Gujarat High Court
Hitesh vs State on 1 July, 2008
Gujarat High Court Case Information System
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CR.MA/12174/2007 13/ 13 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL
MISC.APPLICATION No. 12174 of 2007
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HITESH
HARAKCHAND SHAH & 1 - Applicant(s)
Versus
STATE
OF GUJARAT THROUGH & 2 - Respondent(s)
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Appearance :
MR
BS PATEL for Applicants
MR LB DABHI, ADDL.
PUBLIC PROSECUTOR for Respondent(s) : 1,
NOTICE SERVED BY DS for
Respondent(s) : 2,
MR BIJU A NAIR for Respondent(s) :
3,
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CORAM
:
HONOURABLE
MS.JUSTICE H.N.DEVANI
Date
: 01/07/2008
ORAL
ORDER
By this application under Section 482 of the Code of Criminal Procedure, 1973 (the Code), the petitioners have prayed to quash the first information report registered vide DCB Police Station, Vadodara I ? C.R. No.10/2007 lodged by the respondent No.3 herein alleging commission of the offences punishable under Sections 409, 420, 120B and 114 of the Indian Penal Code (IPC).
The facts of the case stated briefly are that the petitioners are partners of one Apurva Aluminum Corporation (the Corporation). The said Corporation had taken financial assistance from the respondent No.3 ? Bank of Baroda (the Bank). It appears that, on the date of the lodging of the complaint, the dues payable by the Bank to the tune of Rs.4,40,00,000/-, pursuant to which hypothecation loan, cash credit, hypothecation of stock cum debit cum DA and LC etc. have been given. All the partners of the Corporation had executed an agreement in favour of the Bank in June 2003. It is alleged in the complaint that the partners had given an assurance to maintain the margin against the facility obtained by them and in pursuance of such written assurance, the loan had been given. That despite the aforesaid assurance given by the partners, no stock statement had been submitted since September, 2006 and that, a book debt had been submitted on 13.11.2006 for an amount of Rs.5,37,81,109/- which clearly indicated that the margin required to be kept by the Corporation had not been maintained. It appears that an inspection was carried out on the premises of the Corporation on 1st February, 2007 and several irregularities were noticed. That after inspection, the bank demanded the outstanding amount from the Corporation, however, the same was not paid. It is alleged in the complaint that it was the duty of the Corporation to deposit the amount from the proceeds of the sale of hypothecated goods which had been entrusted by the bank under the hypothecation deed on behalf of the bank. In the background of the aforesaid facts, it is alleged that the petitioners and other accused persons had committed the offences punishable under Section 409, 420, 120B and 114 of the IPC.
It appears that on an earlier occasion, the petitioners herein had moved an application under Section 482 of the Code before this Court which came to be rejected by a detailed reasoned order dated 26th April, 2007.
Subsequently, the petitioners have again moved this application under Section 482 of the Code praying to quash the complaint in question.
Heard Mr.B.S.Patel, learned advocate for the petitioners, Mr.L.B.Dabhi, learned Additional Public Prosecutor for the respondents No.1 and 2 and Mr.Biju Nair, learned advocate for the respondent No.3 ? original complainant.
Mr.B.S.Patel, learned advocate for the petitioner has, on the question of maintainability of a successive application under Section 482 of the Code for quashing the complaint, placed reliance upon a decision of the Supreme Court in case of Superintendent of Remembrancer of Legal Affairs W.B. v. Mohan Singh and others, AIR 1975 SC 1002. It is submitted that, in the light of the aforesaid decision of the Supreme Court in case of changed circumstances, it was permissible to file a second application under Section 482 of the Code. It is submitted that, after the passing of the order dated 26th April, 2007, several developments had taken place viz., [1] A proposal had been submitted on behalf of the partnership firm on 21st September, 2007 for one-time settlement of the entire dues of the Corporation, [2] The one-time settlement scheme had been granted by the bank vide letter dated 28th September, 2007, at Annexure ?SF?? to the application. According to the learned advocate for the petitioners, in case of forgery, cheating or any criminal elements, no OTS Scheme can be granted as per the guidelines issued by the Reserve Bank of India, however, considering the fact that in the present case, the OTS Scheme had been sanctioned, which presupposes that there is no element of forgery, cheating or criminality involved. That so far approximately Rs.1,90,00,000/- have already been paid and Rs.2,50,00,000/- are due, in respect of which property had been seized by the Bank under the Securitization and Re-construction of Financial Assets & Enforcement of Security Interest Act, 2002 (the Securitization Act) and according to the valuation made by the bank, the property is worth Rs.3,30,00,000/-. According to the learned advocate for the petitioners, the correspondence entered into by the bank in respect of the OTS Scheme, is with the new partner Mr.Sureshchandra Shah and that, as per retirement deed dated 24th May 2006, the petitioners have retired from the partnership. It is submitted that there is no criminal element in the entire case and that, this is a recovery suit filed before the police station. It is also submitted that, as per the complaint, it is the case of the bank that it was regular, however, the defect has been discovered on or after 13th January, 2007 while the petitioner had retired as a partner since 24th May, 2006, hence, the petitioner at best can be held liable under the civil law, but not under the criminal law. (That the petitioner No.2 addressed a letter to the Manager of the Bank on 17th March, 2006 that the petitioner has retired and Mr.Sureshchandra Shah and his family members are attending the business much before the registration of the complaint and retirement date). According to the learned advocate for the petitioner, the property in custody of the bank is worth more than what is due and payable to the bank, hence, the bank is under a legal obligation to sell the same under the Securitization Act. That in the changed circumstances, not only substantial amount is paid, but the entire public money is secure and there is no chance of loss of public money as property worth Rs.3,30,00,000/- is under the direct control of the complainant Bank.
