Chattisgarh High Court
M/S K S K Mahanadi Power Company Limited vs State Of Chhattisgarh on 5 January, 2022
Author: Rajani Dubey
Bench: Rajani Dubey
1
NAFR
HIGH COURT OF CHHATTISGARH, BILASPUR
Order Reserved on : 17/11/2021
Order Delivered on : 05/01/2022
CRMP No. 700 of 2019
1. M/s K S K Mahanadi Power Company Limited having its
registered address at 8-2-293/82/A/431/A, Road No.- 22,
Jubilee Hills, Hyderabad and works at village Nariyara,
Tehsil-Akaltara, District- Janjgir-Champa, Chhattisgarh,
represented through its authorized signatory.
2. Sastry Ayyapa Kolluri S/o Venkateswara Rao Kolluri
Ayyappa, aged about 59 Years, R/o Vengala Rao Nagar
Hyderabad., District : Hyderabad, Telangana
3. Sethuraman Kishore S/o Nemam Subramaniyam
Sethuraman, aged about 57 Years, R/o Domalguda,
Hyderabad., District : Hyderabad, Telangana
4. Abhay Mahadev Nalwade S/o Mahadeo Hari Nalawade
aged about 69 Years, R/o Audh, Pune, District : Pune,
Maharashtra
5. Shankar Chidambram Narayan S/o Panchapakesan
Chidambaram, aged about 57 Years, R/o Secunderabad,
Haderabad, District : Hyderabad, Telangana
6. Alankrita Soni D/o Soni, aged about 35 Years, R/o
Gautam Buddha Nagar, Uttar Pradesh. Noida, District :
Noida, Uttar Pradesh
7. Srinivas Phani Sekhar Muddadha S/o Apparao Muddada,
aged about 38 Years R/o Kondapur, Hyderabad., District :
Hyderabad, Telangana
8. Ashu Handa S/o Satish Handaaged, aged about 48 Years,
R/o Serrilingampally, Hyderabad., District : Hyderabad,
Telangana
9. Sishir Kalkonde S/o Shrikant Gangadhar Kolkonde, aged
about 41 Years, R/o Kothaguda, Serilingampally,
Rangareddy, Hyderabad., District : Hyderabad,
Telangana
10. Bishwajeet Bhaskar S/o Radha Krishna Prasad Aged
About 36 Years R/o Ayyapa Soceity, Madhapur,
Hyderabad., District : Hyderabad, Telangana
2
---- Petitioners
Versus
1. State of Chhattisgarh Through : Station House Officer,
Mulmula, Janjgir-Champa, Chhattisgarh.
2. Hind Energy And Coal Benefication (India) Limited
Through its Chief Financial Officer Hind House, Sai
Parisar Commercial Complex, Shri Kant Verma Marg,
Bilaspur, Chhattisgarh.- 495001
---- Respondents
For Petitioners : Mr. Ashish Shrivastava, Sr. Advocate assisted by Mr. Aman, Advocates.
For Respondents : Mr. Ankit Singhal and Mr. Ayaz Naved, G.A. Hon'ble Smt Justice Rajani Dubey CAV ORDER
1. The matter is taken up for hearing on I.A.No.01/2019, for grant of interim relief/stay.
2. The petitioner, in this application, prayed for restraining the respondents not to proceed further in respect of impugned FIR No.32/2019 registered on 20.02.2019 for the offence punishable under Sections 406, 420, 120-B and 34 of the Indian Penal Code (for short 'the IPC'), at Police Station - Mulmula, District Janjgir- Champa, and also seeks direction against respondents not to take any further steps against the petitioners in pursuance to the registration of FIR.
