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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION NO.442 OF 2009
Prashant Jhunjhunwala s/o. Late )
Shri Rajkumar Jhunjhunwala, )
R/o. J-1/76, Gupta Colony, Khirki )
Extension, Malviya Nagar, New )
Delhi. ) ... Petitioner
Versus
1. Union Territory of Daman & )
Diu, through its Secretary, )
Daman & Diu at Daman. )
2. State of Maharashtra )
3. Police Sub-Inspector, Daman )
Police Station, Nani, Daman. )
4. Shri Kamal Kumar Bagla, Age )
40 years, Occu. Service, )
Power of Attorney Holder of )
M/s. Century Pulp & Paper )
Division of M/s. Century )
Textile & Industries Limited, )
having its marketing office )
at 411-413, 4th Floor, Laxmi )
Deep Building, Laxmi Nagar, )
District Center, Delhi - 110 )
092. ) .... Respondents
Mr. Niteen Pradhan i/b Mr. S.D. Khot and Mr. M. Pradhan
for the petitioner.
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Ms. P.H. Kantharia, A.P.P. for the State.
Mr. D.A. Nalawade for respondent.
Mr. S. Malik with Mr. Santosh Mishra i/b Mr. B.D. Chauhan
for the original complainant.
CORAM : SMT. RANJANA DESAI &
R.G. KETKAR, JJ.
DATE ON WHICH THE JUDGMENT IS
RESERVED : 28TH APRIL, 2009.
DATE ON WHICH THE JUDGMEMT IS
PRONOUNCED : 9TH JUNE, 2009.
JUDGMENT.:- (Per Smt. Ranjana Desai, J.)
1. Rule. Rule made returnable forthwith. Respondents
waive service. By consent of the parties, taken up for
hearing and final disposal.
2. In this petition filed under Article 226 of the
Constitution of India and under Section 482 of the
Criminal Procedure Code, 1973 (for short, “the Code”), the
petitioner has prayed that First Information Report
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bearing Crime No.M/01/06 dated 8/2/2006 registered at
P.S. Daman (for short, “the said complaint”) be quashed
and set aside. He has also prayed for certain
consequential reliefs.
3. Since the petitioner is seeking quashing of the said
complaint, it is necessary to examine its contents. Gist of
the said complaint is as follows:
a) The 4th Respondent in the petition is the
complainant and is the power of attorney
holder of M/s. Century Pulp & Paper
Division of M/s. Century Textile & Industries
Limited (for convenience, “the complainant
company”). M/s. Shiv Ganga Paper
Converters Private Limited is the 1st
accused in the complaint (for short, “the
accused company”). It is a private limited
company, having its industrial units at
Daman, Kota (Rajasthan) and Rudrapur
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4(Uttaranchal). The 1st accused
manufactures note books and, hence,
requires paper. The petitioner is the 2nd
accused. He is the director of the accused
company. The 3rd accused – Arun Kejariwal,
the 4th accused – Smt. Usha Kejariwal and
the 5th accused – Nikhil Kejariwal are the
directors of the accused company. They
are related to each other. The 6th Accused
– B.K. Mehta and the 7th accused – Vinod
Tiwari are the managers of both the units
of the 1st accused at Daman. M/s. Narsingh
Das & Co. is the authorised dealer of the
complainant company.
b) The complainant company entered into an
agreement with the accused company to
sell to the latter 4000 M.T. of paper over a
contractual period beginning from 1/4/2005
and ending on 31/3/2006. As per the
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agreement, payments were to be made
within 30 days of the goods being
dispatched, in default of which interest was
to be charged.
c) Initially, the accused company was regular
in payments. In the first week of January,
2006, instead of depositing three cheques
in the Corporation Bank, the accused
company deposited only one cheque and
other two cheques were deposited later.
The balance amount of Rs.1,73,73,212/-
was outstanding from the accused
company till 22/12/2005 which the accused
company ought to have paid before
22/1/2006. As the accused company was
not making the payment, the complainant
company approached the accused
company on 28/1/2006. The petitioner
gave an excuse that there were disputes
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between the directors and he was not able
to make any payment. After long
pursuation, the 3rd accused i.e. Arun
Kejariwal promised to make part payment.
He handed over two cheques of Rs.10 lakhs
one dated 31/1/2006 and another dated
2/2/2006 and authorization for return of
100 M.T. paper of the value of Rs.35 lakhs.
He asked the complainant company to
approach the 4th respondent for the
outstanding amount. There was express
promise to make payment of the dues in
the first week of February, 2006. When the
complainant approached the 2nd accused,
he promised to make the payment in kind
by returning 250 M.T. paper from Daman
and 100 M.T. paper from Rudrapur
(Uttaranchal). On 3/2/2006, he authorised
the complainant and M/s. Narsingh Das &
Co. to receive the said paper. The value of
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350 M.T. paper was about Rs.1,15,00,000/-.
d) On 6/2/2006, the complainant went to
Daman to receive 250 M.T. of paper from
the units of Bhimpore, Nani Daman. The
complainant learnt that there are number
of creditors of the accused to whom the
accused had not made payment. The
complainant contacted the 6th accused,
that is, B.K. Mishra, General Manager of the
accused company for delivery of paper.
