Patna High Court
Dr. Velisetty Ashok Kumar & Anr vs State Of Bihar & Anr on 19 April, 2017
Author: Ashwani Kumar Singh
Bench: Ashwani Kumar Singh
IN THE HIGH COURT OF JUDICATURE AT PATNA
Criminal Miscellaneous No.39284 of 2013
Arising Out of PS.Case No. -2236 Year- 2012 Thana -PATNA COMPLAINT CASE District- PATNA
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1. Shri Ranjit Shahani Son Of Late Shri Govindram Shahani Vice Chairman &
Managing Director Novartis India Limited Sandoz House Shivsagar Estate Dr.
Annine Besant Road Worli, Mumbai - 400 018
2. Novartis India Limited Having Its Registered Office At Sandoz House Shisagar
Estate Dr. Annine Besant Road Worli, Mumbai - 400 018 Through Its General
Consel, Mr. Dinesh Charak.
.... .... Petitioner/s
Versus
1. The State Of Bihar
2. Smt. Preetey Verma Wife Of Shri Anil Kumar Verma Proprietor, Maa Durga
Agency B - 11, Uday Palace, Govind Mitra Road Patna - 800004
.... .... Opposite Party/s
With
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Criminal Miscellaneous No. 40618 of 2013
Arising Out of PS.Case No. -2236 Year- 2012 Thana -PATNA COMPLAINT CASE District- PATNA
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1. Dr. Velisetty Ashok Kumar Son Of Late Sri V Venkateshwara Rao Business
Unit Head Of Animal Health Novartis India Limited Sandoz House Shivsagar
Estage, Dr. Annie Besant Road, Worli, Mumbai - 400 018
2. Mr. Ajit Kumar Gosavi Son Of Shri Manohar V Gosvi Head Of Technical
Operations Of Animal Health Division Novarties India Limited Sandoz House
Shivnagar Estate Dr. Annie Besant Road, Worli, Mumbai - 400 018
.... .... Petitioner/s
Versus
1. The State Of Bihar
2. Smt. Preety Verma Wife Of Shri Anil Kumar Verma Proprietor, Maa Durga
Agency, B-11, Uday Palace, Govind Mitra Road, P.S.- Pirbahore, District- Patna,
800 014
.... .... Opposite Party/s
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Appearance :
(In Both the cases)
For the Petitioner/s : Mr. Chittaranjan Sinha, Sr. Adv.
Mr. Sandeep Kumar, Adv.
Mr. Abhishek Kumar, Adv.
For the State : Mr. Pranav Kumar, APP
For Opposite Party No.2 : Mr. L. N. Das, Adv.
Mr. Subroteswar De, Adv.
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CORAM: HONOURABLE MR. JUSTICE ASHWANI KUMAR SINGH
ORAL JUDGMENT
Date: 19-04-2017
Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017
2/43
Heard Mr. Chittaranjan Sinha, learned Senior Advocate
for the petitioners of these two applications and Mr. L.N. Das, learned
Advocate for the opposite party no.2.
2. In these two applications preferred under Section 482 of
the Code of Criminal Procedure (for short „Cr.P.C.‟), the common
challenge is to the order dated 08.01.2013 passed by the learned
Judicial Magistrate 1st Class, Patna in Complaint Case No.2236(C) of
2012 whereby the petitioners have been summoned to face trial for
the offences punishable under Section 406 of the Indian Penal Code
(for short „IPC‟) and Section 138 of the Negotiable Instruments Act
(for short „N.I. Act‟).
3. Since both the applications arise out of the same
complaint and the relief prayed for is common, they have been heard
together and are being disposed of by a common order.
4. In Cr.Misc. No. 39284 of 2013, the petitioner no.2 is
Novartis India Limited (for short „the Company‟) and the petitioner
no.1 Shri Ranjit Shahani is its Vice Chairman and Managing Director
whereas in Cr.Misc. No. 40618 of 2013, petitioner no.1 Dr. Velisetty
Ashok Kumar is the Business Unit Head for Animal Health and
petitioner no.2 Mr. Ajitkumar Gosavi is the Head of Technical
Operations of Animal Health Division of the aforestated Company.
5. The opposite party no.2 Smt. Preety Verma, proprietor
Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017
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of the firm „Maa Durga Agency‟ (for short „the complainant‟) filed
complaint Case No. 2236(C) of 2012 under Section 200 of the
Cr.P.C. in the court of the Chief Judicial Magistrate, Patna against the
petitioners alleging inter alia the following :-
(a) On 17.03.2000 an agreement was made between the
Company and the complainant in which the complainant was
appointed as Distributor and Carrying and Forwarding Agent to
market the Animal Health products of the Company. Later on
agreement was renewed on 01.04.2005 and again in the month of
February, 2008.
(b) As per the terms of the agreement the complainant gave a
demand draft for Rs.3 lakhs to the Company as security deposit on
which the Company agreed to give 12% per annum interest till the
date of termination of agreement after deduction of rate of interest at
the rate of 10% and the total amount was refundable after termination
of the contract.
(c) All of a sudden the notice for termination of contract dated
22.05.2012was served on the complainant. The termination letter was signed by the petitioners Ajit Kumar Gosavi and Dr. V. Ashok Kumar.
(d) Though the notice for termination dated 22.05.2012 was issued to the complainant on some wrong pretext, the complainant Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 4/43 decided to accept the proposal of termination of contract. She informed the accused Dr. V. Ashok Kumar vide letter dated 24th May, 2012 to pay the security deposit along with interest and amount of commission through demand draft and further informed the accused to collect all the goods saleable and non-saleable and the documents form the premises of the complainant within seven days.
