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India – Litigation September Review.

24 October, 2013

 

Legal News & Analysis – Asia Pacific – India – Dispute Resolution

 

  • Acknowledging the possible threat to persons who file complaints accusing public servants of corruption, the Supreme Court (‘SC’) held, in the case of Manjeet Singh Khera v. State of Maharashtra1, that in cases where the prosecuting authority acts on a complaint against corruption, conducts its enquiry and lodges a criminal case on the basis of such enquiry, the accused person cannot be said to be prejudiced by the non-disclosure of the complaint or the identity of the Complainant.

    The Petitioner before SC was an accused facing trial under Section 13(2) read with Section 13(1)(e) of the Prevention of Corruption Act, 1988 (‘
    Act’) along with Section 109 of the Indian Penal Code, 1860 before the Special Sessions Court, Greater Bombay, Maharashtra. The sections invoked under the Act pertain to criminal misconduct by a public servant where he cannot account for pecuniary resources or property disproportionate to his income. The Petitioner had applied to the Special Sessions Court for a copy of the complaint and the name of the Complainant on the basis of which the Anti-Corruption Bureau, State of Maharashtra conducted an enquiry and lodged a criminal case. The Special Sessions Court passed an order rejecting the Petitioner’s application. The order of the Special Sessions Court was upheld by Bombay High Court (‘Bombay HC’) in the Petitioner’s appeal and, hence, the Petitioner moved SC.

    The Petitioner relied on the judgment of SC in
    V.K. Sasikala v. State Represented by Superintendent of Police2 to contend that the prosecuting authority is duty bound to supply documents that lead to investigation. SC distinguished the ratio of the V.K. Sasikala (supra) judgment by observing that in that case, unlike the Petitioner’s case, the accused had sought copies of documents that formed part of the police report and were in the custody of the Court. SC held that the complaint in question only triggered the investigation, based on which an enquiry report was prepared that ultimately led to the criminal case being lodged. It was observed that in many situations a person may not want to disclose the identity as well as the information/complaint passed to the Anti-Corruption Bureau for fear of embarrassment or a threat to their life. In these circumstances, SC refused to interfere with the order of Bombay HC and dismissed the petition filed by the Petitioner.

 

  • In the case of The Bank of New York Mellon v. Zenith3 a Single Judge of the Bombay HC admitted a winding-up petition against Zenith Infotech Limited (‘Zenith’) and appointed an administrator to take symbolic possession of Zenith’s assets. The winding up petition was admitted despite the fact that Zenith had filed a reference before the Board for Industrial and Financial Reconstruction (‘BIFR’) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (‘SICA’) which provides for timely detection of sick companies and preventive and remedial measures in relation to such companies. The provisions of SICA provide for a freeze of legal proceedings, including winding up proceedings, upon a reference being made under it.

    The Single Judge had held that the bar stipulated in Section 22 of SICA (which provides that no winding-up proceedings against a company will lie or be proceeded with further, except with the consent of the BIFR) does not begin to operate by virtue of the mere filing of a reference with the BIFR, as opposed to such reference being registered by BIFR’s Registrar.

    By an order dated September 2, 2013
    4, a Division Bench of Bombay HC upheld a decision of the Single Judge of the same Court.

    The winding-up petition has been filed by AZB & Partners representing the Bank of New York Mellon (‘
    BNYM’) in its capacity as a trustee in view of Zenith’s admitted debt, admitted insolvency and admitted default in respect of Foreign Currency Convertible Bonds (‘FCCBs’) in the sum of approximately US$89 million, issued in two tranches, in 2006 and 2007, which became due and payable in August, 2011.

    A Special Leave Petition to appeal against the order of the Division Bench was preferred by Zenith before SC, which was dismissed as withdrawn on September 30, 2013.

    Incidentally, during the pendency of the appeal before the Division Bench, by way of an order stated August 12, 2013, BIFR’s Registrar rejected Zenith’s reference on the ground that Zenith is not an “industrial undertaking”, and is, therefore, not entitled to apply under SICA. Zenith’s appeal against this order to the Secretary, BIFR, was also rejected. The Secretary, BIFR, stated in his order that Zenith had manipulated its accounts, to appear to be an industrial undertaking, given the blatant inaccuracies in Zenith’s balance sheet, its appeal would be rejected. We understand that Zenith has preferred a further appeal before the learned Chairman, BIFR.

End Notes:

1 2013 (10) SCALE 525

2 (2012) 9 SCC 771
3 Company Petition No. 28 of 2012 along with Company Application No. 66 of 2012
4 Zenith Infotech Ltd. v. The Bank of New York Mellon Branch; Appeal (L) Nos. 344,347 of 2013 in Company Petition
No. 28 of 2012

 

AZB

 

For further information, please contact:

 

Zia Mody, AZB & Partners
[email protected]

 

Abhijit Joshi, AZB & Partners 
[email protected]


Shuva Mandal, AZB & Partners 

[email protected]

 

Samir Gandhi, AZB & Partners
[email protected]


Percy Billimoria, AZB & Partners 

[email protected]

 

Aditya Bhat, AZB & Partners 
[email protected]


Dispute Resolution Law Firms in India

 

 

 

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