However, he refused to give delivery by
saying that he will not accept the order of
the 2nd accused. When the 2nd accused was
contacted on phone, he replied that he had
never consented for delivery of paper.
e) The complainant learnt that the accused
who are from one family and who claim to
be directors of the accused company had
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diverted all their funds in benami
transactions since last few months. They
had purchased properties in the name of
their relatives at Faridabad – Gurgaon Road
and formed another company by name M/s.
Aastha Agriculture Private Limited in
Gauhati (Assam). The 5th accused had
wound up all his Daman units and shifted
to Kota with his family.
f) Though there was no business and the
accused had not paid money to the
suppliers, the accused purchased large
quantity of paper. They made the
complainant believe that they had
purchased crores of rupees worth paper.
Just to avoid payment and to make a show
that they had honest intentions, the
accused gave authorization dated 3/2/2006
to receive 250 M.T. paper which was not
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honoured by them. They diverted their
funds and formed another company. All
the accused are thus party to a criminal
conspiracy. They have committed offence
under Section 420 read with Section 120-B
of the Indian Penal Code (for short, “the
IPC”).
4. The said complaint was registered under Section 420
read with Section 120-B of the IPC at P.S. Daman against
the petitioner and five other accused.
5. We have heard Mr. Pradhan, learned counsel
appearing for the petitioner. He submitted that a purely
civil dispute has been given the colour of a criminal
offence. He submitted that this is a dispute about goods
sold and delivered and payments allegedly not received
for the same. Criminal law could not have been set into
motion on these facts. Mr. Pradhan submitted that, after
filing of the said complaint, on 20/6/2006, the
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complainant-company has filed a suit in the Delhi High
Court, which is pending adjudication. The civil suit must,
therefore, be allowed to be prosecuted and the criminal
complaint ought to be quashed. In support of his
submissions, learned counsel relied on the judgments of
the Supreme Court in Alpic Finance Ltd. v. P.
Sadasivan & Anr., (2001) 3 SCC 513, Hridaya Ranjan
Prasad Verma & Ors.
ig v. State of Bihar & Anr.,
(2000) 4 SCC 168, Vir Prakash Sharma v. Anil
Kumar Agarwal & Anr., (2007) 7 SCC 373, Ajay
Mitra v. State of M.P. & Ors., (2003) 3 SCC 11, G.
Sagar Suri & Anr. v. State of U.P., (2000) 2 SCC
636 and Indian Oil Corpn. v. NEPC India Ltd. &
Ors., (2006) 6 SCC 736.
6. Learned counsel then urged that, in fact, the
complainant-company and the accused had settled the
dispute. He drew our attention to the annexures to the
petition. He pointed out that on 8/5/2006, a pursis came
to be filed in the Court of Chief Judicial Magistrate,
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Daman, which stated that the accused had accepted the
liability and consented to give delivery of 227 M.T. of
paper and, in the circumstances, the complainant-
company consented that “the prosecution may be
disposed of, even though the civil liability is not affected”.
Learned counsel pointed out that this pursis is signed by
the advocate for the accused and advocate for the
complainant-company.
ig It is also signed by Mr. Pradeep
Gupta for M/s. Narsingh Dass & Co., who is the authorized
dealer of the complainant-company. The pursis is also
signed by the 3rd accused. On the same day, affidavit
came to be filed by the 3rd accused, inter alia, stating that
227 M.T. of paper is to be delivered to the complainant-
company and, he had decided to honour the challan
issued by the petitioner. Mr. Pradhan drew our attention
to order dated 8/5/2006 passed by I/C. Chief Judicial
Magistrate, Daman, in which he has observed that all the
parties to the pursis have admitted the contents and they
have also agreed to the compromise agreement. Learned
Magistrate has further recorded that all the applications
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are disposed of in terms of pursis (Ex-18). Pursis (Ex-18)
is signed by the advocate for the complainant-company
and the 3rd accused. Learned counsel submitted that in
view of the settlement, this court should quash the
complaint as its continuance will be a futile exercise. In
this connection, he relied on the Supreme Court’s
judgment in Nikhil Merchant v. C.B.I. & Anr. (2008)
9 SCC 677.
7. Learned counsel submitted that in any case, the
petitioner had resigned from the directorship of the
accused-company on 30/12/2005. He drew our attention
to an order passed by the Company Law Board, New
Delhi, (for short, “the CLB”), dated 16/1/2009. He
submitted that the CLB has accepted that the petitioner
has resigned from the directorship of the accused-
company. The CLB has observed that he shall continue to
be on the Board of the accused-company till the accounts
are settled. It is observed that the petitioner was able to
make out its case of oppression and mismanagement
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resulting in gross-misappropriation of funds and stocks
despite the CLB’s orders and, therefore, he shall not be
liable for any default subsequent to the date of intimation
of disassociation with the affairs of the accused-company.