(e) On 29th May, 2012, Mr. Nilesh Kulapkar, an employee of the accused Company came at the premises of the complainant and handed over three cheques to Kamlesh Kumar Upadhyay, a staff of the complainant‟s firm.
(f) The said cheques were deposited in the account of the complainant on 31.05.2012 at United Bank of India, Patna. Two cheques amounting to a total sum of Rs.6,43,834 were dishonoured by ING Vaisya Bank, Patna on 01.06.2012. The information given by the Bank in this regard was received by the complainant‟s husband on 06.06.2012 and the reason assigned was "payment stopped by the drawer". The third cheque dated 25.05.2012 was also returned unpaid by the payee Bank on 09.06.2012, which was received by the complainant on 12.07.2012 but before taking any usual action by the complainant the amount of Rs.64,863/- was paid to the complainant through demand draft dated 06.07.2012 towards commission during the business payable to the complainant.
Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 5/43
(g) A legal notice dated 20th June, 2012 was issued on behalf of the complainant and the reply thereto was given vide letter dated 6th July, 2012. The amount towards commission was paid through demand draft, which was enclosed with the reply to the said legal notice.
(h) The complainant informed the Company and the other accused with regard to the dishonoured two cheques amounting to Rs.6,43,834/- and further requested to pay the aforesaid amount by Demand Draft but on some pretext or others they avoided to pay the amount with false promise.
(i) From the conduct of the accused persons it would be evident that they made prior consultation amongst themselves to cheat the complainant and wanted to take away the products and documents from the premises of the complainant without refund of the security deposit which was deposited in the year 2001 in the account of accused no.1. It also appears that from the very beginning it was the intention of the accused persons to cheat the complainant to devour the aforesaid amount.
6. On the basis of the aforesaid complaint under Sections 420, 406 and 120-B of the IPC and Section 138 of the N.I. Act, the aforestated complaint case was instituted against the petitioners of these two cases.
Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 6/43
7. In support of the complaint filed under Section 200 of the Cr.P.C., the complainant was examined on oath and apart from her, two witnesses, namely, Anil Kumar Verma and Kamalesh Upadhyay were also examined in course of inquiry conducted under Section 202 of the Cr.P.C. whereafter the learned Magistrate summoned the petitioners to face trial for the offences punishable under Section 406 of the IPC and Section 138 of the N.I. Act vide order dated 08.01.2013.
8. Assailing the aforesaid order dated 08.01.2013, Mr. Chittaranjan Sinha, learned Senior Advocate appearing for the petitioners submitted that the petitioner Company is one of the leading international companies in the field of improvement of health and well being in the core area of pharmaceuticals, vaccines, consumer health, generics, eye-care and animal health. He submitted that the institution of the present case against the petitioners is malicious in nature and has been brought with ulterior motives. He contended that the complainant‟s firm was appointed as Carrying and Forwarding Agent of the Company for a period of five years under the renewed agreement dated 14th February, 2008 from 30th April, 2008 unless the said agency was terminated earlier by either party in accordance with clause 13(d) of the said agreement under which the firm was required to have diverse obligations set out clearly in the Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 7/43 agreement, which inter alia expressly declared that the Company shall be the sole and exclusive owner of all the products and the stocks in the premises of the complainant‟s firm. The stocks in possession of the complainant were never intended to nor in fact transferred to him or his firm. Breach of any of the terms and conditions of the said agreement entitled the Company to terminate the said agreement forthwith and upon such termination it was incumbent upon the complainant to forthwith return to the Company all stocks and materials lying with the complainant failing which the Company was legally entitled to liquidate damages. He submitted that the dispute arising between the parties in relation to the said agreement was covered by an arbitration clause contained therein. He contended that the said agreement was terminated by the Company vide notice dated 22nd May, 2012 as the complainant refused to upgrade the storage facility as per the requirement of the Company. The complainant being conscious of her default, accepted the termination without any protest and asked the Company to take back its stock and further to refund the security deposit and also to pay the outstanding commission due to her whereafter the authorized representative of the Company came to Patna on 29th May, 2012 and met the representative of the compliant to take the stocks of the Company lying with the complainant and also to hand over the requisite Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 8/43 documents along with three bankers cheques towards full and final settlement as agreed by the complainant and the bankers cheques bearing nos. 833565 for Rs.1,00,000/-, 833566 for Rs.5,43,834/- were towards the refund of the security deposit along with interest and 386683 for Rs.64,863/- was towards the outstanding final commission payable to the complainant.
9. Mr. Chittaranjan Sinha, learned Senior Advocate submitted that on assurance that stocks of the Company would be returned forthwith by the complainant, the representative of the Company handed over the aforesaid bankers cheques to the representative of the complainant, who went away on the pretext of bringing the keys of the store but did not return thereafter though the representative of the Company kept on waiting for him for a sufficiently long time. He submitted that the representative of the complainant played a trick upon him by vanishing with the aforesaid bankers cheques with dishonest intention. When the representative of the Company contacted the complainant, he was shocked to know that the said instruments had been deposited in the bank and the complainant had no intent to hand over the stocks of the Company.
10. On the basis of these submissions, Mr. Sinha submitted that under the circumstances the Company was left with no option but to instruct the concerned bank to "stop payment" in order to prevent Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 9/43 the fraud played upon the Company. He submitted that the aforesaid two instruments were handed over to the complainant not in discharge of any "debt" or "liability" rather the return of those instruments were contingent upon return of the goods of the Company worth Rs.24 lakhs lying in the godown of the complainant. He submitted that subsequently a legal notice was sent by the complainant to the Company which was duly replied by contending that the legal notice was manifestly concocted and malafide which tantamount to black-mailing and arm-twisting tactics.
