You Will Never Thought That Knowing 5 Top White Collar Crime Cases In India You Never Know Could Be So Beneficial!

What is White Collar Crime?

White–collar crime or a corporate crime refers to financially motivated, nonviolent crime committed by government and businesses professionals. Below are some of the top 5 white collar crime cases in India.

1. Harshad Mehta Securities Fraud (1988-1995)  

Protagonist – Harshad Mehta 

Harshad Mehta was a stockbroker, and he established his security firm in 1990, “ Grow More Research & Asset Management Limited”. He was a reputed name in the stock market, and is considered the ‘Sultan of Dalal Street’, investors blindly followed Mehta’s footsteps.[1] He took a loan of huge amount from the bank and purchased the scrips at high prices, thereby creating a false market. He misused his status and manipulated the stock prices of certain scrips for his gain.[2] This resulted in unnatural pumping of money in the stock markets causing an abnormal rise in the price of these shares. This act of Harshad Mehta though being immoral was not illegal. The problem arose when Mehta obtained capital to invest in the stock market by misappropriating bank’s money. This misappropriation of money falls in the purview of money laundering. He earned approximately ₹ 5000 crores.[3] The then renowned journalist Sucheta Dalal exposed this scam. This unabated selling caused the market to loose ₹ 0.1 million in a day. This was the biggest ever crash which the Indian stock market had ever experienced. To curtail such transaction various changes were brought in SEBI rules and regulations.

2. Satyam Scandal: biggest ever corporate accounting fraud

Protagonist – B. Ramalingam Raju

This scam came into light on 7^th January, 20009 by way of confession letter written by B. Ramalingam Raju (Founder and chairman of Satyam Computers Services Limited) published in Times of India. The letter confessed about manipulating his books of account by overstating the assets and understating liabilities.[4]

The books of accounts are the reflection of the company’s financial standing. They act as an important tool on which investors can rely on before investing their money. Accounts books were manipulated to cheat investors and shareholders.

The whole scam cost approximately ₹14,000 crore and is considered to be an important factor which contributed to the recession of 2009.[5]

In this scandal, SEBI hit back strongly, holding Ramalinga Raju and nine major associates and guilty of insider trading, indulging in fraudulent and unfair trade practices. SEBI directed accused to pay approximately ₹3000 crore within 45 days and also debarred them from accessing the security markets in any way for 14 years.[6] SEBI managed to lash back strongly to ensure such a scam never happened again.

3. Ketan Parekh Security Scam

Protagonist – Ketan Parekh  

Parekh was involved in circular trading and stock manipulation through 1999-2001. He borrowed from banks like Global trust Bank and Madhavpura Mercantile Co-operative bank and manipulated a host of stocks known as K-10 stocks.[7] The scandal amount was approximately ₹ 1,250 Crore. He has spent only one year in jail, but he has been debarred from trading in the Indian Stock market till 2017.

Although his name continues to haunt the street as he has been accused of playing from backstage. An Intelligence Bureau Report alleged Parekh and his associates to be engaged in circular and insider trading through front entities.

4. Saradha chit fund case

Protagonist- Sudipta Sen  

Saradha Group financial Scandal was a major financial scam and alleged political scandal caused by the collapse of Ponzi scheme run by Saradha Group, a consortium of 200 private companies that were believed to be running collective investment schemes popularly and wrongly referred to as Chit Fund.[8] This group collected around ₹200 to ₹300 billion from over 1.7 million depositors, promising a multiplied hefty sum in return in the form of cash or real estate and other assets.[9]

At least 10 Saradha group entities were alleged for committing fraud through public money-pooling activities. Amidst continuing public protest against the group’s alleged fraudulent activities, SEBI barred Saradha Realty India and its managing director Sudipta Sen from the securities market till it winds up all the Collective Investment Schemes (CIS) and makes the refund, as the same amounts to CIS Violation.[10]

The central government through income tax department and Enforcement Directorate launched a multi-agency probe to investigate the Saradha Scam and similar Ponzi scheme. Later, in May 2014 Supreme Court of India, alleging possible international money laundering, severe regulatory failures an alleged political nexus, referred this case to CBI, India’s federal investigation agency.[11] Many prominent personalities were arrested for their involvement in the scam including two Members of Parliament- Kunal Ghosh, Srinjoy Bose, former West Bengal director general of police- Rajat Majumdar, a top football club official Debabrata Sarkar, Sports and Transport minister in the Trinamool Congress government Madan Mitra.

