Rule Of Law Has Responsibility To Protect Investments Of Foreign Investors: Supreme Court Revives Proceedings In Cheating Case Against Korean National

The Appeal before the Apex Court was filed at the instance of the complainant-Company aggrieved by the final judgment of the Karnataka High Court whereby the criminal proceedings as well as the chargesheet in a case registered under Sections 406, 408, 409, 418, 420, 120B read with section 34 of the Indian Penal Code, 1860 was quashed.

The Division Bench comprising Justice Sanjay Karol and Justice Ahsanuddin Amanullah held, “The rule of law has a responsibility to protect the investments of foreign investors, while at the same time ensuring that any person accused of mishandling such funds is really and fully protected by the power of the phrase ‘innocent till proven guilty’.”

Factual Background

The instanct case pertained to alleged fraud having been committed by the respondent while in the employment of Daechang Seat Automotive Ltd. The present appellant is the authorized representative of the said Company. The main business of this company is to manufacture seat related equipment for cars of the ‘KIA’ make. It was alleged that the Company had wrongly claimed input tax credit amounting to Rs.9,73,96,225.80p., by N.K. Associates.

The FIR came to be registered and it came forth in the statement of the accused that the complainant was the successor of the respondent herein as the Chief Financial Officer and upon taking over such position and inspecting the records of the Company, he found that money had been debited from the Company’s account(s) on account of ‘GST payment’, but the same had not been credited to the concerned authority. A Chargesheet was filed and cognizance was taken by the concerned Court. The present respondent (accused No.5) approached the High Court under Section 482 of the Code of Criminal Procedure, 1973. The High Court noticed that the petitioner had explained that he received some money from the Korean National as a loan, and he used to pay Korean currency in their country. Except for the voluntary statement, there was nothing recovered by the police to show he had received money as a bribe from the first accused. It was held that there was no prima facie material placed on record for framing charge against the petitioner-accused No.5 for having received money from the main accused.

Reasoning

In order to explain the contours of exercise of the powers under Section 482 Cr.P.C., the Bench referred to the well-known case of State of Haryana v. Bhajan Lal (1993) where seven circumstances have been explained where the exercise would be justified.

The Bench noticed that the statement of the first respondent acknowledged the possibility that he had received money from the first accused, which the latter had also alluded to and there prima facie appeared to be a connection. Moreover, it was on the first accused’s recommendation that the respondent ‘appointed’ one Ritesh Merugu, who is the second accused, as Accounts Manager. “Furthermore, we are surprised by the fact that the CFO of a company and an alleged chartered accountant, both readily agreed to not put ink to paper to formalise this relationship between them, and sans the same found it completely alright to share all financial details and books of accounts”, it said.

Keeping in view the large amounts of money involved, the Bench allowed the appeal and restored the proceedings to the file of III Additional Chief Metropolitan Magistrate, Bengaluru.

Cause Title: Hyeoksoo Son Authorized Representative for Daechang Seat Automotive Pvt. Ltd. v. Moon June Seok & Anr. (Neutral Citation: 2025 INSC 474)

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