3. Learned counsel for the petitioners submits that the petitioner has filed this petition under Section 482 of the Criminal Procedure Code, 1973 (for short 'the Cr.PC') for quashing the impugned FIR registered against them. The petitioner No.1-M/s KSK Mahanadi Power Company Limited (earlier known as Wardha Power Company Limited - CG Project) (for short 'the Company') is a Public Limited Company incorporated under the Companies Act, 1956 having its registered office at Plot No.431/A, Road No.22, Jubille Hills, Hyderabad and its power plant is coal based set up at 3 Nariyara, District Janjgir-Champa, (C.G.) and the petitioner Nos. 3, 5 and 6 are the Director of the Company, whereas petitioner Nos. 2 and 3 were the former Directors of the Company and they are no longer with the Company as they have tendered their resignation on 27.08.2018 and 04.10.2018 respectively. Learned counsel further submits that the Petitioner's Company engaged respondent No.2 for Active Mine Management and Open market Coal Supply Services to the Power Plant being operated by the Company for that proper work orders have been issued, invoices were raised and payments were made from time to time as is evident from the documents, resulting a business worth approximately Rs.400/- crore for respondent No.2. It is also submitted that due to financial crisis being faced by the entire thermal power sector companies in India, the Company faced with severe restriction of cash flow and could not clear some bills raised by respondent No.2 and the amount became outstanding. In the meanwhile, certain disputes also arose between the parties with regarding to outstanding amount. In order to get the outstanding amount cleared, the respondent No.2, on 27.09.2017, raised a Demand Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 (for short 'IBC') demanding payment of Rs.17,74,51,624/- with interest @ 18% vide Annexure P/3. Learned counsel for the petitioners also submits that the Demand Notice dated 27.09.2017 of respondent No.2 was disputed by the Petitioner's Company on the ground that it did not fulfill the requisites criteria of various work orders and purchase orders issued by the Company such as the non-supply of quantum of coal specified under each work order/purchase order or the quality of coal supplied or the penalties to be for short delivery etc. Thereafter, the Company further issued work and purchased orders irrespective of the Demand Note and the respondent No.2 were still working on those orders, out of which some are pending. The Company again raised a dispute with regard to payment of money to the tune of Rs.2,70,62,314/- which was not accounted for by respondent No.2 in the total outstanding amount. It has been also submitted that the Company in order to get the dispute resolved requested the respondent No.2 to come forward and reconcile the differences and disputes with regard to outstanding amount but respondent No.2 never responded to the Company's request. It is settled between the parties to the contract on the 4 bars of which the present case is governed by multiple work orders. Each and all of them are governed by an Arbitration Clause (Annexure P/4). Subsequently, the responded No.2, in the capacity of an Operational Creditor, on 07.03.2018, filed an application under Section 9 of the IBC against the petitioner's company at the National Company law Tribunal (for short 'the NCLT') in Hyderabad for Corporate Insolvency Resolution Process reducing the default shown in the said application to Rs.15,03,89,490/- after adjusting the payments received earlier from the petitioner's company but not duly accounted for without raising any allegation to which could attract Sections 120-B, 406 and 420 read with Section 34 of IPC. It is next submitted that the petitioner's company approached respondent No.2 for amicable settlement, entered into an agreement (Annexure P/6) on 21.07.2018 and the petitioner's company agreed to pay a total amount of Rs.11,35,55,670/- in 11 installments. It was also agreed by the parties in the agreement, in clause 6, to withdraw Section 9 application of IBC pending before NCLT, Hyderabad, however, the clause 6 of the agreement provides for respondent No.2 to proceed for legal action for recovery in default of payment by the petitioner's company, which shows that the petitioner's Company is willing to pay the outstanding amount. In terms of clause 6 of the Agreement, the respondent No.2 withdrew its application on 06.08.2018 pending before NCLT, Hyderabad (Annexure P/7.).
4. Learned counsel for the Petitioners further submits that after the execution of agreement, due to anticipated increase in operations and cash flows failed to materialize, the Petitioner's company initiated Corporate Insolvency Resolution Process before NCLT under Section 7 of the IBC, 2016, which was beyond the control of the Company. The anticipated cash flow, the fund situation further dried up resulting in adverse financial situation at the petitioner's Company. It is also submitted that due to the continuous scarcity of the cash flow, the Company was not in a position to meet the payment scheduled of respondent No.2. The respondent No.2 further sent a demand notice on 25.10.2018 raising demand for payment, thereafter the impugned FIR was filed against the petitioner's Company under Section 406, 420, 120-B and 34 IPC at Police Station Mulmula bearing Crime No.32/2019 5 (Annexure P/1). It has been argued by learned counsel for the petitioners that there is no material available against the present petitioners to substantiate the charges. Even if the entire allegations are taken on its face value, prima-facie, no offence under Sections 120-B, 406, 406 read with Section 34 is made out against the petitioners. The FIR lodged against the appellant is bad in eye of law as no provision in the agreement precludes the respondent No.2 from proceeding against the Company under civil remedies available under the law. It has been also argued that the allegations so raised by responded No.2 in the FIR do not disclose to be a cognizable offence, justifying an investigation by police under Section 156(1) of the Cr.P.C. The lodging of complaint is contrary to clause 8 of the agreement executed between them, on the basis of which, the complaint is filed. But the fact remains that the parties had mutually agreed that the exclusive jurisdiction for any disputes with regard to this settlement agreement the Court at Hyderabad shall have exclusive jurisdiction. It has been argued that relevant clause of agreement provides for remedy for breach of condition and the subsequent NCLT order accepting withdrawal of application filed under Section 9 of IBC by respondent No.2 established the correct situation and, therefore, ingredient of Section 415 to 420 are not made out in the instant petition. In support of his contention, learned Sr. Advocate placed reliance on the decisions of Hon'ble Supreme Court in the matter of Vijayander Kumar and Others V. State of Rajasthan and Another1, Ravindranath Bajpe V. Mangalore Special Economic Zone Ltd. And Others2, Samir Sahay alias Sameer Sahay V. State of Uttar Pradesh and Another 3 and Satishchandra Ratanlal Shah V. State of Gujarat and Another4.
