HC refuses to quash criminal proceedings against real estate tycoon in cheque dishonour case

File image of the Embassy Office Parks building. (Representative Image)

The Karnataka High Court has declined to quash the criminal proceedings against the owner of city-based Embassy Group, Jitendra Virwani in a cheque dishonour case.

The criminal case initiated under the Negotiable Instruments Act against Virwani, chairman of real estate conglomerate Embassy Group is pending before an Additional Chief Metropolitan Magistrate here.

The original complaint was filed against OMR Investments LLP and six of its partners and signatory authorities, including Virwani. Pardhanani Chatrabhuj Bassarmal and Sahadeva Reddy are the complainants. The complainants had a deal with the OMR Investments LLP regarding co-development of a property and reinvestment in a Embassy Group project in a special economic zone.

In furtherance of this agreement, certain transactions took place between the parties and subsequently on December 6, 2016, two loan agreements were entered into between the accused and the complainant for a sum of Rs 490 crores which was to be invested in the property development scheme.

Based on the assurance of the Embassy Group, the complainants claim to have transferred the amount in three instalments. The amount was to be paid back in 12 months and a deed of guarantee with post dated cheques for Rs 390 crore was drawn up, the complainants claimed. The details of the post-dated cheques issued are a part of the complaint. They vary from November 5, 2021 and May 31, 2022. When time arose for presentation of these cheques and were presented, all of them were dishonoured for want of sufficient funds’.

The Dubai-based complainant filed a private complaint. Taking cognizance, the Magistrate court issued summons to Virwani and the other accused on March 24, 2022. Virwani and others approached the HC challenging this. Justice M Nagaprasanna heard their petitions and pronounced the judgement on July 4 dismissing them. Virwani and other accused had challenged the criminal case on four grounds.

First the complaint was filed by a special Power of Attorney holder of the complainant which was not maintainable. In response to this, the HC said the complainant had fulfilled the requirements as per law.

Second, the order taking cognizance is vitiated on account of it not being preceded with recording of sworn statement of the complainant, they said. The high court dismissed this saying, "At best, it is an irregularity which would not impede fair trial to the accused or to the complainant. Hyper-technicalities in the form of irregularities cannot override substantive justice."

The petitioners also contended that the cheques issued as security do not come under the ambit of Section 138 (cheque bounce) of the Negotiable Instruments Act. The HC cited a Supreme Court judgement to reject this contention as "these are disputed questions of fact and have to be tried in a full-blown trial." The Chairman or Directors of the Company weren’t aware of the transactions, they claimed.

The HC, however, said, "A mammoth transaction of this nature being executed without passing muster through the office bearers of the Company cannot be imagined at this juncture." The HC said the accused have to come clean through the trial and dismissed the petitions.