Full Judgment Text
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CASE NO.:
Appeal (crl.) 62 of 2008
PETITIONER:
Suryalakshmi Cotton Mills Ltd.
RESPONDENT:
Rajvir Industries Ltd. & Ors.
DATE OF JUDGMENT: 09/01/2008
BENCH:
S.B. Sinha & Harjit Singh Bedi
JUDGMENT:
J U D G M E N T
[Arising out of SLP(Crl.) No. 2920 of 2007]
S.B. SINHA, J :
1. Leave granted.
2. Private parties herein were the Directors of the appellant Company.
They were closely related. It had two units. One was known as
Mahaboobnagar Unit and the second was a sales depot at Tirupur. The
Managing Director of the Company was Shri L.N. Agarwal. He was
stationed at Hyderabad. Allegedly, pursuant to negotiations which took
place between him on the one hand, and Shri U.K. Agarwal and Ritesh
Kumar Agarwal (Accused Nos. 2 and 3) on the other, representations were
made that as process for obtaining cheques from the Managing Director had
been taking considerable time, it would be advisable that signed blank
cheques be left in the hands of accused Nos. 2 and 3 for efficient
management of Mahaboobnagar Unit and Tirupur Sales Depot.
3. Relying on or on the basis of the said representation, signed blank
cheques were handed over to them during the period 2000 A.D. to 2004
A.D. Disputes and differences arose between the parties in 2005 A.D.
4. A Company Petition was filed before the Andhra Pradesh High Court.
A Scheme for arrangement submitted by the parties was approved, pursuant
whereto Mahaboobnagar unit was transferred in favour of Rajvir Industries
Limited (Accused No. 1) and Mahaboobnagar Unit to Shri L.N. Agarwal.
For the said purpose, the units were demerged and vested in the respondent
No. 1. Allegedly, the said Scheme was fully implemented and the
respondent Nos. 2 and 3 by a letter dated 22.4.2005 stated out that they
would not make demand of any payment in respect of the said
Mahaboobnagar Unit.
5. L.N. Agarwal allegedly made oral requests to theaccused Nos. 2 and 3
to return the unused signed blank cheques, in his capacity as the Secretary of
the appellant Company.
6. However, allegedly on the premise that Respondent Nos. 2 and 3
herein entered into a conspiracy to misuse the said cheques; an informal
complaint was filed on 20.10.2006 and another complaint was filed on
30.10.2006 with Mahankali Police Station. An endorsement was made
therein that there was no role for the police to play at that stage.
7. Respondents herein thereafter issued a letter dated 1.10.2004 as also a
telegram dated 20.10.2004 stating that as the institutional liability of the
respondent No. 1 had crossed 13.25 crores, with a view to repay a part of the
said amount, a cheque of a sum of Rs. 6.28 crores had been drawn by the
appellant in favour of the first respondent being the amount of difference
which had been deposited for collection. In the telegram, it was stated;
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\023I HEREBY INFORM YOU THAT AFTER THE
DEMERGER M/S. SURYALAKSHMI COTTON
MILLS LIMITED AND M/S. RAJVIR INDUSTRIES
LIMITED THE SHARES WERE TRANSFERRED
FROM MY SIDE AND YOUR SIDE FOR THE
DIFFERENCE OF SHARE TRANSFER AMOUNTS
AND AS PER OUR PERSONAL
UNDERSTANDING TO CLEAR THE
DIFFERENCE AMOUNT OF MY FAMILY
HOLDING SHARES YOU HAVE ISSUED TWO
CHEQUES ONE FOR RS. 3,39,12,086.00 DATED
31.07.2006 VIDE CHEQUE BEARING NO. 444842
AND ANOTHER CHEQUES BEARING NO.
