Madras High Court
Gaurang Mehta vs / on 13 October, 2017
Author: G.Jayachandran
Bench: G.Jayachandran
IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved on : 04.10.2017 Pronounced on : 13.10.2017 Coram The Hon'ble Dr.Justice G.Jayachandran Crl.O.P.No.1288 of 2017 and Crl.M.P.No.909 of 2017 Gaurang Mehta .. Petitioner /versus/ The Inspector of Police, Central Bureau of Investigation, Bank Securities and Fraud Cell, Bangalore. (Ref.Crime No.5(E)/2002-BSFC/CNI dated 20.08.2002) .. Respondent Criminal Original Petition has been filed under Section 482 of the Code of Criminal Procedure Code praying to call for the records and quash the prosecution as against the petitioner in C.C.No.31289/2004 pending on the file of this Court for offences under Section 120(B) CPC r/w 420, 467, 468 & 471 of IPC. For Appellant :Mr.A.Ramesh, SC for Mr.C.Arunkumar For Respondent :Mr.K.Srinivasan, Spl.P.P. ------ O R D E R
This petition has been filed praying to quash the prosecution against the petitioner in C.C.No.31289 of 2004 pending on the file of Additional Chief Metropolitan Magistrate, Egmore, Chennai.
2. History of the case is as follows:
Based on the source information, CBI has registered First Information Report on 20.08.2002 against M/s Pan Clothing Consolidated Company Limited and Directors of the Company along with Senior Manager of Punjab and Sind Bank and unknown persons, Mount Road Branch, Chennai. The core of the allegation is that, the Manager, Punjab & Sind Bank along with Managing Director and Directors of M/s Pan Clothing Consolidated Company Limited and other unknown persons entered into a criminal conspiracy during the period of 1997-2000 to cheat Punjab & Sind Bank by committing criminal misconduct and in furtherance of the said criminal conspiracy, various credit facilities were sanctioned to M/s Pan Clothing Consolidated Company Limited from the Bank. Based on forged and fabricated property document, a loss for the Bank is estimated to the tune of Rs.42,97 crores. After investigation, the respondent police filed a final report on 15.12.2004, wherein 12 persons, who are shown as accused are Managing Director and Directors of the Company and its employees and few of them are private persons, who are part of the conspiracy.
3. The prosecution has submitted that since the competent authority has not sanctioned to prosecute against the public servants, requested the Special Judge, CBI cases to transfer the Original First Information Report to the Additional Chief Metropolitan Magistrate. After filing the final report, one Shreyas Sripal[A1], V.S.Vasan[A3] and K.S.Selvakumar[A9] filed a petition to discharge. The trial Court has allowed their petition on 20.10.2014. Aggrieved by that, Investigating Agency has preferred criminal revision petitions, which are pending before the High Court.
4. Some of the accused alone succeeded in getting discharge from the trial Court. As against the order of discharge, CBI has filed a revision in Crl.R.C.No.27 of 2015 before the trial Court. However, on revision preferred by the respondent police, the learned XV Additional Sessions Judge, Chennai has allowed the appeal on 07.09.2015 by setting aside the order of discharge passed by the trial Court in Crl.M.P.No.790 of 2014. By way of filing quash petition invoking under Section 482 of the Code of Criminal Procedure, the petitioner[A7] has preferred the present petition for the aforesaid relief.
5. The role of the petitioner as found in the final report is extracted in the counter filed by the respondent, which is as under:
The petitioner/A7 is part and parcel of the conspiracy and in pursuance of it, he opened a fictitious firm in the name of M/s Bombay Traders for facilitating opening Letters of Credit for heavy amount and discounting it and availing funds from the Bank, without any genuine trade transactions and diverting the same. The petitioner knowingly created the fictitious firm in the name and style of M/s Bombay Traders, with an address, where there was already a firm in the same name, which was owned by Shri Mehta & Shri Dilip Mokjati with which M/s Pan Clothing Consolidated Company Ltd., had business dealings. The petitioner accused knowingly opened an account for the fictitious firm M/s Bombay Traders in Canara Bank, Kodambakkam Branch, Chennai for discounting of Letters of Credit, which is for accommodation purpose and without any genuine trade. After opening of fictitious firm and the bank account in the same name as M/s Bombay Traders, by the petitioner accused, 13 Letters of Credits were fabricated and encashed to the tune of Rs.3,18,76,199/-, which is without any genuine business. The petitioner/accused(A-7) had opened the bank account with Canara Bank, singed blank cheques, invoices and delivery challans etc., and played hand in glove in the conspiracy and facilitated diversion of funds of Bank by other accused.
6. The learned counsel appearing for the petitioner submitted his arguments on the following grounds:
(i)The transfer of First Information Report by the Special Court for CBI cases to Additional Chief Metropolitan Magistrate, Egmore, Chennai is against the procedure established under law and without the order of Higher Court. Hence, the very same transfer of the case is illegal and consequently, the prosecution has to be quashed.
