'Police Preventing Transfer Of Shares? We Can't Allow This': Supreme Court Stays UP Police Notices To Yes Bank
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The Supreme Court on Tuesday reprimanded the Uttar Pradesh Police for issuing Cr. P. C. section 102 notice to Yes Bank in respect of shares allegedly pledged by Dish TV and injuncting it from transferring the same or exercising its voting rights at the latter's AGM.The bench of Justices D. Y. Chandrachud, A. S. Bopanna and Vikram Nath was hearing Yes Bank's SLP against the November 25 order...
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The Supreme Court on Tuesday reprimanded the Uttar Pradesh Police for issuing Cr. P. C. section 102 notice to Yes Bank in respect of shares allegedly pledged by Dish TV and injuncting it from transferring the same or exercising its voting rights at the latter's AGM.
The bench of Justices D. Y. Chandrachud, A. S. Bopanna and Vikram Nath was hearing Yes Bank's SLP against the November 25 order of the Allahabad High Court dismissing the bank's writ petition against an FIR and the consequent Section 102 notices. The High Court said that the disputed facts cannot be examined under Article 226, that the petitioner has alternative remedies and that it is not inclined to exercise its writ jurisdiction to stifle a legitimate investigation.
On Tuesday, the bench recorded that the principal issue which has been canvassed in the SLP, which arises from a judgment and order of the division bench of the High Court of Judicature at Allahabad of November 25, is that notice was issued under section 102 of the Cr. P. C. by the second respondent, the investigating officer of the crime branch in the Police Commissionerate, G. B. Nagar Greater Noida, and the notice is beyond jurisdiction.
The bench further recorded that Senior Advocate Dr Abhishek Manu Singhvi, for the petitioner, submits that a loan of Rs. 5,720 crores was disbursed to the Essel group and its sister concerns between 2016 to 2018; that a pledge of Rs. 44.53 crores approximately was invoked following which, between May and July, 2020, intimation was furnished to the BSE, NSE and RBI; that the invocation of the pledge was sought to be interdicted in civil proceedings which have been since withdrawn; a complaint was lodged on June 22, 2020 by the third respondent, complaining that the borrowers have been induced or pressurised to take loans; that the FIR on the basis of the complaint under sections 420, 467, 468, 409, 120 B, 34 of the IPC was registered on September 12, 2020; that the AGM of the Company 'Dish TV' was to take place on November 30, 2021 which was deferred.
"In the above backdrop, it has been submitted that a notice under section 102 which has been issued by the second respondent, directing the petitioner not to transfer the 44.53 crore shares or to exercise rights in respect of the shares 'till completion of investigation or further orders' is beyond jurisdiction and manifestly there has been a misuse of criminal process to restrain the petitioner from exercising its rights under the pledged shares", the bench noted.
"The Allahabad High Court however dismissed the petition on the ground that there is an alternative remedy under section 451 and 457 of the Cr. P. C. Senior advocate Kapil Sibal, for the third respondent on caveat, while seeking an opportunity to file a counter affidavit, submitted that there is neither a genuine loan transaction nor a valid pledge of shares in favour of the petitioners. He submitted that given an opportunity to do so, it would be possible to demonstrate before this court that the order of the second respondent does not suffer from a want of jurisdiction, having regard to the provisions of Section 102", the bench observed.
"How could the police inspector pass an injunction against you?", expressed the bench.
Justice Chandrachud also asserted, "We can't permit police officers sitting in Gautam Buddha Nagar to do this kind of an exercise- preventing voting rights on shares? Restricting transferring of shares? The police officer has done something which even the Company Law Tribunal has not done. What kind of state of affairs would result if this happens? We cannot allow this in the country. That is why 226 is a very valuable right- To interfere in these kinds of cases!"
