Holding

The Supreme Court held that the bail order was obtained by misrepresentation and was therefore recalled, directing the accused to surrender.

Summary

Arvind Mohan Johar and Anand Krishna Johari were granted bail by the Supreme Court on the basis that Rs. 17 crore and Rs. 13 crore respectively were lying in the credit of the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) and would be used to satisfy the claimants. The BSE and NSE later filed applications stating that no such amounts were payable to the appellants and that the claim was false. The Court examined the representations made by the appellants and found that they had deliberately misled the Court about the existence of the funds. Relying on its power under Article 142 of the Constitution, the Court held that the bail order was obtained by fraud and therefore must be recalled. The appellants were directed to surrender before the trial court and the applications for recall were disposed of.

Issues considered

Whether bail granted on the basis of a false representation regarding funds lying with the stock exchanges can be cancelled.
Whether the Supreme Court can recall its own bail order under Article 142 when the order was obtained by misrepresentation.
Whether the stock exchanges can be directed to deposit money that they claim does not exist.

Legislation cited

Code of Criminal Procedure, 1973s. Section 436, s. Section 437, s. Section 439
Constitution of Indias. Article 142

Subjects

bail cancellationmisrepresentationArticle 142Supreme CourtNational Stock ExchangeBombay Stock ExchangeCriminal Procedure CodeSection 436 CrPCrecall of order

Judgment

-..,,.
A ARVIND MOHAN JOHAR! AND ANR.
~
v.
Sl:ATE OF U.P. AND ANR.

MAY 4, 2005

B [N. SANTOSH HEGDE, D.M. DHARMADHIKARI AND
S.B. SINHA, JJ.]

Bail-Cancellation of-FIR against accused in respect of transactions
-
with other companies-Bail granted by Supreme Court on representation made
c by the accused that amount lying to their credit in National Stock Exchange
and Bombay Stock Exchange be appropriated in disbursing payments to
c/aimants-N.S.E. and B.S.E. directed to deposit the amount lying to the credit ,..-
of the accused-The two Stock Exchanges filing application for recalling the
order stating that no amount was payable by them to the accused-Held, the
D accused misled the Court in passing the order-Order granting bail and
directing the two Stock Exchanges to deposit the money recalled

CRIMINAL APPELLATE JURISDICTION : Criminal Misc. Petition
Nos. 47-48 of 2005.

E IN

Criminal Appeal Nos. 1265-66 of 2004.

From the Judgment and Order dated 23.3.2004 of the Allahabad High
Court in Crl. Misc. Case No. 1889 (B) of 2003 & Crl. Misc.Case No. 1891
F (B) of 2003. ,,..,,
WITH
Criminal Misc. Petition Nos. 53-54 of 2005 in Crl. Appeal Nos. 1265-
1266 of 2004.

G R. Mohan, Additional Solicitor General, Swaraj Kaushal, Dushyant A.
Dave, Rakesh Dwivedi, Jayant Bhushan and J.L. Gupta, Dinesh Kumar Garg,
B.S. Billowria, D.K. Gupta, S.K. Bandyopadhyay, Manish Singhvi, Sheetal
Prasad Juneja, Pratap Venuopal, P.S. Sudheer, Vivek Raj Singh, Ms.
Meenakshi Arora, Rohima Nath, Umesh Kumar Khaitan, Amit Kumar, Sanjay ~-·
'{
H 1204
AR VIND MOHAN JOHAR! v. STA TE OF U.P. 1205

Bhatt, Anurag Sharma, Vishnu Sharma and P. Parmeswaran with them for A
• the appearing parties.

The following Order of the Court was delivered :

These applications have been filed for clarification and/or recalling an
order dated 3.11.2004 passed by this Court in Criminal Appeal Nos.1265-66 B
of 2004 whereby and whereunder the respective applicants were directed to
deposit the money lying in the credit of the Appellants herein.

The said applications have been filed in the following circumstances.
The Appellants floated various groups of companies including one known as
'Mis Century Consultants Ltd.' Two criminal cases were initiated against c
them arising out FIR No. R.C. No. 8(S)/200l to R.C. No. 12(S) of2001/CBI,
..., Lucknow dated 6.7.2001 and R.C. No. 15(S)/2001 to R.C. No. 18(S)/2001/
CBI, Lucknow dated 6. 7.200 I; one relating to transactions in respect of M/
s Country Inform Tech Pvt. Ltd. and another in relation to Mis Century
Consultants Ltd .. Mis Century Consultants Ltd. has since been directed to be
D
wound up in a winding up proceeding by the learned Company Judge.