11. Mr. Sinha, learned Senior Advocate submitted that one of the essential ingredients required to constitute an offence under Section 138 of the N.I. Act is that the cheques should have been issued in discharge, in whole or part, of any debt or any liability. He submitted that the aforesaid condition set out in Section 138 of the N.I. Act is not satisfied herein since the payments of the said instruments were stopped for genuine and valid reason on account of fraudulent and dishonest act of the complainant. He submitted that even otherwise, the Officer/Director of the Company cannot be made liable under sub-section (1) of Section 141 of the N.I. Act. He contended that for making the Director or Officer of the Company liable for the offence committed by the Company under Section 141 of the N.I. Act there must be specific averment against the Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 10/43 Director/Officer showing as to how and in what manner he was responsible for the conduct of the business of the Company. He submitted that a clear case should be made out in the complaint against the person sought to be prosecuted for criminal charges. He contended that in the entire complaint there is no specific role attributed against the petitioners of the present case in order to make them liable for being prosecuted either for the offence under Section 406 of the IPC or for the offence punishable under Section 138 of the N.I. Act.
12. He contended that even before filing the complaint case, the complainant had filed an arbitration petition before the court of Principal Civil Judge (Sub-Judge-I), East Champaran, Motihari vide Arbitration Misc. Case No. 21 of 2012 under the provisions of Section 8 of the Arbitration and Conciliation Act, 1996. The Company has already entered appearance in the aforesaid arbitration case and filed its reply. However, no order has been passed till date.
13. Opposing the two applications filed under Section 482 of the Cr.P.C., Mr. L.N. Das, learned Advocate appearing for the complainant submitted that there is no illegality in the order passed by the learned Magistrate whereby the petitioners have been summoned to face trial for the offences punishable under Section 406 of the IPC and Section 138 of the N.I. Act. He submitted that all the Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 11/43 ingredients of Section 138 of the N.I.Act are clearly attracted to the facts of the present case. According to him, there is no dispute to the fact that the Company handed over three bankers cheque to the complainant and on presentation they all got dishonoured for the simple reason that the drawer Company had requested the bank to stop encashment of the cheque amount. He submitted that the notices were sent to the accused persons within the prescribed period of time and despite service of notice they failed to make payment of the amount equivalent to the two bankers cheques within the stipulated period of time whereafter the complaint in question was instituted.
14. He submitted that the complainant in her examination on oath and the two enquiry witnesses examined in course of enquiry fully supported the allegations made in the complaint and the ingredients of the offences of criminal breach of trust and under the N.I. Act are clearly attracted in the present case. He contended that after finding a prima facie case to be made out against the accused petitioners, the learned Magistrate rightly summoned them to face trial after taking cognizance of the offences. He submitted that it is not the stage to appreciate the defence of the petitioners, which can be considered by the trial court at the appropriate stage.
15. Mr. L.N. Das, learned Advocate submitted that all the goods, which were lying with the complainant in 2012 at the time of Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 12/43 termination of agreement were either damaged or broken or expired or near to expiry and the accused persons were not interested in taking them back. He submitted that from the conduct of the petitioners it would be apparent that on the false plea of non-return of goods they wanted to criminally misappropriate the huge amount of security deposit of the complainant.
16. I have heard learned counsel for the parties and carefully perused the record.
17. In order to appreciate the contentions advanced on behalf of the parties, at this stage, it would be apposite to refer to Section 406 of the IPC and Section 138 of the N.I.Act under which the learned Magistrate has found a prima facie case to be made out and summoned the petitioners to face trial, which are as under :-
"406 of the IPC. Punishment for criminal breach of trust --
Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.
138 of the N.I. Act. Dishonour of cheque for insufficiency, etc., of funds in the account. -- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 13/43 arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless--
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation.-- For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability."
18. From a reading of Section 406 of the IPC, it would be evident that the same prescribes punishment for the offence of criminal breach of trust, which is defined under Section 405 of the IPC.
19. Section 405 of the IPC reads as under :-
"405. Criminal breach of trust --
Whoever, being in any manner entrusted with Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 14/43 property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits "criminal breach of trust"."
20. From a reading of definition of offence of criminal breach of trust as given in Section 405 of the IPC, it would be evident that to constitute an offence of criminal breach of trust, there must be dishonest misappropriation by a person in whom confidence is placed as to the custody or management of the property in respect of which the breach of trust is charged. Thus, there must be entrustment and there must be misappropriation or conversion to one‟s own use or use in violation of any "legal direction" or "of any legal contract". It is well settled that every breach of trust gives rise to suit for damages, but it is only when there is evidence of a mental act of fraudulent misappropriation that the commission of embezzlement of any sum of money becomes a penal offence punishable as criminal breach of trust.
21. What was the legal contract or whether the act of the petitioners was in violation to the legal direction has to be seen from the agreement entered into between the Company and the complainant, which has been brought on record by the petitioners in Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 15/43 these cases and marked as Annexure-1 to the petitions. The complainant has not disputed the veracity of contents of Annexure-1 rather the learned counsel for the complainant has placed reliance upon the various clauses of the agreement in order to support the case of the complainant.
22. In this regard, I would like to refer to the relevant clauses i.e. clause 13 to 17 of the agreement, which are as under :-
"13. (a) Novartis shall be entitled to terminate this Agreement immediately forthwith in any one or more of the following events, by giving a notice in writing to the C&FC :
(i) If the C&FC commits a breach of any of the terms and conditions of this Agreement.
(ii) If there is any change (not acceptable to Novartis) in the constitution of the C&FC without the prior written consent of Novartis.
(iii) If for any reason, the C&FC is prevented for a period of three months from performing any of his obligations under this Agreement.
