Electoral Candidate's Wife Holding Minuscule Shares In Company With Govt Contract No Ground For Disqualification Sans Proof Of Irregularity: Telangana HC

The Telangana High Court while dismissing an election petition, has held that if a candidate's wife holds minuscule shares in a company which has entered into a contract with the government, the same would not be a ground for disqualifying the candidate from contesting elections unless proof of irregularity in assets can be shown.

"Though the wife of the first respondent is directly connected with Kakatiya Industries as a shareholder, as she is having a miniscule shareholding of 00.15% in Kakatiya Industries, it would not have any bearing on the decision taken by the said company...The oral evidence adduced about the irregularities or non-disclosure of the assets by the first respondent, is not corroborated by any documentary evidence to prove the said fact," the Bench comprising of Justice G. Anupama Chakravarthy said.

The Court was hearing an election filed by Dr. Nagam Janardhan Reddy challenging the election of Sri Marri Janardhan Reddy from the Nagarkurnool Assembly Constituency, Kurnool District, for the Telangana Rashtra Samithi (now, Bharat Rashtra Samithi).

In 2018, Dr. Nagam Janardhan Reddy ("Petitioner") lost the election to Sri Marri Janardhan Reddy ("Respondent") who has been previously elected as the representative of Nagarkurnool Assembly Constituency, Telangana on 6 different occasions. The Petitioner filed an Election Petition before the High Court in 2019, contending that the election of the Respondent should be held void as per Section 9A and 100 of the Representation of People Act 1951 ("RP Act"), since he failed to disclose material particulars in Form 26 of his Nomination, which would amount to indulgence in 'corrupt practice'.

The Petitioner submitted that the Respondent did not disclose that he had indirectly entered into a contract with the Government in the course of trade, and wilfully suppressed the same, as it would lead to disqualification under section 9A of the RP Act. It was alleged that the Respondent's wife was the director and owner of 4,09,000 shares in Kakatiya Industries (India) Pvt. Ltd. ("Company") and the same could be confirmed by the information provided by the Registrar of Companies (ROC). The Company entered into a contractual agreement with the Government for the supply of HDPE Pipes throughout Telangana under Mission Bhagiratha. The Respondnet's wife, Smt. Marri Jamuna Rani, had allegedly given a loan of Rs. 40 Lakhs to the Company.

Further, M/s J.C. Brothers Holding Pvt. Ltd. held equity shares worth Rs. 1.94 Crores in the Company and the Respondent is a director in J.C Brothers.

It was argued that non-disclosure of information under paragraph 9B(f) column of Form 26 Affidavit amounts to corrupt practice falling under the heading “undue influence” as defined under Section 123(2) of the R.P.Act. Therefore, the Respondent should be disqualified under Section 100 of the R.P. Act. Further, disqualification should also be done for having a subsisting contract with the government at the time of submission of Nomination, as per section 9(f) of the RP Act, Petitioner argued.

The Respondent argued that his wife was a Director in the Company and had resigned prior to the commencement of the Election process.

Further, Respondent's wife, on the approval of the Board, had sold 4,00,000 lakh shares in April 2018 for which she received consideration. Post transfer, she held shares worth Rs. 90,000/- only in the Company which is a merger portion of 0.0015% of the entire share amount. The same was disclosed in Form 26.

HIGH COURT VERDICT

The Court opined that an election petition should be dealt with in the same manner as that of criminal proceedings. Accordingly, the burden of proof is on the Petitioner, akin to the principle followed in criminal proceedings. It was observed that no proof was placed on record to show that the Respondent was the Director of J.C Brothers on the day of filing nominations or that Respondent's wife was a director in the Company. 

It was observed that as per the provisions of the R.P. Act, a person shall be disqualified, if and for so long as there subsists a contract entered into by him in the course of his trade or business with the appropriate Government, for the supply of goods, to or for the execution of works undertaken by that Government. However, the Petitioner has failed to prove that the Respondent or his wife has entered into any contract with the Government directly or indirectly.

Court said no document has been filed by the Petitioner to show that the Respondent's wife held shares or the balance shares of Kakatiya Industries, to disqualify the Respondent from contesting the election. 

Further, the Court held that the Respondent had not entered into the contract with Government directly or indirectly and hence cannot be disqualified from contesting elections. 

"In view of the specific allegation made by the petitioner that Kakatiya Industries has entered into a contract with the Rural Water Supply and Sanitation Department, Government of Telangana, for manufacture, supply and delivery of HDPE pipes anywhere in Telangana State for Intra-Village Network under Mission Bhagiratha and the said contract was in subsistence till 16.11.2018 i.e., on the date of submission of the nomination by the first respondent, this Court is of the considered view that subsistence of the contract with the Government as far as the first respondent is concerned is not directly or indirectly, is not a ground for disqualifying the first respondent from contesting the election."

It has been held that the case of the Petitioner lacked clarity and failed to form a case beyond reasonable doubt. Hence it could not be said that the Respondent had indulged in 'corrupt practices' as per section 123 of the RP Act.

"In view of the admitted fact that neither the pleadings nor the evidence on record do not have any material substance to attract the ingredients of Section 123 of the R.P. Act, and therefore, no issue was framed as far as the ingredients under Section 123 of the R.P. Act is concerned...Hence, this Court is of the considered view that no finding needs to be given as to Section 123 of the R.P. Act."

The petition has been dismissed. 

Case Title: Dr. Nagam Janardhan Reddy v. Marri Janardhan Reddy 

Case No.: ELECTION PETITION No.14 of 2019

Counsel for petitioner: C.V. Mohan Reddy, Senior Counsel

Counsel for respondent: Prakash Reddy, Senior Counsel

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