On Friday, Karnataka High Court had dismissed a petition filed by businessman and Wipro founder Azim Premji seeking relief from summoning proceedings initiated at a Bangalore court in a financial fraud case. A Bangalore court had issued summons to Azim Premji, his wife, and others in a case filed under several sections of IPC and Prevention of Corruption Act, and Premji had moved the High Court seeking to quash the summons, but the High Court refused his plea.
The Case against Azim Premji & Others
An organisation named India Awake for Transparency had filed three complaints against Azim Premji and others, namely, Yaseem Premji and Pagalthivarthi Srinivasan accusing them of siphoning off ₹13,602 crores from three companies in the form of gifts between 2010 and 2012. The accused had then allegedly transferred the amount to a private trust run by them. Reportedly, the companies had assets worth ₹51,549.47 crores where they served as Directors.
As per the allegation, after transferring the ₹13,602 to themselves as gifts, the three companies were merged into a 4th loss-making company, Hasham Investment and Trading Company Private Limited. This gave the accused control over the remaining assets of the company worth ₹31,342 crore. A complaint was also filed against Venkateshwara Rao, who served as a consultant chartered accountant.
Summons were thus issued by a Bangalore civil court asking the accused to stand trial under Prevention of Corruption Act, 1988 and Indian Penal Code (IPC) Sections 34, 120B (criminal conspiracy), 34 (acts done by several persons in furtherance of common intention) and 409 (criminal breach of trust).
Arguments made by the Accused
While filing the plea in the Karnataka High Court, the accused argued that the allegations levelled against them do not constitute a criminal offence. Besides, they said that the amalgamation of the companies was done following due procedures and was even accepted by the Karnataka High Court.
The counsel appearing for the accused stated that the complainant had earlier challenged the amalgamation in the National Company Law Tribunal (NCLT) in Bengaluru and NCLAT in Delhi. Reportedly, the petition was dismissed at both places with ₹2 lacs imposed against the complaint NCLAT, Delhi.
Observations made by Karnataka High Court
The Bench of Justice John Michael Cunha at the Karnataka High Court observed that three financially sound companies were merged into a loss-making company, Hasham during the amalgamation process. And this happened despite Hasham not “paying any consideration” to buy the assets of the three companies.
The Court observed that through the amalgamation, the accused became the owners of the assets of the three companies and as such, it was a criminal breach of trust (IPC Section 409). The Court noted that the accused were neither the shareholders or the owners of these companies at the time lf amalgamation, they were only directors of the companies.
The Court pointed, “Under the said circumstances, when the corporate vehicle is set up for the purpose of acquiring the control or ownership over the assets of the incorporated Companies to which accused Nos.1 to 3 were not legally entitled, it is necessary to find out the persons and the purpose behind setting up such a corporate vehicle on the guise of amalgamation.” The court also held that the Special Judge of the Bangalore Civil Court was thus justified in issuing summon proceedings to the accused.
The Court also stated, “The alleged transaction is not a simple or innocuous amalgamation as sought to be made out by the petitioners; rather the whole exercise as reflected in the voluminous documents produced before the Special Court indicate that the entire transaction was contrived to get hold of the valuable assets of the Transferor Companies camouflaged as amalgamation.” As such, the Court refused to grant relief to Azim Premji and other accused.
Hasham Investment and Trading Company Private Limited operates in the Finance sector. The Three companies that were merged into were Napean Trading & Investment Company Pvt Ltd (NTICPL), Vidya Investment & Trading Company Pvt Ltd (VITCPL) and Regal Investments & Trading Company Pvt Ltd (RITCPL), all of whom were registered as Non Banking Finance Companies (NBFC).