Delhi High Court
Raffles Education Corporation Ltd vs State Of Nct Of Delhi & Anr. on 11 November, 2024
Author: Dinesh Kumar Sharma
Bench: Dinesh Kumar Sharma
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
RESERVED ON - 20.09.2024.
% PRONOUNCED ON - 11.11.2024.
+ CRL.M.C. 5108/2022, CRL.M.A. 20383/2022
RAFFLES EDUCATION CORPORATION LTD .....Petitioner
Through: Mr. Sandeep Sethi, Sr. Adv. with Mr.
Shri Singh, Mr. Faraz Maqbool, Mr.
Chandan Kumar, Ms. Sana Juneja,
Ms. Surabhi V., Advs.
versus
STATE OF NCT OF DELHI & ANR. .....Respondents
Through: Ms. Priyanka Dalal, APP for the State
and SI Mukesh Chauhan, PS EOW,
Mandir Marg.
Mr. Vivek Sood, Sr. Adv. with Mr.
Achint Singh Gyani, Mr. Aman Singh
Rathore, Mr. Varun Chugh, Ms.
Shreya Mittal, Ms. Shagun S. Chugh,
Mr. Utsav, Advs. for R-2.
CORAM:
HON'BLE MR. JUSTICE DINESH KUMAR SHARMA
CRL.M.C. 5108/2022 Page 1 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
S.No. Particulars Page No.
A. Preface 2-3
B. Factual Matrix 3-9
C. Submissions on behalf of the Petitioner 9-15
D. Submissions on behalf of Respondent no. 2 15-19
E. Finding and Analysis 19-31
F. Conclusion 31-32
JUDGMENT
DINESH KUMAR SHARMA,J :
A. Preface
1. The present petition has been filed under section 482 Cr.P.C. seeking to
set aside the order dated 02.08.2022 passed by the Court of Ld. ASJ-
06, Patiala House Courts, New Delhi, in criminal revision petition
bearing no. 264/2021 titled „Shantanu Prakash v. State & Anr.’
2. A revision petition was filed by Mr Shantanu Prakash/ Respondent No.
2 before the Ld. ASJ seeking to set aside the order dated 22.05.2019,
passed in CC no. 11448/18 by the Ld. CMM, Patiala House Courts
whereby Respondent No. 2, along with Educomp Solutions Limited
and associated persons, were summoned for the offence punishable
under Sections 420/34 IPC.
3. Ld. ASJ, while dismissing the summoning order dated 22.05.2019 of
Ld. CMM, opined that the allegations, even if accepted at face value,
did not amount to a prima facie case of cheating under Section 420
CRL.M.C. 5108/2022 Page 2 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
IPC.
B. Factual Matrix
4. Petitioner is a listed company headquartered in Singapore. A complaint
was filed on behalf of the petitioner company under Section 200
Cr.P.C. before the Ld. CMM, Patiala Courts, New Delhi District,
alleging a concerted scheme by Educomp Solutions Limited
(Educomp), led by its Chairman and Managing Director, Sh. Shantanu
Prakash (Respondent No. 2) and other associated persons to defraud the
petitioner and obstruct the lawful transfer of control over the joint
venture entity, JRRES. It was alleged that the accused persons by their
acts caused wrongful loss to the Complainant to tune of over Rs. 100
crores and wrongful gain to themselves and have committed offences
punishable u/s 403/406/420 r/w 34/120B IPC.
5. Briefly stated facts, as alleged in the complaint, are that in October
2007, Respondent No. 2, Mr. Shantanu Prakash, who heads and
controls Educomp Group of Companies., along with other accused
persons, approached the Raffles Group seeking
collaboration/investments in educational ventures in India. It has been
alleged that Respondent No. 2 and his associates represented
themselves as a leading educational company in India, with over 13
years of government connections, professional expertise and financial
wherewithal in delivering large-scale educational projects.Believing
these representations, the Raffles Group through the petitioner
company agreed to enter into a Master Joint Venture Agreement (JVA)
on 16.05.2008. As part of the joint venture, two companies were
incorporated:
CRL.M.C. 5108/2022 Page 3 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
1. Educomp-Raffles Higher Education Ltd. (ERHEL) with equal
shareholding (50%) by both parties, and
2. Millennium Infra Developers Ltd. (MIDL), a subsidiary of
ERHEL
6. One of the key ventures proposed by the accused persons allegedly was
the establishment of a Management and Technical University in India,
using Jai Radha Raman Education Society (JRRES) as the operating
entity. JRRES is a society registered in Delhi in 2004 and had 44 acres
of leased land from the Greater Noida Industrial Development
Authority vide lease deed dated 18.06.2006. It was allegedly informed
to the petitioner by Respondent no. 2 that they had gotten involved in
JRRES in 2006 and further allegedly represented that his associates
were made members in 2008 and therefore JRRES was under their
control and could be used to build the proposed university. It has been
alleged that Respondent no. 2 repeatedly represented to the petitioner
company that he had control of the affairs of JRRES directly as well as
indirectly through his associates.
7. It has been alleged that Educomp and Respondent No. 2 enticed the
petitioner to invest substantial funds into a joint venture,
misrepresenting their control over JRRES and promising smooth
operations with equal say in the affairs of the Society by both parties.
Loans were also provided to JRRES under favourable terms through a
Loan Agreement dated 01.07.2009, with no interest charged for the
first year and a three-year moratorium on repayment. Petitioner also
agreed for MIDL to provide construction and project management
services for setting up the university at its own cost with terms
CRL.M.C. 5108/2022 Page 4 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
dictating that JRRES was not to pay any such services for three years
after its first intake of students in 2011.
8. It has been alleged that from 2008- 2010, Respondent no. 2 steadily
increased the membership of his associates in the Governing Body of
JRRES, and when it was constituted vide meeting dated 06.09.2010, it
allegedly solely consisted of associates of Respondent no. 2. In 2012,
Respondent 2 also became the president of the governing body and
amended the rules and regulations of the society to the extent that it
gave Respondent no. 2 as the president of the society the sole control
over the management. It was in 2014 that the appointment of members
of representative on behalf of the petitioner company was made equal
to the members of the associates of Respondent no. 2.