(iv) If the C&FC is guilty of any conduct which, in the opinion of Novartis, is prejudicial to Novartis interest or Novartis principles of fair business practices.
(v) If the C&FC assigns or purport to assigns its rights, interest or benefits or charge the benefits of the Agreement without obtaining the consent in writing of Novartis.
(vi) If the C&FC are declared insolvent or commit any act of insolvency or compound or enter into a scheme of compromise with their creditors.
(vii) If the C&FC are charged with committing breach of any law of India.
(viii) If, in the sole opinion of Novartis, the Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 16/43 performance of the C&FC is found to be below expected levels.
13. (b) The parties understand, acknowledge and agree that any default in depositing of cash/cheques issued in favour of Novartis by the due date, or dispatch of produces without instrument, or completion of despatches within the month shall cause loss to Novartis, which C&FC agree to pay to Novartis at Rs.5000/- per day in case of default for the first time and all subsequent defaults at Rs.10,000/- per day as reasonable damages during the period of default, which C&FC authorizes Novartis to deduct from the following monthly commission payable to the C&FC. In case of a written approval for such deviations, this clause will not be enforced.
13. (c) Novartis‟s decision whether any default under Clause 13(a)- (i), (ii), (iii), (iv) and (v) and 13(b) shall be final and conclusive and shall be final and binding on the C&FC and the C&FC shall not question the same on any ground whatsoever. In the event of termination of the Agreement/penalty by Novartis any of the aforesaid reasons, Novartis shall not be liable to pay any compensation for loss/damages that may be sustained by the C&FC as a consequence thereof.
13. (d) Either party may, without assigning any reason, terminate this Agreement by giving to the other, three months‟ notice in writing.
14. Upon expiration or sooner determination or purported determination of this Agreement, the C&FC shall forthwith:
(i) return to Novartis or otherwise dispose of as Novartis may direct, all samples, instruction books and manuals, technical data/literature, price catalogues and other materials, documents and papers whatsoever sent to the C&FC and relating to the business of Novartis which the C&FC may have in their possession or under their control and shall deliver to Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 17/43 Novartis, upon the termination of this Agreement, all separate books of Accounts and statutory records including inter-alia statutory forms relating to the Carrying and Forwarding Contract kept in accordance with this Agreement. A failure of the C&FC to deliver any such records, forms or documents to Novartis shall entitle Novartis to liquidated damages equal to the loss suffered by Novartis on account of such non-delivery.
(ii) deliver to Novartis or otherwise dispose of as Novartis directs, the products or any part thereof entrusted to the C&FC in storage by Novartis or which are in the possession or under the control of the C&FC and the C&FC shall account to Novartis for the value thereof at list price and make good any deficiency in the stock of such products.
(iii) Novartis shall have no liability to the C&FC or to any third party for any damages, losses, indemnity, compensation, costs or expenses of any kind for lost profits or prospective sales, finance cost, depreciation costs, investments made or expenses incurred in connection with the establishment, development or maintenance of the premises or Novartis‟ business, markets or customers, or any other similar claims, damages, fees or payments resulting from the expiration or termination of this agreement.
15. Any notice required to be given to the C&FC, shall be deemed to have been sent and given to the Agents if it is forwarded by registered post or courier at the known address of the C&FC carrying on its business.
16.(a) In order to secure the due performance of this Agreement, and to secure the products entrusted to the C&FC, the C&FC shall, at its own cost, furnish to Novartis a cash security and/or a bank guarantee from an acceptable scheduled/nationalized bank in India, for such amount as may be decided by Novartis, within 30 days from the date of this Agreement which shall be valid during the entire period of this Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 18/43 Agreement and for a period of 3 months thereafter.
(b) Novartis shall be entitled at its sole and absolute discretion to invoke the said bank guarantee and/or to adjust and appropriate the said deposit or any part thereof towards any loss, damage, costs, charges, expenses or other liabilities including without limitation damages under clause 14(i) hereof which Novartis may suffer or be required to incur by reasons of the failure or neglect on the part of the C&FC to observe and perform its obligations hereunder.
17.1 Any dispute or difference arising out of, in connection with or relating to this Agreement shall be referred to arbitration before a sole arbitrator appointed by the mutual consent of both parties in accordance with and subject to the provisions of the Arbitration and Conciliation Act 1996 or any statutory modification or re-enactments thereof. The award of the Arbitrator shall be final and binding upon the parties. The venue of such arbitration shall be Mumbai. The governing law shall be Indian law and the arbitration shall be conducted in English. 17.2 Subject to clause 17.1, this agreement shall be subject to exclusive of jurisdiction of courts in Mumbai."
23. From a bare reading of clause 13(a)(i) of the aforesaid agreement, it would be evident that it entitles the Company to terminate the agreement immediately forthwith in anyone or more of the events as narrated therein by giving a notice in writing to the complainant. Clause 14 casts a duty upon the complainant to return or otherwise dispose of as may be directed by the Company all samples, instruction books and manuals, technical data/literature, price Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 19/43 catalogues and other materials, documents and papers whatsoever sent to the complainant and relating to the business of the Company which the complainant may have in possession or under control. It further entitles the Company to liquidate damages equal to the loss suffered by the Company on account of failure of the complainant. Clause 16(b) of the aforesaid agreement entitles the Company at its sole and absolute discretion to invoke the cash security and/or bank guarantee furnished by the complainant or to adjust and appropriate the said deposit or any part thereof towards any loss, damage, costs, charges, expenses or other liabilities which the Company may suffer or be required to incur by reasons of the failure or neglect on the part of the complainant to observe and perform obligations under the agreement. Clause 17 of the agreement provides for resolution of dispute through arbitration. According to clause 17.1 the venue of arbitration is agreed by the parties to be at Mumbai.
