Kerala High Court
N.A. Mohammed Kutty vs State Of Kerala on 29 March, 2021
Equivalent citations: AIRONLINE 2021 KER 541
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI
MONDAY, THE 29TH DAY OF MARCH 2021 / 8TH CHAITHRA, 1943
Crl.MC.No.2526 OF 2017(E)
TO QUASH THE COMPLAINT AND ALL FURTHER PROCEEDINGS IN CC
645/2016 AND ALL FURTHER PROCEEDINGS PENDING BEFORE THE
HONOURABLE JUDICIAL FIRST CLASS MAGISTRATE, KALAMASSERY
PETITIONERS/ACCUSED:
1 N.A. MOHAMMED KUTTY,
AGED 50, SON OF AYAMU HAJI, MANAGING DIRECTOR,
FALCON INFRASTRUCTURES LIMITED, VIII/47A,
COMMERCIAL COMPLEX, INTEGRATED SERVICE COMPLEX,
ELOOR-683501.
2 FALCON INFRASTRUCTURES LIMITED, VIII/47A,
COMMERCIAL COMPLEX, INTEGRATED SERVICE COMPLEX,
ELOOR-683501, REPRESENTED BY N.A. MOHAMMED
KUTTY, MANAGING DIRECTOR.
BY ADVS.
SRI.ANIL D. NAIR
SRI.ANIL S.RAJ
SMT.ANILA PETER
SMT.K.N.RAJANI
SRI.RADHIKA RAJASEKHARAN P.
SRI.S.SUDHEESH
RESPONDENTS/STATE & DEFACTO COMPLAINANT:
1 STATE OF KERALA
REPRESENTED BY THE PUBLIC PROSECUTOR,
HIGH COURT OF KEARLA.
2 N.K.IBRAHIMKUTTY
AGED 65, SON OF LATE SRI.KUNJAMMU, "SHANSAD",
TNRA10, DARSANA ROAD, BYE-PASS JUNCTION, ALUVA,
REPRESENTED BY HIS POWER OF ATTORNEY HOLDER
SAFIYA USMAN, PEACE COTTAGE, UC COLLEGE P.O.,
ALUVA-2.
Crl.M.C.No.2526/2017
2
R1-2 BY ADV. SRI.K.MOHANAKANNAN
R1 BY ADV. SRI.NAVANEETH D.PAI
SRI B JAYASURYA -SR PP
THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON
24.03.2021, THE COURT ON 29.03.2021 PASSED THE FOLLOWING:
Crl.M.C.No.2526/2017
3
R.NARAYANA PISHARADI, J
************************
Crl.M.C.No.2526 of 2017
------------------------------------------
Dated this the 29th day of March, 2021
ORDER
The petitioners are the first and the second accused in the case C.C.No.645/2016 pending in the Court of the Judicial First Class Magistrate, Kalamassery.
2. The first accused is the Managing Director of the second accused company by name "M/s.Falcon Infrastructures Limited" (hereinafter referred to as 'the company').
3. The case is one instituted upon the complaint (Annexure-A1) filed by the second respondent (hereinafter referred to also as 'the complainant').
4. The complaint has been lodged narrating in detail the allegations against the accused. The substance of the allegations in the complaint can be stated as follows: The complainant is a Crl.M.C.No.2526/2017 4 business man. The second accused company is a public limited company. The first accused is the Managing Director of the company. The complainant had personal talks with the first accused regarding purchase of five lakhs shares of the company. The first accused told the complainant and made him believe that the face value of each share of the company was Rs.10/- and that the shares of the company were being sold at Rs.30/-, at a premium of Rs.20/- per share. Believing the words of the first accused that the market value of the share was Rs.30/-, the complainant invested one crore and fifty lakhs rupees in the shares of the company. In the meeting of the Board of Directors of the company held on 22.05.2008, the company allotted five lakhs shares to the complainant at the rate of Rs.30/- per share. The value of the share of the company was only Rs.10/- per share. The first accused had suppressed that fact. In the meeting held on 22.05.2008, the Board of Directors of the company had allotted shares to many other persons at the rate of Rs.10/- per share. If the first accused had not induced and deceived him, the complainant would not have parted with the excess amount Crl.M.C.No.2526/2017 5 of one crore rupees. The first accused fraudulently induced the complainant to part with one crore rupees in excess to the company for purchasing five lakhs shares. Thus, the accused have committed the offences punishable under Sections 418 and 420 read with 34 of the Indian Penal Code.
