Vaigai Industries vs Superintendent of Police

CRL RC No. 1291 of 2026
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 26-10-2026
CORAM
THE HON'BLE MR.JUSTICE V. LAKSHMINARAYANAN
CRL RC No. 1291 of 2026
AND
CRL RC NO. 1292 OF 2026,CRL MP NO. 10851 OF 2026,CRL MP NO.
10846 OF 2026
1.Vaigai Industries
Rep by its Chairman V.Needhi Mohan,
Factory,
No.32/1, Melakasakudy,
Karaikal
Puducherry
Registered Office at No.39-B,
Anna Nagar, Madurai.
2.V.Neethi Mohan
Chairman,
M/s Vaigai Chemical Industries Ltd.,
R/o 38/375, Anna Nagar,
Madurai.
..Petitioners
Vs
Superintendent of Police
Central Bureau of Investigation (CBI),
Economics Offence Wing (EOW).
Chennai.
FIR.No.16 of 2009
..Respondent
CRL RC No. 1292 of 2026
P.Dhanasekaran
S/o. Periaswamy Nadar,
Vice-Chairman,
M/s. Vaighai Chemical Industries Ltd.,
Madurai-20.
..Petitioner
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CRL RC No. 1291 of 2026
Vs
Superintendent of Police
Central Bureau of Investigation (CBI),
Economics Offence Wing (EOW),
Chennai.
FIR No.16/2009
..Respondent(s)
CRL RC No. 1291 of 2026
To call for the records and set aside the order dated 03.01.2026 passed in
Crl.MP.No.28 of 2025 in CC.No.4 of 2024 on the file of the Learned Judicial
Magistrate I, Karaikal and consequently discharge the first and second
petitioner from CC.No.4 of 2024 on the file of the Judicial Magistrate I,
Karaikal.
CRL RC No. 1292 of 2026
To call for the records and set aside the order dated 03-01-2026 passed in
Crl MP No.33 of 2025 in CC No.4 of 2024 on the file of the Learned Judicial
Magistrate - I, Karaikal, and consequently discharge the Petitioner from C.C.
No.4 of 2024 on the file of the Judicial Magistrate - I, Karaikal.
For Petitioners : Mr.A.Ramesh, Senior Counsel for
Mr.A.R.Ramanathan
For Respondent : Mr.B.Mohan
Special Public Prosecutor For CBI Cases
Common Order
These two revisions challenge the dismissal of the applications for
discharge filed by the accused Nos.1 to 3 in CC.No.4 of 2024
(RC16/E/2009/CBI/EOW/Chennai) on the file of the learned Judicial Magistrate
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CRL RC No. 1291 of 2026
- I, Karaikal. The first petitioner/Vaigai Industries in Crl.RC.No.1291 of 2026 is
the first accused and its Chairman is the second accused. The petitioner in
Crl.R.C.No.1292 of 2026 is the third accused, who is the Vice-Chairman of the
Vaigai Chemical Industries Limited, a division of which is the first accused. An
FIR was registered by the Food Cell Police, Karaikal, Puducherry in Crime
No.5 of 2009 on 08.07.2009.
2. The complainant was one Shri.N.Rajendran, The Additional Director,
Agricultural Department, Karaikal. Initially, the complaint invoked Section 7(1)
(a)(ii) of Essential Commodities Act read with Clauses 25(1) and 25(2) of
Fertilizer (Control) Order, 1985. Thereafter, on the request of the Government
of Puducherry, the case was re-registered by the Economic Offences Wing of
CBI on 18.09.2009 in RC.16/E/2009/CBI/EOW/Chennai.
3. The case of the prosecution is as follows:
The first accused is a company by name, M/s.Vaigai Industries,
Karaikal. The said company is a unit of M/s.Vaigai Chemical Industries
Limited. This company manufactures Potassium Chlorate. It came to the
knowledge of the prosecution that the said company was utilising fertilizer
grade Potassium Chloride for the purpose of manufacturing Potassium Chlorate.
