SC Allows Foreign Investor To Withdraw Money From Bank After 17 Years, Sets Aside Bank Guarantee

Subject: Criminal Law - Freezing of Assets - Foreign Investor - Imposition of Bank Guarantee

On 9 May 2023, the Supreme Court allowed a foreign institutional investor, M/s. Jermyn Capital LLC Dubai, to withdraw an amount of Rs. 38.52 crores along with 4% simple interest, which shall be payable from 08.05.2006 till the date of actual payment. The Apex Court set aside the bank guarantee imposed by the lower courts against the appellant company's assets under Section 102 of the Code of Criminal Procedure, 1973.

The appellant company was permitted by Securities and Exchange Board of India to buy and sell shares and securities in the Indian Stock Market. However, due to certain litigations, the appellant company had quit trading in the Indian markets in 2006. At this point, the appellant company had shares and money in its bank account with ICICI bank.

Subsequently, the appellant company was subject to two freeze orders under Section 102 of the Code of Criminal Procedure, 1973. The second freeze order had incapacitated the appellant from repatriating an amount of Rs. 38.52 crores, which was realized in their favour pursuant to an order passed by the Securities Appellate Tribunal dated 08.05.2006.

The lower courts had imposed a bank guarantee equivalent to the amount sought to be withdrawn, which the appellant had challenged. The appellant company had approached the High Court, however, the High Court reiterated the imposition of the bank guarantee.

The Apex Court observed that the freeze orders and the bank guarantee were solely imposed on the grounds of criminal proceedings being alive against one Dharmesh Doshi, who is alleged to be connected to the appellant company. However, Dharmesh Doshi was in no way connected to the appellant company, and he was never an employee/share holder/director or a key managerial person in the appellant company. The said Dharmesh Doshi, on the basis of whom the condition of bank guarantee was imposed, has now been discharged of the alleged offences by the Trial Court.

It further held that even if Dharmesh Doshi's discharge is subsequently reversed, and he is convicted, such a conviction would still have no bearing on the properties of the appellant company herein, since the appellant company is not alleged to be a part of the crime.

Apex Court set aside the bank guarantee imposed by the lower courts and allowed the appellant company to withdraw the amount along with interest.

Date of Decision: 09th May, 2023

M/s. Jermyn Capital LLC Dubai  vs Central Bureau Of Investigation & Ors.