'No arguable case of fraud': London High Court judge dismisses plea to freeze accounts of Pratap Shirke

High Court of Justice, London (Photo via Wikimedia Commons)

The bitter family dispute in the Goa-headquartered Chowgule group, which is worth Rs 2,500 crore has reached London. In 2021, there were reports of a settlement between the two factions headed by siblings Vijay Chowgule, 77, and Padma Chowgule, 67, but it seems it has not been successful.

The group has interests in metals, shipbuilding, shipping, mining and heavy engineering and has usually kept itself out of the media limelight. The Chowgule empire is over a century old and was established by Datta Chowgule, the grandfather of Vijay and Padma. However, it was Vishwasrao Chowgule, Vijay and Padma’s father, who established Chowgule and Company Private Ltd (CCPL) in 1942 that laid the foundation for the group’s stupendous success.

As managing director of CCPL, Vishwasrao was helped by his two brothers Y.D. Chowgule and L.D. Chowgule who served as directors. Vishwas Chowgule died in 2008 at the age of 93, leaving three sons Vijay, Ashok, Umaji and three daughters Sarita, Rohini and Padma. Sarita and Vijay each own 10 percent of CCPL directly or indirectly. The remaining 80 percent is mostly owned by various other members of the Chowgule family.

The family firm was helmed by Vijay Chowgule for a long time, including as managing director between 1988 and 2019, and as chairman between 2008 and 2019. In 2021 Padma, the youngest sibling, became the chairperson replacing Vijay. Padma and Ashok Chowgule are joint managing directors of CCPL, which also has Umaji among other family members as directors. The other group consists of Vijay and Sarita Shirke.

The case in London

CCPL claims that Vijay, Pratap Shirke (Sarita's husband), Pradip Mahatme, a chartered accountant and a friend of Vijay, committed fraud of $128 million on CCPL and its subsidiary Rudra. They sought freezing injunctions against Pratap Shirke who has been based in the UK since 1984. Vijay Chowgule and Mahatme are based in India.

According to the allegations, between 2009 and 2014, Vijay Chowgule, Pratap Shirke and Mahatme induced CCPL to make investments worth $128 million for a chemical tanker business. The funds, however, it is alleged, were instead siphoned off. Based on these allegations CCPL, which is now under the control of the faction led by Padma, approached the high court in London saying there has been no satisfactory explanation about the $128 million.

Pratap Shirke has been married to Sarita for over 50 years, and was a childhood friend of Ashok Chowgule. His family business is in the construction sector, and he is a director in the family company B.G. Shirke Construction Technology Pvt. Ltd. He was also involved in the overseas shipping business of the Chowgule group from 1987. As matters stand, he and his wife Sarita are in the faction headed by Vijay.

Shirke’s stand was that all transactions relating to the investment were fully disclosed and the CCPL board was well aware of every development. He termed the allegations of fraud and conspiracy as fantasy concocted by the rival faction to bring pressure in the ongoing family disputes.

Harish Salve, KC, representing Shirke, told the court that there was no merit in the allegations of fraud and that if Vijay Chowgule, Shirke and Mahatme wanted to defraud CCPL, there were clearly more effective ways of doing it, than what was being claimed.

The decision

Considering the complexity of the allegations, Justice Dias noted: “I am far from saying that there are not matters which still need to be investigated. As already noted, there were a large number of inter-company transactions and there is clearly a lot of background still to be revealed. It may well be that the involvement of Vijay and Mr Mahatme in the stay application will shed much greater light on the course of events. So far as concerns the present application, however, the Claimants' case is unequivocally based on allegations of fraud and it follows that if I am not satisfied that they have the better of the argument as to the existence of that alleged fraud, the application must fail.” The judge concluded that “no arguable case of fraud has been demonstrated”.

This reporter has written to both Harish Salve for Pratap Shirke and Milbank LLP, the law firm acting for Chowgule and Company Pvt Ltd, seeking a statement/comment. This article will be updated with their response.

The court earlier this month dismissed the application for a freezing injunction against Shirke remarking that the unchallenged evidence is that he is a “man of good reputation and unimpeachable character”. As wider facts of the case came out, it was clear that the current proceedings are intimately linked to the dispute over the 2021 settlement agreement.

An arbitration proceeding is currently ongoing between both the parties to enforce the terms of the family settlement. It also emerged that a criminal complaint has been filed in Goa by the parties and a complaint has been lodged against Mahatme with the disciplinary committee of the Institute of Chartered Accountants in India.

In December 2023, a further hearing is expected on applications by Vijay Chowgule, Shirke, and Mahatme to stay or set aside proceedings in the high court in London on the basis that India and not England is the proper forum.