24. In view of the aforesaid clauses of the agreement, if the refund of security deposit along with interest thereof aggregating Rs.6,43,834/- has not been made by the petitioner Company and the amount of security deposit has been adjusted towards loss caused due to non-return of stocks of the Company, in the considered opinion of this Court, it cannot be alleged that the Company or its Director or Officer misappropriated the security deposit in relation of any legal Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 20/43 direction or any legal contract.
25. As seen above, the essential ingredients for attracting the mischief under Section 406 read with Section 405 of the IPC are "dishonest misappropriation" or "conversion of property" or "dishonest use or disposal of that property". The foregoing condition is fulfilled only when such dishonest misappropriation or conversion or use or disposal of that property is in "violation of any direction of law" or "of any legal contract". In the present case, the aforesaid ingredients are conspicuous by their absence. On the contrary, the security deposit made by the complainant was treated in a manner which is completely congruent with the legal contract entered between the parties. The return of the security deposit along with interest thereupon aggregating to a sum of Rs.6,43,834/- was contingent upon return of the stocks of the accused Company lying with the complainant. Admittedly, the said stocks lying with the complainant was never returned. Under the circumstances, the complainant cannot legitimately make any claim for return of the security deposit. Therefore, no iota of the provisions of Section 406 read with Section 405 of the IPC can be said to be attracted in the present case.
26. The only other offence under which the cognizance has been taken is Section 138 of the N.I. Act. In order to constitute an Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 21/43 offence under Section 138 of the N.I. Act, following ingredients are required to be fulfilled :-
"(i) The cheque should have been issued for the discharge, in whole or in part, of any "debt" or "other liability";
(ii) The cheque should have been presented within a period of six months or within the period of its validity whichever is earlier;
(iii) The payee or the holder in due course should have issued a notice in writing to the drawer within 30 days of the receipt of the information by him from the bank regarding the return of the cheque as unpaid;
(iv) After receipt of the said notice from the holder in due course, the drawer should have failed to pay the cheque within 15 days of the receipt of the said notice.
27. The ingredients being thus for constituting an offence under Section 138 of the N.I. Act, let me apply them to the facts of the present case.
28. Since in the present case there is no controversy regarding the fact that the representative of the Company had handed over three bankers cheques to the representative of the complainant, which on presentation to the Bank within the stipulated period were returned unpaid as the payment was "stopped by the drawer". It also stands admitted that an amount of Rs.64,863/- was paid to the complainant by the Company through demand draft towards commission payable to the complainant. With regard to the dishonour Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 22/43 of the two cheques of total amount of Rs.6,43,834/-, it is admitted that no payment was made by the accused Company despite legal notice sent by the complainant on the plea that the complainant was not legally entitled to deposit the said bankers cheques before the stocks were handed over to the Company and on her refusal to hand over the stocks, after issuance of the said instruments, the Company had no option but to instruct the bank to stop encashment in order to prevent consummation of fraud.
29. In view of the fact that there is no dispute with regard to drawal of bankers cheques by the Company, their dishonour on presentation before the bank, issuance of legal notice by the complainant and refusal by the Company to pay the amount on the ground that those cheques were not issued in discharge of "legal liability" or "debt", let me examine as to whether the two dishonoured cheques can be said to have been issued in "discharge of legal liability or not".
30. But before that one has to keep in mind that Section 118(a) of the N.I. Act raises a presumption against the drawer of the cheque. It holds that until contrary is proved, it shall be presumed that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 23/43 transferred for consideration. Further Section 139 of the N.I. Act raises a presumption in favour of the holder of the cheque that the same has been issued for "discharge of any debt" or "liability".
31. Sections 118(a) and 139 of the N.I. Act read as under :-
"118 Presumptions as to negotiable instruments.
--Until the contrary is proved, the following presumptions shall be made:--
(a) of consideration -- that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration.
139. Presumption in favour of holder.--It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability."
(emphasis mine)
32. Having seen the aforesaid Sections of the N.I. Act, one has also to keep in mind that there is presumption that the issue of cheque is for discharge of any "debt" or "liability". The presumption, however, is rebuttable in nature. Further, the standard of proof required for rebutting any such presumption is not as high as that required of the prosecution.
33. In Krishna Janardan Bhat Vs. Dattatraya G. Hegde [(2008) 4 SCC 54], the Supreme Court observed "Statute mandates Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 24/43 raising of presumption but it stops at that. It does not say how presumption drawn should be held to have rebutted. Other important principles of legal jurisprudence, namely, presumption of innocence as human rights and the doctrine of reverse burden should be delicately balanced."
34. In Bharat Barrel and Drum Manufacturing Company Vs. Amin Chand Payrelal [(1999) 3 SCC 35], presumptions under Section 118(a) and 139 were held to be rebuttable on a preponderance of probabilities by the Hon‟ble Supreme Court.
35. With the abovesaid two presumptions, in order to prosecute an accused for the offence under Section 138 of the N.I. Act, the complainant is required to prima facie satisfy one of the essential ingredients that the cheque drawn by a person was issued for discharge, in whole or in part, of any "debt" or "any other liability". The expression "debt" or "other liability" has been explained to be a "legally enforceable debt" or "other liability". So, unless and until there is any legally enforceable debt, dishonour of any cheque would not give rise to an offence under Section 138 of the N.I. Act. The banker‟s cheques in question were handed over to the complainant under a bonafide belief and understanding that the complainant would simultaneously return the Company‟s stocks lying with the complainant. Only upon return of the Company‟s stocks by Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 25/43 the complainant, she could have been entitled to present the said instruments for encashing because only then the security deposit lying with the Company would have been liable to be refunded. Till then, no legally enforceable debt had arisen in favour of the complainant. As the stocks were admittedly not returned by the complainant, it cannot be said that the banker‟s cheques were issued in discharge of any "legally enforceable debt" or "liability". The complainant has nowhere stated in the complaint that she returned the Company‟s stocks rather the complainant‟s case is that the goods lying in the godown were either damaged or broken or expired or near to expiry and the accused persons were not interested in taking them back. The plea taken by the complainant seems to be quite weak as admittedly immediately before the termination of the contract the complainant‟s firm was the C&F Agent of the accused Company and the goods were supplied by the Company in due course of business.