In the aforementioned criminal proceedings, the Appellants prayed for
grant of bail which was rejected whereagainst these appeals were preferred.
The Appellants before us had contended that they would have no. objection
ifthe assets held and possessed by them are sold for payment to the depositors E
of Mis Century Consultants and Mis City Cooperative Bank Ltd. It was
contended that the amounts of Rs. 17 Crores and Rs. 13 Crores were lying
with the Bombay Stock Exchange and National Stock Exchange respectively.
It was further urged that the amounts lying with the Stock Exchanges stand
admitted in their written statements filed in Civil Suit No. 312 of 2002.
F
" The Bombay Stock Exchange now contends that the aforementioned
two contentions raised on behalf of the Appellants herein were not correct.
In this behalf, our attention has been drawn by Mr. Dushyant A. Dave,
learned senior counsel appearing on behalf of Bombay Stock Exchange, to
the following statements: :
G
"(ii) That in the instant case, the Century Consultant Ltd., during the
period from 15th March 200 I to 23rd March 200 I had failed to make

• payments to the Exchange towards their settlement obligations in
respect of the Rolling as well as Weekly settlement on the respective
pay-in dates. The said member initially failed to pay its pay-in H
1206 SUPREME COURT REPORTS [2005] 3 S.C.R.

A obligation pertaining to the Rolling Settlement No. 241/00-01 (Pay-
in date was 16th March 2001) and thereafter had committed defaults
in paying its obligations in subsequent Rolling Settlements as well as
Weekly Settlements on the respective Pay-in dates as under :

Settlement Trading Pay-in Amount (Rs. )
B No. date dates

DR-241/00-0 l 09.03.01 16.03.01 3, 70,26, 753.00
DR-242/00-01 12.03.01 19.03.01 2,53, 13,535.00
DR-243/00-01 13.03.01 20.03.01 2.02,24,601.00
c DR.244/00-0 I 14.03.01 21.03.01 2,67,24,553.00
DR-245/00-01 15.03.01 22.03.01 27,45,540.00
DR-246/00-01 16.03.01 23.03.01 3,03,01,237.00 .....-
DR-51/00-01 12.03.01 22.03.01 4,27 ,89,326.00
(Weekly) to ....._

D 16.03.01
DR-52/00-01 19.03.01 29.03.01 13,31,602.00
(Weekly) to
23.03.01

E xxx xxx xxx

(vi) Though the Century Consultants Ltd. failed to meet its
obligations in the aforesaid settlements, the Exchange being bound to
.
ensure timely completion of the bona fide transaction of the members
of the Exchange inter se in the aforesaid settlements as per its Rules, ,..
F Bye-laws and Regulations of the Exchange. As at the relevant time,
r'"
the securities and margin deposits furnished by Century Consultants
Ltd., to avail the trading facility, was sufficient to meet their liabilities
in the aforesaid settlements, the Exchange completed the Pay-out in
the aforesaid Settlements by utilizing same as provided in its Rules,
Bye-laws and Regulations. As these aforesaid Pay-out was to be made/
G completed on their respective Pay-out dates and as the realization/
liquidation of the collateral Securities/guarantees would take some
time to receive the payment, the Exchange fulfilled the above
obligations of the Century Consultants Ltd. initially from the funds of
the Exchange. Thereafter the collateral securities/guarantees provided
H by the Century Consultants Ltd. were liquidated in accordance with
ARVINDMOHANJOHARI v. STATEOFU.P. 1207
the Rules, Bye-laws and regulations of the Exchange and recouped A
• the same. Accordingly, the Exchange fulfill the Pay-in obligations of
the Century Consultant Ltd., in the aforesaid Settlements amounting
to Rs. 21,06,72,837.00 including the value of short delivery of shares
by the Century Consultants Ltd., in the above Settlements out of the
collateral securities/guarantees provided by the Century Consultants B
Ltd. As such, there are no assets of the Century Consultant Ltd., lying
with the Applicant Exchange by way of bank guarantee, security
margin money etc. amounting to Rs. 17 crores as alleged before this
Hon'ble Court. The Exchange respectfully says and submits that on
the other hand Century Consultant Ltd., are required to pay to the
Exchange an amount of approximately Rs. 18.14 crores towards their C
liabilities on account of non:payment of arbitration awards obtained
by other members/clients, arbitration fees, debit balance with Clearing
House, Transaction Guarantee Fund (TGF) etc. as per Rules, Bye-
laws and Regulations of the Exchange. The Exchange has also from
time to time apprised SEBI about default of Century Consultants Ltd.
in making Pay-in obligations in the aforesaid settlements and D
completion of settlements as stated herein above."

It is urged that the Appellants herein were aware of the said proceedings
as in relation thereto show cause notices had been served upon M/s Century
Consultants Ltd. Mr. Dave would further contend that in the said suit even E
no written statement was filed by the Bombay Stock Exchange, as alleged by
the Appellants.

