate was merely gathering the material on the basis of which he will decide whether a prima facie case is made out for taking cognizance of the offence or not. "Cognizalce of offence' means taking notice of the accusations and apptying the judicial mind to the contents of the complaint and the material filed therewith. It is neither practicable nor desirable to define as to what is meant by taking cognizance. Whether the Magistrate has taken cognizalce of the offence or not will depend upon facts and circumstarces of the particular case.

29. In the present case petitioner is a company, a juristic person. It has been arrayed as accused No.lO through its Chairman. Question is whether the petitioner can be criminally proceeded against? Corollaqr to the above question, is the question as to whether there was application of mind by the CBI Court while taking cogrizaice?

30. In Sunil Bharati Mittal v. CBI (supra) Supreme Court exa-rnined the principl e of alter ego in the backdrop of \, 30 commission of an offence involving a company or corporation After a detailed analysis, Supreme Court held that the criminal intent of the alter ego of the company i.e. personal group of persons that guide the business of the compary would be imputed to the company/corporation. If the person or group of persons who control the affairs of the company commit an offence with a criminal intent, their criminality can be imputed to the company as well as they a-re the alter ego of the company. After holding so, Supreme Court discussed the circumstances when the Director/ person ln charge of the affairs of the company can also be prosecuted when the company is an accused person. It has been held as follows:

42. No doubt, a corporate entity is an artificial person which acts through its officers, directors, managing director, chairman etc- If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifrcally provides so.

43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made accused, along with the company, if there is suflicient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases $,here the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporal ing such a provision. 31 xxx xxx xni >

44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect- One such example is Section 141 of the Negotiable lnstruments Act, 1881. In Aneeta Hadae. the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable lnstnrments Act has to be understood. Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of "alter ego", was applied only in one direction namely where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in conkol and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company.

31. Thus from the above, it is discernible that if an offence is allegedly committed involving a company or a corporation the criminal intent of the alter ego of the company or corporation would be looked into. Alter eEto means a person or a group of persons who control the affairs of the company or the corporation. However Supreme Court sounded a note of caution that since corporate entity is an artificial person there can be no vicarious liability of the alter eEIo unless the statute specifically provides for because it is the cardinal principie of \ 'aneeta Hada v. Godfath er Trave Is & Tours (p) Lrd-, (2012)S SCC 661 32 criminal jurisprudence that there can be no vicarious liability unless the lau, so provides. In this connection, an example has been given of Section 141 of the Negotiable Instruments Act, i881. Therefore it has been held that u'hen a company or a corporation is ar offender, vicarious liability of the directors or tl:e alter ego cannot be imputed automatically if there is no statutory provision to this effect.

32. In the recent decision of the Supreme Court in Ravindra Bajpe v. Mangalore SEZ Limitedlo Supreme Court held that summoning of an accused in a criminal case is serious matter. Criminal law cannot be set into motion as a matter of course. In the order issuing summons, the learned Magistrate has to record his satisfaction about the prima facie CASC against the accused who are Managing Director, Compaly Secretary and the Directors of the company and the roie played by them in their respective capacities which is sine qua non tor initiating criminal proceedings against them. Merely because the accused are ofiicials of the compaly, they cannot be held vicariously iiable unless there are specific allegations / 1o ( rimin.l Appeal N os 1A4 / 1O481?O2l decided an 21 .O9.2021 against them. In the facts of that case, Supreme Court found that the learned Magistrate had not recorded his pima facie satisfaction that a case against the officia-ls of the company was made out or not. Merely because respondents therein u,ere officials of the company, they could not automatically be held vicariously liable, unless there are specific allegations against each one of them with respect to their individual role. Thus Supreme Court. held that the High Court had rightly dismissed the revision application by confirming the order of the Sessions Court quashing the order of the learned Magistrate in issuing summons to the respondents therein. It has been held as follows:

8.3 As held by this Court in the case of GHCL Employees Stock Option Trust v. India Infoline Limitedrt, in tlle order issuing summons, the learned Magistrate has to record his satisfaction about a prima facie case against the accused who are Malaging Director, the Company Secretary arld the Directors of the Company and the role played by them in their respective capacities which is sine qua non for initiating criminal proceedings against them. Iroking to the averments arld the allegations in the complaint, there are no specihc allegations and/or averments with respect to role played by them in their capacity as Chairman, Managing Director, Executive Director, Deputy General Manager and Planner & Executor. Merely because they are Chairman, Managing Director/ Executive Director and/or Deputy General Manager and/or Planner/ Supervisor of A1 & 4.6, without any specihc role attributed and the role played by them in their capacity, they cannot be arrayed as an accused, more particularly they cannot be held vicariously liable for the offences committed by 41& A6. " lzor:1 a scc sos 34

9. From the order passed by the learned Magistrate issurng thc process against the respondents herein - accusecl Nos.l to 8, there does not appear that the learned Magistrate has recorded his satisfaction about a prima facie case against respondent Nos.2 to 5 and 7 and 8. Merely because respondent Nos.2 to 5 and 7 & 8 are the Chairman/ Managing Director/Executive Director/Deputy General Manager/Planner & Executor, automatically they cannot be held vicariously liable, unless, as observed hereinabove, there are specific altegations and averments against them with respect to their individual role. Under the circumstances, the High Court has rightly dismissed the revision applications and has rightly confirmed the order passed by the learned Sessions Court quashing and setting aside the order passed by the learned Magistrate issuing process against respondent Nos.1 to 8 herein original accused Nos.1 to 8 for the offences punishable under Sections 427, 447 , 506 and 1208 read with Section 34 IPC,

33. Reverting back to the present case, more particularly to the cognizance order dated 13.09.2012, it is seen that the CBI Court merely recorded that it had perused the charge sheet, relevant documents, office note and the citations whereafter the charge sheet has been taken on file including as against the petitioner i.e., accused No.10, a corporate entity represented by its Chairman. Thus, the Court below did not record any satisfaction that there is a pima facie case against the petitioner or of the Chairman; whether only the Chairman can be held vicariously liable for commission of alleged offices by the corporate entity. As held by the Supreme Court, there cannot be any automatic fastening of crimina-l culpability on 35 the Chairman for commissiot't of alleged offence b.y thc petitioner i.e., corporate entity. From the order dated

13.09.2012 application of mind by the learned CBI Judge while taking cognizance qua the petitioner, an artificial person, is not at all discernible. It appears to have been done mechanically.

34. Having noticed the above, it would be apposite to deal with the contours of power exercised by the High Court under Section 482 Cr.P.C. Section 482 Cr.P.C. reads as under:

482. Saving of inhereat powers of High Court.- Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to ary order under this Code, or to prevent abuse of the process of any court or otherwise to secure the ends ofjustice.

35. Thus, Section 482 Cr.P.C. provides that nothing therein shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessaqr to give effect to any order under the Cr.P.C or to prevent abuse of the process of any Court or otherwise to secure the ends of justice. Examining this provision, Supreme Court in State of Karnataka v. L. Muniswamyl2 held as under: t, (t977) 2 SCC 699 36 ln the exercise of this wholesome power, the High Court is cntitlcd to quash a proceeding if it comes to the conclusion that allowing the proceeding to continue rvould be an abuse of the process of the Court or that the ends ofjustice require that the proceeding ought to be quashed. The saving of the High Court's inherent powers, both in civil and criminal matters, is designed to achieve a salutary public purpose which is that a Court proceedings ought not to be pe.mitted to degenerate into a weapon of harassment or persecution. ln a criminal case, the veilecl object behind a lame prosecution, the very nature of the material on rvhich the structure of the prosecution rests and the tike would justify the High Court in quashing the proceeding in the interest of justice. The ends of justice are higher than the ends of mere law though justice has got to be administered according to la$,s made by the legislature. The compelling necessity for making these obserations is that without a proper realisation of the object and purpose of the provision which seeks to save the inherent powers of the High Court to do justice between the State and its subjects, it would be irnpossible to appreciate the width and contours of that salient jurisdiction-

36. Thus Supreme Court observed that saving of the High Court's inherent powers is designed to achieve a salutary public purpose; in a criminal case the veiled object behind a lame prosecution, the very nature of the material on which the structure of the prosecution rests and the like would justify the High Court in quashing the proceeding in the interest of justice.