Potassium Chloride was being purchased from Tamil Nadu at subsidised rates
meant for agricultural purpose instead of the rates meant for industrial purpose
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CRL RC No. 1291 of 2026
and smuggled to Karaikal, Puducherry. Potassium Chloride is a highly
subsidised chemical. In terms of Clauses 25(1) and 25(2) of Fertilizer (Control)
Order, 1985, permission has to be obtained from the Government of India for
industrial use of fertilizer or for procurement of fertilizer grade as raw material
for industrial use.
4. The Government of India was importing Potassium Chloride at
Rs.10,256 per Metric Tonne in December 2006 and at about Rs.33,077 per
Metric Tonne in July 2009. As a measure to encourage farmers, the imported
Potassium Chloride was being sold at a subsidised rate of Rs.4,425 with
additional charges for handling and dealer commission. This Potassium
Chloride was also called Muriate of Potash (MOP). As Potassium Chloride is a
controlled commodity, it can be sold only by persons licenced under the
Fertilizer (Control) Order, 1985. The license was given on the condition that the
fertilizer can be sold only to farmers for agricultural purpose and it cannot be
diverted for industrial purpose.
5. The prosecution alleged that this imported MOP was diverted by the
license dealers to several agents, who in turn sold it for industrial purpose. It
was alleged that the petitioners herein had entered into a criminal conspiracy
with the dealers for purchase of the subsidised MOP for their company.
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CRL RC No. 1291 of 2026
6. The prosecution further alleged that the petitioners herein had procured
14,455 Metric Tonnes of subsidised MOP meant for agricultural use and
diverted it for industrial use. On account of such diversion, the Government of
India suffered a loss of Rs.19.23 crores.
7. It was further alleged that the first accused/Vaigai Industries had
secured a license under the Arms Act to manufacture a maximum of 3,285
Metric Tonnes of Potassium Chlorate in 2003-04. However, between the years
2004 and 2010, the first accused had illegally exceeded its manufacture and had
produced 7,617.25 Metric Tonnes in 2007-08. In order to get the license
renewed, the first accused had suppressed the production figures. It was further
alleged that accused Nos.4 to 18 had illegally diverted the MOP received from
M/s.Indian Potash Limited to the use of A1 to A3. Consequently, a final report
was filed on 29.09.2010 before the learned Judicial Magistrate-2 Karaikal
charging the petitioners of having committed offences under the following
provisions:
(i) Section 120B read with Section 420 of IPC,
(ii) Sections 7(1)(a)(ii) and 10 read with Section 3 of the Essential
Commodities Act, 1955,
(iii) Clauses 25(1) and 25(2) of the Fertilizer (Control) Order, 1985, and
(iv) Sections 25(1)(a) and 33 read with Section 5 of the Arms Act, 1959.
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CRL RC No. 1291 of 2026
8. The charge sheet was taken on file as C.C.No.334 of 2010. The
accused Nos.1 & 2 filed a discharge petition in Crl.M.P.No.1285 of 2012 and
the accused No.3 filed a discharge petition in Crl.M.P.No.1293 of 2012.
Subsequently, the case was transferred from the file of the Judicial Magistrate
No.2 to the file of the Judicial Magistrate No.1, Karaikal and re-numbered as
CC.No.4 of 2024 and the discharge petitions in Crl.M.P.No.1285 of 2012 and
Crl.M.P.No.1293 of 2012 were re-numbered as Crl.M.P.No.28 of 2025 and
Crl.M.P.No.33 of 2025 respectively. By an order dated 03.01.2026, the learned
Trial Judge dismissed those applications. Hence, these revisions.
9. I heard Mr.A.Ramesh, learned Senior Counsel appearing for
Mr.A.R.Ramanathan for the petitioners and Mr.B.Mohan for the respondent.
