Madras High Court
N. Sekar, Proprietor, M/S. Leo ... vs Superintendent Of Police Spe/Cbi/Scb ... on 27 August, 1999
Equivalent citations: 2000(1)CTC662
Author: M. Karpagavinayagam
Bench: M. Karpagavinayagam
ORDER
1. N. Sekar, the Proprietor of M/s. Leo Furnaces and N. Sridhar are the petitioners herein. The first and second petitioners are brothers.
2. Superintendent of Police. SPS/CBI/SCB. Madras filed a charge-sheet against the petitioners for the offences under Sections 120B read with 420, 419, 467 read with 471, IPC. This was taken on file by the Trial court in C.C.No.6607 of 1995.
3. The petitioners filed a petition under "Section 239 of Criminal Procedure Code, seeking discharge from the above case for the reason that there were no materials to frame the charges for the offences under sections mentioned above.
4. The respondent filed a counter.
5. The Trial Court, after hearing the counsel for the parties and on perusal of the records, dismissed the petition for discharge and framed the charges under Sections 120B read with 420, 468, 471 and 419, IPC. When the charges were read over, petitioners pleaded not guilty. After recording the same, the trial Court posted the matter for trial. At that stage, the petitioners have filed this revision, seeking to set aside the order, dismissing the petition for discharge and framing charges against them.
6. Few facts shall be stated before dealing with the point that arises for consideration for the disposal of the case:-
(a) The first petitioner is the sole proprietor of M/s.Leo Furnace situated at Chennai. During the year 1990, he applied for a term loan and bills purchase clean loan for an amount of Rs.4.6 lakhs and Rs.35,000 respectively from Bank of India, Mount Road Branch, Chennai. To secure the said loan, the first petitioner executed the loan documents as well as mortgaged an immovable property of Mr.M.V.Ramakrishnan and one Mr.S.P.Madhavan stood as guarantor for the said loan. The loan was applied on 6-1-1990 for the purpose of putting up a unit of melting copper scrap. It is stated in the loan application that they purchased a new Melting Furnace from M/S.Mac Arch Engineering and a new casting chamber from M/s.Pyrotech Equipments and Tools for the prices at Rs.4,90,000 and Rs.72,972 respectively. The Manager, Bank of India, granted the loan on 16.2.1990 vide sanction latter MO.MT; ADV:MT:1079 stating that the loan amount had been sanctioned and the principal security for the term loan would be hypothecated to the machinery proposed to be purchased apart from the collateral security and personal guarantee. The first petitioner gave two cash receipts to the bank, which ware purported to have been issued by M/s.Mac Arch Engineering, Bangalore for Rs.1,25,000 and another one purported to have been issued by M/S.Pyrotec Equipments and Tools, Bangalore for Rs.50,000 to show that he has already made the above payments to the above firms for the purchase of the machineries. The Manager, Bank of India, on the basis of the receipts, released the loan for the remaining amounts i.e. Rs.3,55,000 and Rs.54,722 respectively, through the De-mand Drafts. The first petitioner collected those demand drafts.
(b) In the mean time, the first petitioner and his brother, second petitioner opened two Current Accounts in the assumed names as N.Subramaniam and S.Prakash. The fictitious current account a were also opened at Bangalore in the names of M/s.Mac Arch Engineering and M/s.Pyrotec Equipments and Tools. They used the Current Accounts to encash the Demand Drafts, which were issued in the name of those fictitious companies. When these things came to light, the respondent-Police registered a case and investigated into the matter. Bank officials in-spected the factory premises and found out that the new machineries have not been purchased from the companies mentioned above and those companies are fictitious companies and the amounts obtained as loan, were not spent for the intended purpose and they committed fraud by using the forged documents and thereby, cheated the bank.
(c) On the basis of the materials collected by the Investigating Agency, the charge-sheet had been filed before the trial Court. The contents of the Charge Sheet are as follows:-
" CHARGE/INFORMATION.
Name of the offence and circumstances connected with it in concise details and under what sections of Law charged.
U/Sec.120B r/w 420, 419, IPC, 420. 467, 467 r/w IPC.
A1 is M/s.Leo Furnaces. No.48/22, V.O.C. Street, Valasaravakkam, Kaikkankuppam, Madras-87. A2 is shri N.Sekar. Proprietor of M/s.Leo Furnaces, R/o.149, Periyar Road, Choolalimedu. Madras-94. A3 is Shri N.Sridhar, Mo.14, State Bank Colony. Gill Nagar, Madras-29.