9. Once the investments were being made, the accused failed to meet their
financial obligations, forcing the petitioner to increase its stake to
58.18% in ERHEL, with Educomp retaining only 41.82%. As a result,
the burden of Rs. 110 crores in funding for JRRES was borne almost
entirely by the petitioner.
10. To resolve the disputes and facilitate the transfer of control, a Share
Purchase Agreement (SPA) was executed on 12.03.2015, wherein the
petitioner agreed to purchase Educomp‟s stake in ERHEL for
approximately Rs. 98 crores.The process of completing the SPA was
set out in detail in the SPA itself, which provided that on signing, the
Claimants were to pay (and did pay) 10% of the purchase price to an
escrow agent (” Escrow Agent”), following which a number of key
documents were to be provided by the Educomp to the Escrow Agent
in copy and/or original. The transaction was structured in such a
CRL.M.C. 5108/2022 Page 5 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
manner that upon execution of the SPA, the funding of the operation of
JV entities – ERHEL, MIDL and JRRES would be the exclusive
responsibility of the petitioner company. However, one of the
preconditions for completion of SPA was that nominees of Educomp
JRRES would resign, allowing full control to be transferred to the
petitioner. A Business Advisory Agreement (BAA) dated 12.03.2015
was also signed between Raffles Education Investment Pvt. Ltd. and
M/s Edulearn Solutions Ltd., under which Rs. 10 crore was promised to
EduLearn for advisory services in regards to Joint Ventures in India,
with Rs. 1 crore paid upfront to M/s Edulearn Solutions Ltd.
(“Advisors”) on the condition that if the conditions precedent in SPA
dated 12.03.2015 were not met, this payment would be returned.
11. It has been alleged that Respondent No. 2 was the mastermind of the
entire scheme and allegedly misappropriated funds provided by the
petitioner and withheld Rs. 1 crore under a fraudulent Business
Advisory Agreement. It has been alleged that Respondent No. 2 failed
to fulfil the terms of the Share Purchase Agreement (SPA) and
obstructed the transfer of control over JRRES to the Petitioner, despite
repeated attempts to enforce the agreement.
12. Respondent No. 2 allegedly also orchestrated the appointment of key
associates and nominees to strategic positions in JRRES to retain
control. Harpreet Singh, Pramod Thatoi, Ashok Mehta, Bindu Rana,
and Soumya Kanti Purkayastha were inducted as Educomp‟s nominees
and they allegedly facilitated the mismanagement of JRRES,
manipulated key processes, and misrepresented the status of
resignations of critical members to maintain Educomp’s influence over
CRL.M.C. 5108/2022 Page 6 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
the joint venture.
13. As per the complaint, Mr. Jagdish Prakash, father of Respondent no. 2
became a life member of JRRES to ensure Educomp‟s dominance,
actively obstructing the lawful functioning of the society in alignment
with the broader conspiracy led by Respondent No. 2.
14. As the petitioner tried to regain control, it has been alleged that Mohan
Krishna Lakhamraju and Narpat Singh conspired with Respondent No.
2 to delay the transfer of JRRES and further disrupt its operations.
Narpat Singh, acting on behalf of Respondent No. 2, allegedly issued
threats to prevent the petitioner from exercising lawful control over the
institution, thereby frustrating the petitioner‟s efforts to manage the
joint venture effectively.
15. The complaint further alleges that Ashish Mittal made false
representations and issued threats concerning the SPA to the Petitioner.
Meanwhile, Mahesh Bathla, as Financial Controller, allegedly abused
his position by withholding critical payments necessary for JRRES‟s
operations.
16. These alleged actions ultimately led to the closure of the institution,
causing significant harm to the petitioner‟s interests. Consequently, the
petitioner initiated arbitration proceedings in Singapore seeking
specific performance of the SPA and completion of the Transaction,
failing which an award of damages was sought.
17. The arbitral tribunal issued its award on 31st March 2017 wherein it
analysed the legality of the SPA under Indian Law, the nature of
obligations under the SPA and the automatic Termination of the SPA
under Clause 5.9.
CRL.M.C. 5108/2022 Page 7 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
18. The tribunal examined the purpose and structure of the SPA, noting
that although it was ostensibly designed to enhance educational
infrastructure, the practical effect of transferring control of JRRES to a
foreign entity went beyond operational efficiency. The tribunal found
that the SPA involved an aspect of monetisation of JRRES’s assets, but
held that Educomp failed to demonstrate adequately that the petitioners
had an intention to do so.
19. The tribunal also scrutinized the contractual obligations outlined in the
SPA and determined that Educomp‟s responsibilities were absolute, not
conditional or best-efforts. Further, it noted that Clause 5.9 was
enforceable and provided for automatic termination if the transaction
was not completed by 19th August 2015.
20. Given the termination of the SPA and that specific performance
required actions to be taken by the third party, damages were rendered
as an appropriate remedy. It was held that if specific performance was
to be awarded, SPA would be enforced in India and in circumstances
where local courts of India would not allow specific performance, such
a remedy can not be granted by the Tribunal either. Petitioner was
awarded only monetary damages. It is pertinent to note that in
pursuance of the arbitral award, an execution proceedings bearing
O.M.P. (EFA)(COMM) 6/2017 was filed by the petitioners and is sub-
judice before the coordinate bench of this Court.
21. Thereafter, in 2018, the petitioner filed a complaint with the Economic
Offences Wing (EOW), seeking criminal action against Educomp and
its representatives for fraud, misrepresentation, and breach of trust. The
EOW, however, did not entertain the complaint terming it as a civil
CRL.M.C. 5108/2022 Page 8 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
dispute.