36. The issue whether the post-dated cheques issued by the purchasers as an advance payment in respect of purchase orders could be considered in discharge of legally "enforceable debt" or "other liability", and, if so, whether the dishonour of such cheques amounts to an offence under Section 138 of the N.I. Act was examined by the Supreme Court in the matter of Indus Airways (P) Limited Vs. Magnum Aviation (P) Limited [(2014) 12 SCC 539]. The said issue Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 26/43 arose before the Supreme Court while considering the appeal arising out of a judgment of the Delhi High Court in Magnum Aviation (P) Limited Vs. State [(2010) 172 DLT 91] wherein the Delhi High Court following its earlier decision in Mojj Engg. Systems Ltd. Vs. A.B. Sugars Ltd. [(2008) 154 DLT 579] had held that the issuance of a cheque at the time of signing such contract has to be considered against a liability, as the amount written in the cheque is payable by the person on the date mentioned in the cheque.
37. After taking note of the conflicting judgments of different High Courts, the Supreme Court in Indus Airways (P) Limited (Supra) allowed the appeal against the judgment of the Delhi High Court in Magnum Aviation (P) Limited and while setting aside the judgment of the Delhi High Court it held as under :-
"15. The above reasoning of the Delhi High Court is clearly flawed inasmuch as it failed to keep in mind the fine distinction between civil liability and criminal liability under Section 138 of the N.I. Act. If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. We are unable to accept the view of the Delhi High Court that the issuance of cheque towards advance payment at the time of signing such contract has to be considered as subsisting liability and dishonour of such cheque Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 27/43 amounts to an offence under Section 138 of the N.I. Act. The Delhi High Court has traveled beyond the scope of Section 138 of the N.I. Act by holding that the purpose of enacting Section 138 of the N.I. Act would stand defeated if after placing orders and giving advance payments, the instructions for stop payments are issued and orders are cancelled. In what we have discussed above, if a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability."
38. On the same analogy, when I examine the facts of the present case, it would be evident that in terms of the contract the Company was entitled to determine the agreement and liquidate the damages equal to the loss suffered by it on account of non-delivery of the goods. If the bankers cheques were stopped by the drawer on account of non-return of the stocks and goods, the said act of the drawer Company would not make it liable to be prosecuted for the offence under Section 138 of the N.I. Act. There was no "debt" or "liability" on the Company or on any of its Officer/Director on the date of issuance of the bankers cheques as the contingent and future liability was never converted into a subsisting liability because admittedly the goods and stocks were not returned by the complainant. Thus, the transaction from its very nature was purely Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 28/43 civil in nature.
39. The issue involved in these two cases can also be examined from yet another angle. The petitioners have argued that apart from the fact that in para 2 of the complaint, the complainant has mentioned the details of the post of the petitioners in the Company , there is no whisper in the entire complaint against any act of omission or commission on the part of the petitioners Ranjit Shahani, Dr. Velisetty Ashok Kumar and Ajitkumar Gosavi and in the absence of any allegation made against them, they should not have been made vicariously liable for the commission of the offences under Section 406 of the IPC and Section 138 of the N.I. Act.
40. Adverting to the aforesaid submission, looking at the provisions of the IPC and the N.I. Act, it can safely be said that IPC does not provide for vicarious liability for any offence committed by a Company. In this regard, one can refer to the judgment of the Supreme Court in S.K.Alagh Vs. State of U.P. & Ors. [(2008) 15 SCC 662] wherein it is held that the Indian Penal Code, save and except some provisions specifically providing therefore, does not contemplate any vicarious liability on the part of a party who is not charged directly for commission of an offence.
41. Similarly, in Maksud Saiyed Vs. State of Gujarat & Ors. [(2008) 5 SCC 668], the Supreme Court held as under :-
Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 29/43 "...Indian Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company when the accused is the Company. The learned Magistrate failed to pose unto himself the correct question viz. as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the respondents herein were personally liable for any offence. The Bank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability."
42. However, the N.I. Act specifically contemplates creation of such a legal fiction under Section 141 which reads as under :-
"141. Offences by companies (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:
Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 30/43 Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.
(2) Notwithstanding anything contained in sub-
section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation.--For the purposes of this section,--
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "director", in relation to a firm, means a partner in the firm.
43. In Sabitha Ramamurthy Vs. R.B.S. Channabasavaradhya [(2006) 10 SCC 581], the Supreme Court while dealing with the issue of vicarious liability observed as under :-
"It may be true that it is not necessary for the complainant to specifically reproduce the wordings of the section but what is required is a clear statement of fact so as to enable the court to arrive at a prima facie opinion that the accused are vicariously liable. Section 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. Such vicarious liability can be inferred so far as a Company registered or incorporated under the Companies Act, 1956 is concerned only if the requisite statements, which are required to be averred in the complaint petition, are made so as to make the accused therein vicariously liable for the offence committed by the Company. Before a person can be made vicariously liable, strict compliance of Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 31/43 the statutory requirements would be insisted."