37. The question as under what circumstances and in what categories of cases, a criminal proceeding can be quashed either in exercise of the extra-ordinary po\^rers of the High Court under Article 226 of the Constitution or in exercise of 37 its inherent powers under sectio:n 482 Cr.P.C. was considered in great detail by the Supreme Court in Bhajan Lal (supra). In the backdrop of the interpretation of various relevant provisions of Cr.P.C. and the judicial precedents relating to exercise of the extra-ordinary power of the High Court under Article 226 or the inherent powers under section 482 Cr.P.C., Supreme Court laid dovvn categories of cases by way of illustration wherein such power couid be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice. The categories of cases by way of illustration mentioned in paragraph 7O2 of the report a-re as under: (1) Where the allegations made in the first information report or the complaint, even if they are tal{en at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused; (2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(l) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code; (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of anv offence and make out a case against the accused; (4) Where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police oflicer without an order of a Magistrate as contemplated under Section 155(2) of the Code; (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused; (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing eflicacious redress for the grievance of the aggrieved partyl (7) Where a criminal proceeding is manifestly attended with mala Iide and/or where the proceeding is maliciously instituted with an ulterior motive for rvreaking vengeance on the accused and with a view to spite him due to private and personal grudge.

38. Supreme Court in Priya Vrat Singh v. Shyam Ji Sahail3, relied upon category 7 as laid down in Bhajan Lal (supra) ald observed that Section 482 Cr.P.C. envisages three circumstances under which inherent jurisdiction of the High Court may be exercised, namely, (1) to give effect to an order under the Cr.P.C., (2) to prevent abuse of the process of court, arrd (3) to otherwise secure the ends of justice. It is neither possible nor desirable to lay down any inflexible rule which would govern the exercise of inherent jurisdiction. It is to be exercised ex debito justitiae to do real and substantial justice for the administration of which alone courts exist. In exercise of such powers, court would be justifie d to quash any (2008) 8 SCC 232 '3 39 proceeding if it finds that initiation/continuance of it amounts to abuse of the process of court or quashing of proceeding would otherwise serve the ends of justice. No hard-and-fast rule can be laid down in this regard.

39. That being the position and having regard to the provisions of Section 482 Cr.P.C. as explained above, Court is of the view that it would not at all secure the ends of justice if the criminal prosecution is allowed to continue against the petitioner, a corporate en tity, through its Chairman. Consequently, C.C.No.14 of 2Ol2 pending on the file of the Principal Special Judge for CBI Cases, Nampally, Hyderabad, qua the petitioner is quashed. Criminal Petition is accordingly allowed. However, there shall be no order as to costs. Miscellaneous petitions, if any, pending in this criminal petition shall stand closed. //TRUE COPY// SD/-B.S.CHIRANJEEVI JOINT REGISTRAR i. SECTION OFFICER

1. The Principal Special Judge for CBI Cases, at Red Hills, Nampally, \ To, Hyderabad.

2. The Chief lnvestigating Officer, CBl, Hyderabad' 3. Two CCs to Sri K. Surender, Special Public Prosecutor for Central Bureau of lnvestigation (CBl), High Court for the State of Telangana, at Hyderabad

4. bne CC to Sri T. Nagariuna Reddy, Advocate [OPUC] 5. Two CD Copies 6. One Spare Copy MI/K HIGH COURT DATED:2810712022 --,a=a::'--.::.:= p.u S IA tq: ,i --)c .,) 2 2 AtjE ?tr12 J ORDER CRLP.No.8113 of 2021 ALLOWING THE CRIM!NAL PETITION w