Karnataka High Court
Mr.Sunil Konoria vs Naganagouda S/O Shivanagouda Neeragi on 7 January, 2022
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 7TH DAY OF JANUARY 2022
BEFORE
THE HON'BLE MR. JUSTICE M.NAGAPRASANNA
CRIMINAL PETITION NO.102202/2019
BETWEEN
1. MR.SUNIL KONORIA,
MANAGING DIRECTOR,
DIN-00421564, KANORIA HOUSE,
3 MIDDLE ROAD, HASTINGS,
KOLAKATTA-700022.
2. MR.TAPAS SARKAR, SENIOR MANAGER/ ARM,
VISHWAKARMA 86C, TOPSIA ROAD (SOUTH),
KOLKATTA-700046.
3. SRI.VINOD VARORA REGIONAL HEAD,
M/S. SREI EQUIPMENT FINANCE PVT. LTD.,
#25, SHANKAR NARAYAN TOWER,
2ND FLOOR, M.G. ROAD,
BENGALURU-560001.
4. SRI.VITTAL V. KAMAT, VICE PRESIDENT,
M/S. SREI EQUIPMENT FINANCE PVT. LTD.,
#25, SHANKAR NARAYAN TOWER,
2ND FLOOR, M.G. ROAD, BENGALURU-560001.
5. SRI.UMESH GURUPADAPPA TAKKANNAVAR,
M/S. SREI EQUIPMENT FINANCE PVT. LTD.,
NO.3, 2ND FLOOR, PACIFIC BELOMAKAR CENTRE,
2
Crl.P.102202/19
CLUB ROAD, HUBBALLI-560029.
6. SRI.PAVAN DOMBAR
M/S. SREI EQUIPMENT FINANCE PVT. LTD.,
NO.3, 2ND FLOOR, PACIFIC BELOMAKAR CENTRE,
CLUB ROAD, HUBBALLI-560029.
...PETITIONERS
(BY SMT.SUNITHA P. KALASOOR, ADVOCATE)
AND :
NAGANAGOUDA S/O SHIVANAGOUDA NEERALAGI,
AGE: 43 YEARS, OCC: BUSINESS,
VEERBHADRESHWAR INFRASTRUCTURE AND
HOUSING PVT. LTD. MUTTALLI COMPOUND,
SARASWATPUR, DHARWAD.
... RESPONDENT
(NOTICE TO RESPONDENT SERVED AND UNREPRESENTED)
THIS PETITION IS FILED UNDER SECTION 482 OF
CRIMINAL PROCEDURE CODE AND PRAYED TO SET ASIDE
THE ORDERS PASSED BY III ADDL. SENIOR CIVIL JUDGE
AND CJM DHARWAD DATED 16.05.2015 IN
C.C.NO.107/2015 ALLEGING THE OFFENCES U/SEC.192,
197, 208, 209, 210, 403, 405, 409, 415, 418, 420, 421,
423, 424, 441, 506 R/W SEC.34 OF IPC FILED BY
RESPONDENT NO.1 WITH RESPECT TO PETITIONERS NO.1
TO 6 AND THE ORDER PASSED BY IV ADDL. DISTRICT &
SESSIONS JUDGE, DHARWAD IN REVISION PETITION
NO.81/2016 ON 08.11.2019 UPHOLDING THE AFORESAID
ORDER TO ISSUE SUCH OTHER ORDER OR TO ISSUE SUCH
OTHER DIRECTION AS THE HON'BLE COURT DEEMS FIT IN
PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE.
3
Crl.P.102202/19
THIS PETITION COMING ON FOR ADMISSION THIS
DAY, THE COURT MADE THE FOLLOWING:
ORDER
Petitioners-accused Nos.1 to 6 are before this Court calling in question the proceedings in C.C.No.107/2015 registered for offences punishable under Sections 192, 197, 208, 209, 210, 403, 405, 409, 415, 418, 420, 421, 424, 441, 506 r/w Section 34 of IPC and have also called in question the order passed in Crl.R.P.No.81/2016 dated 8.11.2019.