44. Similarly in Saroj Kumar Poddar Vs. State (NCT of Delhi [(2007) 3 SCC 693], while following S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another [(2005) 8 SCC 89] and Sabitha Ramamurthy (Supra), the Supreme Court held that with a view to make a Director of a Company vicariously liable for the acts of the Company, it was obligatory on the part of the complainant to make specific allegations as are required in law and under Section 141 of the N.I. Act and further held that in absence of such specific averments in the complaint showing as to how and in what manner the Director is liable, the complaint should not be entertained.
45. A person would be vicariously liable for the commission of the offence under Section 138 of the N.I.Act on the part of the Company only in the event of fulfilling the condition laid down in Section 141 of the N.I. Act. In the case of S.M.S. Pharmaceuticals (Supra), it is held that it is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the Company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. Section Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 32/43 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed.
46. In Kirshna Texport & Capital Markets Ltd. Vs. Ila A. Agrawal & Ors. [AIR 2015 SC 2091], the Supreme Court observed as under :-
"15. If the requirement that such individual notices to the directors must additionally be given is read into the concerned provisions, it will not only be against the plain meaning and construction of the provision but will make the remedy under Section 138 wholly cumbersome. In a given case the ordinary lapse or negligence on part of the Company could easily be rectified and amends could be made upon receipt of a notice under Section 138 by the Company. It would be unnecessary at that point to issue notices to all the directors, whose names the payee may not even be aware of at that stage. Under Second proviso to Section 138, the notice of demand has to be made within 30 days of the dishonour of cheque and the third proviso gives 15 days time to the drawer to make the payment of the amount and escape the penal consequences. Under clause (a) of Section 142, the complaint must be filed within one month of the date on which the cause of action arises under the Page 14 14 third proviso to Section 138. Thus a complaint can be filed within the aggregate period of seventy five days from the dishonour, by which time a complainant can gather requisite information as regards names and other details as to who were in charge of and how they were responsible for the affairs of the Company. But if we accept the logic that has weighed with the High Court in the present case, such period gets reduced to 30 days only. Furthermore, unlike proviso to clause (b) of Section 142 of the Act, such period is non-extendable. The summary remedy created for the benefit of a drawee of a dishonoured cheque will thus be rendered completely cumbersome and capable of getting frustrated."
Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 33/43
47. Thus, it would be evident that the N.I. Act affixes liability on the Directors of a Company even when they are not directly involved with bouncing of cheques. However, before the Directors of a Company are prosecuted, there must be specific statement alleging role of the Directors. It must be said that the Director concerned was in-charge of and responsible to the Company for conduct of business of the Company.
48. In National Small Industries Corporation Limited Vs. Harmeet Singh Paintal & Ors. [(2010) 3 SCC 330], with regard to affixing the liability of the Director, the Supreme Court made following observations :-
"(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.
(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.
(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 34/43 accused were in-charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.
v) If accused is Managing Director or Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.
(vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.
(vii) The person sought to be made liable should be incharge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases."
49. On a careful consideration of the ratio laid down by the Supreme Court in the aforementioned cases, one can infer that the Managing Director, Director or Officer, who signed the cheque are always vicariously liable and there can be no escape for them from prosecution even if the complaint is silent about their specific role. However, the other Directors or Officers of the Company cannot be made vicariously liable for any act on behalf of the Company.
50. Coming back to the facts of the present case, since the petitioner Ranjit Shahani was the Managing Director of the Company, he may be held vicariously liable for the act of the Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 35/43 Company. However, so far as other two accused, namely, Dr. Velisetty Ashok Kumar and Ajitkumar Gosavi are concerned, no ground has been made out to prosecute them for the offences under Section 138 of the N.I. Act.
51. Though I have given a finding that petitioner Ranjit Shahani cannot take the point of not being vicariously liable for the act of the Company, it does not mean that he has to be prosecuted for the offences alleged. Having regard to the facts and circumstances of the case, I am of the opinion that the complaint itself has been instituted with ulterior motive and the fact that I have already held that no legally enforceable "debt" or "liability" had arisen in favour of the complainant, which is one of the most essential ingredients for constituting an offence punishable under Section 138 of the N.I. Act.
52. It has been held in catena of judgments of the Supreme Court that where a criminal proceeding is manifestly attended with malafide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and/or where even on admitted allegations no offence is made out, it becomes imperative to exercise the powers conferred under Section 482 of the Cr.P.C. to prevent abuse of the process of any court and otherwise to secure the ends of justice.
53. In State of Karnataka Vs. L. Muniswamy & Ors. (1977) Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 36/43 2 SCC 699], the Supreme Court observed that the wholesome power under Section 482 of the Cr.P.C. entitles the High Court to quash a proceeding when 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 requires that the proceeding ought to be quashed. The High Courts have been vested with inherent powers, both in civil and criminal matters to achieve a salutary public purpose. It held that a court proceeding ought not to be permitted to degenerate into a weapon of harassment or persecution. The ends of justice are higher than the ends of mere law. To meet the ends of real and substantial justice, it is imperative to quash malafide, malicious and vengeful proceeding. It further held that the authority of the court exists for advancement of justice and if any attempt is made to abuse that authority so as to produce injustice, the court has power to prevent such abuse. It would be an abuse of the process of the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of powers, the court would be justified to quash any proceeding if it finds that initiation/continuance of it amounts to abuse of the process of court or quashing of these proceedings would otherwise serve the ends of justice.
54. In State of Haryana & Others Vs. Bhajan Lal and Others [1992 Supp (1) SCC 335], the scope of exercise of power Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 37/43 under Section 482 of the Cr.P.C. and the categories of the cases where the High Court may exercise its power under it relating to cognizable offences to prevent abuse of the process of the court or otherwise to secure the ends of justice were set up by the Supreme Court as under:-
"102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extra-ordinary power under Article 226 or the inherent powers Under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any Court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.