5. On the other hand, learned counsel for State/respondent No.1 opposing the interlocutory application (I.A.01/2019) submits that quashing of complaint or FIR should be an exception and not routine exercise. In this case, the entire matters are at premature stage, investigation has not yet been completed, the evidence has to be collected and gathered after thorough, this Court should not 1 (2014) 3 SCC 389 2 2021 SCC Online SC 806 3 (2018) 14 SCC 233 4 (2019) 9 SCC 148 6 anticipate the result of investigation. It has been argued by learned State counsel that the responded No.2 had filed an application before NCLT, Hyderabad, but all the accused persons named in the subject FIR were all along acting in agreement and in collusion with each other in pursuance of a fraudulent and pre- meditated scheme, designed to defraud and cheated the respondent No.2 Company into withdrawing the company petition filed by it before the NCLT, Hyderabad and parting with its legally recoverable dues and substantial funds. The material placed on record discloses prima-facie case against the petitioners for the purpose of putting them on trial. The investigation is in initial stage and looking to the allegations of cheating and playing fraud with the Complainant, the matter has to be enquired. At this stage, it cannot be said that the petitioners have not committed any offence, whereas serious allegations have been levelled against them in the complaint. Therefore, the petitioner are not entitled for any interim relief. In support of submission, learned counsel placed reliance on the decisions of Hon'ble Supreme Court in the matter of Archana Rana V. State of Uttar Pradesh and Another5 and Amit Kapoor V. Ramesh Chander6.
6. I have heard learned counsel for the parties and have carefully gone through the material available on record.
7. The Hon'ble Supreme Court in the matter of Neeharika Infrastructure Pvt. Ltd. Vs. State of Maharashtra, reported in AIR 2021 SC 1918, held in paras 36 and 37, which read as under :-
"36. So far as interim relief is concerned, the investigation is in progress and the record would demonstrate that Rs. 6.41 crore disproportionate income has already been identified by the State, the Hon'ble Supreme Court in Neeharika Infrastructure (Supra) has issued certain guidelines for granting interim protection while hearing petition under Article 226 of the Constitution of India or Section 482 of Cr.P.C. The Hon'ble Supreme Court has held in para 15 to 18, which read as under:-
"15. As observed hereinabove, there may be some cases where the initiation of criminal proceedings 5 (2021) 3 SCC 751 6 (2012) 9 SCC 7 may be an abuse of process of law. In such cases, and only in exceptional cases and where it is found that non interference would result into miscarriage of justice, the High Court, in exercise of its inherent powers under Section 482 Cr.P.C. and/or Article 226 of the Constitution of India, may quash the FIR/complaint/criminal proceedings and even may stay the further investigation. However, the High Court should be slow in interfering the criminal proceedings at the initial stage, i.e., quashing petition filed immediately after lodging the FIR/complaint and no sufficient time is given to the police to investigate into the allegations of the FIR/complaint, which is the statutory right/duty of the police under the provisions of the Code of Criminal Procedure. There is no denial of the fact that power under Section 482 Cr.P.C. is very wide, but as observed by this Court in catena of decisions, referred to hereinabove, conferment of wide power requires the court to be more cautious and it casts an onerous and more diligent duty on the court. Therefore, in exceptional cases, when the High Court deems it fit, regard being had to the parameters of quashing and the self-restraint imposed by law, may pass appropriate interim orders, as thought apposite in law, however, the High Court has to give brief reasons which will reflect the application of mind by the court to the relevant facts.