Learned counsel submitted that, therefore, in any event,
from the date of the petitioner’s resignation i.e.
30/12/2005, the petitioner cannot be held responsible for
any mismanagement
ig or offence committed by the
accused-company. Mr. Pradhan submitted that this is
therefore a fit case where this court should in exercise of
its power under Article 227 of the Constitution of India and
Section 482 of the Code quash the said complaint.
8. We have also heard Mr. Nalawade, learned counsel
appearing for the 1st respondent i.e. Union Territory of
Daman and Diu. Mr. Nalawade submitted that it is well
settled that a complaint can be quashed only if on the
face of it, it does not disclose any offence. Learned
counsel submitted that in this case, the said complaint
clearly discloses the offence of cheating and, therefore, it
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cannot be quashed. Mr. Nalawade submitted that on the
said complaint, learned Magistrate has passed an order
under Section 156(3) of the Code for inquiry and
investigation. Relying on the judgment of the Supreme
Court in T. Vengama Naidu v. T. Dora Swamy Naidu
& Ors., (2007) 12 SCC 93, learned counsel submitted
that the FIR is to be taken at its face value for adjudging
the same.
Where investigation is in progress and the
police has not submitted a report to the Magistrate, the
FIR can be quashed only if there appears to be no offence
spelt out in the complaint. At the stage of investigation,
the High Court cannot examine the nature of transaction
or whether any offence was actually committed by the
accused or not. The High Court cannot quash the FIR, at
this stage, by examining the nature of the transaction.
Learned counsel drew our attention to the affidavit in
reply filed by Mr. D.M. Jadav, HCB, attached to the Daman
Police Station wherein it is stated that there are number
of cases relating to bouncing of cheques registered
against the accused. It is also stated that two similar
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cases have been filed in Surat and Ahmedabad, and one
by Tamil Nadu Print Paper Mills in Chennai Court against
the accused-company. He submitted that in the
circumstances no case is made out for quashing the said
complaint.
9. We have also heard Mr. Malik, learned counsel
appearing for the 4th respondent. He submitted that this
is not a case where the complaint does not make out any
offence at all. He submitted that an offence under Section
420 of the IPC is clearly made out. Learned counsel
submitted that the contention that the dispute is of civil
nature is totally misconceived. He submitted that no
settlement was ever arrived at between the accused-
company and the complainant-company and Narsingh
Dass had no authority to settle the dispute. Learned
counsel relied on the judgments of the Supreme Court in
Rajesh Bajaj v. State NCT of Delhi & Ors. (1993) 3
SCC 259, Trisuns Chemical Industry v. Rajesh
Agarwal & Ors. (1999) 8 SCC 686 and an unreported
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judgment of the Supreme Court in State of Punjab
v. Pritam Chand & Ors. in Criminal Appeal No.1069
of 2004 dated 11/2/2009 and submitted that the
petition deserves to be dismissed.
10. Before we go to the cases cited by Mr. Pradhan, it is
necessary to refer to the petitioner’s case that he had
resigned from the accused company. Mr. Jadhav, the
investigating officer has stated in his affidavit that the
petitioner has written a letter on 3/2/2006 in his capacity
as the director of the accused company. He has signed
the said letter as a director. The complainant has in his
affidavit also stated so. Prima facie, this conduct of the
petitioner militates against his case that he had resigned
from the accused company. His case of resignation,
therefore, cannot be accepted at this stage. It requires to
be investigated.
11. Reliance placed by Mr. Pradhan on the CLB’s order
dated 13/3/2009 is also misplaced. It is pertinent to note
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that before the CLB, the petitioner who is the 2nd accused
had alleged mismanagement of the accused company by
accused 3 to 5. It is an internal matter between the
directors. Obviously, the complainant company could
never have participated in the proceedings before the
CLB. The order shows that accused 3 to 5 admitted that
the petitioner was not involved in the affairs of the
company since
November, 2005. It is in these
circumstances inter alia on the concession made by
accused 3 to 5 that the CLB observed that the petitioner
shall not be liable for any defaults subsequent to the date
of intimation of disassociation with the affairs of the
accused company. At this stage, the petitioner cannot be
absolved of the allegations made against him on the basis
of this order.
12. We shall now refer to the cases cited by learned
counsel. In Hridaya Ranjan Prasad Verma’s case
(supra), the Supreme Court was concerned with a
petition filed for quashing of the complaint under Section
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482 of the Code. In that case, the appellants had agreed
to sell land to the 2nd respondent. A cheque in the sum of
Rs.11,00,000/- was given to the appellants by the
respondents. The appellants executed a registered sale
deed and delivered possession of the land. The cheques
given by the respondents bounced. The appellants made
requests to the respondents for payment of the amount.
