The Supreme Court has said the rule of law has a responsibility to protect the investments of foreign investors, as it revived criminal proceedings against a Korean national for fraud with a company in the name of GST payments.
The top court set aside Karnataka High Court’s order which quashed proceedings against Moon June Seok, then Chief Financial Officer of a complainant company for alleged fraud and misappropriation of about Rs 10 crore in the name of GST payments, along with co-accused chartered accountants and financial advisors.
A bench of Justices Sanjay Karol and Ahsanuddin Amanullah said let it be proven in a trial that there is no evidence against him and he deserved to be acquitted in the case.
“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’,” the bench said.
Upon hearing senior advocate Sidharth Luthra for Hyeoksoo Son, authorised representative of aggrieved company Daechang Seat Automotive Ltd, seat manufacturer for ‘KIA’ cars, the court restored the proceedings against Moon June Seok, and directed the parties to appear before the court in Bengaluru on April 16, 2025.
“At this stage, we are unable to convince ourselves that coming to such a conclusion (that the proceedings should be quashed) would be just, reasonable, and proper, more so, keeping in view the large amounts of money involved,” the bench said in its judgment on April 8, 2025.
Questioning validity of the quashing order, Luthra said the inherent power of the High Court ought to be exercised sparingly and an endeavour cannot be made to examine the reliability or genuineness of the allegations made in the chargesheet.
The counsel submitted the court cannot conduct a ‘mini trial’ or engage in an inquiry, testing the veracity of the allegations. The allegations have to be taken at face value and it is to be examined whether a prima facie case is to be made out or not. The truth or falsity in the allegation can only be determined upon trial, he said.
The amount of bribe received by the respondent, be it high or low, cannot be a ground for quashing. As the Chief Financial Officer, the respondent was in control of the finances of the Company and the other co-accused persons were brought into the fold of the operations at his behest, and therefore, he is not at liberty to state that he is only a forwarding agent. In fact, he is a vital link in the chain, the counsel said.
Luthra also contended that the respondent was not able to justify the recovery of Rs 9,69,000 from his residence. Moreover, accused No 1 Nikhil Kumar Singh and the respondent, both, in their statements have acknowledged the receipt of Rs 1,80,00,000 in identical instalments, on the same dates and locations – clearly establishing the latter’s role as co conspirators, he submitted.
Senior advocate, appearing for the respondent, submitted the High Court’s observation that there was no direct evidence against him was correct. The appellant was under the wrong assumption that as ‘CFO’ he had control over the company’s funds—due to language barriers—when, in fact, his role was administrative. Voluntary statement of co-accused cannot form the sole basis of conviction and further there was an unexplained delay of eight months in lodging the FIR, he said.
To the contention that reliance solely on the statement of the co-accused was not justified, the bench said, “We find this submission to be incorrect for presently, respondent’s own statement also presents some corroboration for the statement of accused No 1.”
The court said when his own statement acknowledged the possibility that he had received money from accused No 1, which the latter has also alluded to, there prima facie appears to be a connection.
This, however, is not the only connection between these two persons. It was on accused No 1’s recommendation that respondent No 1 ‘appointed’ one Ritesh Merugu, who is accused No 2, as Accounts Manager, the bench noted.
“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,” the bench said.
In the case, the FIR was registered on December 11, 2022 with Sanjay Nagar police station, Bengaluru, on the complaint by the successor of the respondent, Moon June Seok, who worked as the Chief Financial Officer.
The complainant stated, on taking over the position and inspecting the records of the company, he found that money had been debited from the accounts for ‘GST payment’, but it had not been credited to the concerned authority.
Charge sheet was filed on March 18, 2023 before the III Additional Chief Metropolitan Magistrate, Bengaluru City.
The Karnataka High Court, however, quashed the proceedings against Moon June Seok by its judgment of February 19, 2024.
