Madras HC Sends Back Woman’s ₹42-Lakh Loan-Commission Fraud Complaint for Fresh Decision, Says Payment Documents Aren’t Required at 156(3) Stage

The petitioner alleged that respondents 1–5 had obtained ₹42 lakh from her as commission for arranging a ₹5 crore SBI loan to establish a textile industry, but did not arrange the loan; she further alleged that they threatened and abused her when she sought repayment.

She applied to the Judicial Magistrate under Section 156(3) CrPC, alleging offences under Sections 120B, 420, 452, 294(b) and 506(i) IPC.

Following an enquiry, the police recommended dismissal on the basis that the dispute was civil in nature. The Magistrate dismissed the application, citing the petitioner’s failure to produce documents showing payment and the pendency of a civil suit. The petitioner challenged that order in revision

Section 154 CrPC requires information disclosing a cognizable offence to set the criminal law in motion; it does not require the informant to establish the allegation with documentary evidence at that stage.

Under Section 156(3) CrPC, a Magistrate may order police investigation before taking cognizance, and the application need only disclose a cognizable offence; investigation is the process of collecting evidence, as reflected in Section 2(h) CrPC.

Relying on Madhao v. State of Maharashtra, (2013) 5 SCC 615, the Court stated that a Magistrate has discretion to refer a complaint for investigation under Section 156(3) where that course is conducive to justice, before taking cognizance.

The Magistrate dismissed the application because the petitioner had not documented the alleged transfer and because a civil suit was pending.

The High Court held that requiring documentary proof at the Section 156(3) stage was erroneous: the application sought an investigation to collect evidence and alleged cognizable offences.

It also found that the civil suit was for an injunction concerning possession and alleged unlawful collection of money, not a money suit concerning the transactions alleged in the complaint; its pendency therefore did not justify dismissal.

The Magistrate had, moreover, been unduly influenced by the police report rather than independently applying judicial mind.

It directed the Magistrate to complete the exercise within three months of receiving the order and without being influenced by the High Court’s observations.