A2 and A3 entered into criminal conspiracy at Madras and elsewhere during the year 1987-1992 to cheat Bank of India, Mount Road Branch, Madras in the matter of sanction of credit facilities/loan to A1 firm M/H.S. Leo Furnaces.
In pursuance of the said criminal conspiracy, A2, Shri N.Sekhar floated a firm A1 M/s.Leo Furnaces and on 6-1-90, A2 submitted a loan application at Bank of India, Mount Road Branch, Madras-2 for sanction of term loan of Rs. 4.95 lacs, duly signed by him as the proprietor of A1 firm together with forged documents such as pro forma invoice issued by two fictitious firms for the purchase of machineries and advance receipts purported to have been effected by A2 to the supplier firms as advance by A1 firm.
In pursuance of the said criminal conspiracy, A3 supplied proforma invoices of the fictitious firms M/s.Byro Tech Equipments and M/s.Mac Arch Engineering, Bangalore, for supply of casting chamber for Rs.72,972 melting furnace for Rs.4,61,538 to A1 firm without actually supplying any machinery, which were submitted by A2 alongwith the application for grant of term loan to Bank of India, Mount Road branch, Madras' The Branch Manager of Bank of India, Mount Road branch, after processing the application on the basis of false and forged proforma invoice, advance receipts, submitted by A2 believing them as genuine, recommended the proposal for sanction of the loan The branch manager of Bank of India, Mount Road branch, induced by the false and forged proforma invoice and advance receipts, recommended to Regional Office for sanction of the loan. The Regional Office had sanctioned term loan of Rs.4,60,000 and Bills purchase limit of Rs.35.000 on 16.2.1990 which is repayable in 60 monthly instalments.
The Branch Manager of Bank of India, Mount Road branch, Madras, after receipt of sanction order, communicated the sanction to A1 firm. The Branch Manager of Bank of India, Mount Road Branch disbursed the loan amount of Rs.4,19,722 by handing over DDs which were in favour of the supplier firm to A2, favouring supplies of machinery on 22.2.1990 and 16.3.1990 after executing necessary documents by A1 firm. The said two DDs were handed over to A3 by A2 which were encashed by A3 and the said amount was utilised for their personal use by A2 and A3 and thereby, cheated the Bank of India to the tune of Rs.4,19,722. No machinery was purchased by the accused firm out of the said loan sanctioned to them.
Thus the act of A2 and A3 discloses commission of offences punishable under Section 120B r/W 420, 419 IPC. 420. 467. 467 r/w 471, IPC.
It is prayed that the accused may be dealt according to due process of law.
Hence the charge."
(d) As stated earlier, the petitioners/accused persons filed a petition for discharge under Section 239 of Criminal Procedure Code, which was ultimately dismissed and the charges have been framed against them.
(e) The impugned order passed by the trial Court is as follows:-
"1. Since Mr.N.Sekar A2 in the charge sheet is also the Proprietor of the Firm, Leo Furnaces which is the A1 in the charge sheet, he will be the A1 in the proceedings, from now on. Due to this change, the A3 Mr.M.Sridhar will be the A2 from now on.
2. The arguments of both the sides were heard. The charge sheet and the documents submitted were scrutinized. Since it appears that there is a prima facie case against A1 N.Sekar, Proprietor, Leo Furnaces and A2 Mr.N.Sridhar. charges under Section 120B read with Section 420, Section 468 read with Section 471 and Section 420 of I.P.C. are made out against A1 and charges under Section 120B read with Section 420. Section 468 and Section 419 I.P.C. are made out against A2 and the petition for discharge is dismissed."
This order was passed on 24-7-1996 and on the very same date, separate charges have been framed by the trial Court and it questioned the accused, who in turn pleaded not guilty."
7. Mr.Habibullah Badsha, the learned senior counsel appearing for the petitioners, while assailing the impugned order, seeking to set aside the same, would raise the following contentions :-
" The Trial Court, in the absence of any material, framed charges against the petitioners for the offences under Sections 120B read with Section 420, 468, 471 and 419 I.P.C. There is no material whatsoever to show that the petitioners dishonestly induced the Bank of India to grant loan nor to make a wrongful gain to themselves and caused wrongful loss to the bank. More over, the Bank had never given any complaint of cheating ass against the petitioners. The Bank released the loan only based on the mortgage of immovable property of one Ramakrishnan along with the guarantee of one S.D.Madhavan. The Bank did not sanction the loan based on the proforma invoices. The sanction order, granting loan, would show that the term loan was sanctioned only based on the collateral security and personal guarantee on the hypothecation of the machinery proposed to be purchased.