5. This application is filed under Section 482 of the Code of Criminal Procedure, 1973 (for short 'the Code') for quashing Annexure-A1 complaint and all further proceedings taken against the accused based on it.
6. Heard learned counsel for the petitioners and also the second respondent and the learned Public Prosecutor.
7. Learned counsel for the petitioners contended that, the allegation against the accused in the complaint that it was on the basis of the inducement made by the first accused that the complainant purchased the shares at a price of Rs.30/- per share (at a premium of Rs.20/-) is not at all true. Learned counsel for the petitioners would contend that the complainant had filed a company petition before the Company Law Board but it was dismissed and it was thereafter he initiated the criminal Crl.M.C.No.2526/2017 6 proceedings against the petitioners. Learned counsel for the petitioners would also contend that the allegation that the complainant purchased shares of the company at a premium merely on the basis of the oral inducement made by the Managing Director of the company is inherently improbable.
8. Per contra, learned counsel for the second respondent would contend that the allegations in Annexure-A1 complaint would constitute the ingredients of the offences alleged against the accused and therefore, it would not be proper for this Court to invoke the power under Section 482 of the Code to quash the complaint and the criminal proceedings against the petitioners based on it.
9. Section 420 of the I.P.C states that, whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and Crl.M.C.No.2526/2017 7 shall also be liable to fine.
10. Section 420 of the Indian Penal Code deals with certain specified classes of cheating. It deals with the cases whereby the deceived person is dishonestly induced to deliver any property to any person or to make, alter or destroy, the whole or any part of a valuable security or anything which is signed or sealed and which is capable of being converted into a valuable security. It is well-settled that deception of a person and dishonest inducement of the person are essential to attract an offence punishable under Section 420 of the Indian Penal Code. Deception is the quintessence of the offence.
11. The ingredients to constitute an offence under Section 420 of the I.P.C are: (i) a person must commit the offence of cheating and (ii) the person cheated must have been dishonestly induced to (a) deliver property to any person; or (b) make, alter or destroy valuable security or anything signed or sealed and capable of being converted into valuable security. Cheating is an essential ingredient of an act to make it the offence under Section 420 of the I.P.C.
Crl.M.C.No.2526/20178
12. Cheating is defined under Section 415 of the I.P.C. It states that, whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".
13. The ingredients of the offence of cheating, as defined under Section 415 of the I.P.C, are: (i) there should be fraudulent or dishonest inducement of a person by deceiving him; (ii) (a) the person so induced should be intentionally induced to deliver any property to any person or to consent that any person shall retain any property, or (b) the person so induced should be intentionally induced to do or to omit to do anything which he would not do or omit if he were not so deceived; and (iii) in cases covered by (ii)(b) above, the act or omission should be one which caused or is likely to cause Crl.M.C.No.2526/2017 9 damage or harm to the person induced in body, mind, reputation or property. A fraudulent or dishonest inducement is an essential ingredient of the offence of cheating.
14. Cheating, as defined under Section 415 of the I.P.C, is an essential ingredient of the offence punishable under Section 418 of the I.P.C also.
15. Deception has in it the element of misleading, of making a person believe something which is not real. It implies causing of a person to believe as true something that is false. The word 'deceive' indicates making an impression so that one takes the false as true, the unreal as existent, the spurious as genuine.