444841 DATED 31.07.2006 FOR AN AMOUNT OF
RS. 3,80,77,646-00, BOTH THE CHEQUES WERE
DRAWN ON ANDHRA BANK, TIRUPUR
BRANCH, TAMILNADU. THEREAFTER YOU
HAVE REQUESTED ME ORALLY TO PRESENT
THE SAME IN THE 3RD WEEK OF OCTOBER,
2006. AS PER YOUR INSTRUCTIONS I HAVE
DEPOSITED THE SAID CHEQUE FOR
COLLECTION WITH OUR BANK. PLEASE
HONOUR THE SAME.\024
8. A First Information Report thereafter was lodged by the appellant
before the Station House Officer of the Police Station Mahankali, Hyderabad
alleging inter alia that the blank signed cheques issued in the year 2001-2002
had been fraudulently used.
9. F.I.R. thereafter was sought to be lodged.
10. On a purported refusal by the Police Station to register a complaint on
the basis thereof, the appellant filed a complaint petition in the Court of XI
Additional Chief Metropolitan Magistrate, Secunderabad. Pursuant to the
direction issued by the learned Magistrate, a First Information Report was
lodged by the officer-in-charge of the Mahankali Police Station.
11. Legal notices were, however, issued by the first respondent upon the
appellant with regard to dishonour of three cheques bearing No. 444840
dated 31.7.2006 of Rs. 6.28 crores, Cheque No. 444841 dated 31.7.2006 of a
sum of Rs. 3,80,77,646/- and Cheque No. 444842 dated 31.07.2006 of an
amount of Rs. 3,39,12,086/-.
12. On or about 13.11.2006, an application was filed before the High
Court for quashing of the said First Information Report. Admittedly, on
6.12.2006, a complaint petition was filed by the first respondent herein
purported to be under Section 138 and 141 of the Negotiable Instruments
Act against the appellant and also its Chairman and Managing Director. By
reason of the impugned judgment, the said quashing application filed by the
respondents herein has been allowed.
13. A learned Single judge of the High Court, in his judgment, not only
considered the ingredients for the offences under Section 406, 420, 460 of
the Indian Penal Code but also the background facts leaving to the dispute
between the parties so as to enable it to ascertain whether the ingredients
thereof stood satisfied or not. It was held that the said complaint petition
was filed on the basis whereof the First Information Report was directed to
be lodged only to pre-emt the accused from filing a complaint petition under
Section 138 of the Negotiable Instruments Act stating :
\023\005..Therefore, even if the allegations in the
complaint are taken as true and correct, at this stage,
they do not make out prima facie case of cheating or
criminal breach of trust or forgery. Therefore,
continuation of proceedings against the present
petitioner is nothing but abuse of process of Court.\024
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14. Mr. Rakesh Dwivedi, learned senior counsel appearing on behalf of
the appellant would submit that the High Court committed a manifest error
in quashing the First Information Report at such an early stage and acted in
total disregard of the parameters of its jurisdiction under Section 482 of the
Code of Criminal Procedure. Taking us through various documents
including the notices served by the parties against each other and the
Scheme of Demerger, it was urged that the purpose for which the cheques
are said to have been issued being not supported by any document or the
deed of demerger, it was pre-mature on the part of the High Court to quash
the First Information Report. It was contended that it is not the law that for
the purpose of constitution of an offence under Section 420 of the Indian
Penal Code, subsequent conduct for the purpose of ascertaining intention of
the accused in regard to making of a false representation to the complainant
cannot be taken into consideration, more particularly in a case, where blank
cheques have been issued on good faith and on a representation made by the
accused. After the Scheme of Demerger was framed in March, 2001, it was
the duty of the respondent to return the cheques which were \021properties\022,
within the meaning of the provisions of Section 405 of the Indian Penal
Code, and then, it was contended, a case of Criminal Procedure of
_________ order been made out. Embezzlement and/or conversion thereof
for the purposes other than for which the same had been entrusted would
also go to show that the respondents have committed a criminal breach of
trust.
The theory that the accused must have had a bad intention at the time
of the very inception of the contract would apply only to contractual
liabilities and not where some valuable documents are entrusted. In any
event, the said principle will have no application in relation to offences made
under Section 406 and 463 of the Indian Penal Code.
