First Leasing scam: Madras HC dismisses Muthiah's quash petition

Muthiah had submitted that he was only a non-executive director and couldn't be criminally charged for transgressions of FLCI

The Madras High Court has dismissed a petition of industrialist and former Board of Control for Cricket in India chief A C Muthiah, who sought to quash the proceedings against him in the economic offences court in Chennai, related to the alleged manipulation in documents of First Leasing Company of India Ltd (FLCI).

The Reserve Bank of India (RBI) had launched four prosecutions in 2014 before the additional chief metropolitan magistrate, Economic Offences Wing-II (EOW-II), Chennai, against four accused for offences under sections of the RBI Act, 1934, and the quash applications were filed in Madras High Court by Muthiah.

V Gopinath, senior counsel appearing for Muthiah, submitted that the latter was only a non-executive director and, therefore, he could not be criminally made liable for transgressions of FLCI. Moreover, he had no means to know that the financial statements were fudged, said the senior counsel.

In the order, Justice P N Prakash observed it was not essential for the concerned magistrate, who transferred the case to the additional chief metropolitan magistrate, EOW-II, Chennai, to record reasons or pass a speaking order, and the court did not find any infirmity in the cognizance order of the magistrate.

“In the light of the above law, a perusal of the adjudication order shows the magistrate has perused the complaint on file and only thereafter, he has transferred it to the additional chief metropolitan magistrate, EOW-II, for disposal, according to law. In the facts and circumstances of this case, it cannot be stated that he has not applied his mind, while taking the complaint on file,” read the order.

“This court does not find any infirmity in the cognizance order of the magistrate. In the result, these petitions stand dismissed being devoid of merits,” said the order, adding any observation made in the order shall not, in any way, prejudice the defence available to the petitioner during trial.

RBI has alleged that FLCI had published financial statements for the years 2010 to 2013, containing false particulars and statements, in order to make it look as if the company was financially sound, on the strength of which huge loans were borrowed from various financial institutions.

Based on this allegation, four separate complaints had been lodged for submitting four financial statements for the four years referred to above, containing the allegedly false particulars and information.

The prosecution argued that the allegedly distorted annual reports were signed by Muthiah and his long-time associate-turned-foe Farouk Irani, and the annual reports formed part and parcel of the complaint. These materials are against Muthiah’s plea that he cannot be held liable for the alleged fraud.

Notably, Farouk Irani, the former managing director of FLCI and two former senior officials were arrested by the Enforcement Directorate, for allegedly cheating IDBI Bank and State Bank of India to the tune of over Rs 500 crore a few years ago.