Bombay HC allows proceedings against Helios & Matheson
May 13, 2011
While setting aside the orders passed by the Sessions Court, the HC has allowed a revisionapplication by VMoksha's co-founder Rajiv Sawhney against H&M
Moneylife Digital Team
The Bombay High Court has set aside the orders of the Sessions Court and allowed a revision application of VMoksha Technologies co-founder Rajiv Sawhney against Helios & Matheson Information Technology (H&M).
In an order passed on 6 May 2011, Justice JH Bhatia restored the order of the Additional Chief Metropolitan Magistrate (ACMM) of the 47th Court, Mumbai, to restart proceedings against the accused, including H&M's chairman V Ramachandran. This has come as a reprieve to Mr Sawhney, a US-based non-resident Indian (NRI), who is fighting a long battle with H&M.
Judge Bhatia said,"the Additional Sessions Judge, on the basis of facts disclosed in the complaint, had also come to the conclusion that a prima facie case was made out. Having come to such a conclusion, the judge embarked upon the consideration of other grounds and quashed the order, which was well-reasoned and based on facts disclosed in the complaint. Therefore, in my opinion, it is a fit case where this Court should, under its inherent power under Section 482, interfere and quash the order passed by the Additional Sessions Judge."
Advocate Rahil Moghe, counsel of Mr Sawhney, told Moneylife that the process will now begin from where it was stopped. The court has also order all the parties to appear before the Additional Chief Metropolitan Magistrate on 4 July 2011, he said.
"On 18 January 2007, the chief magistrate issued a process against all the accused, including H&M. This was challenged by them in the Sessions Court, where the decision was quashed on various grounds. We then challenged this decision at the Bombay High Court, which has now quashed the decision of Sessions Court and has upheld the decision of the learned magistrate," Mr Moghe said.
The case dates back to 2005, when shareholders of vMoksha, an IT company, decided to sell its three units. The company appointed PriceWaterhouseCooper, who found out H&M as potential buyer for vMoksha's three units. On 11 May 2005, both the companies signed a share purchase agreement under which V Ramachandran, chairman of H&M, was to pay $19 million for the three units, out of which $4 million was to be paid to Pawan Kumar, the then chief executive of vMoksha and also former CEO of the controversial DSQ Software, as earn out. Although, Pawan Kumar and his family members were also stakeholders in vMoksha, Mr Sawhney later bought out their stake as well.
Mr Ramachandran was supposed to pay $13.4 million to Mr Sawhney, after paying some amount to Tapan Garg and Madhuri Garg, son and wife of Pawan Kumar for their holding. Mr Sawhney soon realised that he had been kept in the dark about many aspects of the deal.
For instance, he found that instead of receiving $19 million, a bank account had been 'fraudulently' opened in the State Bank of Mauritius in vMoksha's name and used to borrow $13.5 million, using a fake board sanction and false entries. That money was remitted to H&M ostensibly for subscription of redeemable preference shares on 28 June 2005.
The regional director of the MCA conducted a technical scrutiny of H&M and found that the loan was, indeed, obtained by falsifying the board minutes and making false entries. Worse, the H&M chairman provided a personal guarantee for this borrowing by vMoksha, even before acquiring the company or transferring any funds for its acquisition. The State Bank of Mauritius allegedly approved the loan, although the loan documents were unsigned and on plain sheets of paper instead of the company's letterhead.
On 30th June, the same funds were transferred back to vMoksha ostensibly as part of the acquisition amount and were used to pay back the dubious loan. According to Mr Sawhney, this was to defraud him and other shareholders of the subsidiaries of vMoksha. He contended that for this purpose, Pawan Kumar had entered into a conspiracy with the State Bank of Mauritius, Ravi Kumar, who was manager of State Bank of Mauritius's Chennai branch and H&M, Mr Ramachandran, GK Muralikrishna, managing director of H&M and Maharashtra. Pawan Kumar created the forged and fabricated documents to show that he was authorised to open the account to obtain the loan and to transmit that amount to the account of H&M.
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