Mr. J.L. Gupta, learned Senior Counsel appearing on behalf of the
National Stock Exchange, would submit that although written statement had
been filed by the National Stock Exchange in the aforementioned suit but it p
had categorically been contended therein :

"The Defendant No. I traded on the Defendant No. 3 and had
cleared all its settlement dues up to Settlement No. W 2001045 (pay
in date March 13, 200 I). It is submitted that the Defendant No. I did
not pay subsequent settlement and other obligations to Defendant No. G
3 and National Securities Clearing Corporation of India Ltd. (NSCCL),
a subsidiary company of Defendant No. 3 amounting Rs.
18,94,80,836.52. Out of the said sum, an amount of Rs.
I0,80,74,719.54 was adjusted against from the security deposits, bank
guarantee invocation amounts, sale of securities and release of margins
H
1208 SUPREME COURT REPORTS [2005] 3 S.C.R.

A and other amounts lying to the credit of Defendant No. 1 still leaving
a balance liability of Rs. 8,14,06,116.98 due from Defendant No. l
to Defendant No. 3 and NSCCL. Therefore, it is clear from the above
that the claim of the Plaintiff in para 8 of the plaint that the Defendant
No. 1 paid Rs. 30 crores towards purchase of shares and that Rs. 30
crores is lying with the Defendant No. 3 is completely false. Thus,
B the very basis of the claim of the Plaintiff is false and there is no
cause of action in favour of the Plaintiff."

In the counter affidavit filed by the Appellants to the said applications,
the said contentions raised in ttie said applications were denied and disputed,
C Mr. Swaraj Kaushal and Mr. D.K. Gupta, learned counsel appearing on behalf
of the Appellants would contend that the question as to whether the respective
Stock Exchanges were entitled to debit the amounts of Rs. 21 <;rores and 17
Crores respectively towards their purported claim should be directed to be
scrutinized by us by a Chartered Accountant. According to the learned counsel,
the Bombay Stock Exchange and National Stock Exchange have raised
D frivolous pleas in support of the applications and in that view of the matter,
it would be proper to determine the dispute between the parties.

It is not in dispute that this Court passed the aforementioned order
dated 3~1 l.2004 granting bail to the Appellants herein relying on or on the
basis of the representation made by them that all endeavours would be made
E to disburse to the claimants realise as much amount as possible from the
personal and other assets of the Appellants by putting them on sale or
otherwise. It was with that end in view, this Court directed :

"The National Stock Exchange and the Bombay Stock Exchange
are directed to deposit the money lying in the credit of the Company/
F Appellants as early as possible subject to the determination of the
pending enquiry by SEBI. If any enquiry is pending, SEBI shall
dispose of the same as expeditiously as possible."

This Court directed release of the Appellants herein on bail on the
G conditions mentioned therein and issued several directive~ .in exercise of its
jurisdiction under Article 142 of the Constitution of India to do complete
justice to all the parties. While considering application for grant of bail in a
criminal case, this Court ordinarily cannot determine a dispute between the
parties wherefor forums have been created under the statutes.

H It appears that the recoveries have been directed to be made by the
AR VIND MOHAN JOHAR! v. STATE OF U.P. 1209
Stock Exchanges in exercise of their power conferred upon them under the A
bye-laws governing the parties. Furthermore, several arbitration awards are
said to have been passed in favour of the clients/investors and the members
of the Stock Exchanges. The parties, therefore, must get their disputes
determined in an appropriate forum.·

The fact, however, remains that no amount as such is admittedly payable B
by the applicants Stock Exchanges. In their respective applications, as indicated.
hereinbefore, the Applicants had stated that they, in fact, would be entitled
to realize a huge amount from the Appellants. In that view of the matter, we
are of the opinion that the Appellants misled this Court in passing the said
order dated 3. l l.2004 by raising contention to the effect that a sum of Rs. C
17 Crores and 13 Crores are admittedly lying with the Bombay Stock Exchange
and National Stock Exchange in the shape of bank guarantee money and
securities margin money etc.
·..
It is true that the prayers made by the Applicants herein in their
applications are confined to the directions issued against them but we are of D
the opinion, having regard to the peculiar facts and circumstances of this
case, that if a substantial sum lying with them are not available for disbursement
to the claimants, the very purpose for enlarging the Appellants herein on bail
would not be subserved and in that view of the matter the order dated 3.4.2004
granting bail to the Appellants herein should be recalled. Accordingly, the
Appellants, Arvind Mohan Johari and Anand Krishna Johari are hereby E
directed to surrender before the Trial Court within one week from date
whereupon they may be taken into custody. If and when the disputes between
the Stock Exchanges and the Appellants are adjudicated upon by a competent
forum and/or court of law, as a result whereof the Appellants would be in a
position to repay the outstanding dues of the claimants, namely, Mis City F
Cooperative Bank Ltd. and M/s Century Consultants Ltd., they may apply for
grant of bail afresh.

These applications are disposed of with the aforementioned observations
and directions.
G
R.P. Applications disposed of.