HC strikes down FIR against pharma major over BMC’s Covid drug purchase
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The Bombay High Court has quashed two separate FIRs involving corporate malfeasance allegations, citing insufficient evidence in one case and legal jurisdictional bars in the other. These rulings underscore the court's strict adherence to procedural law and the specific statutes governing financial and pharmaceutical regulations.
Judicial Scrutiny of Corporate FIRs: Recent Bombay High Court Rulings
The Mylan Laboratories Case: Pandemic Procurement
The Bombay High Court recently quashed an FIR against Mylan Laboratories Ltd regarding the procurement of Remdesivir injections by the Brihanmumbai Municipal Corporation (BMC) during the height of the Covid-19 pandemic. Justice Ashwin Bhobe’s decision centered on the legal threshold for criminal prosecution, noting that the allegations—which included claims of criminal breach of trust, cheating, and conspiracy—did not disclose a cognizable offense. This ruling serves as a reminder that administrative irregularities in emergency public procurement must meet a specific criminal standard to warrant police intervention.
Procedural Integrity in Emergency Situations
During the pandemic, municipal bodies like the BMC faced immense pressure to procure life-saving medications. The legal challenge against Mylan highlights the friction between urgent public health needs and the subsequent retrospective auditing of tender processes. By striking down the FIR, the court has signaled that without clear evidence of criminal intent or specific statutory violations, the mere existence of irregularities in procurement does not automatically constitute a criminal offense, protecting corporate entities from potentially unfounded litigation arising from complex government contracts.
The Axis Mutual Fund Case: Jurisdictional Boundaries
In a parallel development, the Bombay High Court quashed a separate FIR against Viresh Gangaram Joshi, the former chief dealer at Axis Mutual Fund. This case involved allegations of a massive ₹2.52-lakh crore fraud related to 'front-running.' Unlike the Mylan case, where the court focused on the lack of evidence of a crime, the court here acted based on a specific legal bar under the Securities and Exchange Board of India (SEBI) Act, 1992.
SEBI Act Precedence and Legal Bars
Justice Ranjitsinha Raja Bhosale’s decision emphasizes the importance of jurisdictional hierarchy. The court observed that 'front-running' is a specialized offense governed under the SEBI Act. By invoking Section 26 of the SEBI Act, the court clarified that when a specialized regulatory statute covers a specific type of market misconduct, police investigations based on general criminal law provisions may be superseded by the regulatory framework. This reinforces the principle that specialized regulators have primary authority over market-related offenses.
Broader Implications for Corporate Compliance
These twin rulings demonstrate a rigorous judicial approach to corporate criminal litigation. Whether it involves public tender disputes or complex financial market regulations, the court is increasingly demanding that FIRs strictly align with the relevant statutory framework. For corporations, this provides a degree of legal clarity, ensuring that they are held accountable under the appropriate legislative acts rather than through broad or misapplied criminal charges.
Future Trends in Financial Litigation
Moving forward, these cases suggest a trend where the judiciary will likely continue to emphasize regulatory compliance over general criminal prosecution for corporate entities. As financial and procurement landscapes become more complex, the reliance on specialized acts—such as the SEBI Act—will likely become the standard for determining the validity of investigations. This shift places a higher burden on law enforcement to ensure that their legal approach is precise and jurisdictionally sound from the outset.
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