2. Brief facts leading to the filing of the present petition are as follows:
The complainant is a builder and a developer. The petitioners-accused are the manufacturers of certain equipments that are necessary for development and construction. Owing to certain necessity of infrastructure equipment the complainant purchases two machines (i) Batching plant machine and (ii) Backhoe loader machine from the petitioners. The petitioners after verification 4 Crl.P.102202/19 agreed to finance the purchase of the said machines on certain terms and conditions that had drawn up into an agreement between the parties. The parties were the complainant-the purchaser, the company and the seller, both the petitioners. The equal monthly instalment that was payable by the complainant was Rs.95,200/- . This was to be cleared in 34 such equal monthly instalments.
3. The complainant appears to have defaulted in payment of amount, pursuant to which, the petitioners issued notice, in spite of which, the complainant did not make any payment towards the monthly instalments, which necessitated the petitioners to approach the Arbitrator as was provided in the agreement. In the Arbitration Proceedings permission was sought of the Arbitrator to take custody of the machines and sell them in the event the complainant would fail to repay the due instalments after taking possession of the machines. Again the complainant was given several opportunities to make good the amount, so that the machines could be given 5 Crl.P.102202/19 back to the complainant. All these proceedings take place before the Arbitrator who was seized of the arbitration proceedings between the parties. It is, thereafter, the Arbitrator also permitted the petitioners to sell the machinery in the event the complainant would not pay the amount.
4. Due to severe default by the complainant in neither paying the amount nor responding to any of the notices or action taken by the petitioners, the petitioners were constrained to terminate the agreement and put up the machines for auction. Before the machines could be transferred to the auction purchaser, the complainant appears to have paid certain amount amounting to Rs.9,72,900/- which is equivalent to 10 monthly instalments and later sought re-possession of the machines. It is here the complainant claims that the petitioners assured him that they would give back the machines on receipt of the said payment of 10 monthly instalments. Even after payment of Rs.9,72,900/-, a 6 Crl.P.102202/19 balance of Rs.18,64,572/- still remained. Notwithstanding the 10 months payment, it is the claim of the complainant that the petitioners-Company transferred the machinery from Karnataka to Madhya Pradesh and have in turn cheated the complainant, made him believe that the machinery would be given back and got the 10 month deposit made at one stroke. Based upon the said incident, the complainant registers a private complaint invoking Section 200 of the Cr.P.C. for the aforesaid offences.
5. Upon issuance of notice, the petitioners had knocked the doors of this Court in Crl.P.No.101078/2015. This Court, by an order dated 14.07.2016 disposed the petition with a direction to file a revision under Section 397 of the Cr.P.C. The petitioners, later on, filed Revision Petition in Crl.R.P.No.81/2016 which came to be dismissed by an order dated 08.11.2019. It is this order and the proceedings in C.C.No.107/2015 that are called in question in the subject petition.
7Crl.P.102202/19
6. Heard Smt.Sunitha P.Kalasoor, learned counsel appearing for petitioners. The respondent-complainant is served and unrepresented.
7. The afore-narrated facts and events being a matter of record are not reiterated. The crux of the complaint is that the petitioners-accused have fraudulently transferred the machines from Karnataka to Madhya Pradesh despite assuring the complainant of its return, when the considerable amount of instalment was paid to the petitioners. This is only in the complaint. If a little history to the complaint as narrated hereinabove is noticed, it becomes unmistakably clear that the complainant wanted to arm twist or wreck vengeance against the petitioners for his own default.
8. It is not in dispute that the complainant and the petitioners enter into a contract for financing of money to enable purchase of the machinery by the complainant. It was also agreed upon that the equal monthly instalment would be Rs.95,200/-. It is also not in dispute that the 8 Crl.P.102202/19 complainant defaulted and that the entire proceedings were at large before the Arbitrator and also before this Court in a Miscellaneous First Appeal. The machinery was taken possession of from the hands of the complainant upon the orders of an Arbitrator before whom both the petitioners and the complainant were parties. The Arbitrator also granted sufficient time for the complainant to make good the amount in default. As on the date of registration of the complaint against the petitioners, the complainant was still in default of close to Rs.20 lakhs. Therefore, no fault could be found with the action of the petitioners in taking possession of the machinery and selling them to secure their credit. This legal act of the petitioners is given a colour of crime and a complaint is registered for various offences, crux of which was cheating and criminal breach of trust by the petitioners against the complainant.
