HC relief for Gautam Adani, Rajesh Adani in market regulations violation case

The Bombay High Court on Monday discharged industrialist Gautam Adani, the chairman of Adani Enterprises Ltd., and the company’s Managing Director Rajesh Adani in a ₹388 crore alleged market regulation violation case filed by the Serious Fraud Investigation Office (SFIO).

A single Bench of Justice Rajesh N. Laddha on Monday quashed a 2019 sessions court order which refused to discharge the duo and the company.

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A complaint was filed on April 26, 2012, by the Union of India through the Senior Assistant Director (Investigation) of the SFIO in the Court of Additional Chief Metropolitan Magistrate, Ballard Pier, Mumbai. The complaint was filed against Triumph Securities Limited and ten other accused for offences punishable under Sections 420, 120B of the IPC, concerning cheating and criminal conspiracy. The investigation alleged that Gautam and Rajesh Adani provided funds and shares to entities linked to Ketan Parekh, leading to stock price manipulation and illegal profits.

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The SFIO claimed Mr. Parekh’s entities made unlawful profits of ₹151.40 crore through transactions with Adani scrips while the promoters of Adani Group allegedly made unlawful profits of ₹388.11 crore, resulting in an estimated ₹540 crore loss to the public and other investors.

The SFIO filed a chargesheet in 2012 against Adani Enterprises Ltd. and 12 individuals, including the Adani brothers, accusing them of cheating and conspiracy.

On March 7, 2014, the Adanis filed applications seeking discharge and the trial court ruled in favour of them and granted their discharge from the case. However, the SFIO, challenged the discharge by filing criminal revision applications under Section 397 CrPC to which the Additional Sessions Judge set aside the discharge orders passed by the trial court and directed the trial court to reconsider and re-evaluate the discharge applications. The Adanis then moved the high court with a writ petition.

Representing the Adanis, senior advocate Amit Desai, submitted, “The SFIO does not have the legal authority or jurisdiction to file a complaint for offences under the IPC and drew this Court’s attention to an office order dated 16 January 2012 issued by the Government of India, which directed an investigation into the operations of Manmandir Estate Developers Private Limited, Nakshatara Software Private Limited, Chitrakoot Computers Private Limited, Triumph Securities Limited, Amadhi Investments Limited, Zenet Software Limited, Welvet Financial Advisors Limited, and Sugandh Estate and Investment Private Limited, and not the petitioners.”

Mr. Desai asserted that no grievances have been raised by any members of the public. “The complaint filed by the concerned officer, in an official capacity, is based on the authorisation granted by the Central Government through a Notification dated December 4, 2008, under Section 621(1) of the 1956 Act along with an office order dated 16 December 2008,” he argued.

He also said that the trial court had discharged the Adanis after reviewing the complaint and concluding that no prima facie offence was made out against the petitioners. In the impugned orders, the additional sessions judge acknowledged the legal principle that a revisional court could not examine material beyond what was available before the trial court. Despite this acknowledgement, the sessions judge erroneously relied on the investigation report in the impugned orders even though this report was neither a part of the trial court’s record nor introduced before the sessions court.

Justice Laddha observed, “Upon a careful evaluation of the submissions and the records, it becomes evident that the complaint fails to satisfy the essential ingredients of the offence of cheating under Section 420 of the IPC. The learned Additional Sessions Judge has also categorically acknowledged that the complaint lacks any assertion from any member of the public alleging that they were deceived or induced, whether fraudulently or dishonestly, to part with their money or the shares as a result of alleged price manipulation.”

The Judge also noted that a fundamental requirement for an offence under Section 420 IPC is the presence of an element of deception, which leads to the victim suffering from loss while the accused gains wrongfully. “However, in the present case, there is a conspicuous absence of any such allegations from an affected party. Merely by asserting that the accused has made a wrong gain without demonstrating the corresponding wrongful loss or deception suffered by a specific victim does not suffice to attract the offence of cheating under the IPC,” he said.

The high court upheld the discharge order and passed the order, “In light of the above, the impugned orders dated November 1, 2019, passed by the Additional Sessions Judge, Mumbai, in Criminal Revision Applications No. 248 of 2017 and 1496 of 2015 are hereby set aside, and the discharge orders passed by the learned Additional Chief Metropolitan Magistrate, 38th Court, Ballard Pier, Mumbai, on May 9, 2014, and October 7, 2015, are reinstated. The writ petitions stand disposed of accordingly.”