22. The petitioner then filed Complaint No. 11448/2018 before the Patiala
House Courts, alleging cheating, criminal conspiracy, and breach of
trust under Sections 420, 406, and 120B of the IPC. The trial court
issued a summoning order on 22.05.2019, finding prima facie evidence
against Respondent no. 2and the other accused. The Respondent
aggrieved of this filed the revision petition. The Revisional Court vide
the impugned order set aside the summoning order.
C. Submissions on behalf of the Petitioner
23. Sh. Sandeep Sethi, leaned senior counsel for the petitioner submitted
that the impugned order dated 02.08.2022 is liable to be set aside as it
fails to appreciate the threshold for taking cognizance/issuance process
underlying exercise that is required to be conducted by a trial Court at
this preliminary/nascent stage of any criminal case.
24. At the outset, it has been submitted that the impugned order by the Ld.
ASJ is ex-facie baseless and erroneous. It is the case of the petitioner
that the revisional court erroneously set aside the summoning order
dated 22.05.2019, which was issued correctly by the Ld. CMM based
on cogent material and evidence. It has been contended that the
summoning order was passed by the Ld. CMM on 22.05.2019 after a
thorough examination of the petitioner‟s complaint, pre-summoning
evidence, and other supporting documents, which establish a prima
facie case of fraud and dishonest conduct by Respondent No.2.
25. Learned senior counsel for the Petitioner submits that the Ld. ASJ
exceeded its revisional jurisdiction by evaluating the defence
arguments at the nascent stage of proceedings, amounting to a mini-
CRL.M.C. 5108/2022 Page 9 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
trial. Such an approach, it is argued, is contrary to settled legal
principles, as only a prima facie case needs to be established for the
issuance of summons. To buttress this contention, reliance has been
placed on the judgement of the Hon‟ble Supreme Court in U.P.
Pollution Board v. Mohan Meakins Ltd. (2000) 3 SCC 745, Dy.
ChiefController v. Roshanlal Agarwal, (2003) 4 SCC 139, Kanti Shah
v. State, (2000) 1 SCC 722, and the judgement of this court in Aseem
Kapoor v. State 2018 SCC Online Del 9073. Learned Counsel for the
petitioner has also placed reliance on a plethora of judgements of the
Hon‟ble High Court of Allahabad to contend that the defence of the
accused is not to be considered at the stage of revisional jurisdiction
against a summoning order including Shayesta Khan & Anr. v. State
of UP & Ors. (2016) SCC Online ALL 1922, Mohd. Sajid and others
v. The State of U.P. and another(2009) SCC OnLine All 1924,
Prabhakar Pandey v, The State of UP& Ors.bearing no Crl. Revision
No. 2341/2001 and Jagdish Kumar v. State of UP. bearing no Crl.
Revision No. 936/2003
26. Learned senior counsel for the petitioner submitted that Respondent
No. 2 engaged in fraudulent inducements at multiple stages of the
transactions, resulting in significant financial loss to the Petitioner. This
conduct has been divided into phases by the petitioner:
1. Phase 1:It has been submitted that the Petitioner was induced to
enter into a JV Agreement based on Respondent No. 2’s false
claims of expertise, financial stability, and governmental
connections. It has been stated that Respondent No. 2 fraudulently
represented the expertise of accused persons, financialCRL.M.C. 5108/2022 Page 10 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
wherewithal and local contacts/connections in the Indian
education market, and strong working relations with various
Government agencies, which could ensure timely
approvals/clearances on a range of education-related issues based
which the Petitioner entered into a JV Agreement.
2. Phase 2: Further, it has been submitted that inducements were
also made regarding Respondent No. 2‟s control over JRRES. It
was stated that it was fraudulently represented that Respondent no.
2 qua, his associates (members of JRRES) and himself have full
control over the society. This induced the petitioner company to
have large sums of money on extremely favourable terms and to
bear a lopsided financial burden. Contrary to assurances of shared
governance, it has been submitted that Respondent No. 2 inserted
his associates into key positions, retaining unilateral control, while
the Petitioner bore the financial burden of more than INR 110
crores.It has been stated that in January 2009, Respondent No. 2
and as well as his father became life members of the governing
body of JRRES.
3. Phase 3:It has been submitted that the petitioner company was
fraudulently induced to enter into the Share Purchase Agreement
(SPA) and the Business Advisory Agreement (BAA), resulting in
an advance payment of INR 1 crore to Respondent No. 2. This
amount, it is contended, was never intended to be repaid. It has
been submitted that Respondent no. 2 had no intention of either
closing the SPA or giving up control/shareholding in JV entities as
he failed to provide resignation letters of the nominee members onCRL.M.C. 5108/2022 Page 11 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
a false pretextthat he had no control over them (contrary to
previous representations).
27. Learned senior counsel for the petitioner submitted that Respondent
No. 2 deliberately frustrated the closing of SPA by not sending relevant
documents and sought an unconditional extension for the closing of
SPA without any explanation. Learned Senior Counsel submitted that
having no option petitioner extended the Closing Date till it became
clear that all this was a ruse to induce them to continue the funding
while R-2 had control. On 11.09.2015, an illegal meeting was
convened by the accused persons in the absence of the Chairman of
JRRES wherein it was held that affairs of JRRES were to revert to the
state before execution of SPA. It has been stated that Respondent No. 2
held various void meetings and continued interfering with the affairs of
JRRES by unilaterally suspending key employees, interfering in the
work of the Director of JRE College, refusing to cooperate in the
approval of expenses for essential services and also asserting that loans
given by the petitioner herein were not recoverable.
28. Reliance has been placed on Vijay Ghai v. State 2022 SCC OnLine SC
344, Devendra v. State (2009) 7 SCC 495, Hridaya Verma v. State
(2000) 4 SCC168, B.M. Gupta v. State 2013, SCC OnLine Del 3065 to
contend that it was only the representations by the accused persons that
induced the petitioner to enter into the transactions.