10. Mr.A.Ramesh, after reading out from the FIR and charge sheet,
submitted that soon after the FIR was registered, writ petitions were filed by the
petitioners herein in W.P.Nos.15893 to 15896 of 2009. This was on account of
the orders passed by the Fertilizer Inspector of Karaikal, seizing the stock of
Potassium Chloride in possession of the petitioners in contravention of clauses
25(1) and 25(2) of the Fertilizer (Control) Order, 1985. A learned Single Judge
of this court by an order dated 17.09.2009 dismissed the miscellaneous petitions
filed by the petitioners seeking stay of the operation of the seizure. However, he
granted a direction to refer the samples of Potassium Chloride, that had been
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CRL RC No. 1291 of 2026
seized from the petitioners, for analysis to the CSIR lab at Pune as sought for by
the petitioners. This direction was given in order to enable the CSIR to submit a
report whether those seized were Potassium Chloride of Potassium Chloride
technical grade. The learned Single Judge also directed that the report submitted
by the CSIR should be taken into consideration along with the analysis report of
the Regional Fertiliser Control Laboratory, Madhavaram, dated 19.08.2009.
11. Mr.A.Ramesh further pointed out that aggrieved by the said order,
appeals were preferred by the Fertiliser Inspector of Karaikal and other
authorities before a Division Bench of this Court. These appeals were clubbed
along with the writ petitions and an order was passed on 21.06.2010. In that
order, the direction given by the learned Single Judge was set aside and the
District Collector was called upon to issue notice to the writ petitioners under
the Essential Commodities Act and pass appropriate orders after giving
reasonable opportunity to both sides.
12. Mr.A.Ramesh further urged that the learned District Magistrate,
Karaikal had initiated proceedings under Section 6A of the Essential
Commodities Act of 1955. After obtaining the report from the National Test
House, Kolkata, Ministry of Consumer Affairs, Food and Public Distribution,
Government of India, he concluded that the seized sample sent for testing is not
a technical grade Potassium Chloride. Consequently, he concluded that the
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CRL RC No. 1291 of 2026
seized sample is not an “ essential commodity ” and dropped further proceedings
under Section 6A of the Essential Commodities Act.
13. Mr.A.Ramesh pointed out that in a connected proceeding, the learned
District Magistrate came to a conclusion that the seized sample is an essential
commodity and confiscated the seized Potassium Chloride. Aggrieved by the
said order, the petitioners preferred an appeal in Crl.A.No.10 of 2011 before the
learned Additional Sessions Judge, Karaikal. This appeal, under Section 6C of
the Essential Commodities Act, came to be allowed on 29.08.2011, setting aside
the order of the learned District Magistrate. A direction was also issued that the
confiscated material should be released to the petitioners. Accordingly, the
material was also released. It was in the meantime that a charge sheet came to
be filed in this case.
14. Furthermore, Mr.A.Ramesh stated that a writ petition came to be
presented before this court in W.P.No.22850 of 2011 by the Additional Director
of Agriculture, Karaikal and another, challenging the proceedings of the learned
District Magistrate releasing the goods on 20.05.2011. This writ petition came
to be dismissed for default on 12.06.2012. A restoration petition filed in
W.M.P.No.6017 of 2022 also came to be dismissed on 13.10.2022. He urged
that as the foundational fact itself had been knocked out by the order under
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CRL RC No. 1291 of 2026
Section 6A as confirmed by the order under Section 6C, the petitioners deserve
to be discharged.
15. Mr.A.Ramesh thereafter pointed out that the offence under Section 3
of the Arms Act is barred due to Section 468 of the Cr.P.C. Furthermore, as no
sanction had been taken from the District Collector as required under Section 39
of the Arms Act, the prosecution should fail for want of sanction.
16. He stated that the offence under Section 420 of IPC is not attracted,
since there was no representation to the Government of India by the petitioners.
He pointed out that the materials relied upon by the petitioners at the stage of
discharge are all of sterling quality and therefore, the learned Trial Judge ought
to have relied upon them and discharged the accused.