This scam is often compared to the Sanchayita investment scam, a multi-crore rupees scam that occurred in West Bengal in the 1970s, complaints related to the same have to lead to the formation of Prize Chits and Money Circulation Schemes (Banning) Act, 1968.[12]

5. Punjab National Bank Fraud

Protagonist- Nirav Modi  

Nirav Modi is a diamantaire, elite jewelry designer and India’s 85^th richest person.

Bank said that Modi and the companies linked to him colluded with its officials to get guarantees or Letter of Undertaking to help fund buyer’s credit from other overseas banks.[13]

PNB’s preliminary investigation showed that two officials of the bank had fraudulently issued Lou’s to the said firms without following the due procedure. These Los were then transmitted across the SWIFT messaging system, based on which the credit was offered to the said firms.[14]

PNB alleged that the funds ostensibly so raised for the purchase and sale of diamonds were not used for the purpose.

PNB issued to the stock exchange, about the detection of the fraudulent and unauthorized transaction. PNB has incurred $1.8 billion fraud, one of the largest to be detected in Indian Banking Sector.[15]

Read Also: Taxpayers Don’t Fall For These Types of Tax Scams in India

[1] “THE GROWTH OF SEBI – FROM HARSHAD MEHTA TO SUBRATA ROY” (PDF) <https://lawsdocbox.com/Legal_Issues/73899378-The-growth-of-sebi-from-harshad-mehta-to-subrata-roy.html> accessed May 13, 2019.

[2] Ibid.

[3] Ibid.

[4] Datta D and Datta D, “Ramalinga Raju And The Incredible Story Of India’s Greatest White Collar Crime” (HuffPost India July 15, 2016) <https://www.huffingtonpost.in/devangshu-datta/ramalinga-raju-and-the-in_b_7032688.html> accessed May 13, 2019.

[5] Ibid.

[6] Ibid.

[7] Nimmi (KETAN PAREKH SCAM) <https://www.indianmirror.com/indian-industries/indian-scams/ketanparekhscam.html> accessed May 13, 2019.

[8] “Here’s Why Saradha Was Not a Chit Fund but a Ponzi Scheme” (first post-December 20, 2014) <https://www.firstpost.com/business/heres-why-saradha-was-not-a-chit-fund-but-a-ponzi-scheme-739597.html> accessed May 13, 2019.

[9] Ibid

[10] “Saradha Chit Fund Scam: Mercedes of Sudipta Sen’s Son Seized” (The Economic TimesMay 7, 2013) <https://economictimes.indiatimes.com/news/politics-and-nation/saradha-chit-fund-scam-mercedes-of-sudipta-sens-son-seized/articleshow/19937529.cms?from=mdr> accessed May 13, 2019.

[11] Reporters BS, “SC Jolt for Mamata: CBI to Probe Saradha Scam” (Business StandardMay 9, 2014) <https://www.business-standard.com/article/current-affairs/sc-jolt-for-mamata-cbi-to-probe-saradha-scam-114050900345_1.html> accessed May 13, 2019.

[12] Mukherji UP, Bandyopadhyay K, and TNN, “Sanchayita Haunts Saradha Victims | Kolkata News-Times of India” (The Times of IndiaMay 13, 2019) <https://timesofindia.indiatimes.com/city/kolkata/Sanchayita-haunts-Saradha-victims/articleshow/19656723.cms> accessed May 13, 2019.

[13] “Nirav Modi Case: How PNB Has Defrauded of Rs 11,400 Crore” (Business TodayMarch 15, 2018) <https://www.businesstoday.in/sectors/banks/nirav-modi-case-pnb-fraud-11400-crore-scam-ed-cbi-raid/story/270708.html> accessed May 11, 2019.

[14] Desk BQ, “The Nirav Modi-PNB Fraud Case: Everything We Know So Far” (BloombergQuintFebruary 17, 2018) <https://www.bloombergquint.com/law-and-policy/the-nirav-modi-pnb-fraud-case-everything-we-know-so-far> accessed May 11, 2019.

[15] Nair V, “The Nirav Modi Case: How The $1.8 Billion Fraud Detected At PNB Unfolded” (BloombergQuintFebruary 19, 2018) <https://www.bloombergquint.com/pnb-fraud/the-nirav-modi-case-how-the-18-billion-fraud-detected-at-pnb-unfolded> accessed May 11, 2019.

