IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 22.1.2008 CORAM THE HON'BLE MR.JUSTICE M.JEYAPAUL Crl.O.P.Nos.992 and 993 of 2007 and M.P.Nos.1 of 2007 N.Duraisamy Petitioner in Crl.O.P.Nos.992 of 2007 Bhoopathy Petitioner in Crl.O.P.Nos.993 of 2007 vs. State rep by Inspector of Police, CBI (BSNFC), Bangalore. Respondent in both cases
Criminal Original Petitions filed under section 482 Cr.P.C. to call for the records and quash C.C.No.18 of 2003 on the file of the II Additional District/Sessions Judge (CBI Cases), Coimbatore.
For petitioners: Mrs.Hema Sampath for
Ms.R.Meenal
For respondent : Mr.N.Chandrasekaran,
Special Public Prosecutor for CBI
COMMON ORDER
The fourth accused and the fifth accused in C.C.No.18 of 2003 on the file of the learned II Additional Sessions Judge (CBI Cases), Coimbatore have respectively preferred the aforesaid criminal original petitions.
2. The common contention of the petitioners is that they were carrying on partnership business by name M/s.Banu Knitters in exporting garments. N.Muthusamy was the Managing Director and he was in incharge of the business, managing the export of garments and regulating the financial aspects. The petitioner in Crl.O.P.No.992 of 2007 was looking after the factory and the petitioner in Crl.O.P.No.993 of 2007 was a sleeping partner. A loan was raised from Syndicate Bank with the consent of Canara Bank by the partnership firm M/s.Banu Knitters. The Syndicate Bank filed suit in O.A.No.8 of 1997 against the firm before the Debt Recovery Tribunal, Chennai for recovery of a sum of Rs.2,13,46,834/= from the firm. The money dispute was settled under a one time settlement scheme and thereupon, the suit was withdrawn by the bank. The Special Director of Enforcement conducted an enquiry under section 18(2) of the Foreign Exchange Regulations Act wherein he had found that the said Muthusamy looked after all the export activities and was responsible for realisation of the proceeds. The petitioner in Crl.O.P.No.992 of 2007 was just looking after the factory and the manufacturing activities. The liability of the bank was also discharged. There is no prima facie material to implicate the petitioners and therefore, the complaint lodged as against the petitioners are liable to be quashed, it is contended.
3. The points that arise for determination are
i) Whether the discharge of the debt owed by the firm M/s.Banu Knitters to the Syndicate Bank would absolve all the criminal liabilities including the charge under section 420 of the Indian Penal Code.
ii) Whether the petitioners were in charge of the affairs of M/s.Banu Knitters.
4. Based on the source information, a complaint was lodged as against M/s.Banu Knitters and its partners including the petitioners herein. After investigation, charge sheet was laid by the CBI as against the Branch Manager, Syndicate Bank, Thiruppur Branch, M/s.Banu Knitters and its partners including the petitioners for offences under sections 120-B read with 420 of the Indian Penal Code and section 13(2) read with section 13(1)(d) of the Prevention of Corruption Act, 1988. The major charge is that the petitioners herein dishonestly induced Syndicate Bank to part with funds and thereby they cheated the bank and caused a wrongful pecuniary loss to the extent of Rs.5.99 crores to Syndicate Bank, Thiruppur Branch and acquired correspondingly wrongful gain to themselves, having hatched a conspiracy.
5. Learned Senior Counsel appearing for the petitioners would submit that inasmuch as the entire debt owed by M/s.Banu Knitters was already discharged and the bank which lent loan to the firm has now no grievance as against the petitioners, the charge under section 420 of the Indian Penal Code does not stand scrutiny. It is further submitted that the complaint is bereft of the allegations that the petitioners were responsible for the conduct of the business of the partnership firm. Therefore, all the charges framed against the petitioners will have to be quashed.
6. Learned Special Public Prosecutor for CBI Cases would contend that the CBI, having investigated the matter, found, prima facie, that a case has been made out as against the petitioners and others and thereupon, they have laid charge sheet before the competent court. The enquiry report of the Enforcement Directorate under section 18(2) of the Foreign Exchange Regulations Act cannot be looked into for any purpose by the Trial Court while framing the charges. Independent of the said report, CBI investigated the matter and arrived at a conclusion that a case has been made out as against these petitioners also. It is his vehement submission that discharge of the debt owed by M/s.Banu Knitters wherein the petitioners were also partners cannot be a ground for discharge as criminal prosecution was not laid based merely on a loan transaction, but, on the allegation of cheating in culmination of criminal conspiracy levelled against the petitioners.
