The Kerala High Court on Thursday refused to quash the First Information Report (FIR) registered against Indian Union Muslim League MLA MC Kamaruddin, who has been arrested in a financial fraud related to his gold jewellery business. Hearing a petition by the Manjeshwaram MLA, Justice VG Arun declined to quash the FIR, stating that the investigation cannot be "scuttled at this stage". He was arrested on November 7 in connection with over 70 cases of alleged cheating registered against him, based on the complaints by investors in the gold jewellery business, in which he was a “director".
Counsel for the MLA contended that Kamaruddin was not a “full-time employee" of the firm and that he was not even involved in the day-to-day affairs of the company. However, the court said the fact that he was not a "whole-time Director" was not sufficient to hold the investigation to be illegal.
"The mere fact that, in the statement filed by the investigating officer, the petitioner is described as a full-time director, by itself, is not sufficient to hold the investigation to be illegal, since Section 2(94) of the Companies Act only states that a 'Whole Time Director' includes a Director in the whole time employment of the Company," it said.
The prosecution objected to the plea for quashing the FIR and said the depositors were not made shareholders or issued with share certificates and the amounts deposited by them were not even entered in the "unsecured loans" of the company.
"Hence, the intention to cheat existed from the very inception," it argued.
"The investigation is in its initial stage and the question of arraying the company and the other Directors as accused will be decided during the course of the investigation. The allegation of the criminal prosecution having been motivated by political enmity is false," the state government said.
The court observed the allegation that an agreement was created with the intention of giving an impression that the depositor has become a shareholder, "cannot be brushed aside". If so, the suspicion of the intention to deceive having existed from the inception cannot, at this point of time, be held unreasonable.
The mere fact that some payment, termed as the dividend, was made was not sufficient to efface this suspicion, especially in view of the fact that the deposited amount was not repaid in spite of repeated requests, the judge held.
"Therefore, the investigation cannot be scuttled at this stage and the complainant relegated to avail his civil remedies," Justice Arun said.
The arrest was under sections 406 (criminal breach of trust) and 420 (cheating) of the Indian Penal Code, provisions of Kerala Protection of Interests of Depositors in Financial Establishments Act and section 3 and 5 of the Banning of Unregulated Deposit Schemes Act.