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10 Small But Important Things To Observe In Section 139 Of Negotiable Instruments Act

Section 139 of Negotiable Instruments act, 1881

As per the prevailing laws in India, under the Indian Evidence Act, every person until proven guilty is presumed to be innocent. Section 139 of Negotiable Instruments Act, 1881 talks about the liability of a person who is issuing a cheque which has been dishonored. Such a person is presumed to be guilty until and unless he proves his innocence. When an offense under section 138 is constituted, there is a set of admitted facts and situations where it is presumed that the person is guilty.[3]

In Krishi Vikas Kendra v Mukund[4], the amount due was paid partly by the accused. This amounts to a transaction made and the court held that the burden of proof is on the accused to prove his innocence with respect to dishonored cheque.

Under section 139 there is a presumption that a cheque presented is for a discharge of the liability of debt either partially or wholly. And until and unless the respondent purposes any purpose other than the discharge of liability, it shall be presumed under section 138.[5] The accused person cannot merely escape by saying it was only given as security and the day cheque was issued there was no liability towards the person.[6]

Once the presumption of liability is rebutted, the burden of proof shifts to the complainant to prove that the same cheque was issued for discharge of liability.[7] In the case of Rangappa v. Sri Mohan[8], it was held that if to any fact the accused has not replied in the statutory notice (notice under section 138) proves to be a merit for the complainant side.

This presumption is governed by the rule of evidence which is dealt by in section 118(a) of chapter XIII. Section 140 talks about the possible grounds which may not be allowed as a ground of defense for prosecution under section 138.

In the case of Krishna Janardhan Bhat v. Dattatraya G. Hedge[9],

“Presumption of innocence as human rights and the doctrine of reverse burden which is granted under section 139 should be balanced with respect to the facts of each case, material evidence on record and governing statutes of law.”[10]

For it is a presumption only with regard to existing debts. So, if the amount on the cheque exceeds the amount which is due to the person, then section 138 and section 139 shall not be attracted, this was held in the case of Angu Parameswari Textiles P Ltd. v. Sri Rajan and co.[11]

On the reading of this section, it is pertinent to highlight that court which is taking cognizance should be prima facie satisfied that the case is attracted under this section. The drawer of the cheque gets a chance to rebut this presumption at the trial.[12]

In the case of Kishan Rao v. Shankargouda[13], the SC held that section 1309 cannot be merely rebutted by denial. It has to be proved. The matter in controversy shall be proven to be denied with evidence.

This presumption is however not available to a money lender. He has to prove the fact of due of loan and liability through other evidence and not merely by a presumption of being guilty.[14]

The initial burden after discharged, Section 139 comes into the picture. In the case of A.B.M raja Sah v. B.M.S. Srinivas Sah[15], it was held that once signatures on the cheque were verified by the drawer and he s presumption arose and the accused couldn’t explain the liability. The court ordered the accused to pay twice the amount of the cheque and no sentence was passed.

CONCLUSION

When a cheque which was issued for discharge of liability or debt whether in whole or in part, shall under section 139 be presumed that the accused is liable for the offense under section 138 and thus the accused is under the burden of proof to prove its innocence.

[1] Added by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988

[2] Goa Plast (P) Ltd. V. Chico Ursula D’Souza, (2004) 1 BC 246 (SC)

[3] R. Sankaralingam v. Union of India; (1997) 1 BC 541

[4] (2007) 3 BC 542

[5] K. I George v. Muhammed Master

[6] K.N.Bena v. Muniyappan (2006) 4 BC 287

[7] Pine Products Industries v. RP Gupta and sons

[8] (2010) 11 SC 441

[9] 2008 (1) SCALE 421

[10] M.L. Tannan’s Banking Law and Practice in India, Student Edition, 2015

[11] (2002) 1 BC 99 (mad)

[12] Modi Cements Ltd. v. Kuchil Kumar Nandi, (1998) 1 BC 421 (SC)

[13] Criminal Appeal No. 803 of 2018

[14] M. senguttuvan v. Mahedevaswamy, (2007) 4 BC 708 (Kant)

[15][15] (2007) 4 BC 649 (Mad)

Ten Bounced Cheque Cases In Online Banking Era That Had Gone Way Too Far

Introduction To Negotiable Instrument

  

A negotiable instrument is a transferable signed document that promises to pay the bearer a sum of money at a future date or on demand. Negotiable Instrument is a general term, and as per section 13 of Negotiable Instruments Act, there are three kinds of negotiable tools, it includes a promissory note[1], bill of exchange[2] or cheque [3] payable moreover to order to bearer.