16. We have come across many orders passed by the High Courts passing interim orders of stay of arrest and/or "no coercive steps to be taken against the accused" in the quashing proceedings under Section 482 Cr.P.C. and/or Article 226 of the Constitution of India with assigning any reasons. We have also come across number of orders passed by the High Courts, while dismissing the quashing petitions, of not to arrest the accused during the investigation or till the chargesheet/final report under Section 173 Cr.P.C is filed. As observed hereinabove, it is the statutory right and even the duty of the police to investigate into the cognizable offence and collect the evidence during the course of investigation. There may be requirement of a custodial investigation for which the accused is required to be in police custody (popularly known as remand). Therefore, passing such type of blanket interim orders without assigning reasons, of not to arrest and/or "no coercive steps" would hamper the investigation and may affect the statutory right/duty of the police to investigate the cognizable offence conferred under the provisions of the Cr.P.C. Therefore, such a blanket order is not justified at all. The order of the High Court must disclose reasons 8 why it has passed an ad-interim direction during the pendency of the proceedings under Section 482 Cr.P.C. Such reasons, however brief must disclose an application of mind.
The aforesaid is required to be considered from another angle also. Granting of such blanket order would not only adversely affect the investigation but would have far reaching implications for maintaining the Rule of Law. Where the investigation is stayed for a long time, even if the stay is ultimately vacated, the subsequent investigation may not be very fruitful for the simple reason that the evidence may no longer be available. Therefore, in case, the accused named in the FIR/complaint apprehends his arrest, he has a remedy to apply for anticipatory bail under Section 438 Cr.P.C. and on the conditions of grant of anticipatory bail under Section 438 Cr.P.C being satisfied, he may be released on anticipatory bail by the competent court. Therefore, it cannot be said that the accused is remediless. It cannot be disputed that the anticipatory bail under Section 438 Cr.P.C. can be granted on the conditions prescribed under Section 438 Cr.P.C. are satisfied. At the same time, it is to be noted that arrest is not a must whenever an FIR of a cognizable offence is lodged. Still in case a person is apprehending his arrest in connection with an FIR disclosing cognizable offence, as observed hereinabove, he has a remedy to apply for anticipatory bail under Section 438 Cr.P.C. As observed by this Court in the case of Hema Mishra v. State of Uttar Pradesh, (2014) 4 SCC 453, though the High Courts have very wide powers under Article 226, the powers under Article 226 of the Constitution of India are to be exercised to prevent miscarriage of justice and to prevent abuse of process of law by the authorities indiscriminately making pre-arrest of the accused persons. It is further observed that in entertaining such a petition under Article 226, the High Court is supposed to balance the two interests. On the one hand, the Court is to ensure that such a power under Article 226 is not to be exercised liberally so as to convert it into Section 438 Cr.P.C. proceedings. It is further observed that on the other hand whenever the High Court finds that in a given case if the protection against pre-arrest is not given, it would amount to gross miscarriage of justice and no case, at all, is made for arrest pending trial, the High Court would be free to grant the relief in the nature of anticipatory bail in exercise of its powers under Article 226 of the Constitution of India, keeping in mind that this power has to be exercised sparingly in those cases where it is absolutely warranted and justified. However, such a blanket 9 interim order of not to arrest or "no coercive steps"
cannot be passed mechanically and in a routine manner.
17. So far as the order of not to arrest and/or "no coercive steps" till the final report/chargesheet is filed and/or during the course of investigation or not to arrest till the investigation is completed, passed while dismissing the quashing petitions under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of India and having opined that no case is made out to quash the FIR/complaint is concerned, the same is wholly impermissible.
18. This Court in the case of Habib Abdullah Jeelani (supra), as such, deprecated such practice/orders passed by the High Courts, directing police not to arrest, even while declining to interfere with the quashing petition in exercise of powers under Section 482 Cr.P.C. In the aforesaid case before this Court, the High Court dismissed the petition filed under Section 482 Cr.P.C. for quashing the FIR. However, while dismissing the quashing petition, the High Court directed the police not to arrest the petitioners during the pendency of the investigation. While setting aside such order, it is observed by this Court that such direction amounts to an order under Section 438 Cr.P.C., albeit without satisfaction of the conditions of the said provision and the same is legally unacceptable. In the aforesaid decision, it is specifically observed and held by this Court that "it is absolutely inconceivable and unthinkable to pass an order directing the police not to arrest till the investigation is completed while declining to interfere or expressing opinion that it is not appropriate to stay the investigation". It is further observed that this kind of order is really inappropriate and unseemly and it has no sanction in law. It is further observed that the courts should oust and obstruct unscrupulous litigants from invoking the inherent jurisdiction of the Court on the drop of a hat to file an application for quashing of launching an FIR or investigation and then seek relief by an interim order. It is further observed that it is the obligation of the court to keep such unprincipled and unethical litigants at bay. In the aforesaid decision, this Court has further deprecated the orders passed by the High Courts, while dismissing the applications under Section 482 Cr.P.C. to the effect that if the petitioner-accused surrenders before the trial Magistrate, he shall be admitted to bail on such terms and conditions as deemed fit and appropriate to be imposed by the Magistrate concerned. It is observed that such orders are de hors the powers conferred under 10 Section 438 Cr.P.C. That thereafter, this Court in paragraph 25 has observed as under:
25. Having reminded the same, presently we can only say that the types of orders like the present one, are totally unsustainable, for it is contrary to the aforesaid settled principles and judicial precedents. It is intellectual truancy to avoid the precedents and issue directions which are not in consonance with law. It is the duty of a Judge to sustain the judicial balance and not to think of an order which can cause trauma to the process of adjudication. It should be borne in mid that the culture of adjudication is stabilised when intellectual discipline is maintained and further when such discipline constantly keeps guard on the mind."