"We don't want to give this kind of power to the police. They will start interfering in other public limited companies. Short-circuiting the judicial process by getting orders from police officers? This we will not allow! That would be the easiest thing to catch hold of a police officer and restrain a share-holder from the company from exercising voting rights and transferring shares! Using the criminal process to achieve results which you ought to take recourse to a civil proceeding? Very dangerous! Look at the overall consequences if you allow police officers to do these things!", continued Justice Chandrachud.
Then, the bench proceeded to dictate its order- "Prima facie, at this stage we are of the view that it would be necessary to protect the interest of the petitioner in respect of the pledged shares, the pledge having been admittedly invoked. Hence, we issue notice and direct that pending further orders, there shall be a stay of the operation of the impugned notices. Also, there shall be a stay of further proceedings in respect of the FIR. The counter affidavit be filed within a period of three weeks"
Senior Advocate Abhishek Manu Singhvi, for Yes Bank, had urged, "Can 102 be used in this manner, for a loan dispersal which started in 2016 and continued till 2018? The FIR is 2020. The only purpose of the impugned document (notice) of November 5 is to freeze voting rights in view of the impending AGM today. Can 102 in any circumstances apply, looking at the operative words of 102? It is the most extraordinarily ingenious misuse of criminal law! 102 speaks of property alleged or suspected to have been stolen or which may be found under circumstances which create suspicion of the commission of any offence! The shares which I have got as a pledge of a lender of 5,700 crore loans are alleged to be stolen or suspected to be stolen? It is acknowledged on the books! The police says you are directed not to transfer? If this kind of thing in collusion with the police is allowed and the High Court says 226 is not maintainable? I don't know why the constitutional framers called it extraordinary jurisdiction then. They should have called a pedestrian ordinary jurisdiction!"
"This is nepotism at its worst. It reeks of it, it stinks of it, the language (of the notice) shows it! If 102 has no application, then under 226, while your lordships may or may not interfere, but is it lack of jurisdiction as the High Court holds? If the division bench of the highest court in the state will not act under 226, where will I go?", he urged.
"Your Lordships, even in normal situations, do hardly ever freeze voting rights on shares. The transferability and the voting rights on shares is the axiom of company law, corporate law. It is part of the fundamental right of the person to do business. And I am a lender of 5000 crores and the shares I have under a pledge are rendered worthless by the criminal code! This is an abuse of process and the high court should have passed strictures!", advanced Dr. Singhvi.
Senior Advocate Kapil Sibal, for Respondent no. 3 and the original complainant, argued, "The scheme was that I take a loan from Yes Bank to clean the books of Yes Bank and Videocon immediately returns that money back to Yes Bank. Your Lordships know what the state of Videocon is today. There was complete round-tripping. The whole purpose was that you take my money and clean my books. The transaction resulted in me buying shares from Videocon and that entire money is returned to Yes Bank. So there is no loan at all! These facts need to be placed on record. He has a remedy under 457!"
"Why has he not shown the shares? He wants to take over the company in the name of somebody else! He has invoked the pledge and for 18 months, he is not selling the shares? Why should a bank take over the company unless it is for somebody else? Banks are not in that business!", he continued.
Justice Chandrachud observed, "Either way, you have the remedy before the NCLT. We can't permit police officers sitting in Gautam Buddha Nagar to do this kind of an exercise. We will grant a stay and you place your facts on record"
Mr. Sibal contended, "Allow me to show how the shares are tainted. If they are tainted, he has the power to freeze them. Record my statement that I will not hold the AGM till My Lords decide the matter"
Dr. Singhvi pressed, "The order should be stayed. Mr Sibal's statement is because I mentioned the matter before CJI yesterday and it was listed today and that is why the AGM is deferred. Shareholders have rights other than voting at the AGM. Just consider the repercussions of what Your Lordships have been told. 'A' has a fight with 'B'. He conveniently manages a police officer who sends a 102 to Kerala to freeze paintings, to freeze jewellery, to freeze shares without going to a civil suit, without going to the NCLT or a single Corporate battle!"
Case Title: Yes Bank Ltd v. State of U.P