The respondents avoided to make the payment. The
appellants lodged a complaint under Sections 406, 420
and 120-B of the IPC. On the facts before it, the Supreme
Court observed that the ingredients of intentional
deception on the part of the accused at the beginning of
the negotiations had not been expressly stated or
indirectly suggested in the complaint. Case of dishonest
intention was not made out. While quashing the
complaint, the Supreme Court stated what should be kept
in mind while determining the question whether offence of
cheating is disclosed. Following are the relevant
observations of the Supreme Court.
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“15. In determining the question it has to be
kept in mind that the distinction between mere
breach of contract and the offence of cheating is
a fine one. It depends upon the intention of the
accused at the time of inducement which may
be judged by his subsequent conduct but for this
subsequent conduct is not the sole test. Mere
breach of contract cannot give rise to criminal
prosecution for cheating unless fraudulent or
dishonest intention is shown right at the
beginning of the transaction, that is the time
when the offence is said to have been
committed. Therefore, it is the intention which
is the gist of the offence. To hold a person
guilty of cheating it is necessary to show that he
had fraudulent or dishonest intention at the time
of making the promise. From his mere failure to
keep up promise subsequently such a culpable
intention right at the beginning, that is, when he
made the promise cannot be presumed.”
13. In G. Sagar Suri’s case, a Finance Company had
lodged a complaint against the appellants and others
alleging that as directors of an Automobile Company they
had taken a short-term loan of Rs.50 lakhs from the
Finance Company. The cheques drawn by them towards
repayment were dishonoured by the bank. A criminal
complaint under Section 138 of the Negotiable
Instruments Act was pending. A complaint was filed by
the Finance Company inter alia, alleging that the 1st
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appellant had got the loan with dishonest intention and
misrepresentation. On facts, the Supreme Court found
that in the complaint nothing was said as to what was the
misrepresentation, what role was played by the appellants
and how the Finance Company was duped. All members
of the family including the parents of the Managing
Director were roped in. A complaint under Section 138 of
the Negotiable Instruments Act was pending. In the
affidavit, the Finance Company admitted that the
appellants were not the directors of the company who had
taken the loan. The Supreme Court came to a conclusion
that there was an attempt to rope in all the members of
the family in the complaint and the complaint was filed
with a view to getting back the amount advanced by
browbeating and terrorizing the appellants with criminal
prosecution. It is against the backdrop of these facts
while quashing the complaint the Supreme Court
observed that criminal proceedings are not a short cut for
other remedies available in law and the High Court has to
examine whether matter which is essentially of a civil
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nature has been given a cloak of criminal offence.
14. In Alpic Finance’s case, the appellant was a non-
banking financial company carrying on business of leasing
and hire purchase. The 1st respondent was the Chairman
and founder Trustee and the 2nd respondent i.e. the wife
of the 1st respondent was also a trustee of the trust. The
respondents entered into lease agreement with the
appellant whereby the appellant agreed to finance the
respondent for purchase of dental chairs. As per the
agreement, the respondents were liable to pay rentals
quarterly and the appellant company was to have
exclusive right, title and interest in the dental chairs till
the hire purchase amount was paid. The appellant made
the payment and the respondents bought dental chairs.
According to the appellant, the respondents were not
regular in making payments. Certain cheques were
dishonoured by the bank. It was their case that certain
chairs were found missing and, hence, the respondents
had committed offences under Sections 420, 406 and 423
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read with Section 120-B of the IPC. The Supreme Court
observed that the appellant’s case was that the
respondents had failed to discharge their contractual
obligations. It was noticed that in the complaint, there
was no allegation of fraud or dishonest intention or that
the chairs were obtained by any fraudulent inducement or
by wilful misrepresentation. On facts, the Supreme Court
concluded that it was difficult to discern an element of
deception in the whole transaction, whereas it was
palpably evident that the appellant had an oblique motive
of causing harassment to the respondent by seizing the
entire articles through magisterial proceedings.
15. In Ajay Mitra’s case, the complainant bottling
company had entered into bottling agreements with M/s.