15. Mr. C.A. Sundaram, learned senior counsel appearing on behalf of the
respondent, on the other hand, submitted;
(i) The question as to whether the First Information Report in the
facts and circumstances of this case should be treated to be an
abuse of process of Court or not should be determined having
regard to public policy involved namely as to whether a defaulter
who has failed to make lawful payment of an amount and thus
liable to be prosecuted in respect whereof the cheque had been
issued by it can pre-emt filing of a complaint petition which
would be his defence in the case filed against him under Section
138 of the Negotiable Instruments Act.
(ii) Prosecution under Section 420 of the Indian Penal Code would
lie only in the event, an allegation is made in regard to the
existence of an intention on the part of the accused from the very
inception of the contract and not thereafter.
(iii) In the counter affidavit filed before the High Court, it has been
alleged that the employees of the respondent No. 1 Company had
filled up the blank cheque which is contradictory to and
inconsistent with the story made out in the complaint petition that
it was respondent Nos. 2 and 3 who did so and, therefore, no
charge can be framed for commission of forgery.
(iv) Keeping in view the fact that the cheques were purported to be
issued in the years 2000 to 2004 when allegedly the parties were
maintaining excellent relationship and the dispute between them
having been arisen only in September, 2004, it is wholly
improbable that the memorandum of understanding would not
contain a clause in regard to handing over of the blank cheques
and/or no demand shall be made to return the same.
16. The parameters of jurisdiction of the High Court in exercising its
jurisdiction under Section 482 of the Code of Criminal Procedure is now
well settled. Although it is of wide amplitude, a great deal of caution is also
required in its exercise. What is required is application of well known legal
principles involved in the matter.
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17. It is neither feasible nor practicable to lay down exhaustively as to on
what ground the jurisdiction of the High Court under Section 482 of the
Code of Criminal Procedure should be exercised, but some attempts have
been made in that behalf in some of the decisions of this Court as for
example State of Haryana Vs. Bhajan Lal [1992 Supp (1) SCC 335], Janata
Dal Vs. H.S. Chowdhary and Others [(1992) 4 SCC 305], Rupan Deol Bajaj
(Mrs.) and Another Vs. Kanwar Pal Singh Gill and Another [(1995) 6 SCC
194], Indian Oil Corp. Vs. NEPC India Ltd. and Others [(2006) 6 SCC 736].
In Bhajan Lal (supra), this Court held;
\023(1) Where the allegations made in the first
information report or the complaint, even if they are
taken at their face value and accepted in their entirety
do not prima facie constitute any offence or make out
a case against the accused.
(2) Where the allegations in the first information
report and other materials, if any, accompanying the
FIR do not disclose a cognizable offence, justifying an
investigation by police officers under Section 156(1)
of the Code except under an order of a Magistrate
within the purview of Section 155(2) of the Code.
(3) Where the uncontroverted allegations made in the
FIR or complaint and the evidence collected in
support of the same do not disclose the commission of
any offence and make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute
a cognizable offence but constitute only a non-
cognizable offence, no investigation is permitted by a
police officer without an order of a Magistrate as
contemplated under Section 155(2) of the Code.
(5) Where the allegations made in the FIR or
complaint are so absurd and inherently improbable on
the basis of which no prudent person can ever reach a
just conclusion that there is sufficient ground for
proceeding against the accused.
(6) Where there is an express legal bar engrafted in
any of the provisions of the Code or the concerned
Act (under which a criminal proceeding is instituted)
to the institution and continuance of the proceedings
and/or where there is a specific provision in the Code
or the concerned Act, providing efficacious redress
for the grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly
attended with mala fide and/or where the proceeding
is maliciously instituted with an ulterior motive for
wreaking vengeance on the accused and with a view
to spite him due to private and personal grudge.\024
We may also place on record that criminal proceedings should not be
encouraged when it is found to be mala fide or otherwise abuse of the
process of court.