It is contended that the provisions of Sections 409 and 420 IPC are clearly not attracted, as in the facts of the present case, the default started in November 2006 after retirement of the petitioner and no inducement is alleged so as to make out any case under Section 420 IPC. It is, accordingly, submitted that, no offence as alleged can be said to have been made out. Hence, the complaint in question is required to be quashed.
On the other hand, Mr.Biju Nair, learned advocate for the respondent No.3 bank has vehemently opposed the application. It is submitted that, as per the terms of hypothecation agreement, the petitioners were duty bound to maintain adequate margin of security including the stocks and except for the purpose of sale or dealing in the ordinary course of business, hypothecated stocks could not be removed or caused to be removed or diverted or disposed of without prior permission of the bank. The hypothecation agreement also provided that the sale proceeds and realization in respect of the hypothecation items should be held by the borrower in trust for the Bank as the Bank's exclusive property. It is submitted that in the present case, the borrowers including the present petitioners did not bother for timely submission of the stock statements from time to time and also in the subsequent inspection conducted by the Bank, it was revealed that various statements which have been furnished through the Bank were totally wrong and fabricated. It is also revealed that the borrowers had removed or disposed of the hypothecation items without maintaining adequate margin and the proceeds of the same were not deposited with the bank.
It is submitted that siphoning of the money without depositing the same with the Bank would constitute criminal breach of trust. Moreover, the overall conduct of the borrower which is evident from non-submission of stock statements or submission of fabricated stock statements repeatedly is indicative of their criminal intention to cheat the Bank and as such, they are criminally liable for the same. It is further submitted that it is true that the Bank has vide its letter dated 28th September, 2007 accepted the compromise proposal submitted by the borrowers for a total of Rs.398.09 lakhs along with interest and legal charges, as against the total outstanding liability of around Rs.435 crores as on that date. Out of that, Rs.132.59 lakhs has already been paid. However, substantial amounts are still due from the borrowers. It is, accordingly, submitted that this is not a fit case requiring consideration by this Court under Section 482 of the Code, and hence, this Court may not entertain the application.
In response to the submissions advanced by the learned advocate for the respondent No.3 bank, Mr.B.S.Patel, learned advocate for the petitioner has submitted that M/s Apurva Alluminium Corporation is a partnership firm, however, subsequently, the petitioners have lost their status as partners. That the petitioner No.2 had already addressed a letter to the Bank informing that he is not attending the day to day business of the firm since the last three years. According to the learned advocate for the petitioners, the petitioners were not partners at the relevant time and as such, cannot be held liable for the alleged offence.
This Court has considered the submissions advanced by the learned advocates for the parties and has perused the record of the case as well as the decisions cited at the bar.
It is an admitted position that on an earlier occasion, the petitioners herein had moved an application under Section 482 of the Code for quashing the complaint in question, which has been rejected by this Court vide order dated 26th April, 2007. It may be pertinent to note the following findings recorded in the said order :
?SIn the instant case, it is important to note that the respondent no.2 in the complaint had made a specific allegation to the effect that the present petitioners in their capacity as partners of the partnership firm M/s. Apurva Aluminum Corporation had obtained the loan in the year 1993, entered into an hypothecation agreement on 2-6-2003 as also entered into a contract with the bank to the effect that whenever the bank demands the amount, the petitioners are duty bound to pay the same with interest. According to the hypothecation agreement, the petitioners were required to prepare and submit stock statement to the bank, however, from the record it reveals that even though the production in the factory had stopped the present petitioners prepared false statement of stock and submitted the same to the bank, and thereby, misappropriated the goods which shows the dishonest intention of the petitioners. The present petitioners being partners of the firm M/s. Apurva Aluminum Corporation and when the loan had been availed of in the name of the firm, the petitioners would have domain and control over such assets of the firm. When the petitioners are found to have dishonestly misappropriated the goods, it can be said that they are guilty of the offences alleged in the complaint, more particularly, when this fact is reflected in the complaint. Apart from this, the respondent no.2 in his affidavit-in-reply has stated on oath that the cheques are signed by the petitioners and that the balance-sheet in respect of M/s Apurva Aluminum Corporation for the financial year 2005-2006 shows that the current capital account is in the name of the present petitioners. Moreover, the partnership firm M/s. Apurva Aluminum Corporation is still in existence. The question whether the present petitioners have retired from the partnership firm or that they have not played any specific role after the joint family partition on 1-4-2003 or that they were responsible for the business of the partnership firm at the time of offence are all disputed questions of fact which can only be gone into by the trial Court and it shall always be open to the petitioners to raise such contentions. The contention raised by the learned Counsel for the petitioners that the transaction is of a civil nature also cannot be accepted since an action of a party may have civil as well as criminal consequences. Here, in the instant case, as discussed earlier, the averments in the complaint spell out a criminal offence, and therefore, the complaint cannot be quashed.?? (Emphasis supplied).