Cadbury Schweppes Beverages India Private Limited (for
short, “M/s. Cadbury”). The agreements were to continue
for a term of five years. Either party could terminate
them at the end of initial term by giving the other party
the prescribed notice. One Atlantic Industries (a member
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of Coca Cola Group of industries) purchased trademarks of
M/s. Cadbury upon which the bottling agreements
between M/s. Cadbury and the complainant were assigned
to Atlantic Industries. Atlantic Industries gave a notice to
the complainant that the bottling agreement shall not be
renewed. The complainant then filed a complaint against
M/s. Cadbury, Coca Cola India and some of its officers
(appellants i.e. accused 7 to 11 being some of them)
alleging that it is M/s. Cadbury who had approached the
complainant and a memorandum of understanding was
signed between the two. The complainant was asked to
discontinue its brand “Sprint” by M/s. Cadbury. The
complainant invested money and modernized its plant to
the satisfaction of M/s. Cadbury and thereafter bottling
agreement was entered into between the two. It was
alleged that Coco Cola India has adopted unfair trade
practices and has made wrongful gain. According to the
complainant, all the accused had cheated it. Offences
were registered against the accused under Section 420
read with Section 34 and Section 120-B of the IPC. The
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High Court refused to quash the FIR. On facts, the
Supreme Court came to a conclusion that the appellants
were not in picture when the complainant spent money on
its plant on the basis of agreement entered into with M/s.
Cadbury, therefore, there was no intention on their part to
deceive the complainant. The Supreme Court observed
that a guilty intention is an essential ingredient of the
offence of cheating.
ig The Supreme Court came to a
conclusion that the allegations made in the complaint
even if they are taken at their face value and accepted in
their entirety do not disclose the commission of any
offence. It is in these circumstances, that the Supreme
Court quashed the complaint.
16. In Vir Prakash’s case, the parties had entered into
a contract of sale and purchase of goods. The appellant
had issued two cheques which had bounced. The
complainant filed a complaint alleging offences under
Sections 406, 409, 420 and 417 of the IPC against the
appellant. The High Court refused to quash the
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complaint. The Supreme Court noted that the allegations
in the complaint did not disclose the ingredients of
criminal breach of trust. No act of inducement on the part
of the appellant had been alleged. The Supreme Court
further noted that there were some vague unpalatable
allegations about the subsequent conduct of the
appellant. It is in this context, while quashing the
complaint the Supreme Court observed that the dispute
between the parties was essentially a civil dispute and
that non-payment or underpayment of the price of the
goods by itself does not amount to commission of an
offence of cheating or criminal breach of trust.
17. In Indian Oil Corporation’s case (IOC), the IOC
had entered into a contract with the NEPC (India) Limited
agreeing to supply aircraft fuel. According to the
appellant, the respondent committed default in making
payment. Complaint was filed under Sections 378, 403
and 425 of the IPC. The High Court quashed the
complaint. The Supreme Court held that High Court was
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not justified in quashing the complaint in its entirety
because the allegations in the complaint are sufficient to
constitute offences under Section 415 (cheating) and 425
(mischief). While allowing the appeal partly the Supreme
Court reiterated the following principles:
(i) A complaint can be quashed where the
allegations made in the complaint, even if theyare taken at their face value and accepted in
their entirety, do not prima facie constitute any
offence or make out the case alleged againstthe accused.
For this purpose, the complaint has to be
examined as a whole, but without examiningthe merits of the allegations. Neither a detailed
inquiry nor a meticulous analysis of the materialnor an assessment of the reliability or
genuineness of the allegations in the complaint,
is warranted while examining prayer for
quashing of a complaint.
(ii) A complaint may also be quashed where it
is a clear abuse of the process of the court, as
when the criminal proceeding is found to havebeen initiated with mala fides/malice for
wreaking vengeance or to cause harm, or where
the allegations are absurd and inherently
improbable.
(iii) The power to quash shall not, however, be
used to stifle or scuttle a legitimate prosecution.
The power should be used sparingly and with
abundant caution.
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(iv) The complaint is not required to verbatim
reproduce the legal ingredients of the offence
alleged. If the necessary factual foundation is
laid in the complaint, merely on the ground that
a few ingredients have not been stated in detail,
the proceedings should not be quashed.
Quashing of the complaint is warranted only
where the complaint is so bereft of even the
basic facts which are absolutely necessary for
making out the offence.
(v) A given set of facts may make out : (a)
purely a civil wrong; or (b) purely a criminal
offence; of (c) a civil wrong as also a criminal
offence. A commercial transaction or a
contractual dispute, apart from furnishing a
cause of action for seeking remedy in civil law,
may also involve a criminal offence. As the
nature and scope of a civil proceeding are
different from a criminal proceeding, the mere
fact that the complaint relates to a commercial
transaction or breach of contract, for which a
civil remedy is available or has been availed, is
not by itself a ground to quash the criminal
proceedings. The test is whether the
allegations in the complaint disclose a criminal
offence or not.
18. In Trisun’s case, the case of the appellant company
was that the accused directors approached him and
offered to supply 5450 metric tons of soyabean extracts
for a price of nearly four and half crores of rupees. The
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sum was paid through cheques. The accused sent goods
of inferior and substandard quality. The complainant
suffered loss of Rs.17 lakhs. According to the appellant,
he was induced to pay the price on the representation
that the best quality commodity would be supplied. On
such representation, the price was paid. But by supplying
inferior quality, the accused deceived the complainant.