16. In the instant case, it was in the meeting of the Board of Directors of the company held on 22.05.2008 that the shares were allotted to the complainant at a premium of Rs.20/-, that is, at Rs.30/- per share. Annexure-A1 complaint was filed in the court only on 09.10.2013. Nothing is mentioned in the complaint regarding the inordinate delay occurred in initiating criminal proceedings against the petitioners.
Crl.M.C.No.2526/201710
17. The complainant is not a layman. Even in the complaint, it is stated that he is a business man who has been conducting business for the last forty years. It is also stated in the complaint that he is a person who has invested money in shares of different companies in India. Therefore, he is a person very well acquainted with the issue and purchase of shares of a company. It cannot be believed that such a person would invest one crore and fifty lakhs rupees for buying the shares of a company at a premium of Rs.20/- per share merely on the basis of the oral representations made to him by the Managing Director of the company. Such an allegation is inherently improbable. It is pertinent here to note that the complainant has no case that inspite of the request made by him to make available the relevant documents, the accused did not provide him such documents for verifying and assessing the market value of the shares of the company.
18. The complainant had filed a Company Petition as C.P.No.1195/2010 before the Company Law Board, Chennai with the prayer that the company may be directed to issue ten lakhs Crl.M.C.No.2526/2017 11 shares in lieu of one crore rupees collected from him as premium on the five lakhs shares allotted to him on 22.05.2008 and to rectify the register of members accordingly. The Company Law Board dismissed the aforesaid petition. Annexure-A7 is the copy of the order passed by the Company Law Board. The following passage in that order has got significance.
"It is strange to note that the petitioner himself, in his affidavit, has stated that he applied for 5,00,000 equity shares of the Company @ Rs.30/- per share including Rs.20/- per share as premium. He also stated that the Company provided the audited balance-sheet as on 31.03.2007 to justify the share premium of Rs.20/- per share. From the statement as made in the Company Petition, the petitioner is aware of the fact that the value of the share of the Company is Rs.30/- per share including Rs.20/- per share towards premium. Before subscribing to the shares, the petitioner has also undergone due diligence of the records of the Company. After having satisfied himself that the price is Rs.30/- per share, the petitioner subscribed to the shares and the Company allotted the shares to the petitioner in the year 2008."Crl.M.C.No.2526/2017 12
The above passage is extracted here only to indicate that in the affidavit filed before the Company Law Board the complainant had stated that, before purchasing the shares of the company at Rs.30/- per share, he had perused the audited balance sheet of the company and he had due diligence of the records of the company. There is no dispute with regard to the fact that the above order of the Company Law Board has attained finality.
19. Of course, the dismissal of the company petition by the Company Law Board will not preclude the complainant from initiating criminal proceedings against the accused. However, the complainant had suppressed the fact that he had filed a company petition before the Company Law Board and it was dismissed.
20. The grievance of the complainant is that shares were allotted to certain other persons at face value of Rs.10/-, in the same meeting of the Board of Directors held on 22.05.2008. He has no case that rights issue to the existing share holders is not contemplated under law. The complainant was not an existing share holder of the company. He has no case that issue of shares at a premium was not contemplated by the Companies Crl.M.C.No.2526/2017 13 Act, 1956. In fact, Section 78 of the Companies Act contemplates issue of shares at a premium.
21. The allotment of shares to the complainant was made in May, 2008. Annexure-A7 order of the Company Law Board is dated 18.07.2013. Annexure-A1 complaint is dated 09.10.2013. It appears that just after a few days of the dismissal of the company petition which was filed by him, it suddenly dawned upon the complainant that he was cheated by the accused.
22. The expression 'sufficient ground' used in Sections 203 and 204 of the Code relates to the facts which the complainant place before the Court to show the existence of a prima facie case against the accused. True, the Magistrate shall not weigh the evidence meticulously at this stage. It is not the province of the Magistrate to enter into a detailed discussion of the merit or demerits of the case. But, in coming to a decision as to whether process should be issued or not, the Magistrate can take into consideration inherent improbabilities appearing on the face of the complaint or in the evidence let in by the complainant in support of the allegations. Reasons for dismissing a complaint Crl.M.C.No.2526/2017 14 may incude the fact that the allegations made in the complaint, being patently absurd or inherently improbable, no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused (See Nagawwa v. Veeranna : AIR 1976 SC 1947).
