Judicial comity & discipline demands that higher Courts should follow the law: Top Court allows ED’s appeal challenging Allahabad HC orders staying money laundering proceedings against IHFL officers
Justices Bela M. Trivedi & Prasanna B. Varale [13-02-2024]

Read Order: DIRECTORATE OF ENFORCEMENT & ORS v. NIRAJ TYAGI & ORS [SC- CRIMINAL APPEAL NO. 843 OF 2024)

Tulip Kanth

New Delhi, February 14, 2024: The Supreme Court has allowed a plea of the Enforcement Directorate (ED) challenging Allahabad High Court orders in money laundering case registered against Niraj Tyagi- President (Legal), and authorized officer of IHFL- Reena Bagga. The Apex Court opined that the High Court could not have stayed the investigations and restrained the investigating agencies from investigating into the cognizable offences as alleged in the FIRs and the ECIR, particularly when the investigations were at a very nascent stage.

The respondent India Bulls Housing Finance Limited (IHFL) is a non- banking financial institution dealing with the public money. The major source of funds for the loans to be advanced by IHFL, is either the loans from the other banks or from the public in the form of non-convertible debentures. The respondents Niraj Tyagi is the President (Legal) and Reena Bagga is the authorized officer of the IHFL. M/s Kadam Developers Pvt. Ltd. was one of the Shipra Group entities which had a sub- lease of a parcel of land in Noida. The 100% equity shares of M/s Kadam were held by Shipra Estate Limited (98%); Mohit Singh (1%) and Bindu Singh (1%).

Between 2017-2020, IHFL had sanctioned 16 loan facilities to the tune of Rs. 2,801 crores to the Shipra Group/ Borrowers comprising of Shipra Hotels Ltd., Shipra Estate Ltd. and Shipra Leasing Pvt. Ltd. for the purposes of the construction and/or development of Housing/Residential Projects. Against the said sanctioned loan, a sum of approximately 1995.37 crores was disbursed. The financial assistance was secured by the Shipra Group by executing 22 pledge agreements. The mortgaged properties also included 73 acres of land at Noida that had been sub-let to M/s Kadam by YEIDA, and the property called ‘Shipra Mall’ in Ghaziabad.

There being defaults in the repayment of loan amount, IHFL had issued notices recalling all the loans advanced to the Shipra Group amounting to Rs. 1763 crores (approx.). A series of litigations under the SARFAESI Act before the DRT and High Court had ensued between the parties. IHFL ultimately sold the shares of M/s Kadam pledged with it to one Final Step Developers P. Ltd., a subsidiary of M3M India P. Ltd. for Rs. 750 crores. The purchase of shares of M/s Kadam by Final Step from the IHFL was funded by the IHFL itself. The mortgaged properties-Shipra Mall at Ghaziabad and the parcel of land also eventually came to be sold by the IHFL towards the recovery of its dues from the Shipra Group.

An FIR came to be filed by one Amit Walia, a Director of Shipra Hotels, against IHFL and its officers for the offences under Sections 420, 467, 468, 471, 120-B IPC, 323, 504 & 506 at Police Station Indirapuram, alleging that IHFL had illegally showed the Shipra group to be the defaulters, so that they may misappropriate the properties owned by the Group through illegal means. The FIR also alleged that IHFL had conspired with M3M India, and by forging and fabricating the documents sold 73 acres of land of M/s Kadam to M3M India, for a sum of 300 crores when the market value of the same was about 4000 crores. IHFL had also undervalued the shares and securities on the basis of false and forged documents and had caused great loss to the Shipra Estate Company and its Directors. Another FIR came to be filed by YEIDA against IHFL, M3M India, M/s Kadam and M/s Beacon Trusteeship Ltd. for the offences under Sections 420, 467, 468, 471 and 120-B.

One Mohit Singh, authorized representative of Shipra Group, also filed an FIR against Reena Bagga in her capacity as an authorized officer of IHFL and others for the offences under Section 420, 120B IPC and 82 of Registration Act. These FIRs came to be challenged by them by filing writ petition. The Directorate of Enforcement (ED) on the basis of the said FIRs registered an ECIR to investigate into the offences of money laundering under the Prevention of Money Laundering Act, 2002.

According to the appellant-ED, this Court without giving the appellant any opportunity of hearing, passed the order whereby criminal proceedings in three such FIRs were stayed. The respondent-Niraj Tyagi and IHFL thereafter filed a writ petition in the High Court seeking issuance of direction for declaring Section 420 of IPC as arbitrary and ultra vires to the Constitution of India and seeking quashing of the FIR. Respondent Reena Bagga and IHFL also filed another writ petition seeking quashing of the FIR registered against them.

The appellants being aggrieved by the interim orders passed by the Allahabad High Court had preferred the instant appeals before the Top Court. Vide the impugned orders, the High Court had stayed the proceedings of the FIRs registered against the concerned respondents-accused as also stayed the proceedings of ECIR registered by the Directorate of Enforcement against the concerned respondents, and further directed not to take any coercive action against the respondents pending the said writ petitions.

The Division Bench of Justice Bela M. Trivedi and Justice Prasanna B. Varale was of view that without undermining the powers of the High Court under Section 482 of Cr.PC to quash the proceedings if the allegations made in the FIR or complaint prima facie do not constitute any offence against the accused, or if the criminal proceedings are found to be manifestly malafide or malicious, instituted with ulterior motive etc., the High Court could not have stayed the investigations and restrained the investigating agencies from investigating into the cognizable offences as alleged in the FIRs and the ECIR, particularly when the investigations were at a very nascent stage.

“It hardly needs to be reiterated that the inherent powers under Section 482 of Cr.PC do not confer any arbitrary jurisdiction on the High Court to act according to whims or caprice. The statutory power has to be exercised sparingly with circumspection and in the rarest of rare cases. In a way, by passing such orders of staying the investigations and restraining the investigating agencies from taking any coercive measure against the accused pending the petitions under Section 482 Cr.PC, the High Court has granted blanket orders restraining the arrest without the accused applying for the anticipatory bail under Section 438 of Cr.PC”, the Bench held.

Placing reliance upon the judgment in Neeharika Infrastructure Pvt. Ltd. vs. State of Maharashtra and Others where while strongly deprecating the practice of the High Courts in staying the investigations or directing not to take coercive action against the accused pending petitions under Section 482 of Cr.PC, the Top Court had issued certain guidelines, the Bench opined, “The impugned orders passed by the High Court are in utter disregard and in the teeth of the said guidelines issued by the Three-Judge Bench of this Court.”

“Without elaborating any further, suffice it to say that judicial comity and judicial discipline demands that higher courts should follow the law. The extraordinary and inherent powers of the court do not confer any arbitrary jurisdiction on the court to act according to its whims and caprice. The impugned orders passed by the High Court being not in consonance with the settled legal position, the same deserve to be set aside and are hereby set aside”, the Bench asserted.

Thus, allowing the appeal, the Bench held that the impugned interim orders passed by the High Court qua the concerned respondents-accused in the present appeals would stand vacated forthwith.