In All Cargo Movers (I) Pvt. Ltd. & Ors. v. Dhanesh Badarmal Jain &
Anr. [2007 (12) SCALE 391], it was opined :
\023We are of the opinion that the allegations made in
the complaint petition, even if given face value and
taken to be correct in its entirety, do not disclose
an offence. For the said purpose, This Court may
not only take into consideration the admitted facts
but it is also permissible to look into the pleadings
of the plaintiff-respondent No. 1 in the suit. No
allegation whatsoever was made against the
appellants herein in the notice. What was
contended was negligence and/or breach of
contract on the part of the carriers and their agent.
Breach of contract simplicitor does not constitute
an offence. For the said purpose, allegations in the
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complaint petition must disclose the necessary
ingredients therefor. Where a civil suit is pending
and the complaint petition has been filed one year
after filing of the civil suit, we may for the purpose
of finding out as to whether the said allegations are
prima facie cannot notice the correspondences
exchanged by the parties and other admitted
documents. It is one thing to say that the Court at
this juncture would not consider the defence of the
accused but it is another thing to say that for
exercising the inherent jurisdiction of this Court, it
is impermissible also to look to the admitted
documents. Criminal proceedings should not be
encouraged, when it is found to be mala fide or
otherwise an abuse of the process of the Court.
Superior Courts while exercising this power should
also strive to serve the ends of justice.\024
18. Ordinarily, a defence of an accused although appears to be plausible
should not be taken into consideration for exercise of the said jurisdiction.
Yet again, the High Court at that stage would not ordinarily enter into a
disputed question of fact. It, however, does not mean that documents of
unimpeachable character should not be taken into consideration at any cost
for the purpose of finding out as to whether continuance of the criminal
proceedings would amount to an abuse of the process of Court or that the
complaint petition is filed for causing mere harassment to the accused.
While we are not oblivious of the fact that although a large number of
disputes should ordinarily be determined only by the civil courts, but
criminal cases are filed only for achieving the ultimate goal namely to force
the accused to pay the amount due to the complainant immediately. The
Courts on the one hand should not encourage such a practice; but, on the
other, cannot also travel beyond its jurisdiction to interfere with the
proceeding which is otherwise genuine. The Courts cannot also lose sight of
the fact that in certain matters, both civil proceedings and criminal
proceedings would be maintainable.
19. The High Court, however, in this case went into various facts
including the backdrop of dispute between the parties. It proceeded on the
basis that in view of the demerger scheme, the conduct of the appellant in
keeping mum for a long time for getting the unused blank cheques returned
is tell tale. It entered into the question as to whether the complaint petition
was filed only with a view to pre-emt the respondents herein to take recourse
to the remedies available to them to initiate a criminal proceeding under
Section 138 of the Negotiable Instruments Act or the complaint petition in
effect and substance should be permitted to be raised only by way of
defence. What has failed to attract the attention of the High Court was that
maintainability of a criminal proceeding like the present one should not be
determined only upon raising a presumption in terms of Section 139 of the
Negotiable Instruments Act, it being a rebuttable one.
20. The High Court, in our opinion, should have further taken into
consideration the fact that in the event, the defence of the appellant
is accepted in the criminal case, it will have no remedy to
prosecute the respondents again. To contend that the acquittal of
the appellant would have been the springboard for filing a
complaint will not be correct. Nobody knows when the criminal
case would come to an end. In a given situation, even it may
become barred by limitation. It must also be borne in mind that
commercial expediencies may lead a person to issue blank
cheques. The course of action in the aforementioned situation, in
our opinion, which could be taken recourse to was to make an
attempt to find out as to whether the complaint petition even if
given face value and taken to be correct in its entirety constitutes
an offence under Section 420, 406, 463 of the Indian Penal Code or
not.