The High Court inter alia found that there was an
arbitration clause in the memorandum of understanding.
The High Court held that whether the complainant
company suffered a loss or not is a matter to be
adjudicated by the civil court and not by the criminal
court. The High Court observed that the disputes can be
resolved through arbitration. The High Court quashed the
complaint. The Supreme Court set aside the High Court’s
order and observed as under:
“Quashing of FIR or complaint in exercise
of the inherent powers of the High Court
should be limited to very extreme
exceptions. Merely because an act has a
civil profile is not sufficient to denude it
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referring the disputes to arbitration is not
an effective substitute for a criminal
prosecution when the disputed act is anoffence. Arbitration is a remedy for
affording reliefs to the party affected by
breach of the agreement but the
arbitrator cannot conduct a trial of anyact which amounted to an offence albeit
the same act may be connected with the
discharge of any function under the
agreement. Hence, those are not goodreasons for the High Court to axe down
the complaint at the threshold itself. Theinvestigating agency should have had
the freedom to go into the whole gamut
of the allegations and to reach aconclusion of its own. Preemption of
such investigation would be justified only
in very extreme cases.”
19. In Rajesh Bajaj’s case, the appellant company was
a manufacturer and exporter of garments. The 5th
respondent approached the complainant for purchase of
readymade garments and induced the appellant to
believe that the 5th respondent would pay the price of the
said goods on receiving the invoice. The appellant
believed the complainant and dispatched the goods. But
the 5th respondent did not pay the entire outstanding
amount. According to the appellant, he came to know
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later that the respondent had similarly duped several
persons to the tune of Rs.10 crores. According to the
appellant, the 5th respondent induced him to believe that
he was a genuine dealer but actually his intentions were
not clear. The High Court quashed the complaint on the
ground that the allegations disclose purely a commercial
transaction where seller did not pay the balance purchase
price and that there was nothing in the complaint to
indicate that the accused had dishonest or fraudulent
intention at the time of export of goods.
20. The Supreme Court set aside the High Court’s order.
The Supreme Court observed that it is not necessary for
the complainant to state in so many words that the
intention of the accused was dishonest. The Supreme
Court observed that the complainant had stated in the
body of the complaint that he was induced to believe that
the respondent would honour payment on receipt of
invoices, and the complainant later on realized that the
intention of the respondent was not clear. This would
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prima facie make out a case for investigation. The
Supreme Court observed that the crux of the postulate is
the intention of the person who induces the victim and not
the nature of transaction. We may quote the relevant
observation of the Supreme Court.
“It may be that the facts narrated in the
present complaint would as well reveal acommercial transaction or money
transaction. But that is hardly a reason
for holding that the offence of cheatingwould elude from such a transaction. In
fact, many a cheatings were committed
in the course of commercial and also
money transactions.”
21. In our opinion the above judgments make it clear
that whether a complaint discloses a criminal offence or it
involves only a civil dispute depends on facts and
circumstances of each case. A complaint may have civil
profile but it may also have overwhelming criminal
overtones. In such case, a criminal court cannot shut its
doors to it. Because a complaint involves a commercial
transaction, it cannot be inferred that it contains a civil
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dispute if ingredients of a criminal offence are present. It
is trite that in several commercial transactions, criminal
offences are committed. A case involving a simplicitor
dispute about quality and quantity of the goods received
and the amount of price to be paid could well be
described as a civil dispute in a given set of
circumstances. But where ingredients of cheating or
some such offence are evident from a bare reading of the
complaint, its criminal nature must be acknowledged.
Dishonest intention is a hallmark of a criminal complaint.
Dishonest intention must be present at the inception of
the offence. It must be expressly stated or indirectly
suggested in the complaint. It is possible that in a given
case, the complainant may later on realize that the
intention of the accused was not honest at the inception.
It may become evident on account of the subsequent
conduct of the accused. In such cases, investigation is
necessary. But subsequent conduct is not the sole test to
determine whether a complaint has civil or criminal
profile. It can support the case of the complainant that
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the accused had dishonest intention at the inception of
the offence. Where there is an attempt to use a criminal
complaint to harass or terrorize a party with a view to
forcing it to settle a purely civil dispute such complaint
should not be allowed to be prosecuted. That would
amount to abuse of the process of the court. Criminal
complaint which is bereft of ingredient of an offence
cannot be allowed to be used as a tool to cut short time
consuming civil procedure. At the same time, it must be
remembered that the complainant does not have to state
verbatim the ingredients of the offence alleged. Basic
facts which disclose offence need to be stated. Presence
of an alternative remedy is not a good enough reason for
throwing the complaint overboard if it discloses criminal
offence, because the alternative forum may not be able to
conduct a trial and convict the accused of the offence. A
complaint can be quashed where the allegations made in
the complaint, even if they are taken at their face value
and accepted in their entirety do not prima facie
constitute any offence. For this purpose, the complaint
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has to be examined as a whole, but without examining the
merits of the allegations. A complaint may be quashed
where it is a clear case of abuse of the process of the
court or is initiated with mala fides. The power to quash
the complaint should not be used to stifle a legitimate
prosecution. This power should be used sparingly and
with abundant caution.
