Supreme Court: Sets aside Allahabad High Court order refusing to entertain Yes Bank's plea

Supreme Court: Sets aside Allahabad High Court order refusing to entertain Yes Bank's plea

The Supreme Court set aside the Allahabad High Court order and refused to entertain the Yes Bank plea challenging the police investigation into an FIR lodged by the Essel Group in connection with the bank-Dish TV dispute on pledging of shares.

The three judges bench comprising of Chief Justice DY Chandrachud and Justices PS Narasimha and JB Pardiwala further directed that in its previous order of 30th November, 2021, staying police investigation in the FIR shall remain in operation till the High Court disposed of the Yes Bank's plea against the FIR.

The top court was hearing an appeal filed by the bank against the 25 November, 2021 order of the Allahabad High Court refusing to quash the notices under Section 102 of the Code of Criminal Procedure, 1973 (in short Cr.P.C.) and FIR lodged by the police.

Yes Bank contended that this was one of the most extraordinary cases where "malafide" criminal proceedings were initiated to scuttle the voting rights of the largest shareholder of the Essel Group.

The bank had distributed a loan of Rs 5,270 crore to the Essel Group and its sister concerns between 2016 and 2018 and 44.5 crore shares were pledged against it. The pledge was invoked by the bank and it became the largest shareholder of the company and to prevent the bank from voting in the Annual General Meeting (in short AGM), which was earlier scheduled to be held on 30 November, 2021 to change or refuse to reappoint the directors, these notices were issued.

The Uttar Pradesh police, lodged an FIR against the Bank at Gautam Buddha Nagar police, had issued two notices to the stock exchange and the National Securities Depository Limited (in short NSDL) asking them to not allow any transfer of shares of Essel group held by the bank.

On 30 November, 2021, the Apex Court passed an order which stayed the police investigation and the operation of two notices issued by the UP police to the stock exchange and the NSDL. "Using criminal procedure to achieve results of civil proceedings will have a dangerous consequence. Tomorrow, anybody will catch a police officer and stall the voting of a shareholder. This will be the easiest thing to do," the Court stated.

Erstwhile, the High Court rejected to entertain the plea of the Bank, on the ground that it cannot entertain the petition under writ jurisdiction when equally efficacious remedies were available to the financial institution under the provisions of Cr.P.C. against police investigation.

The FIR against Yes Bank was lodged by Essel group founder Subhash Chandra over allegations of fraud in the merger transaction between Videocon D2H and Dish TV India.

The Apex Court returned the case back to the High Court for fresh disposal on merits within a period of two months after the receipt of the certified copy of its order.

The Top Court opined, "we are of the considered view that the Allahabad High Court was not justified in not dealing with the petition (of Yes Bank) on the ground that the alternative remedy was available under section 451 and 457 of the CrPC (Code of Criminal Procedure). The high court ought to have addressed itself the merits of the petition which it has failed to do, the bench said in its order."

It further observed, "in the above circumstances, we set aside the impugned order of the High Court and restore the proceedings back to the high court for disposal on merits. We request the high court to take up the proceedings for early disposal preferably within a period of two months from the date on which the certified copy of this order is placed on records."

However, the bench elucidated that since it has remanded the proceedings before the High Court for fresh consideration, it has not expressed any opinion on the merits of the contentions raised by the opposing party.