(1) Where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima-facie constitute any offence or make out a case against the accused. (2) Where the allegations in the First Information Report and other materials, if any, acCompany ing the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers Under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.
(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.
Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 38/43 (4) Where, the allegations in the F.I.R. do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.
(5) Where the allegations made in the FIR 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.
(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge."
(emphasis mine)
55. In M/S Zandu Pharmaceutical Works Ltd. & Ors. Vs. Mohd. Sharaful Haque & Anr. [(2005) 1 SCC 122], the Supreme Court observed as under :-
"It would be an abuse of process of the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of the powers court would be justified to quash any proceeding if it finds that initiation/continuance of it amounts to abuse of the process of court or quashing of these proceedings would otherwise serve the ends of justice. When no offence is disclosed by the complaint, the court may examine the question of Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 39/43 fact. When a complaint is sought to be quashed, it is permissible to look into the materials to assess what the complainant has alleged and whether any offence is made out even if the allegations are accepted in toto."
56. In Madhavrao Jiwaji Rao Scindia & Anr. Vs. Sambhajirao Chandrojirao Angre & Ors. [(1988) 1 SCC 692], the Supreme Court held that the process of the court cannot be utilized for any oblique purpose and where in the opinion of the court chances of an ultimate conviction is bleak and, therefore, no useful purpose is likely to be served by allowing a criminal prosecution to continue, the court may while taking into consideration the special facts of a case also quash the proceeding even though it may be at a preliminary stage.
57. In Inder Mohan Goswami & Another Vs. State Of Uttaranchal & Others [(2007) 12 SCC 1], the Supreme Court after considering a series of decisions held that "The court must ensure that criminal prosecution is not used as an instrument of harassment or for seeking private vendetta or with an ulterior motive to pressure the accused."
58. In Padal Venkata Rama Reddy @ Ramu Vs. Kovvuri Satyanarayana Reddy & Ors [(2011) 12 SCC 437], the Supreme Court held as under :-
"The superior Courts have been given inherent powers to prevent the abuse of the process of court Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 40/43 where the court finds that the ends of justice may be met by quashing the proceedings, it may quash the proceedings, as the end of achieving justice is higher than the end of merely following the law. It is not necessary for the court to hold a full-fledged inquiry or to appreciate the evidence, collected by the Investigating Agency to find out whether the case would end in conviction or acquittal."
59. It would be pertinent to note here that there are a large number of cases where criminal law and civil law can run side by side and the two remedies are not mutually exclusive but clearly co- extensive and essentially differ in their context and consequence.
60. However, considering the growing tendency in business circles to convert purely civil disputes into criminal cases, the Supreme Court in Indian Oil Corporation Vs. NEPC India Ltd. and Others [(2006) 6 SCC 736], held that allowing the prosecution to continue in such cases would be an abuse of the process of the Court.
61. In S.W. Palanitkar Vs. State of Bihar, [(2002) 1 SCC 241], it was observed by the Supreme Court that many a times complaints are filed under Section 200 Cr.P.C. by the parties with an oblique motive or for collateral purposes to harass, to wreck vengeance, pressurize the accused to bring them to their own terms or to enforce the obligations arising out of breach of contract touching commercial transactions instead of approaching civil courts with a view to realize money at the earliest. Hence before issuing a process a Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 41/43 Magistrate has to keep in mind the scheme contained in the provisions of Section 200-203 of Cr.P.C. keeping in mind the position of law stated above and pass an order judiciously and not mechanically or in routine manner.
62. In Anil Mahajan v. Bhor Industries Ltd. &Anr. [(2005) 10 S.C.C. 228], the Supreme Court quashed the processes issued by the Magistrate in a case involving only a breach of contract and not a criminal case of cheating.
63. In Uma Shankar Gopalka & Anr. Vs. State Of Jharkhand & Anr. [(2005) 10 SCC 336], the Supreme Court observed "... complaint does not disclose any criminal offence at all much less any offence either u/s. 420 or Sec. 120-B of the Indian Penal Code and the present case is a case of purely civil dispute between the parties for which remedy lies before a civil court by filing a properly constituted suit. In our opinion, in view of these facts allowing the police investigation to continue would amount to an abuse of the process of court ..."
64. In Sardar Trilok Singh & Ors. Vs. Satya Deo Tripathi [(1979) 4 SCC 396] and Bal Kishan Das Vs. P.C. Nayar [1991 Supp (2) SCC 412], the Supreme Court quashed the proceeding on the ground that the dispute was purely of civil nature.
65. In G. Sagar Suri Vs. State of U.P. [(2000) 2 SCC 636], Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 42/43 the Supreme Court observed as under :-
"8. Jurisdiction under Section 482 of the Code has to be exercised with great care. In exercise of its jurisdiction the High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice."
66. As seen above, since the ingredients of the alleged offences are not satisfied in the instant case, exercise of inherent power is not only desirable but necessary so that the judicial forum or the Court may not be allowed to be utilized for ulterior motive as Section 482 of the Cr.P.C. envisages three circumstances under which the inherent jurisdiction may be exercised:-
(i) To give effect to an order under the Cr.P.C.;
(ii) To prevent abuse of the process of the Court; and
(iii) To otherwise secure the ends of justice.
67. Accordingly, in order to prevent abuse of the process of the Court and to otherwise secure the ends of justice, the entire complaint including the summoning order dated 08.01.2013 passed by the learned Judicial Magistrate 1st Class, Patna in Complaint Case Patna High Court Cr.Misc. No.39284 of 2013 dt.19-04-2017 43/43 No. 2236(C) of 2012 is hereby quashed.
68. These applications stand allowed.
(Ashwani Kumar Singh, J) Pradeep/-
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