The Negotiable Instruments Act came into force in the year 1881. Before this legislation was brought into force, laws relating to negotiable instruments were governed by English laws. Later the Act operates on the subject provision of Section 31 and 32 of the Reserve Bank of India Act 1934.

A Cheque is said to be bounced or dishonored when the bank can not clear it for want of sufficient funds in the account or various other reasons, some of it can be overwritten on the cheque, payment stopped by the account holder, signature mismatch, etc.

Dishonor of a negotiable instrument can be broadly committed in two ways, Dishonour by non-acceptance[4] and non-payment[5]. As per Section 138 of the Act, the disgrace of a cheque is a crime and is disciplinary by custody up to two years or with financial forfeit or with both.

The recipient must show the sign to the drawer with 30 days from the date of in receipt of “Cheque Return Memo” from the bank. The notice must be positioning that the cheque sum must be rewarded to the recipient within 15 days from the date of receiving of the notice by the drawer. After in receipt of the notice, if the drawer doesn’t make the sum within 15 days from the day of in receipt of the notice, then he has committed a wrong under Section 138 of the Negotiable Instruments Act.

The grievance should be listed in a judge’s court within a month of the termination of the notice period. It is vital in this case to refer an attorney who is well experienced and accomplished in this area of practice to proceed additional in the stuff.

On 18^th of February 2019, in the case of Sri Santhosh J v. Sri V Narasimha Murthy, High Court of Karnataka at Bangalore; proposed to amend the said act to address the issue of delay in the final resolution of cheque dishonor cases to provide relief to payees of the dishonored cheque. In addition to this, it will also discourage frivolous and unnecessary litigations and save the time of the Court.

After this proposal, certain amendments which are to be brought in the legislature were drafted in the form of The Negotiable Instruments (Amendment) Bill, 2017. After being passed by the Lok Sabha, the said Act is a step closer to becoming a law. In the age of net banking, businesses across India use cheques, including post-dated ones, to make and receive payments from vendors, suppliers, and customers.

The Rajya Sabha passes proposed amendments to be brought after this bill-

1. It aims to bring the provision enforce, under which the drawer of the cheque that has been dishonored to pay interim compensation to the complainant.
2. The Interim compensation that is to be provided shall not exceed the 20% of the amount of the cheque that was dishonored.
3. The interim compensation is to be paid by the drawer of the dishonored cheque in a summary trial or a summons case. The same is applicable even if he pleads not guilty to the charge made in the complaint.
4. The drawer of the cheque has to pay interim compensation within 60 days of the date of order. However, it is at the discretion of the bench to give an extension of further 30 days but not beyond that.
5. In the case when the drawer of the cheque is acquitted in the case, the complainant has to repay the drawer the interim compensation with interest. The repayment has to made within 60 days from the date of the order of the court.
6. An additional 20 percent compensation will have to be paid if the drawer goes for an appeal. This amount would be over the Interim compensation amount paid during the initial period of the suit. This clause aims to deter appeals.

Cutting across the party line, members of opposition parties including Congress supported the bill but suggested that the punishment must be more stringent to curb cheque payments defaults. Another view in the opposition of bill was that there is a presupposition that drawee is wrong and the payee is right, which is right, which is not good. In some instances, the payee is also a culprit.

During the debate on the bill, the Congress Leader Madhusudan Mistry said the penalty proposed was not enough to curb the fraudulent practices. They said the government should come out with laws in parallel with France and UAE, wherein the person who has committed default in the payment of cheque shall be barred from issuing a cheque for five years. This has proved to be an effective deterrence strategy, for that of an experimental law like this.

[1] Section 4 NI Act

[2] Section 5 NI Act

[3] Section 6 NI Act

[4] Section 91 NI Act

[5] Section 92 NI Act

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Most Effective Ways To Overcome Rectification Deed - All You Need To Know

What is Deed of Rectification

Amendment or Confirmation deeds are otherwise called Rectification deeds. They are entered between two parties to redress any blunders made in a past deed. These blunders may incorporate a typing mistake, an incorrectly spelled name, a blunder in the property depiction, or some other mistake in the execution of the reports. These oversights can be later redressed through a Rectification or Confirmation deed.