7. It is not in dispute that the entire debt owed by M/s.Banu Knitters to the Syndicate Bank was already discharged by the firm. It is to be noted that no criminal actin can be taken for the inability of the borrower to pay the debt to the financier or the bank. The point is whether there is any element of dishonest inducement causing wrongful pecuniary loss to the Syndicate Bank. The respondent has collected furtive information about the cheating alleged to have been committed by the firm consisting of the partners therein by misleading the bank and thereby they caused heavy pecuniary loss to the bank. The CBI has collected material, prima facie, to show that a case has been made out for criminal conspiracy and cheating. Therefore, the discharge of the debt does not absolve the criminal liability of the firm and its partners. The fact that the entire debt was liquidated amicably by the firm can be putforth before the Trial Court for the purpose of deciding the quantum of sentence to be imposed on the petitioners after conviction. But, the discharge of the debt cannot be a ground to quash the charge sheet laid after collecting sufficient materials to show, prima facie, a case against the petitioners.
8. The CBI has collected information that the fourth accused has signed the initial application seeking the credit facilities submitted to the Syndicate Bank. The fifth accused, on his part, signed various documents enclosed with the application seeking credit facilities from the bank. It has been alleged in the charge sheet that all the partners dishonestly induced Syndicate Bank to part with the huge amount. It is not as if there is no specific allegation as against the petitioners that they were not responsible for the conduct of the business of the firm. The aforesaid version of the respondent would go to show, prima facie, that they actively involved themselves in obtaining credit facilities from Syndicate Bank. The CBI also has collected materials to show that the petitioners associated themselves in the process of obtaining loan from Syndicate Bank. Therefore, the petitioners will have to establish only during the course of trial that they were not responsible for the conduct of business of the partnership firm. As rightly pointed out by the learned Special Public Prosecutor for CBI, the enquiry report of the Enforcement Directorate under section 18(2) of the Foreign Exchange Regulations Act cannot be looked into by the Trial Court while framing the charge. The charges will have to be framed only based on the materials collected by the investigating agency. The accused cannot thrust upon some document to weigh in the mind of the court at the time of framing the charge based on the materials collected by the respondent police.
9. It has been held in the authority reported in STATE OF U.P. v. R.K.SRIVASTAVA (AIR 1989 SC 2222) that if the allegations made in the FIR are taken at their face value and accepted in their entirety do not constitute an offence, the criminal proceedings instituted on the basis of such FIR should be quashed. But, in this case, the FIR as well as the charge sheet reflects prima facie the commission of offence.
10. In the authority reported in DELHI MUNICIPALITY v. RAM KISHAN (AIR 1983 SC 67) the Supreme Court has held that if there is no clear allegation against the Directors of the Company that they were responsible for the business of the Company, the proceedings will have to be quashed against such Directors. In this case, the FIR has culminated in charge sheet after collecting sufficient materials to show that prima face, the petitioners also participated in the process of obtaining loan from Syndicate Bank and they were in the conduct of business of the firm.
11. In the case reported in C.B.I. v. DUNCANS AGRO INDUSTRIES LIMITED, CALCUTTA (AIR 1996 SC 2452), investigation was not completed and charge sheet was not filed for a long time. Compromise decree in a suit for recovery was passed on payment of the entire amount by the debtor company. The Supreme Court observed that such a development in a criminal case would amount to compounding the offence of cheating. But, in this case, not only the offence under section 420 of the Indian Penal Code but the other offences also have been levelled against the petitioners and others. The materials collected would, prima facie, show that there was a criminal conspiracy, cheating and abetting the public servant to cause loss to the banking industry. Further, in this case, the FIR has culminated in charge sheet after investigation was completed.
12. Of course, in T.D. Naidu V. State, represented by Deputy Superintendent of Police and another (Criminal Appeal No.137 of 2007) by order dated 31.1.2007, the Honourable Supreme Court was pleased to quash the criminal proceedings under section 120-B, 468 and 471 of the Indian Penal Code as it was found that there was no material on record to support such charges as admitted by the counsel appearing on behalf of the respondent police. Such a submission was not made by the counsel appearing for CBI in this case. Further prima facie case has been made out in the instant case. Therefore, the petitioners cannot seek for quashment in the light of the aforesaid ratio.
13. It has been held in S.D.ASHOK KUMAR v. STATE (1991 CRI.L.J. 1963) that the court shall exercise its jurisdiction to quash the proceedings once it is satisfied that the materials collected by the investigating agency do not show any reasonable suspension of commission of any offence. But, in this case, the materials collected would, prima facie, show that offences charged as against the petitioners were made out.
14. Inasmuch as the case is ripe for framing charges with the above materials collected by the investigating agency, the petitioners will have to face the criminal proceedings. Therefore, the court is disinclined to quash the criminal proceedings as sought for by the petitioners on the basis of the aforesaid grounds.
15. In view of the above, both the petitions seeking quashment of the criminal proceedings as against them in C.C.No.18 of 2003 on the file of the II Additional District/Sessions Judge (CBI Cases), Coimbatore stands dismissed. The connected Miscellaneous Petitions also stand dismissed.
ssk.
To
1. The II Additional District/
Sessions Judge (CBI Cases),
Coimbatore.
2. Inspector of Police,
CBI (BSNFC),
Bangalore.