Further more the entire term loan was subsequently paid in full to the Bank, which in turn, issued a letter dated 30-12-1995, giving a "No due certificate" in favour of the first petitioner. Hence, the Bank did not suffer any monetary loss in respect of the term loan advanced to the first petitioner. Under these circumstances, the Trial Court ought to have discharged the petitioners from the above case."
8. In reply to the above submission, the counsel for the respondent would contend that there are materials to show that the loan was sanctioned on the basis of the collateral security and on the basis of the fictitious documents purported to have been issued by the fictitious companies, and that the mere payment of debt, due to the bank, would not absolve the petitioners from the offences that they had already committed, as they had obtained pecuniary advantage, by the deceitful names, for which they are liable to face the consequences.
9. The counsel for both the parties would cite very many authorities to substantiate their respective pleas. Instead of referring to all the decisions cited by the counsel for both the parties, it would be appropriate to refer to only few decisions which would deal with the scope of Section 239 of Criminal Procedure Code, the section conferring powers of the Magistrate to discharge the accused.
10. Section 239, Cr.P.C. is as follows:-
" When accused shall be discharged - If upon considering the police report and the documents sent with it under-Section 173 and making such examination, if any, of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, the Magistrate considers the charge against the accused to be groundless, he shall discharge the accused, and record his reasons for so doing."
Under this section, when the trial Court considers that the charge against the accused is groundless, it shall discharge the accused by recording its reasons.
11. Section 240, Cr. P.C. provides thus :-
"Framing of charge - (1) If, upon such consideration, examination, if any, and hearing the Magistrate is of opinion that there is ground, for presuming that the accused has committed an offence triable under this Chapter, which such Magistrate is competent to try and which, in his opinion could be adequately punished by him, he shall frame in writing a charge against the accused.
(2) The charge shall then be read and explained to the accused, and he shall be asked whether he pleads guilty of the offence charged or claims to be tried."
Under this section, if the Magistrate forms an opinion that the accused could be adequately punished for the offence on finding ground for presuming that the accused committed the said offence, he shall frame charge.
12. The reading of both the sections would reveal that the decision as to whether to frame charge or not is to be taken by the trial court only after the application of judicial mind to the facts of the case.
13. In Satish Mehra v. Delhi Adminstration and another, 1996 (3) Crimes 85(SC) Apex Court would observe thus:-
"In a situation arises under Section 239 of the Code, the Magistrate has to afford the prosecution and the accused an opportunity of being heard besides considering the police report and the documents sent therewith. At these two stages, the Code enjoins on the Court to give audience to the accused for deciding whether it is necessary to proceed to the next stage. It is a matter of exercise of judicial mind. There is nothing in the Code which shrinks the scope of such audience to oral arguments. If the accused succeeds in producing any reliable material at that stage which might fatally affect even the very sustainability of the case, it is unjust to suggest that no such material shall be looked into by the Court at that stage. Here the "ground" may be any valid ground including insufficiency of evidence to prove charge."
14. In State of Maharashtra etc. v. Somnath Thapa etc., etc., 1996 (2) Crimes 64, the Supreme Court would observe thus:-
" In our view, better and clearer statement of law would be that if there is ground for presuming that the accused has committed the offence, a Court can justifiably say that a prima facie case against him exists, and so, frame charge against him for committing that offence.
Let us note the meaning of the word "presume". In Black's Law Dictionary it has been defined to mean "to believe or accept upon probable evidence." In Shorter Oxford English Dictionary it has been mentioned that in law "presume" means "to take as proved until evidence to the contrary is forthcoming". Stroud' s Legal Dictionary has quoted in this context a certain judgment according to which "A presumption is a probable consequence drawn from facts (either certain or proved by direct testimony) as to the truth of a fact alleged," in Law Lexicon by P.Ramanath Aiyer the same quotation finds place at page 1007 of 1987 edition.
The aforesaid shows that if on the basis of materials on record, a court could come to the conclusion that commission of the offence is a probable consequence, a case for framing of charge exists. To put it differently, if the Court were to think that the accused might have committed the offence it can frame the charge, though for conviction the conclusion is required to be that the accused has committed the offence. It is apparent that at the stage of framing of charge, probative value of the materials on record cannot be gone into; the materials brought on record by the prosecution has to be accepted as true at that stage."