17. The petitioner relied upon the following judgments:
(i) Rahul v. State of Uttar Pradesh and Another; 2026 SCC Online SC
1538 ;
(ii) Prashant Bharti v. State (NCT of Delhi), (2013) 9 SCC 293 ;
(iii) Akanksha Arora v. Tanay Maben; (2024) 12 SCR 954 ;
(iv) K.S.Narayanan & Others v. S.Gopinathan; 1981 SCC Online Mad
289 ;
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CRL RC No. 1291 of 2026
(v) Ram Prakash Chadha v. State of Uttar Pradesh; (2024) 10 SCC 651 ;
(vi) Thakur Das v. State of Madhya Pradesh & Another, (1978) 1 SCC
27 ;
(vii) Harbhajan Singh v. State of Madhya Pradesh, 1977 SCC Online
MP 38 ;
(viii) Nadeem Main and Others v. The State, 1977 SCC Online AP 16 ;
(ix) Sivadasan Kunju Nair v. Shashikant Laxman Waghmare and
Others, 2024 SCC Online Bom 2585 ;
(x) Bikash Kumar Agarwal v. State of Odisha, 2023 Supreme (Ori) 102 ;
(xi) Kamalakanta Sahoo & Others v. State of Orissa, 2013 SCC Online
Ori 148 ;
(xii) Surendra Kumar Thakur v. State of Bihar, 1989 SCC Online Pat
60 ;
(xiii) Roshan Lal Arjun Lal v. State of Bihar, 1992 SCC Online Pat
206 ;
(xiv) Prem Raj v. Poonamma Menon & Another, (2024) 4 SCR 29 ;
(xv) Syed Askari Haid Ali Augustine Imam & Another v. State (Delhi
Admn.) & Another, (2009) 3 SCR 1017 ;
(xvi) K.G.Premshanker v. Inspector of Police & Another, 2002 SCR
Supp (2) 350 ;
(xvii) M.S.Sheriff & Another v. State of Madras & Another, (1954) 1
SCC 524 ;
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CRL RC No. 1291 of 2026
(xviii) Anil Behari Ghosh v. Latika Bala Dassi and Others, (1955) 1
ACC 638 ;
(xix) State v. A.K.Mohammed Hussai, Crl.R.C.No.240 of 2016 ; and
(xx) Surendra Kumar Jhunhunwala v. State of Bihar, 1990 SCC
Online Pat 205 .
18. Per contra, Mr.Mohan urges that at the time of dealing with a
discharge application, the court should look only into the documents filed by the
prosecution and it cannot rely upon the documents presented by the accused.
His stand is that even assuming that the orders under Sections 6A and 6C apply,
it will only be with respect to 14 MTs that were seized and sent for examination.
He strongly urged that it will not apply for the other materials that had been
manufactured and sold by the petitioners herein. He states that the documents
filed with the charge sheet show that the commodity procured was agricultural
grade fertilizer, that was purchased by the Government of India at a
considerable cost and subsidized for the purpose of sale to farmers, had been
illegally diverted by the petitioners.
19. Rejecting the plea that Section 3 of the Arms Act applies, Mr.Mohan
pointed out that the petitioners are manufacturers and therefore, the applicable
provision is Section 5 of the Arms Act. He pointed out that excess manufacture
attracts Sections 5 and 25. His entire case is that there had been conspiracy
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CRL RC No. 1291 of 2026
between the petitioners herein and the dealers to unlawfully procure the
fertilizers obtained for agriculture for industrial use and to utilize the same for
conversion of Potassium Chloride into Potassium Chlorate. He urged that the
charges are yet to be framed, despite the fact that the case pertains to 2009
vintage.
20. In response, after recalling his contentions, Mr.A.Ramesh pointed out
that though the petitions for discharge has been filed as early as 2012, the
matters were delayed by the CBI by filing their counter only in the year 2016.
Thereafter, the petitioners cannot be accused of having delayed the proceeding
for a decade and half.
21. I have carefully considered the submissions of both sides. I have gone
through the records.
22. I would divide the judgement into several parts. The first part being
whether the findings given by the Collector under Section 6A and by the
appellate authority under Section 6C of the Essential Commodities Act are
binding on the criminal court while dealing with the prosecution launched under
Section 7 of the Essential Commodities Act.
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CRL RC No. 1291 of 2026
23. Essential Commodities Act creates a cleavage between proceedings
initiated targeting the property and those initiated targeting the persons
responsible for the violation of the Act. Proceedings under Section 6A initiated
by the District Collector are quasi judicial in nature. The effect of an order
passed under Section 6A leads to confiscation or release of the material which
has been seized. Being a quasi judicial action, the proceedings of the Collector
runs on the lines of “ preponderance of probabilities ”.