29. Learned senior counsel for the petitioner submitted that the Learned
Sessions Judge unlawfully quashed the summoning order in its entirety,
even for those accused persons who were not parties to the revision
petition. This is an arbitrary act and goes beyond the scope of the relief
CRL.M.C. 5108/2022 Page 12 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
sought by Respondent No.2. It has been submitted that no finding was
recorded qua the other accused person despite there being specific
allegations in the complaint regarding their collusion with Respondent
no. 2.
30. Learned senior counsel for the petitioner submitted that Ld. CMM‟s
summoning order correctly considered the series of dishonest actions
taken by Respondent No.2, including the breach of agreements, control
over JRRES, and fraudulent retention of funds, amounting to offences
under Sections 420/34 IPC.
31. Furthermore, it has been submitted that the Learned Sessions Judge
failed to appreciate the fraudulent conduct of Respondent No. 2 and
erroneously treated the dispute as purely civil, ignoring the established
legal principle that a single cause of action can give rise to both civil
and criminal liabilities. Reliance in this regard has been placed on the
judgement of the Hon‟ble Supreme Court in Lalmuni Devi v. State of
Bihar (2001) 2 SCC 17.
32. It has also been submitted that the finding by learned Sessions Court
that the petitioner‟s complaint was filed only after the arbitration
proceedings failed is incorrect. It has been submitted that an arbitration
award was passed in favour of the petitioner, and the complaint was
initiated independently based on criminal fraud by the respondents.
Learned Senior Counsel for the petitioner has also pointed out that on
07.03.2023, the Hon‟ble Singapore High Court in Raffles Education
Corporation Ltd. & Ors. v. Shantanu Prakash & Anr. (Suit
No.709/2019) passed a detailed judgment against Respondent No.2
whereby not only it awarded damages (with interest) to the Petitioner
CRL.M.C. 5108/2022 Page 13 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
but also returned categorical & uncontroverted conclusions on issues
relevant to the present case including finding Respondent no. 2
liable/guilty on several counts of fraudulent misrepresentations to the
Raffles Group, inducement, conspiracy etc.
33. Learned senior counsel for the petitioner further submits that
Respondent No. 2 has failed to adequately address the allegations of
fraudulent inducement, financial misrepresentation, and obstruction of
JRRES operations. Respondent no 2‟s claims of not having control
over JRRES members hold no ground as there is enough evidence,
such as agreements, emails, and records of meetings, on record which
demonstrates the Respondent‟s de facto control and influence over the
governing body.
34. Moreover, it has been submitted that the Impugned Order despite
admitting that 1 Crore was paid rendered a contrary finding that there
was no delivery of property and drew an adverse inference against the
petitioner for non-issuance of demand notice. It has been submitted that
delivery of property to the accused is not a sine qua non to establish
cheating. Further, the impugned order erroneously limits itself to
payment made in the escrow account forSPA and ignores that 1 Crore
paid to Respondent no. 2as initial payment for BAA which was never
returned, Raffles Group had invested more than 110 Crores from time
to time on Respondent‟s false representations and that the share capital
was increased only because of the continued false representations of
respondent no. 2. It has been submitted that despite investing/paying
more than 110 Crores, Petitioner never got the equal say in JRRES‟
affairs as promised by
CRL.M.C. 5108/2022 Page 14 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
35. Lastly, it has been submitted that the petitioner has suffered immense
financial loss and damage to its business prospects due to Respondent
No.2‟s fraudulent conduct.
36. Sh. Sandeep Sethi, learned senior counsel for the petitioner submits
that the Impugned Order of the Learned Sessions Judge is legally
unsustainable, having been passed without proper appreciation of the
material facts and legal principles involved. The Petitioner prays that
the Impugned Order dated 02.08.2022 be set aside, and the Summoning
Order dated 22.05.2019 be restored, allowing the trial to proceed in
accordance with law.
D. Submissions on behalf of the Respondent
37. Sh. Vivek Sood, learned senior counsel for respondent no. 2 has
submitted that the present petition is wholly misconceived, vexatious,
and amounts to a gross abuse of the process of law. It is stated to be a
desperate attempt at the hands of the petitioner to achieve what could
not be accomplished through civil remedies or arbitration. It has been
submitted that the petitioner had previously failed to gain control over
JRRES through arbitration proceedings before the Singapore
International Arbitration Centre (SIAC), and the sole objective behind
these criminal proceedings is to harass the respondent, intimidate the
members of JRRES into resigning, and take over control of the society
through coercion which in itself is in violation to the public policy of
India.
38. Learned senior counsel for Respondent no. 2 has also contended that
the petitioner deliberately delayed filing the complaint, and in fact,
these criminal proceedings have been filed only after an unfavourable
CRL.M.C. 5108/2022 Page 15 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
arbitral award from SIAC. The Tribunal vide its award refused to grant
specific performance of the SPA, recognizing that JRRES was not part
of the joint venture arrangement and could not be controlled by the
petitioner. The petitioner was awarded monetary damages, and
execution proceedings for the same are pending before the Hon‟ble
Delhi High Court in O.M.P. (EFA)(COMM.) 6 of 2017.
39. Learned senior counsel for respondent no. 2 has also drawn the
attention of this court to the reports of EOW, Delhi, dated 02.05.2018
and 30.06.2018, which concluded that the matter is civil, arising out of
contractual disputes, and advised the petitioner to seek remedies in
appropriate civil forums. It has been submitted that the Ld. CMM, in
issuing the summoning order, failed to consider the EOW‟s findings
and acted mechanically without applying judicial mind.
40. It has been submitted that the sequence of events makes it evident that
the petitioner‟s grievances have been addressed through civil and
arbitral proceedings. Having exhausted civil remedies, the petitioner
has initiated these criminal proceedings, which amounts to an abuse of
process.
41. Learned senior counsel for respondent No. 2 submitted that the
petitioner‟s allegations are vague and unsupported by any concrete
evidence. The petitioner alleges fraudulent inducement, yet the pre-
summoning evidence does not contain any material to substantiate that
the respondent acted with dishonest intent from the inception of the
business relationship. It has been stated that the mere fact that disputes
arose later does not imply that the respondent‟s intentions were
fraudulent.
