The Delhi High Court held that when company promoters or founders communicate details of ongoing corporate disputes or alleged mismanagement to a lender or any other interested party, such communication cannot be treated as defamation if it is made bona fide and in the context of existing legal proceedings. Justice Neena Bansal Krishna quashed a criminal complaint and a summoning order in a defamation case filed by Dalmia Cement Bharat Limited against the founders and promoters of Calcom Cement India Limited, observing that the statements in question fell within Exception 9 to Section 499 of the Indian Penal Code.
The dispute arose after Dalmia Cement made substantial investments in Calcom Cement, which later led to disagreements between the two parties regarding management and financial decisions. Various legal proceedings followed, including arbitration and company petitions. During this period, the promoters of Calcom Cement sent a letter to GuarantCo, a London-based fund manager that had extended loans to the company. The letter described internal management issues and alleged mismanagement within the company. On receiving the communication, GuarantCo sought clarifications from Dalmia Cement. Dalmia responded by filing a criminal defamation complaint, asserting that the contents of the letter tarnished its reputation.
The High Court noted that the communication was directed to a lender who had a legitimate interest in the affairs of the company. It was written in the context of ongoing disputes and aimed at safeguarding business interests rather than defaming any individual or entity. The Court observed that the promoters, as shareholders and stakeholders, were entitled to inform an interested third party about developments that could affect the company’s financial health. The communication did not constitute public defamation, as it was limited to parties directly involved in the business relationship.
Justice Krishna emphasized that criminal defamation should not be misused as a means of exerting pressure or as a tool to settle corporate disagreements. The Court underscored that invoking criminal law in matters essentially civil or commercial in nature could discourage genuine and necessary communication among stakeholders. It highlighted that the right to express concerns in good faith to interested parties forms an essential part of business transparency, especially in complex corporate structures where multiple investors and lenders are involved.
Upon examining the content of the letter, the Court found no language that could be construed as an attack on the general reputation of Dalmia Cement. Instead, it contained references to specific disputes and management concerns relevant to ongoing legal proceedings. The Court concluded that such correspondence fell within the protective ambit of Exception 9 to Section 499 of the IPC, which shields bona fide communications made in good faith to persons having an interest in the subject matter.
Accordingly, the Delhi High Court quashed the defamation complaint and the summoning order. The judgment reaffirmed that good faith communication among corporate stakeholders made for legitimate purposes and within the bounds of existing legal disputes cannot attract criminal liability for defamation. It further clarified that the legal exceptions to defamation serve to protect honest expressions made to those with a genuine interest in the matter, ensuring that business communications remain transparent without fear of prosecution.
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