22. We shall now proceed to examine the said complaint
in the light of the above principles. We, however, make it
clear that we have not examined the merits of the
allegations and all observations made by us are prima
facie observations made while deciding whether if
allegations made in the complaint are taken at their face
value, they prima facie constitute any offence or not.
23. The facts disclose that there was an agreement to
supply paper between the complainant company and the
accused company and initially the accused company was
making regular payments. This agreement is dated
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2/4/2005. The balance amount of Rs.1,73,73,212/- was
outstanding from the accused till 22/12/2005 which ought
to have been paid before 22/1/2006. The accused
avoided to make the payment. These facts by themselves
may create an impression that this is a civil dispute. But
read in the context of other facts they prima facie disclose
a criminal offence. Accused 3 to 5 are closely related. It
is clearly stated in the complaint that though there was
no business and the accused had not paid money to the
suppliers, the accused purchased large quantity of paper.
They made the complainant believe that they had
purchased crores of rupees worth paper and to avoid
payment and to make a show of their so-called honest
intention the petitioner issued an authorization dated
3/2/2006 on the basis of which the complainant was to
receive the paper back. The authorization was not
honoured. The averment that the accused purchased the
paper though they had no business and had not paid their
suppliers; that they made the complainant believe that
they had purchased paper worth crores of rupees prima
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facie make out a case of dishonest intention at the
inception of the offence. In our opinion, averments made
in the complaint expressly state that the accused had
mala fide intention at the inception of the offence and at
any rate they indirectly suggest so.
24. The averment pertaining to the authorization issued
by the petitioner which was not honoured is equally
important. It is stated in the complaint that when the
complainant went to Daman and met the 6th accused – the
Manager of the accused company for delivery of paper, he
refused to abide by the authorization. When he contacted
the petitioner on phone, the petitioner stated that he had
never consented for return of papers. The subsequent
conduct of the accused in issuing authorization which was
not honoured, of not paying the suppliers; of diverting
their funds in benami transactions, etc. fortify the
complainant’s case that the accused had dishonest
intention at the inception of the offence. Though
subsequent conduct is not the sole test to determine
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whether there is dishonest intention, it is not irrelevant
(Hridaya Ranjan’s case). In Rajesh Bajaj’s case, the
Supreme Court has made it clear that it is not necessary
for the complainant to state in so many words that the
intention of the accused was dishonest. If the
complainant states in the complaint that he was induced
to believe that the accused would make the payment and
later on he realized that the intention of the accused was
not clear, it is a matter for investigation. The present
case is clearly covered by this observation.
25. It is also stated in the said complaint that the
accused who come from one family have diverted their
funds in Benami transactions. They have purchased
properties in the names of their relatives in Faridabad-
Gurgaon Road and formed another company by name M/s.
Aastha Agricultural Private Limited in Gauhati. The 5th
accused has shifted to Kota with his family after winding
up the units in Daman. All these facts stated in the said
complaint will have to be read together. The said
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complaint has to be read as a whole (Indian Oil
Corporation’s case). Case of intention to cheat is prima
facie supported by these facts averred in the said
complaint.
26. Assuming that the facts stated in the said complaint
would as well reveal a commercial or money transaction,
that is hardly a reason for holding that the offence of
cheating would elude from it when ingredients of offence
are so clearly stated in the said complaint (Rajesh
Bajaj’s case).
27. We are informed that a civil suit is filed by the
complainant in the Delhi High Court. It is argued that the
said complaint must be quashed on this ground. In
Indian Oil Corporation’s case, the Supreme Court has
made it clear that a commercial transaction or a
contractual dispute, apart from furnishing a cause of
action for seeking remedy in civil law may also involve a
criminal offence. As the nature and scope of a civil
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39
proceeding is different from a criminal proceeding, the
mere fact that the complaint relates to a commercial
transaction or breach of contract, for which a civil remedy
is available or has been availed, is not by itself a ground
to quash the criminal proceedings. The Supreme Court
has clarified that the test is whether the allegations in the
complaint disclose a criminal offence or not. We have
already stated that the said complaint discloses a criminal
offence. Pendency of a civil suit would not therefore
persuade us to quash the said complaint. Besides, in
Trisun’s case, the Supreme Court has made it clear that
an alternative civil remedy is not an effective substitute
for a criminal prosecution where the disputed act is an
offence. This submission is, therefore, rejected.