CRL.M.C. 5108/2022 Page 16 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
42. Learned senior counsel for respondent no. 2 further submitted that there
is no delivery of property or wrongful gain to the respondent. The
alleged sum of INR 1 crore, under the Business Advisory Agreement,
was never personally received by the respondent. It has been submitted
that the amount was paid to M/s Edulearn Solutions Limited, a separate
legal entity, and the contractual obligations under that agreement were
subject to arbitration, not criminal proceedings.
43. Further, it has been contended that the allegation of the petitioner that
the respondent failed to ensure the resignation of JRRES members as
required under the SPA and the said action warrants these criminal
proceedings is baseless. It has been submitted that the SPA explicitly
provided for civil consequences in the event of non-performance,
including the refund of 10% of the purchase price by the Escrow
Agent. The petitioner‟s attempt to portray this as a criminal offence is
unsustainable. Moreover, even the Business Advisory Agreement
(BAA) similarly outlined a mechanism for the resolution of disputes
through arbitration. There is no evidence that the petitioner issued the
required notice under the BAA, which was a precondition for
demanding a refund of the advisory fee. The petitioner‟s failure to
follow contractual processes further underscores the civil nature of the
dispute.
44. It has been submitted that the learned ASJ passed a detailed and
reasoned order, correctly setting aside the summoning order dated
22.05.2019. The Ld. ASJ carefully examined the agreements between
the parties and concluded that the allegations pertain to the non-
performance of contractual obligations, which cannot constitute an
CRL.M.C. 5108/2022 Page 17 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
offence under Section 420 IPC. The Ld. ASJ rightly emphasized that
the alleged grievances are subject to the terms of the SPA and BAA,
and the petitioner‟s recourse lies in civil forums. Furthermore, learned
ASJ noted that the petitioner‟s complaint lacks specific allegations or
evidence to establish fraudulent intent. Learned ASJ also observed that
the amount of 10% of the purchase price, which the petitioner claims
was wrongfully withheld, was never transferred to the respondent or his
entities but remained with the Escrow Agent.
45. It has also been submitted that the petitioner has a pattern of filing false
and malicious cases against the respondent to exert undue pressure. The
petitioner previously filed complaints with the Serious Fraud
Investigation Office (SFIO) and circulated false allegations to various
authorities, including the Prime Minister‟s Office. These actions
demonstrate a sustained campaign to harass the respondent and
undermine his reputation. The petitioner‟s complaints are stated to be
part of a broader strategy to gain control over JRRES and its assets,
which are governed by strict laws against the commercialization of
education. The petitioner‟s desire to control a not-for-profit society
through improper means is evident from its conduct.
46. Learned senior counsel for respondent no. 2 also submits that the
essential ingredients of Section 420 IPC, such as dishonest inducement
and wrongful gain, are absent in the petitioner‟s allegations. Learned
ASJ correctly held that the allegations pertain to breach of contractual
obligations, which cannot be equated with criminal fraud. In the case of
Commissioner of Police v. Devender Anand, 2019 SCC OnLine SC
996 Hon‟ble Supreme Court has reiterated that criminal law cannot be
CRL.M.C. 5108/2022 Page 18 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
used to settle civil disputes.
E. Findings and Analysis
47. Chapter XV of the Cr.P.C. pertains to “Complaints to Magistrate.”
Upon a private complaint being filed under Section 200 Cr.P.C. the
Magistrate may issue a process under Section 204 Cr.P.C. if there are
sufficient grounds for proceedings. While issuing the process under
Section 204 Cr.P.C., the Magistrate must ascertain whether the
complaint presents a prima facie case based on its assertions. At this
stage, the Magistrate is not required to determine the adequacy of the
evidence or the probability of the accused being found guilty.
However, at this stage, the Court while forming the opinion can
certainly take into consideration inherent improbabilities appearing on
the face of the complaint or in the evidence led by the complainant in
support of the allegations. Reliance can be placed on Nagawwa v.
Veernna AIR 1976 SC 1947.
48. It is no longer res integra that at this stage the Court is only required to
see whether allegations made in the complaint are prima facie
sufficient to proceed against the accused, and the Magistrate is not
permitted to enter into a detailed discussion on the merits and demerits
of the case. This threshold requirement aims to prevent unwarranted
proceedings, as repeatedly underscored by the Constitutional Courts.
Issuance of summons is a serious matter, that requires judicial mind
application to the facts and relevant law. The penal proceedings cannot
be set into motion mechanically. The Court, while issuing the
summons, must apply its judicial mind to the facts of the case and the
law applicable thereto. Merely because a complaint has been filed with
CRL.M.C. 5108/2022 Page 19 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
certain allegations and the complainant has examined his witnesses
who corroborated the allegations does not mean that the Magistrate is
bound to pass a summoning order. The Magistrate is required to
examine the nature of the allegations made in the complaint and
supporting evidence, both oral and documentary and form an informed
opinion about their sufficiency for summoning the accused. The Court
at no stage can be a silent spectator and has to ensure that orders are
passed in accordance with the requirement of the law.