(ii)Out of 12 accused, 10 of them have already been discharged by the trial Court, since the dues to the bank has already been settled in the year 2008, in view of the compromise arrived between the company M/s Pan Clothing Consolidated Company Limited and Punjab & Sind Bank. Since there is no likelihood of conviction of the remaining accused, the trial against the petitioner is going to be a futile exercise. Hence, it is the fit case to quash the petition under Section 482 of the Code of Criminal Procedure Code.
7. It is also brought to the notice of this Court by the learned counsel appearing for the petitioner that after filing charge sheet on 15.12.2004, the prosecution has filed supplementary charge sheet on 09.07.2008 by arraying one K.P.Mohamed Gany as A13, since he was apprehended subsequent to filing charge sheet and on further investigation, in the matter relating to forged document of property offered as collateral security, after discharge of A1 , A2,A3, A5, A7 and A9, third charge sheet has been filed arraying M/s Pan Clothing Consolidated Company Limited as one of the accused. Filing the final report endlessly indicates the pick and choose attitude of prosecution and witch hunting. For all these reasons the petition to quash has to be allowed.
8. The learned Special Public Prosecutor (CBI Cases) appearing for the respondent submitted that the reasons stated to quash the case is not sustainable. Initially, registration of the First Information Report against M/s Pan Clothing Consolidated Limited Company, its Directors and Former Senior Manager of Punjab & Sind Bank and other unknown persons, prima faciely revealed the criminal conspiracy and cheating these accused. Since one of the named accused was a public servant, the offence under the Prevention of Corruption Act, 1988 was made out. Immediately after receipt of the complaint on 20.08.2002, the case was registered against few known and other unknown persons both public servants and private individuals under the Prevention of Corruption Act, 1988. After completion of investigation, the final report was filed against 12 private individuals, since the appropriate authorities refused to accord the sanction for prosecution as against the public servant. The same was mentioned to the Special Court, CBI cases and sought for forwarding the First Information Report to Additional Chief Metropolitan Magistrate, Egmore, Chennai before whom the final report was presented on 14th December 2004. Since no charge under the Prevention of Corruption Act, 1988 was sought to be tried, the process adopted by the prosecution is in consonance with the procedure laid down and there is no error or illegality in it. Insofar as the settlement of dues subsequently in the year 2008, by the borrower is concerned, it will not exonerate the offence of forgery and conspiracy of cheating. It cannot be the reason to quash the criminal prosecution.
9. The judgments relied on by the petitioner are not applicable to the facts of the present case and the recent judgment of the Hon'ble Supreme Court, which has come down heavily upon quashing the criminal prosecution under Section 482 of Criminal Procedure Code, considering the settlement between the parties, in case of grave economic offence. Regarding the discharge of other accused, the learned Special Public Prosecutor (CBI cases) appearing for the respondent submitted that the order of discharge is under challenge before this Court and other Bench of this Court which has heard the cases and reserved for orders. Insofar as the probability of conviction, the learned Special Public Prosecutor(CBI cases) submitted that it is a wishful thinking of the petitioner that scope of conviction is improbable. Whereas there is overwhelming evidence to prove the fabrication of documents fraudulent accounts and cheating the nationalized bank to the tune of Rs.42,97 crores. The subsequent settlement of the due, after launching the prosecution and after filing the civil suit, will not stand in the way of prosecution. In the perpetrating of the crime, if any indulgence is shown to these accused, it will give a wrong signal to the potential of fraudsters.
10. The points for consideration are as follows:
1.Whether the transfer of First Information Report to Additional Chief Metropolitan Magistrate by the Special Court is proper and legal?
2.Whether the prosecution for offence under Sections 120B, 420, 468, 471 of IPC can be quashed under Section 482 on the ground of settlement between the parties?
3.Whether non prosecution of public servant amounts to pick and choose by prosecution?
11. 157(1) of the Criminal Procedure Code reads as under:
157(1)Procedure for investigation:- (1)If, from information received or otherwise, an officer in charge of a police station has reason to suspect the commission of an offence which he is empowered under Section 156 to investigate, he shall forthwith send a report of the same to a Magistrate empowered to take cognizance of such offence upon a police report and shall proceed in person, or shall depute one of his subordinate officers not being below such rank as the State Government may, by general or special order, prescribe in this behalf, to proceed, to the spot to investigate the facts and circumstances of the case, and, if necessary to take measures for the discovery and arrest of the offender.
12. 173(1) of the Criminal Procedure Code reads as under:-
173.Report of police officer on completion of investigation-
(1)....
