Apprising Interested Party Of Company's Ongoing Mismanagement Or Disputes Not Defamation: Delhi High Court
The Delhi High Court has observed that any communication made in the context of existing legal disputes and for protection of a company's financial interests falls within the protective ambit of the defamation law. Justice Neena Bansal Krishna said that to allow criminal prosecution under defamation to proceed in case where the dispute is evidently civil and commercial in nature, would be...
The Delhi High Court has observed that any communication made in the context of existing legal disputes and for protection of a company's financial interests falls within the protective ambit of the defamation law.
Justice Neena Bansal Krishna said that to allow criminal prosecution under defamation to proceed in case where the dispute is evidently civil and commercial in nature, would be to permit the use of criminal law as a tool for harassment and to settle corporate scores.
The Court was dealing with a plea filed by Founders and Promoters of an entity/ Calcom Cement India Limited, seeking quashing of a criminal complaint filed by Dalmia Cement Bharat Limited and a trial court order summoning them for the offence of defamation.
After Dalmia Cement invested in Calcom Cement, certain issues arose with the latter alleging that the former neglected its duties as per the definitive Agreements.
Calcom Cement then initiated multiple legal proceedings, including Company petitions and Arbitration matters, which are pending before various judicial forums.
A letter was issued by Calcom Cement to the Managing Director of GuarantCo, Frontier Markets Fund Managers Limited, London- a lender to the entity in question. It was claimed that the said Letter was written bona fide to apprise an interested party of the ongoing mismanagement and disputes within Calcom Cement.
Thereafter, the letter was forwarded by GuarantCo to Dalmia Cement seeking clarification on the allegations. Based on the Letter, Dalmia Cement filed the Criminal Complaint for defamation, alleging that the statements made by Calcom Cement were false, malicious, and intended to harm its reputation.
Allowing the plea, the Court said that the right to reputation in its vital aspect is not concerned with fame or distinction but has regards to the repute which is slowly built up by integrity, honourable conduct, and right living.
“One's good name is therefore, as truly the product of one's efforts as any physical possession; indeed, it alone gives the value as source of happiness, to material possessions. It is, therefore, reputation alone that is vulnerable; character needs no adventitious support,” the Court said.
It noted that the parties to the dispute were not strangers but were business partners engaged in bitter and protracted corporate disputes pending before multiple judicial forums, including arbitration and the NCLT.
“The Petitioner had direct and legitimate interest in the Company's affairs and management. Viewed in this context, the act of the Petitioners in apprising a lender of what they perceived “mismanagement” and “siphoning of funds” appears to be an act aimed at protecting their own interests as shareholders and guarantors, as well as the interests of the lender to whom the communication was addressed,” the Court said.
It added that when read comprehensively, the contents of the letter did not attack the reputation of Dalmia Cement but were specific to the management of the affairs of Calcom Cement.
”If it was to be held otherwise, the every Petition before NCLT which fails, would result in a defamatory case, which not only is not the intent of law but would be most detrimental too free environment for the trade and commerce to flourish,” the Court said.
“The communication was directed to a party that had lawful authority and interest in the subject matter. Such communication made in the backdrop of existing legal disputes and for the protection of financial interests, was made to GuarantCo which prima facie falls within the protective ambit of Exception 9 to Section 499, IPC,” it added.
The Court concluded that the letter was a communication made inter se the parties involved and concerned with the affairs of Calcom Cement and was in good faith for protection of the interests of the makers, which would be covered by Exception 9 to Section 499 of the IPC.
Justice Krishna then quashed the impugned criminal complaint case for defamation as well as the summoning order.
Title: RITESH BAWRI & ORS v. STATE & ANR
Citation: 2025 LiveLaw (Del) 1271