49. In the case of Birla Corporation Ltd. vs. Adventz Investments &
Holdings Ltd. & Ors. (2019) 16 SCC 610, the Supreme Court, while
discussing the scope of powers of the Magistrate to issue summons
inter alia held as under:
“34. In Pepsi Foods Ltd. and Another v. Special Judicial
Magistrate and Others (1998) 5 SCC 749, the Supreme
Court has held that summoning of an accused in a criminal
case is a serious matter and that the order of the Magistrate
summoning the accused must reflect that he has applied his
mind to the facts ofthe case and law governing the issue. In
para (28), it was held as under:-
“28. Summoning of an accused in a criminal case is a
serious matter. Criminal law cannot be set into motion
as a matter of course. It is not that the complainant has
to bring only two witnesses to support his allegations
in the complaint to have the criminal law set into
motion. The order of the Magistrate summoning the
accused must reflect that he has applied his mind to the
facts of the case and the law applicable thereto. He has
to examine the nature of allegations made in the
complaint and the evidence both oral and documentary
in support thereof and would that be sufficient for the
complainant to succeed in bringing charge home to the
accused. It is not that the Magistrate is a silentCRL.M.C. 5108/2022 Page 20 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
spectator at the time of recording of preliminary
evidence before summoning of the accused. The
Magistrate has to carefully scrutinise the evidence
brought on record and may even himself put questions
to the complainant and his witnesses to elicit answers
to find out the truthfulness of the allegations or
otherwise and then examine if any offence is prima
facie committed by all or any of the accused.”
The principle that summoning an accused in a criminal
case is a serious matter and that as a matter of course,
the criminal case against a person cannot be set into
motion was reiterated in GHCL Employees Stock
Option Trust v. India Infoline Limited (2013) 4 SCC
505.
35. To be summoned/to appear before the Criminal Court as
an accused is a serious matter affecting one’s dignity and
reputation in the society. In taking recourse to such a
serious matter in summoning the accused in a case filed on
a complaint otherwise than on a police report, there has to
be application of mind as to whether the allegations in the
complaint constitute essential ingredients of the offence and
whether there are sufficient grounds for proceeding against
the accused. In Punjab National Bank and Others v.
Surendra Prasad Sinha 1993 Supp (1) SCC 499, it was
held that the issuance of process should not be mechanical
nor should be made an instrument of oppression or needless
harassment.
36. At the stage of issuance of process to the accused, the
Magistrate is not required to record detailed orders. But
based on the allegations made in the complaint or the
evidence led in support of the same, the Magistrate is to be
prima facie satisfied that there are sufficient grounds for
proceeding against the accused. In Jagdish Ram v. State of
Rajasthan and Another (2004) 4 SCC 432, it was held as
under:-
CRL.M.C. 5108/2022 Page 21 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
“10. ….The taking of cognizance of the offence is an
area exclusively within the domain of a Magistrate. At
this stage, the Magistrate has to be satisfied whether
there is sufficient ground for proceeding and not
whether there is sufficient ground for conviction.
Whether the evidence is adequate for supporting the
conviction, can be determined only at the trial and not
at thestage of inquiry. At the stage of issuing the
process to the accused, the Magistrate is not required
to record reasons.”
50. In the plethora of judgements, it has been emphasised the proceedings
should not commence merely based on allegations, the Magistrate at
this stage is also required to see whether the matter, which is essentially
civil, has been cloaked as a criminal offence in an attempt to apply
pressure or harass the accused or out of enmity towards the accused. In
cases where complaints are essentially civil but dressed as criminal
allegations, the Courts have time again cautioned against abuse of
penal provisions to settle scores. While it is true that certain disputes
may exhibit both civil and criminal elements but a criminal trial is
justified only if clear criminal elements exist alongside the civil
componentsi.e. the essential ingredients of the alleged offence are made
out. In Md. Ibrahim & Ors. v. State of Bihar. [2009] 13 S.C.R. 1254,
the Hon‟ble Supreme Court reiterated that criminal jurisdiction cannot
serve as a tool for advancing civil disputes.
51. However, it is pertinent to note that in certain cases, even when civil
remedies are available, they cannot solely justify the quashing of
criminal proceedings The real test is to ascertain whether the
allegations in the complaint disclose the criminal offence and satisfy
CRL.M.C. 5108/2022 Page 22 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
the said ingredients required. In the case Vesa Holdings Private Ltd vs.
State of Kerala (2015) 8 SCC 293 , it was inter aliaheld that when
allegations do not indicate dishonest or fraudulent intent at inception,
no offence under Section 420 can be sustained as Section 420 of IPC
mandates a proof of intent to cheat from the outset of the transaction.
If the allegations in the complaint do not show that, at the very
inception, there was any intention on behalf of the accused persons to
cheat, the summoning order would not be sustained in the eyes of the
law.
52. It is a settled proposition of law that the powers under Section 482
Cr.P.C., are of wide plenitude but have to be exercised sparingly with
caution and only if the conditions laid down in the section are
satisfied. These conditions are to prevent the abuse of the process of
court and to otherwise secure the ends of justice.The object behind the
exercise of such power should be to do real and substantial justice for
the administration of which the courts exist. Therefore, the High
Court,through its inherent power under Section 482 Cr.P.C., can
intervene to quash proceedings if allegations made in the complaint are
taken at face value and accepted in their entirety, do not constitute a
cognizable offence.If the complaint or First Information Report (FIR)
fails to disclose an offense on its face, then allowing the proceedings to
continue is unjust. This principle has been established in multiple cases
of the Hon‟ble Supreme Court and this court including R.P. Kapur v.
State of Punjab 1960 CriLJ 1239 and State of Haryana v. Bhajan Lal,
1992 Supp (1) SCC 335
53. Basically the Court at this stage would see the complaint filed by the
CRL.M.C. 5108/2022 Page 23 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
complainant so as to ensure that were there sufficient grounds to issue
the process against the petitioner. The Court may conduct this exercise
de-hors the order passed by the Ld. Sessions Court and certainly
without taking into the defence of the respondent.