9. For an offence under Section 420 of IPC which deals with punishment for cheating, there has to be 9 Crl.P.102202/19 inducement by the party who wants to cheat upon the victim. In the case at hand, the transaction emanates from an agreement of finance between the complainant and the Company, officers of which are the petitioners. The complainant defaulted in payment, which had resulted in loss of machinery. In a commercial agreement of finance the complainant having with eyes wide open ascribed to such contract cannot be seen to contend that he was induced into the contract. It is plain and simple that the complainant wanted machinery; the petitioners sell such machinery; the complainant wanted finance; the petitioners facilitated buying of machinery by granting finance on terms and conditions drawn up in an agreement. Therefore, none of the ingredients that is required under Section 415 of IPC is even present in the pleading of the complaint.
10. The entire transaction in the aftermath of the default which the complainant alleges fraud and forgery have taken place pursuant to the orders of the Arbitrator. 10 Crl.P.102202/19 Having failed to secure any orders in his favour before the Arbitrator, the complainant has resorted to criminal law by registering a complaint under Section 200 of the Cr.P.C. Therefore, it is a fit case where this Court will have to interfere with the proceedings, as a purely commercial transaction or even a civil transaction is without doubt given a colour of crime.
11. The aforesaid view of mine in this regard draws support from plethora of judgments of the Apex Court wherein the Apex Court has clearly delineated the issue of litigants taking resort to criminal law where the issue is either commercial or civil. The Apex Court in the case of SATISHCHANDRA RATANLAL SHAH V. STATE OF GUJARAT1 has held as follows:
"9. Before we analyse this case, it is to be noted that the criminal application preferred by the accused before the High Court was against the order of the trial court at the stage of framing of charges, wherein it is the duty of the court to apply its judicial mind to the material placed before it and to come to 1 (2019) 9 SCC 148 11 Crl.P.102202/19 a clear conclusion that a prima facie case has been made out against the accused. An order for framing of charges is of serious concern to the accused as it affects his liberty substantially. Courts must therefore be cautious that their decision at this stage causes no irreparable harm to the accused.
10. Coming to the aspect of quashing of the charges, it is well settled that such exercise needs to be undertaken by the High Court in exceptional cases. It is also well settled that the framing of charges being initial stages in the trial process, the court therein cannot base the decision of quashing the charge on the basis of the quality or quantity of evidence rather the enquiry must be limited to a prima facie examination. (Refer to State of Bihar v. Ramesh Singh [State of Bihar v. Ramesh Singh, (1977) 4 SCC 39 : 1977 SCC (Cri) 533 : 1977 Cri LJ 1606] .)
11. Having observed the background principles applicable herein, we need to consider the individual charges against the appellant. Turning to Section 405 read with Section 406 IPC, we observe that the dispute arises out of a loan transaction between the parties. It falls from the record that Respondent 2 knew the appellant and the attendant circumstances before lending the loan. Further it is an admitted fact that in order to recover the aforesaid amount, 12 Crl.P.102202/19 Respondent 2 had instituted a summary civil suit which is still pending adjudication. The law clearly recognises a difference between simple payment/investment of money and entrustment of money or property. A mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 IPC without there being a clear case of entrustment.
12. In this context, we may note that there is nothing either in the complaint or in any material before us, pointing to the fact that any property was entrusted to the appellant at all which he dishonestly converted for his own use so as to satisfy the ingredients of Section 405 punishable under Section 406 IPC. Hence the learned Magistrate committed a serious error in issuing process against the appellant for the said offence. Unfortunately, the High Court also failed to correct this manifest error.