37. It is pertinent to mention here that the petitioner has not filed bail application under Section 438 of Cr.P.C.
for grant of anticipatory bail, therefore, grant of any protection would override the provisions of Section 438 of Cr.P.C. as such, considering the overall material placed before this Court, diary of the case, I am of the considered opinion that the petitioner is not entitled to get any interim relief as prayed for by the petitioner and the interim application is liable to be dismissed. Accordingly, the same is dismissed.
8. The documents available on record would show that respondent No.2 had filed an application under Section 9 of the IBC before NCLT, Hyderabad, against the petitioners and thereafter, both the parties entered into an agreement (Annexure P/6). The relevant clauses i.e. 3, 4, 5 and 6 of Agreement for Settlement are extracted herein under:-
"3. KMPCL undertakes to pay the agreed sum to Hind Energy within the due date in terms of the payment schedule described in Annexure 1 without demur and protest. Towards this, KMPCL agrees to transfer through RTGS, the amount of each installment, on or before the due date, to Bank account of Hind Energy.
4. Hind Energy shall apply to the NCLT for withdrawing its application filed with NCLT on 7 th march, 2018, for triggering the Insolvency Resolution Process against KMPCL within 7 days upon the execution of this Agreement. In the event of failure to withdraw the said application by Hind Energy, this Agreement shall be treated as null and void.
5. KMPCL undertakes and agrees that the aforesaid negotiated sum of Rs.11,35,55,670/- (Rupees Eleven Crore Thirty Five Lakhs Fifty Five Thousands and Six 11 Hundred and Seventy only) is relevant for the purpose of this Agreement only and any default by KMPCL in complying with the terms of this agreement will provide an unfettered/unconditional right to Hind Energy to claim its entire due, less amounts already received, if any, as mentioned in its application filed with NCLT on 7th March, 2018. Provided that Hind Energy agrees to condone a delay of maximum 15 days in making payment of any installment by KMPCL, if KMPCL makes payment of such installment from the due date till the date of payment. In such period of delay, i.e. 15 days, Hind Energy will not trigger any legal proceedings against KMPCL.
6. In the event of any default in honouring in any of the terms of this agreement, whether in part or full by KMPCL, Hind Energy shall be at full liberty to initiate legal action/proceedings, under the relevant laws and enactments and may proceed for recovery of its outstanding dues.
9. What transpired from the record is that the petitioner's company did not comply with the clauses of agreement, therefore, respondent No.2 chosen to file impugned FIR against the petitioners. Hon'ble Supreme Court, in the matter of Satishchandra Ratanlal Shah V. State of Gujarat and another7 held in para 14, which reads thus:-
"14 Moreover, this court in a number of cases has usually cautioned against criminalising civil disputes, such as breach of contractual obligations (refer to Gian Singh V. State of Punjab). The legislature intended to criminalise only those breaches which are accompanied by fraudulent, dishonest or deceptive inducements, which resulted in involuntary and inefficient transfers, under Section 415 IPC."
10. It is also admitted fact of the case that after registration of FIR, petitioner's company has paid about Rs.8,00,00,000/- (Rs. Eight crore) to the respondent's No.2 Company and, thus, no inference can be drawn that the petitioner's company, in any way, committed fraud with respondent No.2.
10. Considering the aforesaid facts and circumstances of the case and in the light of Satishchandra (Supra), I am of the considered opinion that the petitioners are entitled to get interim relief.
11. Accordingly, I.A.No.01/2019, for grant of interim relief stands allowed and further proceedings of Crime No.32/2019 dated 20.02.2019 are stayed till the final disposal of the petition.
7 (2019) 9 SCC 148 12
12. All the contentions raised by the parties are left open which may be decided at the time of final hearing.
List the case for final hearing in due course.
Sd/-
(Rajani Dubey) Judge pekde