- (1.) This application under Section 482 of the Code of Criminal Procedure has been filed by one of the accused persons in Case No. C-26437 of 2008, under Section 63 of the Companies Act, 1956, and Section 199 of the Indian Penal Code, now pending before the learned Chief Metropolitan Magistrate, Calcutta praying fo'r quashing of the proceeding.
(2.) The opposite party No.1 M/s. Gujarat NRE Coke Limited, which is a Company registered under The Companies Act, 1956 was the complainant against this petitioner and five others. The petitioner and the accused Nos. 2, 3, 4 and 5 are said to be Directors of Austral Coke & Projects Limited (hereinafter referred to as ACPL), while accused No. 6 is a Chartered Accountant of the accused company. The complainant claims to be the largest Indian manufacturer of Met Coke and globally a reputed company in manufacture of Low Ash Metallurgical Coke. The present petitioner who is accused No.1 in this case was one of the directors of the complainant company appointed in the year 1993 as Managing Director and was in full-time employment of the complainant company until 1997 when he was dismissed from service in the year 1997. Similarly, accused No. 2 who was the Vice-president (Operations) of the complainant company was also dismissed from service as both the accused Nos. 1 and 2 defalcated and siphoned off crores of rupees from the complainant-company. Various litigations between two companies are said to be pending. In the year 2007, accused No.1 who is the petitioner herein and accused No.2 jointly floated a company called Gremach Infrastructure Equipment & Projects Limited (Gremach) and came out with a publiq issue in the stock market. They invited investors by making tall and unverified claims about their performance. Market price of this Gremach came down in July, 2008 in consequence of which public investors and mutual funds lost several hundred crores of rupees. Then the accused Nos.1 and 2 floated another company called ACPL, in 1995 and made a public offer to raise money. They issued Red Herring Prospectus, (RHP) on 18th July, 2000 and made themselves directors of ACPL. This ACPL entered into capital market through initial public offer, (IPO) of 72,60,000 equity shares in a price band of Rs.164/- to Rs. 196/- per equity share which was open for subscription from 7th August, 2008 and closed on i 3th August, 2008. Now in, their prospectus they made serious mis-statements some of which are in the language of the. complainant as follows :- "(i) The M/s. Austral Coke & Projects Limited has claimed inter alia the existence of various fixed assets at its plant including 4 chimneys and 138 ovens. It has also claimed in its issue marketing materials, the current production capacity of 3.75 lakh MTPA based on such 4 chimneys. This statement is completely baseless considering the fact that the very basis on which the company's projections are made is wrong and misleading. The company has only two chimneys which can give a produce of 60,000-70,000 tones of coke which cannot justify the claimed figurqs by any stretch of engineering excellence. The balance 2 chimneys are still under construction and the ovens are also yet to be constructed, while the same have been claimed as having been completed and added to the list by the Austral Coke & Projects Ltd. (ii) The actual production figures have not been disclosed by Austral Coke in its prospectus to cover up the 'window dressing'. (iii) T. N. Datta & Associates was appointed as an auditor of the M/s. Austral Coke & Projects Limited on or about 28th May, 2008. Within a short period of 18 days, that is, on 1.6th June, 2008 they have purported to have completed the audit of accounts of M/s. Austral Coke & Projects Limited and have submitted the audit report for last 5 years for the purpose of inclusion in the prospectus. As per the statement of profit and loss account appearing on page 147 of the RHP which is part of their audit report, for the 11 months ended 29th February, 2008 sales of products manufactured by the company at Rs. 12481.72 lacs is complemented by Raw materials & Goods consumed at Rs.12843.24 lacs while against sale of products traded by the company for Rs. 10184.43 lacs, the corresponding cost of purchase of such traded goods is not shown thereby grossly inflating the profits reported by the auditors, (iv) The Gross Block of Fixed assets at Rs. 27546,99 lacs Is not supported by the information on existing assets as appearing elsewhere in the prospectus. There is an apparent falsification of books and accounts in this respect. The aggregate insurance policies taken out by the M/s. Austral Coke & Prqjeets Limited on its fixed assets is less than 30% in value of the value of Gross Block certified by the auditors. The auditors have also not shown the amount of capital work-in-progress even though the prospectus as well as insurance policies taken out by the company refer to the same. (v) To cover up the falsification of accounts and such window dressing, accused persons Nos. 1 to 5 have not given in RHP any quantitative details 9f the goods produced and traced by M/s. Austral Coke & Projects Limited. (vi) The complainant is the largest independent coke producer in India With a total coKe making capacity including its subsidiaries at 1 million tonnes per annym. It is the only Indian company to own and operate cooking coal mines in Australia and the value of ownership interest of such mines alone is more than Rs.3,000/- Crores besides the value of coke plant of 1 million tonnes and other assets including a steel plant and wind mills. (vii) The complainant has published the Basis for Issue Price of M/s. Austral Coke & Projects Limited on page Nos. 74 and 75 of the Prospetus, wherein they have compared the