INTRODUCTION
In a notable judgment, the Supreme Court of India invalidated the Karnataka High Court’s order to dismiss criminal charges along with the chargesheet filed against a foreign national for GST fraud and criminal breach of trust. The Court established two essential objectives that protect foreign investment alongside enforcing responsibility for financial wrongdoing. Two judges from the Division Bench issued this decision as part of their ruling: Justice Sanjay Karol and Justice Ahsanuddin Amanullah.
BACKGROUND
Hyeoksoo Son Authorized Representative for Daechang Seat Automotive Pvt. Ltd. v. Moon June Seok & Anr. (2025 INSC 474)
Daechang Seat Automotive Ltd. stands as an Indian manufacturing firm of KIA automobile seat components which faces important financial theft allegations. Former Chief Financial Officer together with his position as a foreign national rightly faced charges for participating in N.K. Associates’ fraudulent claim of ₹9.73 crores in input tax credit (ITC).
An internal audit carried out by the current CFO found large unauthorized account deductions labeled ‘GST payments’. These unsuccessful payments were sought after the respondent became CFO and presently serves as the Supreme Court appellant. Inspection revealed that the deducted funds had not received appropriate government registry for deposit.
An FIR was registered, and a chargesheet was subsequently filed under various sections of the Indian Penal Code, 1860, including Sections 406 (criminal breach of trust), 408 (criminal breach of trust by clerk or servant), 409 (criminal breach of trust by public servant or agent), 418 (cheating with knowledge that wrongful loss may ensue), 420 (cheating and dishonestly inducing delivery of property), 120B (criminal conspiracy), read with Section 34 (acts done by several persons in furtherance of common intention).
KEY POINTS
- The accused named no. 5 filed a petition through Section 482 of the Code of Criminal Procedure 1973 at the Karnataka High Court for discharging his criminal matters and chargesheet.
- The court approved the petition because the accused made no statements by choice but no direct evidence or seized objects proved his involvement in bribe or fraud activities. The court approved the explanation that accused no. 5 got his money from a Korean national through a loan which would be paid back in Korean currency.
- The complainant-company filed an appeal at the Supreme Court because of their dissatisfaction with the quashing order.
- Supreme Court adopted principles that emerged from State of Haryana v. Bhajan Lal (1992 Supp (1) SCC 335). The seven permissible bases to utilize Section 482 Cr.P.C. inherent powers for dismissing criminal proceedings are explained in the case. The Supreme Court mentioned that the present situation failed to match any of the established exceptional categories.
- The Bench identified several inconsistent actions performed by the accused.
- The main accused at the trial recommended the applicant for CFO position of the company.
- After his appointment the respondent rewarded his co-defendant Ritesh Merugu with the Accounts Manager position.
- The parties who managed sensitive financial tasks failed to establish either a written agreement or formal documentation for their collaboration.
- Despite having control of all financial documents the accused did not keep records of essential financial transactions which made the whole situation suspicious.
RECENT DEVELOPMENTS
The Supreme Court approved the appeal process which allowed the criminal prosecution with its corresponding charges again to proceed against the defendant. According to judicial precedent Section 482 Cr.P.C proceedings should not be invoked as a means to suppress valid criminal prosecutions that show initial evidence of wrongdoing.
Through this statement the Bench made an essential observation during the ruling process:
“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 Court expresses its careful method to maintain both investor confidence alongside judicial impartiality. Financial professionals together with businesses need to practice open documentation and complete accountability when dealing with money amounts and international company interests.
CONCLUSION
The Supreme Court ruling ensures that the legal framework safeguards legitimate international investments alongside ensuring payment responsibility for financial offenses without regard to national origin. After reviving the criminal dealings the court launched the path to conduct a complete trial to enable the evaluation of alleged misconduct through judicial procedures. Through this recent verdict the court emphasizes both business transparency and proper investigation standards alongside a universal principle of keeping law beyond anyone’s reach.
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WRITTEN BY RIMPLEPREET KAUR
