‘Huge Scam And An Offence Against The Society’: Gujarat High Court Rejects Fugitive Businessman Mehul Choksi's Plea Seeking To Quash 2017 Cheating Case

Justice Sandeep N Bhatt observed, “Due to such fraudulent act and closure of the showrooms, money invested by the investors is not refunded and it can be said that a huge scam is committed. Therefore, the ultimate liability can be fastened on the shoulders of the persons responsible for the affairs of Gitanjali Gems and present petitioners being the Directors and actively involved in the management of the company cannot shirk their responsibility.” 

“It is true that merely being Directors, they cannot be held responsible for the criminal act but looking to the nature of the allegations in the present case, as there is a large scale scam committed by Gitanjali Gems across the country, the petitioners cannot escape their liability at this stage,” Justice Bhatt added.

The above ruling came in the petition filed by Choksi and Chetna Jayantilal Zhaveri, the Director of Gitanjali Group with a prayer to quash and set aside an impugned FIR registered with DCB Police Station, Ahmedabad, on 3.4.2017 for the offences punishable under Sections 406, 420 and 34 of the Indian Penal Code.

As per the factual matrix of the case, the complainant and her husband visited M/s. Gitanjali Jewellers to make purchases. However, the bill given to them indicated M/s. Divyanirman Jewels, Ahmedabad. The showroom staff informed them about diamond/gold installment schemes where one installment would be covered by the company. The complainant agreed to invest Rs. 5000/- per month in the gold coin scheme for 12 months. They paid Rs. 10,000/- towards two schemes, with subsequent installments collected at their residence until May 25, 2014.

In July 2014, Gitanjali Jewellers informed the complainant of the franchise termination. When they offered to pay the remaining installments for gold coins, they were told only diamonds were available. The complainant declined, requested gold coins or a refund, but received no response after reaching out to Gitanjali Group. The franchisee owner, Digvijaysinh Jadeja, was untraceable. The complainant alleged criminal breach of trust and cheating due to the unfulfilled investment promises.

The accused included Digvijay Jadeja (franchisee owner of M/s. Divyanirman Jewellers), Mehul Choksi (Managing Director of Gitanjali Group), Aniyath Shivraman Nair (Director of Gitanjali Group), and Chetna Jayantilal Zhaveri (Director of Gitanjali Group). The accused argued that the investment was never transferred from M/s. Divyanirman Jewels to Gitanjali Jewellery Retail Limited (GJRL), and there were legal disputes between GJRL and M/s. Divyanirman Jewels regarding unreturned jewelry and pending sales proceeds.

It was later revealed that the complainant settled with the accused, waving her claims and choosing not to pursue the criminal proceedings.

Advocate Salil Thakore, representing the petitioners, argued that based on the contents of the impugned complaint, there was no clear indication of any offense committed by the present petitioners. He further contended that the essential elements required to establish the alleged offenses in the First Information Report (FIR) were not met by the present petitioners.

Thakore emphasized that the accused individuals served as Directors of the company, and unless there was a specific role attributed to them, vicarious liability should not be imposed. He also argued that, considering the nature of the alleged offenses against the petitioners, the most that could be established was a breach of contract related to the sale of goods. Therefore, he asserted that there was no mens rea (guilty intent), and thus no offense could be attributed to the present petitioners.

Since the petition was argued for quashing of the proceedings qua petitioner no.2, i.e., Chetna Jayantilal Zhaveri, before proceeding the Court referred to the observations of the Supreme Court in the case of State of Haryana Vs. Bhajan Lal reported in AIR 1992 SC 604 wherein the Apex had illustrated the cases wherein inherent powers under Section 482 of the Criminal Procedure Code could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice.

The Court noted that Zhaveri, claimed to have been admitted as a Director in the company after the alleged incident, however, it was not denied that she is the Director of the company.

The Court highlighted, “Now considering the scheme of the company giving various options of investment in gold and diamond, various persons have invested their money in such schemes. Since such schemes are closed suddenly and the deposited amount is not refunded to the persons who have invested their money, it is clear that such persons are cheated.”

The Court observed that prima facie, ingredients of the alleged offences were satisfied and the complaint was required to be proceeded further.

“Prima facie, it is found that after giving false promises through their franchisee, such showrooms are closed down and the customers who have invested their money are cheated. It is found that the showrooms of the company in the respective cities are closed down. It is not the case that at one or two places such incidents have occurred but wherever Gitanjali Gems were having their franchisee, at all such places, such incidents have occurred and people, who have invested their money, are cheated,” the Court further observed.

In response to arguments by Advocate Thakore that Zhaveri became a Director after the incidents in question, the court deemed these contentions irrelevant at this stage.

The Court held, “Since prima facie case is made out against present petitioners and charge sheet is also filed, no case is made out by applicants to exercise powers of this Court under Section 482 of the Criminal Procedure Code. The applicants can raise all the contentions as their defence at the time of trial. Looking to the facts and circumstances of the present case, it cannot be said that there is no entrustment of the property or there is no intention to deceive the people by fraudulent act.”

“On the contrary, considering the material available on record and more particularly going through the allegations levelled in the FIR, prima facie, offence is made out and the petitioners are required to face the trial. Considering the scale at which the offence is committed, it can be said that it is a huge scam and an offence against the society,” the Court further held.

In view of above observations and considering the facts of present case, the Court opined that as prima facie case was made out against the accused, thus, no case was made out to exercise inherent powers of this Court under Section 482 of Criminal Procedure Code. Accordingly, the Court dismissed the petition.

Additionally, the court denied the request for an extension of interim relief for Zhaveri, emphasizing the need for the investigation to be completed promptly and the subsequent proceedings to move forward without further delays.

Appearance: Mr Salil M Thakore(5821) For The Applicant(S) No. 1,2 Mr Param R Buch(5625) For The Respondent(S) No. 2 Mr Chintan Dave, App For The Respondent(S) No. 1

Ll Citation: 2023 Livelaw (Guj) 163

Case Title: Mehul Chinubhai Choksi & 1 Other(S) Versus State Of Gujarat & 1 Other(S)

Case No.: R/Special Criminal Application (Quashing) No. 1072 Of 2018