Read Also: Promissory Note Meaning in India

Following are the conditions under which rectification deeds are made

(a) The mistake must be real.

(b) It must be coincidental, not deliberate.

(c) All the parties must consent to the rectification thereof.

Section 17 of the Indian Registration Act, 1908—-

The Indian Registration Act, 1908 governs Rectification deeds. As indicated by Section 17 of the Act, any deed affirming any interest for an immovable property should be enlisted. The affirmation might be given either by passive consent, by impediment, or by deeds.  Rectification deeds attract stamp duty. If the main document is registered or to be registered, then it mandatory for the corresponding confirmation deed to also get registered.

The content of a Deed of Rectification

a) Name and address of the parties involved.

b) Details of the original deed and description of the rectification to be made.

c) Must have clear and concise in language to avoid future complications.

d) Should not alter the scope of the original document or violate any regulations.

e) Must not deprive the party of their rights.

The procedure involved in Rectification deeds

The parties must first mutually agree to the deed and then proceed to a duly executed document.

The parties are required to pay rectification deed registration charges and stamp duty as per the laws of the State. Charges are Rs/-100 for each.

The deed then has to go to the sub-registrar’s office where the original deed has been duly registered.

If by any chance there is an error of any kind in the rectification deed, a supplementary rectification deed shall be executed by paying stamp duty and registration charges, provided that the error must be genuine, inadvertent and not intentional in nature. The parties must agree to the same thereof.

A rectification deed can rectify only factual errors and not those which involve errors of law such as,

a)  Deficient stamp duty
b) A jurisdictional error of Sub-Registry office
c) The basic character of the transaction e.g. Sale transaction cannot be corrected as Gift
d) It is meant to rectify defects in the original deed NOT to change the nature of the transaction OR Intention of the parties involved

In case the parties involved do not agree to the said rectification or amendment of the documents executed, the aggrieved party may file a suit under Section 26 of the Specific Relief Act, 1963. The court, by virtue of its power, can direct the rectification of an instrument if the deed does not express any real intention of the parties.

Format

DEED OF RECTIFICATION

This DEED OF RECTIFICATION is executed at                                                                        this the             day               2004  between

s/o                                                      residing at

hereinafter referred to the RECTIFIER/VENDOR which term includes  its successors and assigns of the ONE PART;

AND

s/o                                     residing at

hereinafter referred to as PURCHASER  which term includes his heirs, executors, administrators, representatives and assigns of the OTHER PART

WHEREAS the property more fully described in the Schedule hereunder was sold by the Rectifier/Vendor in favour of the purchaser herein in and by sale deed dated and registered as Document No. of Book1 volume filed at pages to on the file of the Sub Registrar of            hereinafter referred as the Principal Deed.

WHEREAS in the Principal Deed dated                 in line     of page No.      and inline

of page     the Survey number of the property was wrongly typed as             instead of              .

WHEREAS this typographical error has come to the knowledge of the above said Purchaser and requested the Rectifier/Vendor to rectify the same.

NOW, THIS DEED OF RECTIFICATION WITNESSETH AS FOLLOWS:

That  is the Principal Deed dated      in line       of page No.    and in line     of page No.   the Survey number  of the property conveyed is wrongly typed as       is rectified as

by this Deed of Rectification.

That as rectified as aforesaid, the Principal sale Deed shall remain in full force and effect.

That no consideration has been received by the RECTIFIER/VENDOR for executing this Deed of Rectification.

SCHEDULE OF PROPERTY

(As in the Principal Deed)

SCHEDULE OF PROPERTY

(Rectified by this  deed of Rectification)

Present Market Value of the Property is Rs.

In Witness whereof the RECTIFIER/VENDOR and the  PURCHASER  have set their hands on the day and month year first above written in the presence of

WITNESS                                                                               RECTIFIER/VENDOR

                                                                                                     PURCHASER

No Time Limit—-

There is no time bar for the execution of a rectification or correction deed. At any point in time, when a mistake is discovered, a rectification deed may be executed.

Hence, these deeds are a kind of correction templates which give ample room for the parties to understand and change any error, be it a wrongly spelled name or an error in typing, which might have occurred accidentally.

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