Bombay High Court quashes FIR against Indiabulls Housing Finance Limited alleging siphoning of funds

The Bombay High Court on Wednesday quashed a First Information Reports (FIR) registered against Indiabulls Housing Finance Limited (IHFL) based on a complaint of a shareholder who alleged that the company was siphoning off funds [Indiabulls Housing Finance Ltd & Ors v. The State of Maharashtra]..A Bench of Justices PB Varale and SM Modak allowed IHFL’s plea and set aside a magistrate’s order initiating criminal proceedings against the company, while observing that it was an abuse of process of law."Admittedly, it was only allegations in the complaint and except bare words of the complainant there was no other material before the Magistrate to form such an opinion as such (that there was a diversion of huge monetary funds)...We are of the opinion that the lodgment of the complaint against the Petitioners and continuity of the proceedings, is an abuse of process of law," it held..IHFL moved the Court after one of its shareholders filed a complaint at the Palghar police station in Maharashtra alleging siphoning of funds and requested that the lower court intervene to instruct the police to investigate the matter.The complainant, Ashutosh Kamble, who owns around 500 shares in the company, stated in his complaint that he sustained losses owing to the devaluation of his shares as a result of suspected siphoning of cash and misdealing by IHFL.The same shareholder thereafter petitioned the Judicial Magistrate at Wada district in Maharashtra, and secured an order under Section 156(3) of the Criminal Procedure Code (CrPC) to lodge a FIR and directing the Palghar police to conduct an inquiry..Before the High Court, Senior Advocate Amit Desai for Indiabulls argued that the complaint lodged by Kamble was absolutely malafide and was part of similar attempts made previously against the company by certain persons seeking to initiate criminal proceedings on the basis of false and frivolous allegations in order to extract money from the company.He further said that while Kamble acquired shares for the first time on March 17, 2021, he filed a complaint with the police within less than 10 days. This was an entirely malafide complaint, which the magistrate failed to recognise in the correct context, and there was no prima facie evidence made out for the filing of an FIR, he contended..[Read order]