The Supreme Court recently quashed an FIR filed against Standard Chartered Bank and Starship Equity Holding Limited. The FIR stemmed from a dispute related to a share escrow agreement signed between Corsair and Katra and Standard Chartered Bank, Mauritius.

As per the agreement, Victor Programme Private Limited (Vector) had agreed to sell 13,455 shares of Tamilnadu Mercantile Bank for ₹32,53,68,810 to entities identified by Corsair in 2007. Starship Equity Holding Limited (Starship) was named as an independent investor for this transaction.

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On 13 May 2007, Tamilnadu Mercantile Bank approved the transfer of shares to Vector, and these shares were subsequently transferred and deposited with Standard Chartered Bank in Mumbai. After completing the transaction, Vector received ₹32,53,68,810 on 15 May 2007.

Later, when the valuation of these shares rose sharply, Vector, dissatisfied with the decision, attempted to terminate the escrow agreement by filing a civil suit in 2011. However, the Bombay High Court rejected this request, dismissing both single judge and division bench appeals.

Soon after the division bench rejection, Vector filed a criminal complaint in 2016, which led to seizure of the share certificates under Section 93 of the Code of Criminal Procedure (CrPC). The FIR, registered by the Indiranagar police station, Bengaluru, invoked several sections of the Indian Penal Code (IPC), including sections 406, 409, 420, 108-A, 109 and 120-B.

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Since the Karnataka High Court refused to quash the FIR, Standard Chartered Bank approached the Supreme Court. A bench headed by Justices MM Sundresh and Rajesh Bindal reviewed the case and found no supporting material for the FIR. The court also found that significant transactions had been suppressed.

Quoting the key observation of the Supreme Court:

"There is no dispute that respondent-Vector signed the documents, transferred the shares and received the money. All these transactions were completed on 15.05.2007 itself. It was only thereafter, as a consideration, that respondent-Vector made an unsuccessful attempt by filing a civil suit seeking termination of the escrow agreement and return of the escrow shares. Having obtained adverse orders both from the hands of the learned Single Judge and the Division Bench of the Bombay High Court, a criminal complaint has been filed in a hurry immediately thereafter."

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The court also said:

"There is no contradictory ground to initiate any other criminal proceedings against the appellants. It is the respondent-Vector who was the beneficiary of the transaction and who received the money at the relevant time. Therefore, we have no hesitation in holding that the High Court has erred in not considering the relevant materials in their correct perspective, particularly in not considering the well-deserved judgments of the Bombay High Court. The power under Section 482 of the Code of Criminal Procedure, 1973, as it stood at the relevant time, though expected to be exercised sparingly, would be exercised only when the pendency of criminal proceedings would result in gross abuse of the process of law. This is a fit case where the High Court should have exercised the said power."

Thus, the Supreme Court concluded that the criminal case was a clear abuse of the legal processes and ordered the quashing of the FIR against Standard Chartered Bank and Starship.

Case: Standard Chartered Bank v State of Karnataka and others, Starship Equity Holding Ltd v State of Karnataka and othes

Appearances: Dr. Abhishek Manu Singhvi, Sr. Adv., Mr. M S Krishnan, Sr. Adv., Mr. K. Shiva, Adv., Mr. Anirudh Krishnan, Adv., Mr. Kunal Shah, Adv., Mr. Mohit Rohatgi, Adv., Ms. Ankita Singhania, Adv., Mr. Karthik Adlalka, Adv. , Mr. Kaustub Narendran, Adv., Mr. Umang Nair, Adv., Mr. Balaji Srinivasan, AOR,

Dr. Harish Narasappa, Sr. Adv., Mr. Divyam Agarwal, AOR, Mr. Hormuz Mehta, Adv., Mr. Aniket Aggarwal, Adv., Mr. Mayank Ratnaparkhe, Adv., Mr. Ahsan Allana, Adv., Mr. Pranav Nayar, Adv. [Appellants]

For Respondents :

Mr. V. N. Raghupathy, AOR; Mr. Raghavendra M. Kulkarni, Adv.; Ms. Mythili S, Adv.; Mr. M. Bangaraswamy, Adv.; Mr. Venkata Raghu Mannepalli, Adv.; Mr. Md. Apzal Ansari, Adv.; Mr. Prakash Jadhav, Adv.; Mr. Shiv Kumar, Adv; Ms. Vaishnavi, Adv. Mr. Dhanesh Ieshdhan, Adv.

Mr. Sajan Poovayya, Sr. Adv.; Mr. Palash Maheshwari, Adv.;Ms. Sanjanthi Sajan Poovayya, Adv.; Ms. Raksha Agarwal, Adv.;Mr. Yogesh Somani, Adv.; Mr. Saransh Bhardwaj, Adv.; Mr. Akash Chatterjee, AOR