15. In the decision reported in State of U.P. v. Dr. Sanjay Singh and another, 1994 (2) Supp. SCC 707, it is. held thus :-
"20. This Court in Century Spinning & Manufacturing Co. Ltd. v. State of Maharashtra, while examining the scope of Section 251(A) sub-sections (2) and (3) of the old Code corresponding to Sections 239 and 240 of the new Code has made the following observation: (SCC p. 291. para 17: AIR p.552, para 16) "... If on this material, the Court comes to the conclusion that there is no ground for presuming that the accused has committed an offence, then it can appropriately consider the charge to be groundless and discharge the accused. The argument that the Court at the stage of framing the charges has not to apply its judicial mind for considering whether or not there is a ground for presuming the commission of the offence by the accused is not supportable either on the plain language of the section or on its judicial interpretation or on any other recognised principle of law. The order framing the charges does substantially affect the person's liberty and it is not possible to countenance the view that the Court must automatically frame the charge merely because the prosecution authorities, by relying on the documents referred to in Section 173, consider it proper to institute the case. The responsibility of framing the charges is that or the Court and it has to judicially consider the question of doing so. Without fully adverting to the material on the record, it must not blindly adopt the decision of the prosecution."
16. It is manifest from the reading of the above decisions that the charges can be framed against any accused person only in those discerning few cases where the Court comas to the conclusion that the prosecution has shown a prima facie case against the accused and there is evidence before the Court which is capable of being converted into legal evidence later on during the subsequent proceedings after the framing of the charges. As shown earlier, it is observed in catena of authorities that the prosecution must show a prima facie case against the accused in order to enable the Court to frame a charge against him. If the evidence before the Court is of such type which if unrebutted and unchallenged by way of cross-examination would not be sufficient enough to convict the accused ultimately, then the Court would not be justified in framing the charge against the accused. The Court at that stage is under no obligation to make an elaborate enquiry by sifting and weighing the material to find out a case against the accused beyond a reasonable doubt which is required to do at the time of the final hearing. The Trial Court Judge at that preliminary stage is required to find out whether there is any material which may lead to the inference that the accused has committed an offence. Thus, the charge can be framed by the court against on accused, if the material placed before it raises a strong suspicion that the accused has committed an offence. In other words, the Court would be justified in framing the charges against an accused, if the prosecution has sown the seed in the form of the incriminating material which has got the potential to develop itself into a full-fledged tree during trial.
17. In the light of the above background, it can be now seen as to whether the trial Court is justified in ordering the framing of charges by rejecting the petition filed by the petitioners for discharge.
18. The main contention urged by the counsel for the petitioners, as Indicated above, is that the loan was applied by the petitioners only based on the collateral security and personal guarantee by Mr.M.V.Ramakrishnan and S.D.Madhavan and not on the basis of the proforma invoices and the cash receipts alleged to have been fabricated by the petitioners and that, at any rate, subsequent to the registration of the criminal case, the entire amount has been settled by the repayment of the loan. Therefore, the petitioners ought to have been discharged by the trial Court.
19. On going through the records, it is seen that the loan was applied on 6.1.1990 for the purpose of putting up a unit of melting copper scrap and it is stated in the said application that the new melting furnace was being purchased under proforma invoice for Rs. 4.90,000 from M/s.Mac Arch Engineering Company, Baogalore and a new casting chamber was being procured from M/s.Pyrotech Equipments, Bangalore at an invoice price of Rs.72,972. On the basis of these particulars, the loan was sanctioned on 16.2.1990, It is stated in the sanction letter that the principal security of the term loan would be the hypothecation of the machinery proposed to be purchased, apart from the collateral security and personal guarantee. It is also seen that the cash receipts purported to have been issued by M/s.Mac Arch Engineering, Bangalore and M/s.Pyrotech Equipments and Tools, Bangalore were filed with the bank, in order to show that the advance payment was made for the purchase of the machineries. Thereafter, the remaining amount was sanctioned. These factual details are spoken to the Bank officers.
20. No doubt, it is true that the Bank officers have not stated in their statements that they were cheated by the false representation made by the petitioners. However, it cannot be, at this stage, decided that the loan was sanctioned not on the basis of the proforma invoices and the cash receipts, since in the sanction letter, as already stated, it is clearly mentioned that the principal security for the term loan would be the hypothecation for the machinery proposed to be purchased, apart from other securities.
21. In this context, it is relevant to note that there are some materials to show that the proforma Invoices and cash receipts are not genuine documents and the companies, M/s.Mac Arch Engineering and M/s.Pyrotech Equipments and Tools, which alleged to have been issued the said documents are also fictitious companies. There are also some materials to prove the fact that the bank accounts have been opened in the name of these two fictitious companies by the petitioners by calling themselves as Subramanian and Venkatavaradan and encashed the drafts, issued by the Bank in the name of those fictitious companies.