28. We have examined the said complaint in the light of
judgments cited by both sides and come to the conclusion
that the said complaint cannot be quashed. We are
unable to accept Mr. Pradhan’s contention that judgments
cited by him cover the present case. In Hridaya
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Ranjan’s case, on facts, the Supreme Court came to a
conclusion that the case of presence of dishonest
intention at the inception was not made out expressly or
indirectly in the complaint. Such is not the case here. We
have already dealt with this issue. Hence, this judgment
is not applicable to the present case.
29.
In G. Sagar Suri’s case, the facts were gross.
There was an attempt to rope in members of a family
which was severely commented upon by the Supreme
Court. There was an attempt to browbeat the accused to
recover loan amount. The complaint was bereft of
particulars of dishonest intention. This judgment cannot
be applicable to the present case because the said
complaint contains the necessary particulars. Similarly, in
Alpic Finance’s case, the complaint was silent about
dishonest intention or fraud. On facts, the Supreme Court
noticed that there was an oblique motive of causing
harassment to the accused. Facts of Alpic Finance’s
case are not comparable to the facts which are before us.
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Hence, the said judgment does not cover the present
case.
30. In Ajay Mitra’s case, the Supreme Court noticed
that the appellants/accused were not in the picture when
the offence was committed and therefore the essential
ingredient of guilty intention was lacking. In this case,
prima facie, the accused were on the scene right from the
beginning. Hence, reliance placed on this judgment is
misplaced. Similarly, in Vir Prakash’s case, the
Supreme Court was of the view that the allegations in the
complaint did not disclose the ingredients of criminal
breach of trust. There were vague allegations of
subsequent conduct. In this case, as already stated by us
the said complaint sets out all the particulars with
sufficient clarity. It is, therefore, not possible for us to
apply the ratio of this judgment to the present case.
31. This takes us to the case of the petitioner that the
said complaint deserves to be quashed in view of the
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settlement between the parties. It is not possible for us to
accept the case of settlement because the complainant is
seriously disputing the alleged settlement. It is stated in
the petition that on 8/5/2006, since the dispute was
settled the 3rd accused filed an affidavit before the Chief
Judicial Magistrate, Daman, stating that he was aware
about his liability as per the agreement and he will
respect it.
It is further stated that on 8/5/2006, the
representative of the complainant-company Mr. Pradeep
Gupta executed a pursis in the court saying that since the
accused had accepted the liability “the prosecution may
be disposed, even though civil liability is not affected”.
Copy of the affidavit and pursis are annexed to the
petition. Prima facie, it is difficult to accept this story.
The complainant has filed affidavit denying this story. As
stated by him, the pursis is not signed by the petitioner.
It is stated to be signed by the 3rd accused. According to
the complainant, he had not given authority to Mr.
Pradeep Gupta to file a pursis on behalf of the
complainant company. In such circumstances, the
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compromise theory cannot be accepted.
32. In Nikhil Merchant’s case, the Supreme Court
observed that in case of a dispute which has overtones of
a civil dispute with certain criminal facets, if there is
compromise between the parties, the FIR can be quashed
because the continuance of the same would be a futile
exercise. There can be no dispute about this proposition
and if the parties had, in fact, settled their disputes, we
would have considered the prayer for quashing the said
complaint. But, since there is a serious dispute about the
petitioner’s contention that there was any compromise,
and it is alleged that the person who allegedly signed the
pursis had no authority to do so, in our writ jurisdiction,
we are unable to decide whether there was compromise
or not. Consequently, prayer for quashing cannot be
entertained. Nikhil Merchant’s case does not help the
petitioner.
33. Before closing, we must refer to the judgment of the
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Supreme Court in T. T. Vengama Naidu’s case. The
appellant therein had filed a private complaint against the
respondents which was sent for investigation under
Section 156(3) of the Code. Criminal case was registered
under Sections 464, 423, 420 read with Section 34 of the
IPC. Investigation was in progress. On a petition filed
under Section 482 of the Code, the High Court quashed
the complaint.
The High Court considered whether
offence at all, was committed. The Supreme Court set
aside the High Court’s order by observing that whether
offences were made out could not have been examined by
the court at that stage as the investigation was pending.
The court has only to see whether ingredients of the
offence are present or not. In this case, the investigation
is in progress. This is not a case where if the allegations
made in the said complaint are taken at their face value,
they do not prima facie disclose any offence. Ingredients
of cheating are very much present. It is not possible to
hold, at this stage, that the said complaint is filed with
mala fide intention to wreak vengeance. Power under
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Section 482 cannot be used to stifle a legitimate
investigation based on facts prima facie indicating
commission of an offence such as those which are averred
in the said complaint. In the circumstances, bearing in
mind the principles laid down by the Supreme Court in a
long line of judgments that power of quashing a complaint
under Section 482 of the Code has to be used sparingly
and with great care and caution and in exceptional cases
where the complaint is bereft of the ingredients of the
offence alleged, we reject the petition.
[SMT. RANJANA DESAI, J.]
[R.G. KETKAR, J.]
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