From the aforesaid findings recorded by this Court, it is apparent that various submissions which have been advanced by the learned advocate for the petitioners had been considered by the Court at the relevant time and has been dealt with. In the circumstances, insofar as those submissions are concerned, the same cannot be taken into consideration while deciding this application as the same would amount to review of the earlier order passed by this Court.
As regards the maintainability of a subsequent application under section 482 of the Code for quashing the complaint in question, the issue is no longer res integra. The Supreme Court in the case of Superintendent and Remembrancer of Legal Affairs (supra) has held as follows:
?SThe earlier application which was rejected by the High Court was an application under Section 561A of the Code of Criminal Procedure to quash the proceeding and the High Court rejected it on the ground that the evidence was yet to be led and it was not desirable to interfere with the proceeding at that stage. But, thereafter, the criminal case dragged on for a period of about one and half years without any progress at all and it was in these circumstances that respondents Nos. l and 2 were constrained to make a fresh application to the High Court under Section 561-A to quash the proceeding. It is difficult to see how in these circumstances it could ever be contended that what the High Court was being asked to do by making the subsequent application was to review or revise the order made by it on the earlier application. Section 561-A preserves the inherent power of the High Court to make such orders as it deems fit to prevent abuse of the process of the Court or to secure the ends of Justice and the High Court must, therefore, exercise its inherent powers having regard to the situation prevailing at the particular point of time when its inherent jurisdiction is sought to be invoked. The High Court was in the circumstances entitled to entertain the subsequent application of Respondents Nos. 1 and 2 and consider whether on the facts and circumstances then obtaining the continuance of the proceeding against the respondents constituted an abuse of the process of the Court or its quashing was necessary to secure the ends of justice. The facts and circumstances obtaining at the time of the subsequent application of respondents Nos. 1 and 2 were clearly different from what they were at the time of the earlier application of the first respondent because, despite the rejection of the earlier application of the first respondent, the prosecution had failed to make any progress in the criminal case even though it was filed as far back as 1965 and the criminal case rested where it was for a period of over one and a half years. It was for this reason that, despite the earlier order dated 12th December, l968, the High Court proceeded to consider the subsequent application of respondents Nos. l and 2 for the purpose of deciding whether it should exercise its inherent jurisdiction under Section 561A. This the High Court was perfectly entitled to do and we do not see any jurisdictional infirmity in the order of the High Court. Even on the merits, we find that the order of the High Court was justified as no prima facie case appears to have been made out against respondents Nos. 1 and 2.??
Hence, insofar as the question of maintainability of a subsequent application under section 482 of the Code at the instance of the present petitioners is concerned, in the light of the law laid down by the Supreme Court in the decision cited hereinabove, the same is held to be maintainable.
As regards the merits of the case, the petitioners have placed reliance upon changed circumstances to again invoke the jurisdiction of this Court under section 482 of the Code. The changed circumstances indicated in the application are that a substantial amount has already been paid to the Bank and that the remaining amount is also secure as the Bank has in its possession property worth more than the amount due from the Corporation; that the Bank has given the benefit of the OTS Scheme to the Corporation, hence in view of the RBI guidelines in that regard, it should be presumed that there is no forgery, cheating or criminal element on the part of the Corporation, as otherwise it would not be entitled to the benefit of the Scheme.
In the background of the facts noted above it is true that the Corporation has already paid a substantial portion of the outstanding amount; however it is equally true that a considerable amount still remains outstanding. It may be that the property in the possession of the Bank is worth more than the outstanding amount, but that by itself would not absolve the petitioners of criminal liability, if any. Besides the Bank being a custodian of public money is expected to do the needful to secure the public money. Hence, if the Corporation has been given the benefit of the OTS Scheme with a view to recover, as much of the public money as is possible, that by itself would not be sufficient to hold that there is no cheating or criminal element involved on the part of the partners of the Corporation.
For the foregoing reasons, no case is made out for intervention by this Court in exercise of its inherent jurisdiction under section 482 of the Code. The application is accordingly, rejected. Notice is discharged.
However, the respondent No.2 Bank is also required to be fair. As noted hereinabove, according to the petitioners the Bank is already in possession of property worth more than the outstanding amount. Hence, when the question of public moneys is involved, the Bank is expected to do the needful for securing the same by disposing of the property at the earliest.
[HARSHA DEVANI, J.] parmar* Top