22. The charge sheet and other relevant records would show that there are 29 witnesses. These witnesses belong to both Bangalore and Madras. Moreover, one Sundaresan, Officer. Bank of India had stated that when he had visited the factory premises on 15.12.1993 for inspection, it was found out that the machinery which was available at the factory was fictitious one and there was no description mentioned on the said furnace, containing the name of the Company from which it was said to be purchased. Similarly, though the machineries were said to have been purchased from the said two companies, one Muthukrishnan has given a statement that one furnace was sold by him to the petitioners on behalf of M/s.Leo Furnaces.
23. In the light of the above materials, I am not able to hold now that these materials are not sufficient to frame charges under Section 240, Crl.P.C. Section 240 Crl.P.C. lays down that if the Magistrate is of the opinion that there is ground, for presuming that the accused has committed an offence, he shall frame a charge against the accused.
24. A stated above, in the decision reported in State of Maharashtra etc., etc., v. Somnath thapa etc., etc., 1996 (2) Crimes 64, if the Court were to think that the accused might have committed the offence, it can frame charges even on the strength of suspicion. Hence, I am not able to countenance the submission made by the counsel for the petitioners that the trial Court ought to have discharged the accused, especially, when there are some materials, which would, in my view, to show that there is a strong suspicion that these petitioners had committed these offences, by making false representations on the basis of the documents, which are not stated to be genuine. (Italics supplied)
25. The only question which the trial Court has to decide is whether the material considered in the light of the arguments of the counsel for the parties can lead to the view that the charge framed against the accused is groundless.
26. It is not for the learned Magistrate, at this stage, to consider whether the material, when tested by cross-examination, would or would not be capable of acceptance for recording a conviction. It is not for the trial Court to make presumptions either on the basis of omissions or ambiguous statements which are capable of explanation. In other words, the considerations which might become available to the learned Magistrate at the conclusion of the trial cannot be availed of at this stage.
27. It is contended by the counsel for the petitioners, on the strength of the decision reported in Satish Mehra v. Delhi administration and another, 1996 (3) Crimes 85 (S.C.), that at the Stage of Section 239, Criminal Procedure Code itself, the learned Magistrate would very well consider the defence documents and that, in the instant case, the petitioners have produced 'No due certificate' from the bank, which would show that the entire amount, due to the bank, had already been settled and on the basis of the said document, the learned Magistrate ought to have been discharged the accused.
28. It may be true that in some peculiar situations, as the Apex Court would hold in the light of the facts of the said case, the defence document, in the absence of any dispute in the genuineness of the said document, could be considered by the trial Court before framing the charges. But, that position of law would not be of any use to the present case, in view of the fact that it is a settled law, as held in the decision reported in Vishwa Nath v. State of Jammu and Kashmir, , that the mere refund of the amount, which is the subject matter of the criminal breach of trust, made subsequently, would not absolve the accused of the offence with which he is charged.
29. The Apex Court, in a recent decision reported in Umar Abdul Sakoor Sorathia v. Intelligence Officer, Narcotic Control Bureau, , would hold thus:-
" 16. It is well settled that at the stage of framing charge the court is not expected to go deep into the probative value of the materials on record. If on the basis of materials on record the court could come to the conclusion that the accused would have committed the offence the court is obliged to frame the charge and proceed to the trial."
In the said case, the Apex Court considered the Satish Mehra' s case, 1996 (3) Crimes 85 (S.C.).
30. Under these circumstances, it would be appropriate to hold that the order, framing charges against the accused, is valid and unassailable in the light of some of the materials available on record. However, it shall be remarked in this connection that the order, dismissing the discharge petition, which is the subject matter of this revision, did not contain any reasons to have such a conclusion. This is, as pointed out by the learned senior counsel for the petitioners is quite wrong. The learned Magistrate ought to have given reasons, especially when dealing with the discharge petition, white passing the order either dismissing or allowing the same. for the reason, that alone would enable the higher Forum to judicially review the order passed by the trial Court, whether such an order was passed in accordance with the accepted principles of law. But, at the same time, mere non-recording of reasonings would not be a ground to hold that the charges against the accused ought not to have been framed, inasmuch as there are some materials to presume that the alleged offences would have been committed by the petitioners.
31. In the light of the said fact situation, I am of the view that this revision deserves to be dismissed and accordingly, it is dismissed. No costs. Consequently, the Criminal M.P.No.3044 of 1996 is also dismissed.
32. Before parting with this case, I shall mention that any of the observations made in this revision, relating to the materials referred to above, would be only for the purpose of the disposal of this revision alone and so, the trial Court shall dispose of the matter, uninfluenced by the discussion made by me in the above paragraphs.