13. Now coming to the charge under Section 415 punishable under Section 420 IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168 : 2000 SCC (Cri) 786] .) In the 13 Crl.P.102202/19 case before us, admittedly the appellant was trapped in economic crisis and therefore, he had approached Respondent 2 to ameliorate the situation of crisis. Further, in order to recover the aforesaid amount, Respondent 2 had instituted a summary civil suit seeking recovery of the loan amount which is still pending adjudication. The mere inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, as it is this mens rea which is the crux of the offence. Even if all the facts in the complaint and material are taken on their face value, no such dishonest representation or inducement could be found or inferred.
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 [Gian Singh v. State of Punjab, (2012) 10 SCC 303 : (2012) 4 SCC (Civ) 1188 : (2013) 1 SCC (Cri) 160 : (2012) 2 SCC (L&S) 988] ). 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." 14 Crl.P.102202/19
12. Further, the Apex Court in the case of JASWANT SINGH VS. STATE OF PUNJAB AND ANOTHER2 has held as follows:
"19. From the above discussion on the settled legal principles, it is clear from the facts of the present case that there was a clear abuse of the process of the Court and further that the Court had a duty to secure the ends of justice. We say so for the following reasons:
a) The allegations made in the FIR had an overwhelmingly and predominatingly a civil flavour inasmuch as the complainant alleged that he had paid money to Gurmeet Singh, the main accused to get employment for his son abroad. If Gurmeet Singh failed the complainant could have filed a suit for recovery of the amount paid for not fulfilling the promise.
b) Initially, the investigating officer and two superior officers of the economic wing has found that there is no substance in the complaint making out even a prima facie triable case and had therefore, recommended for closure.2
2021 SCC Online 1007 15 Crl.P.102202/19 However, on the orders of the Senior Superintendent of Police, the FIR was registered and the matter was investigated. No criminal breach of trust was found and the charge sheet was submitted only against Gurmeet Singh under section 420 I.P.C.
c) The complainant Nasib Singh had clearly deposed that he had paid Rs. 4 lacs cash to Gurmeet Singh and had also given a cheque of Rs.2 lacs favouring Gurmeet Singh which he had encashed.
d) During trial the present appellant as also the other co-accused Gurpreet Singh were summoned in April 2014 invoking powers of Section 319 Cr.P.C., for being tried under Section 420 I.P.C. It may be noted that no specific allegations of cheating are made against these two accused as they were both settled abroad in Italy.
e) The complainant Nasib Singh entered into a compromise with the main accused Gurmeet Singh which was filed before the learned Magistrate and the same was 16 Crl.P.102202/19 accepted vide order dated 26.09.2014 and the alleged offence being of financial transaction stood compounded.
Proceedings against Gurmeet Singh were closed.
f) Right from 2014, the present appellant and other co-accused Gurpreet Singh who were in Italy were being summoned by the Court. The appellant was declared proclaimed offender. The appellant applied before the High Court challenging the order declaring him proclaimed offender and also filed a 482 Cr.P.C. petition for quashing of the proceedings wherein, he also filed the compounding order of 26.09.2014.
g) The High Court merely perused the FIR and noting the fact that the name of the appellant was mentioned in the FIR, declined to exercise the inherent power under Section 482 Cr.P.C."
In the light of the law laid down by the Apex Court in the afore-extracted judgments if the facts obtaining in the case at hand are noticed, it becomes a clear case where this Court has to exercise its jurisdiction under Section 482 of 17 Crl.P.102202/19 the Cr.P.C., failing which, the result of the proceedings would become an abuse of the process of the law and result in miscarriage of justice.
13. For the aforesaid reasons, I pass the following:
ORDER
(i) The Criminal Petition is allowed.
(ii) The order passed by the IV Additional District and Sessions Judge, Dharwad in Crl.R.P.No.81/2016 dated 08.11.2019 stands quashed.
(iii) The proceedings in C.C.No.107/2015
pending before III Additional Senior
Civil Judge and CJM, Dharwad stands
quashed qua the petitioners.
(iv) It is made clear that the observations
made in the course of this order is only
for the purpose of consideration of the
case of the petitioners under Section 482 18 Crl.P.102202/19 of the Cr.P.C. and would not influence or bind any other proceeding initiated or pending by the complainant against the petitioners or by the petitioners against the complainant.
SD Judge bkp