54. At this juncture, it is essential to examine the allegations made out in
the complaint. A perusal of the complaint filed by the complainant
before the Ld. Trial Court indicates that in the year 2007, the petitioner
entered into a Master Joint Venture Agreement dated 16.05.2008 with
Educomp Group with the objective of setting up of various projects
including green field campuses, learning and study centres, education
cities etc. in India. Pursuant to this the parties incorporated ERHEL and
MIDL- a subsidiary of ERHEL. It has been alleged in the complaint
that Respondent No.2 and his associates falsely represented control
over JRRES and identified it to establish a Management College and
Technical University. The complainant alleged that respondent No.2
represented that they had his associates as members of JRRES in 2008
and he is in control of the affairs of the society directly and indirectly
(through his associates and confidantes) as on the date of the Joint
Venture Agreement. The complainant further alleged that it was a
stated understanding between the parties that respondent No.2 would
ensure that the affairs of the Society were arranged in such a manner
that Educomp and the Complainant would have equal members and say
in the affairs of the Society and upon these representations the
Complainant agreed to invest in and continually fund the proposed
Management and Technical University through JRRES. The
complainant also allegedly extended huge loans to JRRES upon
CRL.M.C. 5108/2022 Page 24 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
beneficial terms. Vide the Loan Agreement entered into between
ERHEL and JRRES on 01.07.2009 was also duly executed and
allegedly complainant invested a huge amount of money at hugely
beneficial terms on the specific representation of respondent
No.2/Educomp that they control the management of JRRES through
members who were associates and confidants of respondent No.2. The
complainant alleged that however respondent No.2 kept on increasing
the membership of his associates in the Governing Body and took
control of the same. It was also alleged that respondent No.2/Educomp
started defaulting in their obligation to make equal contributions to the
Joint Venture. It was alleged that respondent No.2 represented to the
complainant that Educomp was willing to give up its
shareholding/control in the joint venture entities, including JRRES, and
would ensure that their nominee members in the Governing Body and
the General Body of JRRES shall submit their resignation letters, such
that the Complainant would come in complete control of JRRES. It was
alleged that upon this representation, the complainant agreed to
purchase the stake of respondent No.2/Educomp in the Joint Venture at
a price of approximately Rs. 98 crores vide Share: Purchase:
Agreement dated 12.03.2015 was executed. Allegedly, respondent
No2. Further sought a separate fee of Rs. 10 crores in the form of
Business Advisory Agreement. Allegedly, Rs. 1 crore was paid to
Educomp upon execution of the agreement.
55. Complainant has alleged that subsequent events demonstrated that
respondent No.2 had no intention of actually closing the transaction
and giving up either his shareholding or control of the Joint Venture
CRL.M.C. 5108/2022 Page 25 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
entities including JRRES and fraudulently and dishonestly the
complainant and entered into SPA and fraudulently received a
monetary benefit of Rs. 1 crore under the Business Advisory
Agreement and fraudulently retained control of JRRES, ERHEL and
MIDL. It was alleged that respondent No.2 and accused persons
refused to obtain any of the approvals necessary to transfer the control
of JRRES to the complainant and to complete other formalities. The
closing date of the SPA was extended. In the meanwhile, respondent
allegedly convened the Governing Body meeting of JRRES on
11.09.2015 contrary to the rules and regulations. It was alleged that
since the respondent No.2/Educomp failed to fulfill the obligations, the
unconditional extension was refused by the complainant was
constrained to initiate and suffer an expensive international arbitration
against Educomp in Singapore.
56. The Arbitral Tribunal passed an award dated 31.03.2017 in favor of the
complainant. The complainant alleged that the mala fide and criminal
intent of Mr. Prakash‟s evident from the fact that he never resigned
from JRRES nor he returned the initial Advisory Fee of Rs. 1 crore
received on 12.03.2015. The complainant examined CW-1 John Tham
who reiterated the averments made in the complaint. Ld. Trial Court
vide order dated 22.05.2019 issued the summoning order for the
offence punishable under Section 420/34 IPC.
57. The perusal of the summoning order indicates that Ld. CMM besides
recording the allegations and testimony of CW-1 did not give any
reason for reaching the opinion that there are sufficient grounds for
proceeding or issuing the process under Section 420/34 IPC. Besides
CRL.M.C. 5108/2022 Page 26 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
this, it is pertinent to mention here that the Master Joint Venture
Agreement between the parties was executed on 16.05.2008 and
Addendum to Joint Venture Agreement was executed on 09.05.2012. A
Loan Agreement was executed between ERHEL and JRRES on
01.07.2009. Subsequently, certain disputes arose between the parties
and to settle the dispute Share Purchase Agreement dated 12.03.2015
was executed between the parties.
58. Clause 1.15 of the SPA provided that the documents listed in Clause-
4.1 and 4.3 are to be submitted by the seller to the Escrow agent within
the time limits mentioned therein. The Share Purchase Agreement was
primarily for the purchase of 15,53,209 shares in the amount of INR.
97,11,56,000/- (Rupees Ninety Seven Crore Eleven Lac Fifty Six
Thousand Only) by the theRaffles Education Investment and purchase
of 24,379 Shares of Educomp Professional for the amount of INR
1,52,44,000/- (Rupees One Crore Fifty Two Lac Forty Four Thousand
Only) by the Raffles Design. The Share Purchase Agreement provided
certain conditions precedents of the sellers for the closing in Clause 4.
It is also pertinent to mention here that the amount under the Share
Purchase Agreement was kept with the Escrow agent till the closing of
the agreement, and in case the Share Purchase Agreement stands
terminated, the Escrow agent was required to refund the purchase price
to the purchasers.
59. It is essential to mention that the law related to ESCROW is very well
laid down. In the case of Jeweltouch (India) Pvt. Ltd.v. Naheed
Hafeez Quraishi (Patrawala), 2008 SCC OnLine Bom 82, the
principles regarding release of documents through the escrow
CRL.M.C. 5108/2022 Page 27 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
mechanism were laid down, and it was inter alia observed that the
documents, even though executed, become valid and enforceable in law
only upon release of such documents after due fulfillment of
perquisites and satisfaction of the Escrow agent. Thus, the document
i.e., SPA and BBA were actually forward-looking and was to be
released to Educomp after completion of the conditions spelt out in
Clause- 4 of the SPA. The payment of any amount under SPA cannot
be attributed to the respondent as the amount deposited was with the
escrow agent and admittedly SPA never attained finality.
60. Further, Clause-15.2 of SPA specifically provides the matter be
referred to the arbitration in accordance with the SIAC Rules.
