Corporate Fraud Case: SC Revives Case, Defines Limits of HC Powers

n a robust affirmation of procedural discipline in white-collar crime litigation, the Supreme Court of India has reinstated criminal proceedings against a former Chief Financial Officer (CFO) in a ₹10 crore corporate fraud case.

The April 8, 2025 judgment in Daechang Seat Automotive PYT. Ltd. v. Moon June Seok & Anr. (2025 INSC 474) overturned the Karnataka High Court’s quashing of charges, underscoring that evidentiary disputes belong at the trial stage, not in pre-trial dismissals under Section 482 of the Criminal Procedure Code.

What's the Matter?

The controversy stems from allegations by Daechang Seat Automotive that its then CFO, Moon June Seok, in collusion with financial advisors, siphoned over ₹10 crore meant for GST payments into shell companies like Terminus and N.K. Associates.

The FIR, filed in December 2022, invoked Sections 406, 408, 409, 418, 420, and 120B of the IPC. The chargesheet detailed how the CFO allegedly received ₹1.8 crore in bribes and facilitated the diversion of funds.

Despite these allegations, the Karnataka High Court quashed the proceedings, citing lack of prima facie evidence and excessive reliance on statements by co-accused.

However, the Supreme Court took strong exception to this approach, cautioning High Courts against conducting “mini-trials” at the quashing stage. Relying on precedents like Bhajan Lal and Neeharika Infrastructure, the Court reaffirmed that the only question at this stage is whether the complaint discloses a prima facie offence.

The Supreme Court found that the CFO’s own statements corroborated those of his co-accused, particularly in admitting receipt of ₹1.8 crore from the main conspirator.

This mutual corroboration, the Court held, was sufficient to establish a case warranting trial even if eventual conviction would demand independent corroboration.

The CFO’s attempt to portray himself as a mere administrative facilitator also failed to convince the Court. His authority to appoint financial agents and control cash flows, coupled with the unexplained recovery of ₹9.69 lakh from his home, undermined the defense of non-involvement. The Supreme Court emphasized that the formalities of agreements or audit procedures cannot override glaring factual indicators of complicity.

The High Court’s dismissal of the bribery amount as "meager" also drew judicial ire. The Court reiterated that no threshold amount absolves criminal culpability any illicit payment, regardless of scale, qualifies as misconduct. In this context, Niranjan Hemchandra Sashittal was cited to reassert the irrelevance of quantum in proving the offence.

On the issue of delay, the Court held that the eight-month gap in filing the FIR was justified by the time required to detect the fraud during internal audits. In complex financial crimes, such delays are not only expected but often unavoidable.

Lastly, the question of whether Section 409 (criminal breach of trust by a public servant) applies to the CFO was left to be determined during trial, not precluded prematurely.

This ruling reconfigures the boundaries of Section 482 CrPC, signaling to High Courts that procedural shortcuts cannot become the norm in white-collar crime cases. The judgment also acts as a cautionary tale for corporate executives: administrative roles do not shield liability when financial oversight breaks down.

For India’s business environment, the verdict offers reassurance—justice mechanisms remain available to penalize fraudulent conduct, even against foreign executives. It reinforces investor confidence by signaling that the rule of law remains robust even in high-stake corporate conflicts.

By insisting that complex financial frauds be tested in full trials, the Court has protected both the integrity of judicial processes and the faith of investors in India’s legal system.