23. Where the allegations made in the F.I.R or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused, the power under Section 482 of the Code can be invoked (See State of Haryana v. Bhajan Lal : AIR 1992 SC 604).
24. Criminal prosecution shall not be used as an instrument of harassment or for seeking private vendetta or with an ulterior motive to impose pressure on the accused. In the exercise of the wholesome power under Section 482 of the Code, the High Court is entitled to quash a proceeding if it comes to the conclusion that allowing the proceeding to continue would be an abuse of the process of the Court or that the ends of justice require that the proceedings ought to be quashed. The saving of Crl.M.C.No.2526/2017 15 the High Court's inherent powers is designed to achieve a salutary public purpose, which is, that a court proceeding ought not to be permitted to degenerate into a weapon of harassment or persecution. In a criminal case, the veiled object behind a lame prosecution, the very nature of the material on which the structure of the prosecution rests and the like would justify the High Court in quashing the proceeding in the interest of justice (See State of Karnataka v. L. Muniswamy : AIR 1977 SC 1489).
25. Judicial process should not be an instrument of oppression or needless harassment. The court should be circumspect and judicious in exercising discretion and should take all the relevant facts and circumstances into consideration before issuing process lest it would be an instrument in the hands of a private complainant as vendetta to harass the persons needlessly.
26. In the instant case, on scrutiny of the facts stated in the complaint and consideration of the allied circumstances given out by the petitioners in the petition which led to the issue of shares Crl.M.C.No.2526/2017 16 to the complainant, I am of the view that the complaint and the proceedings against the petitioners deserve to be quashed. No case is made out for proceeding against the petitioners in a criminal court on the basis of the facts stated in Annexure-A1 complaint. The proceedings against the petitioners, based on Annexure-A1 complaint, clearly amount to abuse of the process of the Court.
27. Consequently, the petition is allowed. Annexure-A1 complaint and all proceedings against the petitioners in the case C.C.No.645/2016 pending in the Court of the Judicial First Class Magistrate, Kalamassery are hereby quashed.
(sd/-) R.NARAYANA PISHARADI, JUDGE jsr Crl.M.C.No.2526/2017 17 APPENDIX PETITIONER'S EXHIBITS:
ANNEXURE A1 CERTIFIED COPY OF THE COMPLAINT FILED BY THE 2ND RESPONDENT DATED 9-10-2013.
ANNEXURE A2 COPY OF THE SWORN STATEMENT OF THE 2ND RESPONDENT DATED 7-12-2013.
ANNEXURE A3 TRUE COPY OF THE COMPLAINT FILED BY THE 2ND RESPONDENT BEFORE THE REGISTRAR OF COMPANIES, KERALA.
ANNEXURE A4 TRUE COPY OF THE RESPONSE OF THE
PETITIONERS TO ANNEXURE A3 FILED BEFORE
THE REGISTRAR OF COMPANIES, KERALA
DATED 24-12-2009.
ANNEXURE A5 TRUE COPY OF THE PETITION FILED BY THE
2ND RESPONDENT BEFORE THE COMPANY LAW
BOARD AT CHENNAI DATED 3-4-2010
(WITHOUT ANNEXURES)
ANNEXURE A6 TRUE COPY OF COUNTER AFFIDAVIT FILED BY
THE PETITIONERS AGAINST ANNEXURE A5
BEFORE THE COMPANY LAW BOARD AT CHENNAI
DATED 1-10-2010 (WIHTOUT ANNEXURES)
ANNEXURE A7 TRUE COPY OF THE ORDER ISSUED BY
COMPANY LAW BOARD DISMISSING CP 1195 OF
2010 FILED BY THE 2ND RESPONDENT DTAED
18-7-2013.
RESPONDENTS' EXHIBITS : NIL
TRUE COPY
PS TO JUDGE