(2)(i) As soon as it is completed, the officer in charge of the police station shall forward to a Magistrate empowered to take cognizance of the offence on a police report, a report in the form prescribed by the State Government stating-
(a)the names of the parties
(b)the nature of the information
(c)the names of the person,who appear to be acquainted with the circumstances of the case;
(d)whether any offence appears to have been committed and if so, by whom;
(e)whether the accused has been arrested;
(f)whether he has been released on his bond and, if so, whether with or without sureties;
(g)whether he has been forwarded in custody under Section 170;
(ii).....
13. Sections 3 and 4 of the Prevention of Corruption Act, 1988 read as under:
Section 3: Power to appoint Special Judges-(1)The Central Government or the State Government may, by notification in the Official Gazette, appoint as many special Judges as may be necessary for such area or areas or for such case or group of cases as may be specified in the notification to try the following offences, namely:-
(a)any offence punishable under this Act; and
(b)any conspiracy to commit or any attempt to commit or any abetment or any of the offences specified in clause (a) Section 4 - Cases triable by Special Judges-(1)Notwithstanding anything contained in the Cod of Criminal Procedure, 1973 (2 of 1974), or in any other law for the time being in force, the offences specified in sub-section!() of Section 3 shall be tried by special judges only.
14. Thus, while registering the First Information Report based on the information received, the material facts had revealed offence under the Prevention of Corruption Act, 1988 and Indian Penal Code committed by the public servants and private individuals. Hence, the First Information Report has been forwarded to the Special Court having exclusive jurisdiction to try offences under the Prevention of Corruption Act, 1988, in compliance with Section 157(2) of the Code of Criminal Procedure and Section 4 of the Prevention of Corruption Act, 1988. Later, after completion of investigation, the prosecution agency were declined sanction under Section 19 of the Prevention of Corruption Act, 1988 to prosecute the public servants. In the absence of sanction to prosecute the public servants, offence under Prevention of Corruption Act had been deleted. The prosecution has filed the final report against the private individuals for the IPC offences, disclosing the above fact.
15. At pre-cognizance stage, it is for the court concerned to decide about its jurisdiction competency. In this case, the Special Court has rightly transferred the First Information Report to the Additional Chief Metropolitan Magistrate.
16. Section 4 of the Prevention of Corruption Act, 1988 empowers the Special Judge exclusively to try offence punishable under that Act and when trying case under the Prevention of Corruption Act may also try any offence other than, the offence specified in Section 3 of the Act, with which the accused may, under Criminal Procedure Code be charged at the same trial.
17. Thus, it is amply clear that the Special Judge has no jurisdiction to exclusively try offence other than the offence punishable under the Prevention of Corruption Act, 1988. In other words, the power of the Special Court constituted under the Prevention of Corruption Act shall exercise its jurisdiction to try cases under other Acts inclusive of Prevention of Corruption Act cases but not exclusive of Prevention of Corruption Act cases.
18. Regarding subsequent settlement of due by the company and no due certificate used by the bank and the judgment cited by the counsel, it is pertinent to record that the First Information Report was registered in the year 2002. A suit for recovery of money was filed in the year 2004. The settlement was arrived in the year 2009. The settlement has not come immediately or voluntarily but only after criminal prosecution and civil suit. In this connection, in the recent judgment of the Apex Court in Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai Karmur & Others v. State of Gujarat & Another reported in [CDJ 2017 SC 1109] the three judges bench of the Apex Court, after considering the earlier judgments on quashing criminal prosecution after settlement with the bank has held that:
(i)In Central Bureau of Investigation v. Maninder Singh ((2016) 1 SCC 389), by a bench of two learned Judges of this Court. In that case, the High Court had, in the exercise of its inherent power under Section 482 quashed proceedings under Sections 420, 467, 468 and 471 read with Section 120-B of the Penal Code. While allowing the appeal filed by the Central Bureau of Investigation Mr.Justice Dipak Misra (as the learned Chief Justice then was) observed that the case involved allegations of forgery of documents to embezzle the funds of the bank. In such a situation, the fact that the dispute had been settled with the bank would not justify a recourse to the power under Section 482.
....In economic offences Court must not only keep in view that money has been paid to the bank which has been defrauded but also the society at large. It is not a case of simple assault or a theft of a trivial amount; but the offence with which we are concerned is well planned and was committed with a deliberate design with an eye of personal profit regardless of consequence to the society at large. To quash the proceedings merely on the ground that the accused has settled the amount with the bank would be a misplaced sympathy. If the prosecution against the economic offenders are not allowed to continue, the entire community is aggrieved.