financials of M/s Austral Coke & Projects Limited with complainant. (viii) The financial comparison of M/s Austral Coke & Projects Limited with complainant has been made in utter disregard of the positions held by both companies in the industry with respect to size, quality of assets, Np. of years of standing in business, goodwill built up by complainant and its ownership of various assets in India as well as overseas coking coal mines which are in production and generated a substantial cash flow. As explained hereinbefore, the audited accounts of M/s Austral Coke & Projects Limited have been falsified and distorted. The financial comparison which is based on such engineered and doctored data in respect of M/s. Austral Coke & Projects Limited is made with the twin intent to cheat and defraud investors on the one hand and defame complainant on the other. (ix) In the prospectus, the accused person 1 and 2, the promoters of M/s. Austral Coke & Projects Limited have claimed that they were the one of the promoters of complainant and were instrumental in growth of the complainant, conveniently forgetting to mention that they were forcefully "expelled" in 1997 from the complainant by its shareholders because of their fraudulent practices including defalcation of shareholders' monies. Several cases against accused persons Nos. 1 and 2 are still pending in the Calcutta High Court for investigation and recovery of public investor funds defalcated by them. (x) All such proceedings pending in this Hon'ble Court are for investigation and recovery of company properties siphoned off and defalcated by the accused persons 1 and 2 and none of these cases in any manner related to any family dispute. (xi) Accused person Nos. 1 and 2 have been falsely claiming such pending cases for recovery of company properties defalcated by them to be part of a family dispute and thereby misleading the public at large as well as all those dealing with them. (xii) By wrongfully claiming themselves as original promoters of the complainant without disclosing their true relationship with complainant, they have actively misled with intent to defraud each and every person who relies on such statements made in the prospectus with sole purpose of luring the investors to subscribe to their public issue. (xiii) CARE one of the leading credit rating agencies in the country have graded the public issue of M/s Austral Coke & Projects Limited and has assigned the "CARE IPO GRADE 2" indicating below average fundamentals; (xiv) To wrongfully associate directly as well as indirectly the name of complainant to such below average issue has seriously damaged the credibility of complainant before its existing 1 lac investors as well as prospective investors".
(3.) The accused persons thus committed offence under Section 63 of the Companies Act, 1956. The complainant having come to know of the misstatements issued a Press Release bringing the misstatements to the knowledge of the investors and public in general. Accused Nos. 1 and 2 issued a counter Press Release alleging that the complaint of the complainant was in the nature of a 'family dispute'. The complainant then issued a further Press Release on 8th August, 2008 with the following :- "(i) The promoters of Austral Coke Mr. Ratari Lai Tamakhuwala and Mr. Rishi Raj Agarwal were "employees" of Gujarat NRE Coke Limited. They were "expelled" from the company when they were caught stealing shareholder' monies and company funds. The term "family dispute" is not applicable as the case against the promoters of Austral Coke was not about the division of family properties, but was plain vanilla corruption and theft. (ii) Public Limited Listed Companies are not family fielddoms. To even hint that a management complaint about defalcation of corporate funds is a "family dispute" points at the utter disregard to corporate governance ethics, which only goes to strengthen the original case against the father-son-duo that they were using company and shareholder funds for personal gains, treating the shareholders assets as "family owned". (iii) Various cases are pending against the duo before the Hon'ble Calcutta High Court relating to the defalcation of shareholder funds not family property. (iv) Austral Coke has made several misstatements in the prospectus with a criminal intent to defraud investors. While they have only two running chimneys, they have claimed to have four chimneys seeking to pass off two under construction chimneys as running ones. This in itself a serious offence and warrants immediate investigation. (v) Austral Coke has also claimed a current production capacity of 3.75 lakh MTPA which too is a blatant lie. As per technical specification of ovens, with two chimneys cannot give them a production figure more than 60,000 to 70,000 tons of coke. Even with four chimneys as claimed by Austral, they cannot produce more than 1,40 lakh MPT of Coke. The balance is a screaming lie. We will again urge the media to visit the Austral Coke Plant at Lunva, Taluka Bhachau, Gujarat to veryfy the claims of the company. (vi) The Austral Coke Prospectus does not disclose the actual production figure to cover up the fraud. (vii) Gujarat NRE Coke has already sent and request SEBI and the Company Law Board to consider the Press Release issued yesterday as an FIR and initiate appropriate investigation against the promoters of Austral Coke. (viii) Gujarat NRE Coke would like to ask the Merchant Bankers and various other "interested parties" who have lent their names to the issue as to whether they are aware to the aforesaid facts and whether they can stand up and verify under oath one simple thing that Austral Coke had four chimneys that are in operation as mentioned and certified in the prospectus dated 18.7.2008".;