Similarly, the Business Advisory Agreement was entered into on
12.03.2015, in pursuance of which Rs. 1 crore was paid to EduLearn
Solutions Limited which is a separate legal entity. The Edulearn was
required to refund the initial payment to the Raffles Education
Investment t(India) Pte. Ltd. within 5 business days from the receipt of
the notice from the company requesting the same. It is also pertinent to
mention that Clause 7 of this agreement also provided that any dispute
arising out of or in connection with the agreement shall be referred to
arbitration under the SIAC Rules. It is not disputed that the dispute
arising from the SPA was referred to the arbitration and the Ld.
Arbitrator vide award dated 31.03.2017 granted a compensation of Rs.
30 crores.
61. In brief, the specific allegations against Educomp Group of companies
are that they entered into the Share Purchase Agreement with
fraudulent intent and from the outset, they had no intention of
CRL.M.C. 5108/2022 Page 28 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
complying with the terms of the SPA, specifically regarding the
resignation of Educomp nominee from JRRES, which was a key pre-
condition for the agreement. It is also the case of the petitioner that
Educomp misrepresented its ability to transfer control of JRRES to the
Petitioner company, and false assurances were given to induce the
petitioners to invest more funds and enter the SPA, which Educomp
never intended to honour. The complainant has also alleged that
respondent No.2/Educomp refusal to provide resignation was in fact a
cheating scheme to retain unauthorized control over JRRES and gain
financial advantage.
62. It is pertinent to mention here that the matter was referred to
Arbitration and the Ld. Arbitral Tribunal in the award had inter alia
held that Educomp’s failure to ensure resignations constituted a breach
of contract. A civil case cannot be given a criminal cloak by smart
drafting. While dealing with such matters, the Court has to keep in
mind that there is a distinction between breach of contract and offence
of cheating. Though the distinction is a fine one the same has to be
judged by the conduct of the parties. Subsequent conduct of the alleged
cannot be a sole test, and a mere breach of contract cannot give rise to
criminal prosecution for cheating unless the fraudulent or dishonest
intention is shown right at the beginning of the transaction, that is the
time when the offence is said to have been committed.
63. It is well settled that Section 420 of IPC deals with the offence of
cheating and dishonestly inducing delivery of property. This section is
invoked when an individual deceives another person, leading to the
delivery of property or the alteration or destruction of valuable security.
CRL.M.C. 5108/2022 Page 29 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
To constitute an offence under Section 420 IPC, the following elements
must be present: (i) Deception: The accused must have deceived the
complainant. (ii) Inducement: The deception must have induced the
complainant to deliver property or to do or omit to do something. (iii)
Fraudulent or Dishonest Intention: The intention must be fraudulent or
dishonest from the outset. (iv) Resultant Delivery of Property: The
deception must result in the delivery of property or valuable security.
These elements differentiate an offence of cheating from a mere breach
of contract.
64. The intention is the gist of the offence, and therefore in order to
summon a person for the offence of cheating, there has to be material
on the record that there was fraudulent or dishonest intention at the
time of making the promise. Reference can be made to Hridaya
Ranjan Prasad Verma v. State of Bihar [(2000) 4 SCC 168].
65. In M N G Bharatesh Reddy vs. Ramesh Ranganathan and Another
(2002) SCC Online SC 1061 it was inter alia held that mere breach of
contract cannot give rise to criminal prosecution for cheating unless the
fraudulent or dishonest intention is shown right at the beginning of the
transaction, that is the time when the offence is said to have been
committed. It was also further inter alia held that if the dispute between
the parties was essentially a civil dispute resulting from a breach of
contract, the criminal proceeding shall not be sustained. Reference can
be made to Ajay Mitra v. State of M.P. [(2003) 3 SCC 11 : 2003 SCC
(Cri) 703]).
66. In V.R. Dalal & Ors. vs. Yougendra Naranji Thakkar & Anr. (2008),
the Hon‟ble Supreme Court dealt with a dispute where a partnership
CRL.M.C. 5108/2022 Page 30 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
firm was never acted upon, leading to its cancellation. The Court held
that, as the partnership deed was cancelled and had never been
operational, no wrongful act could be attributed to the appellants. The
Court emphasized that any allegations of conspiracy were unfounded,
as the partnership was void from its inception. This case illustrates that
if a contract is void ab initio and has not been acted upon, there is no
basis for charging an offence.
67. In the case at hand, the complainant was aggrieved of the fact that the
respondents failed to honour their obligations as contained in the Share
Purchase Agreement. However, the Share Purchase Agreement
provided the mechanism in case of the non-fulfillment of the conditions
therein. The non-fulfillment of the conditions had led to the arbitration
agreement. The Ld. Arbitral Tribunal had also found that there was a
breach of contract on the part of the respondent. Furthermore, it has
also to be seen that the initial Joint Venture Agreement was entered
into in the year 2008 followed by Addendum in 2012, the Loan
Agreement was executed in 2016, and the Share Purchase Agreement
and Business Advisory Agreement were executed in 2015. However,
the present complaint was made only in May 2018. Thus there was
substantial delay in making the complaint. The delay on the part of the
complainant has not been explained in any manner. The fact that the
petitioner initially initiated the arbitration proceedings also indicates
that it was merely a civil dispute.
F. Conclusion
68. The Court therefore finds that there is no illegality in the order of the
Ld. Additional Session Judge vide which the summoning order has
CRL.M.C. 5108/2022 Page 31 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09
been set aside. The Court is of the considered opinion that the private
complaint filed by the petitioner did not even fulfill the basic
ingredients of Section 420/34 IPC. Hence, the present petition along
with the pending application(s), if any, stands dismissed.
DINESH KUMAR SHARMA, J
NOVEMBER 11, 2024/Ankit/smg
CRL.M.C. 5108/2022 Page 32 of 32
Signature Not Verified
Signed By:PALLAVI VERMA
Signing Date:11.11.2024
17:38:09