14.In a subsequent decision in State of Tamil Nadu v. R.Vasanthi Stanley ((2016) 1 SCC 376), the Court rejected the submission that the first respondent was a woman who was following the command of her husbandand had signed certain documents without being aware of the nature of the fraud which was being perpetrated on the bank. Rejecting the submission, this Court held that:
...Lack of awareness, knowledge or intent is neither to be considered nor accepted in economic offences. The submission assiduously presented on gender leaves us unimpressed. An offence under the criminal law is an offence and it does not depend upon the gender of an accused. True, it is , there are certain provisions in Code of Criminal Procedure relating to exercise of jursidiction under Section 437, etc., therein but that altogether pertains to a different sphere. A person committing a murder or getting involved in a financial scam or forgery of documents, cannot claim discharge or acquittal on the ground of her gender as that is neither constitutionally nor statutorily a valid argument. The offence is gender neutral in this case. We say no more on this score... ...A grave criminal offence or serious economic offence or for that matter the offence that has the potentiality to create a dent in the financial health of the institutions, is not tobe quashed on the ground that there is delay in trial or the principal that when the matter has been settled it should be quashed to avoid the load on the system..
15.The broad principles which emerge from the precedents on the subject, may be summarised in the following propositions:
(i)Section 482 preserves the inherent powers of the High Court to prevent an abuse of the process of any court or to secure the ends of justice. The provision does not confer new powers. It only recognises and preserves powers which inhere in the High Court;
(ii)The invocation of the jurisdiction of the High Court to quash a First Information Report or a criminal proceeding on the ground that a settlement has been arrived at between the offender and the victim is not the same as the invocation of jurisdiction for the purpose of compounding an offence. While compounding an offence, the power of the Court is governed by the provisions of Section 320 of the Code of Criminal Procedure, 1973. The power to quash under Section 482 is attracted even if the offence is non-compoundable;
(iii)In forming an opinion whether a criminal proceeding or complaint should be quashed in exercise of its jurisdiction under Section 482, the High Court must evaluate whether the ends of justice would justify the exercise of the inherent power;
(iv)While the inherent power of the High Court has a wide ambit and plenitude it has to be exercised; (i) to secure the ends of justice or(ii) to prevent an abuse of the process of any court;
(v)The decision as to whether a complaint or First Information Report should be quashed on the ground that the offender and victim have settled the dispute, revolves ultimately on the facts and circumstances of each case and no exhaustive elaboration of principles can be formulated;
(vi)In the exercise of the power under Section 482 and while dealing with a plea that the dispute has been settled, the High Court must have due regard to the nature and gravity of the offence. Heinous and serious offences involving mental depravity or offences such as murder, rape and dacoity cannot appropriately be quashed thought the victim or the family of the victim have settled the dispute. Such offences are, truly speaking, not private in nature but have a serious impact upon society. The decision to continue with the trial in such cases is founded on the overriding element of public interest in punishing persons for serious offences;
(vii)As distinguished from serious offences, there may be criminal cases which have an overwhelming or predominant element of a civil dispute. They stand on a distinct footing in sofar as the exercise of the inherent power to quash is concerned;
(viii)Criminal cases involving offences which arise from commercial, financial, mercantile, partnership or similar transactions with an essentially civil flavour may in appropriate situations fall for quashing where parties have settled the dispute;
(ix)In such a case, the High Court may quash the criminal proceeding if in view of the compromise between the disputants, the possibility of a conviction is remote and the continuation of a criminal proceeding would cause oppression and prejudice; and
(x)There is yet an exception to the principle set out in propositions(viii)and (ix) above. Economic offences involving the financial and economic well-being of the state have implications which lie beyond the domain of a mere dispute between private disputants. The High Court would be justified in declining to quash where the offender is involved in an activity akin to a financial or economic fraud or misdemeanour. The consequences of the act complained of upon the financial or economic system will weigh in the balance.
19. In this case, the role of the petitioner in the scheme of conspiracy hatched by the accused persons is very predominal and he has fraudulently opened bank account in the name of M/s Bombay Traders, raised Letter of Credit for heavy amount and discounted it, without any actual transaction of goods or commodity, enabled M/s Pan Clothing Company Limited to enrich a sum of Rs.42.97 crores and later, failed to repay it. Thus, the intention to cheat the bank is obviously seen through the records. The modus operandi of the petitioner involving economic fraud undermining the economic wellbeing of the state cannot be ignored just because the fraudsters have settled the due to bank at later point of time after recourse to law.
20. Therefore, for the aforesaid reasons, this Court finds no merit in this petition. Hence, this Criminal Original Petition is dismissed. Consequently, connected Miscellaneous Petition is also closed.
13.10.2017 Index:Yes/No Internet:Yes/No Speaking order/non speaking order ari To
1.The Inspector of Police,Central Bureau of Investigation, Bank Securities and Fraud Cell,Bangalore.
2.The Special Public prosecutor, CBI Cases, Chennai.
Dr.G.Jayachandran,J.
ari Pre-delivery order made in Crl.O.P.No.1288 of 2017 13.10.2017