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21. Ingredients of cheating are;
(i) deception of a person either by making a false or
misleading representation or by other action or
omission; and
(ii) fraudulent or dishonest inducement of that person to
either deliver any property to any person or to consent
to the retention thereof by any person or to intentionally
induce that person to do or omit to do anything which
he would not do or omit if he were not so deceived and
which act or omission causes or is likely to cause
damage or harm to that person in body, mind,
reputation or property.
A bare perusal of Section 415 read with Section 420 of the Indian
Penal Code would clearly lead to the conclusion that fraudulent or dishonest
inducement on the part of the accused must be at the inception and not at a
subsequent stage.
22. For the said purpose, we may only notice that blank cheques were
handed over to the accused during the period 2000-2004 for use thereof for
business purposes till the dispute between the parties admittedly arose much
thereafter i.e. in 2005.
In B. Suresh Yadav Vs. Sharifa Bee [2007 (12) SCALE 364], it was
held;
\02313. For the purpose of establishing the offence of
cheating, the complainant is required to show that the
accused had fraudulent or dishonest intention at the
time of making promise or representation. In a case
of this nature, it is permissible in law to consider the
stand taken by a party in a pending civil litigation.
We do not, however, mean to lay down a law that the
liability of a person cannot be both civil and criminal
at the same time. But when a stand has been taken in
a complaint petition which is contrary to or
inconsistent with the stand taken by him in a civil suit,
it assumes significance. Had the fact as purported to
have been represented before us that the appellant
herein got the said two rooms demolished and
concealed the said fact at the time of execution of the
deed of sale, the matter might have been different. As
the deed of sale was executed on 30.9.2005 and the
purported demolition took place on 29.9.2005, it was
expected that the complainant/first respondent would
come out with her real grievance in the written
statement filed by her in the aforementioned suit.
She, for reasons best known to her, did not choose to
do so.\024
No case for proceeding against the respondent under Section 420 of
the Indian Penal Code is therefore, made out.
23. Filling up of the blanks in a cheque by itself would not amount to
forgery. Whereas in the complaint petition, allegations have been made that
it was respondent Nos. 2 and 3 who had entered into a conspiracy to commit
the said offence as indicated hereinbefore, in the counter affidavit, it has
been alleged that the employees of the Respondent Company did so.
Although, Section 120B of the Code has been added, there does not
exist any averment that the respondent Nos. 2 and 3 have entered into any
conspiracy with their employees. No case for proceeding with the offence of
forgery against the respondents has, thus, also been made out.
24. However, a case for proceeding against the respondents under Section
406 has, in our opinion, been made out. A cheque being a property, the
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same was entrusted to the respondents. If the said property has been
misappropriated or has been used for a purpose for which the same had not
been handed over, a case under Section 406 may be found to have been
made out. It may be true that even in a proceeding under Section 138 of the
Negotiable Instruments Act, the appellant could raise a defence that the
cheques were not meant to be used towards discharge of a lawful liability or
a debt, but the same by itself in our opinion would not mean that in an
appropriate case, a complaint petition cannot be allowed to be filed.
We cannot also lose sight of the fact that the respondents were
keeping watch over the matter. As soon as a first information report was
lodged, a notice was immediately sent. A quashing application was filed
within a few days for the lodging of the first information report. The
investigation was not allowed to take place at all. Whereas it would have
been the duty of the Court to uphold and/or to protect the personal liberty of
an accused in a case; but where the first information report prima facie
discloses commission of a cognizable offence, the High Court, ordinarily,
shall not have interfered with investigation thereof by the statutory authority.
We, therefore, allow the appeal in part.
25. The investigation by the Officer-in-Charge of Mahankali Police
Station may now be confined to the charge under Section 406 of the Indian
Penal Code.
26. We hope and trust that the investigation shall be completed and a final
report shall be filed before the appropriate court at an early date. In the
event, any chargesheet is filed and the cognizance of the offence is taken,
both the cases should be tried by the same Court, one after the other, and
judgment in both the cases must be delivered at the same time.
27. This appeal is allowed to the aforementioned extent and with the
aforementioned observations and directions.