24. The proceedings under Section 7 are launched before the criminal
courts. It is a judicial proceeding. In case the prosecution proves the case, the
result is imprisonment. The purpose of the proceedings under Section 7 is to
determine the guilt of the accused. The evidentiary threshold is “ beyond
reasonable doubt ”.
25. A casual perusal of Sections 6A and 7 of the Essential Commodities
Act would show that they operate on two different spheres. As held by a
Division Bench of the Patna High Court in Surendra Kumar Jhunjhunwala v.
State of Bihar, 1990 SCC Online Patna 205 , the Collector lacks the power to
convict or sentence a person and a Magistrate cannot deal with the property. At
this stage, it is relevant to take note of Section 6D of the Essential Commodities
Act. This clearly states that the award of any confiscation ordered by the
Collector under Section 6A does not prevent any action under Section 7.
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26. I would also take note of Sections 6C(2) and 6A(3)(c) herein. If the
trial ends in an acquittal, the State is called upon to return the value of the
confiscated property or seized commodity itself to the person to whom it
belongs. However, the contra is not true. If the Collector was to drop the
proceedings under Section 6A, as done in the present case, the court would still
be called upon to evaluate the evidence independently to determine if the
offence under Section 7 took place or not. To this end, I will refer to a judgment
of the Calcutta High Court in Sri Rakesh Garg @ Rakesh Kumar Garg v. State
of West Bengal, 2002 SCC Online Cal 434 .
27. It is the plea of Mr.A.Ramesh that as the orders passed by the District
Collector and that of the court are of sterling quality, this court may rely upon
the same and discharge the accused or in the alternative, convert the revision
into a proceeding under Section 482 and quash the same.
28. Let us now analyse the position stage by stage. In State of Orissa v.
Debendra Nath Padhi, (2005) 1 SCC 568 , Three Judges Bench of the Supreme
Court was called upon to lay down the law as to what are the materials the trial
court can examine at the stage of framing of charges or at the time of
considering an application for discharge. The Supreme Court specifically
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CRL RC No. 1291 of 2026
examined whether the trial court has the authority to consider the materials
submitted by the accused at the stage of Sections 227 and 228 of Cr.P.C.
29. Prior to the judgment in Debendra Nath Padhi ’s case, the Supreme
Court in Satish Mehra v. Delhi Administration and Another, (1996) 9 SCC
766, a two Judges Bench of that Court, had held if the accused produces any
reliable materials at the stage of taking cognizance or framing of charges which
affects the very sustainability of the case, it would be unjust for the court to hold
that it would look into them only at the later stage. Since this view was in
conflict with the earlier views of the Supreme Court in State of Bihar v.
Ramesh Singh, (1977) 4 SCC 39 and Superintendent and Remembrancer of
Legal Affairs, West Bengal v. Anil Kumar Bhunja and Others, (1979) 4 SCC
274 , a two Judges Bench referred the matter to a larger Bench.
30. Justice Y.K.Sabharwal, speaking for the Bench, after reviewing
several authorities, concluded that Sections 227, 228 and 91 of Cr.P.C
determine the jurisdiction of a court while framing of charges. The court
overruled the earlier view in Satish Mehra ’s case (cited supra). It held that by
permitting defence submission during the stage of framing of charges, the court
is called upon to conduct a “ mini trial ” within a “ trial ” and thereby,
undermining the purpose of Cr.P.C. itself. It pointed out that if the defence was
to be permitted to produce materials at the stage of discharge, it would lead to
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CRL RC No. 1291 of 2026
unnecessary delays in the trial proceedings. It rejected the argument of the
accused that Articles 14 and 21 of the Constitution and Section 91 of Cr.P.C
confer right to produce defence materials at the stage of framing of charges. The
Supreme Court concluded that at the stage of discharge,only prosecution
materials are to be considered. This decision concludes that the accused must
wait till the trial to present their defence. However, it is left open to the accused
to still move the High Court under Section 482 of Cr.P.C. or Article 226 of the
Constitution of India for quashing in appropriate cases.
