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HDFC Securities Ltd. & Ors. v. State of Maharashtra & Anr.

Criminal Appeal · Neutral citation not assigned (Criminal Appeal No. 1213 of 2016)Decided 9 Dec 2016
Criminal Appeal No. 1213 of 2016
Justice Pinaki Chandra Ghose · Justice Amitava Roy

Background

A client of HDFC Securities Ltd. alleged that the company's relationship manager carried out unauthorised and fraudulent trades in her account causing her heavy losses; she pursued both NSE arbitration (where an award ultimately went against her) and a criminal complaint. When police did not act on her complaint, a Metropolitan Magistrate in Mumbai, invoking Section 156(3) Cr.P.C., directed registration of an FIR and investigation against the company, its Managing Director, Business Head, and Regional Head. The company and its officers challenged that order before the Bombay High Court under Article 227/Section 482 Cr.P.C., but the High Court dismissed their writ petition as premature, holding there was no case yet for exercising its inherent powers.

Decision Breakdown

The Supreme Court held that an order under Section 156(3) merely directing police investigation does not itself cause irreparable injury justifying quashment, since cognizance by the Magistrate only arises later, after the investigation report is filed. The Court rejected the appellants' argument that the civil (arbitration) and criminal proceedings being inconsistent, or the relationship manager's resignation timing, warranted interference at this stage, and reiterated that inherent powers under Section 482 must be used sparingly. Agreeing with the High Court's assessment that intervention at the pre-cognizance, investigation stage was premature, the Supreme Court affirmed the High Court's order and dismissed the appeal.

Lesson Learnt

A person or company facing a mere police-investigation order under Section 156(3) Cr.P.C. generally cannot get courts to quash it at that early stage, quashing petitions are usually premature until the Magistrate actually takes cognizance after investigation, and the existence of a parallel civil dispute (like an arbitration) does not by itself make a criminal investigation illegal.

Official source (sci.gov.in)View Judgment (PDF)

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