31. The aforesaid principles laid down in Debendra Nath ’s case applies
to the facts of the present case. Hence, I am afraid that the discharge
applications filed on the basis of proceedings under Sections 6A and 6C of the
Essential Commodities Act cannot be entertained.
32. This takes me to the second portion of the argument as to whether
this court can convert these revision into petitions for quash and deal with the
same. It has been settled by the Supreme Court in Pepsi Foods Ltd and
Another v. Special Judicial Magistrate and Others, AIR 1998 SC 128 and the
recent judgment in Akanksha Arora v. Tanay Maben, 2024 INSC 962 that the
nomenclature does not matter and the High Court can always convert a petition
under Section 397 to that of Section 482 of Cr.P.C. or by exercising the
constitutional power under Articles 226 or 227 of the Constitution of India and
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quash the proceedings. For the fact that this court has the jurisdiction to do so
does not mean that the power should be exercised in an automaton manner.
33. A careful reading of the charge sheet discloses that apart from the
offence under Section 7 of the Essential Commodities Act, the petitioners have
also been accused under Section 420 of IPC and under the provisions of the
Arms Act. The offence under the Arms Act arises on account of violation of
license condition.
34. Mr.A.Ramesh has been kind enough to produce a copy of the license
along with the typed set of papers. A perusal of the license shows that the
second petitioner in Crl.R.C.No.1291 of 2026 was licenced from 01.01.2002 to
31.12.2004 for an annual production capacity of 3285 MTs of Potassium
Chlorate. The charge sheet shows that far exceeding this capacity, the
petitioners had consistently from 2004 -05 till 2009-10 had manufactured
between 1624.25 MTs to 1035.65 MTs and for some years, he had exceeded
4000 MTs in excess. It is here, I have to take note of the argument of Mr.Mohan
distinguishing Sections 3 and 5 of the Arms Act.
35. It is the plea of Mr.Ramesh that to launch a proceeding under Section
3 of the Arms Act, sanction is necessary from the Collector under Section 39 of
the said Act. Prima facie, I am of the view that Mr.Mohan might be correct in
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his submission. The word “ manufacturer ” is conspicuously absent under
Section 3. However, it is found under Section 5 of the Arms Act. Section 39
does not require obtaining of sanction for offence under Section 5, but only to
Section 3 of the Arms Act. Therefore, the plea of sanction also has to fail.
36. With respect to Sections 120B and 420 of IPC, a reading of the charge
sheet indicates that the Government of India has been importing Potassium
Chloride. While it was selling this commodity at highly subsidised rates for
consumption by the agricultural sector, the said commodity was sold for use of
industrial sector at more or less the price in which it was imported. The
difference in price was borne by the Union of India by way of subsidy.
37. I have already pointed out that the gist of the case is that subsidised
potassium chloride was diverted by the dealers who were called upon to sell it
only for agricultural use, thereby causing huge loss to the Union of India. As
rightly contended by Mr.Mohan, even if the prosecution was to take into
consideration the proceedings under Sections 6A and 6C of the Essential
Commodities Act, they would still have a case with respect to excess
manufacture of potassium chlorate as well as with respect to procurement of
1000 MTS of potassium chloride meant for agricultural purpose diverted for
industrial purpose.
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38. In the light of the above discussions, I am not inclined to accept the
submissions of the petitioners. The revisions are dismissed. Consequently, the
connected miscellaneous petitions are closed.
26-10-2026
nl
Index: Yes/No
Speaking/Non-speaking order
Neutral Citation: Yes/No
To
1. The Superintendent of Police
Central Bureau of Investigation (CBI),
Economics Offence Wing (EOW).
Chennai.
2.The Public Prosecutor,
High Court of Madras
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CRL RC No. 1291 of 2026
V.LAKSHMINARAYANAN J.
nl
CRL RC No. 1291 of 2026
AND
CRL RC NO. 1292 OF 2026,CRL MP NO. 10851 OF 2026,
CRL MP NO. 10846 OF 2026
26-10-2026
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