Telangana High Court
Munnalal Agarwal 3 Others vs The State Of A.P., Through Cbi on 5 May, 2020
Author: G. Sri Devi
Bench: G. Sri Devi
HONOURABLE JUSTICE G. SRI DEVI
CRIMINAL PETITION No. 613 of 2013
ORDER:
The petitioners, who are accused Nos.1 to 3 and 9 in C.C.No.7 of 2007 on the file of the Special Judge for C.B.I. Cases, Hyderabad, filed this Criminal Petition under Section 482 Cr.P.C. to quash the proceedings in the said Calendar Case, registered for the offences punishable under Sections 120-B read with Sections 409, 419, 420, 467, 468, 471 I.P.C. and Section 13 (2) read with Sections 13 (1) ( c ) & (d) of Prevention of Corruption Act 1988.
Brief case of the prosecution is that the petitioners 1 to 3/A1 to A3, who are the Directors of their family concerned businesses, have approached the de facto complainant bank, namely, Oriental Bank of Commerce, and availed various facilities from the bank by furnishing various securities and after availing such facilities, the accused have not paid the amounts to the bank and on further investigation it is alleged that the loans granted by the bank were diverted to various accounts without the consent of the bank. It is further alleged that the petitioners/A-1 to A- 3 and A-9 have hatched a plan along with other accused to cheat the de facto complainant bank at Ameerpet Branch, Hyderabad, in the matter of recommending, sanctioning and availing various credit limits, including Cash Credit, Inland Letter Credit, Working Capital Limit and Bank Guarantee etc., in the account of M/s. Airan Comtrax Towers (P) Limited (A-5), M/s. Airen Steels Limited (A-6) and M/s. Shakthi Steels (A-7). In pursuance of the said criminal conspiracy, the Promoters of accused companies/firms represented by the 1st petitioner/A-1 and others, floated 2 several bogus firms and induced the bank officials to disburse funds on the basis of cheques and other instruments submitted in the name of the bogus firms, which ultimately caused a wrongful loss of more than Rs.517.00 lakhs plus interest to the de facto complainant bank. After investigation, the Inspector of Police, CBI/BS & FC/Bangalore, filed final report for the aforesaid offences, which was taken on file as C.C.No.7 of 2007.
Heard learned Counsel for the petitioners/A-1 to A-3 and A-9, learned Special Public Prosecutor for C.B.I. Cases and perused the record.
The main ground urged by the learned Counsel for the petitioners/A-1 to A-3 and A-9 is that even prior to filing of charge sheet, the petitioners have paid the entire due amount to the de facto complainant bank, which the bank has accepted without any demur and in lieu of the said settlement, a Compromise Memo was filed before the Debts Recovery Tribunal and the recovery proceedings initiated by the bank were ended with full realization of the amounts. Though the closure of recovery proceedings was informed to the Investigating Officer before filing of the final report, the Investigating Officer has filed the charge sheet ignoring the basic fact that the entire dispute with the de facto complainant bank itself has ended into a compromise. He further submits that the prosecution has been launched against the petitioners/accused as a mode of the recovery of the amounts due to the de facto complainant-bank only to exert pressure upon the petitioners, who are the Directors/Promoters of various companies and it is well settled understood principle of law that the criminal process cannot be used to effect recoveries. He further submits that the present matter is purely a case of civil dispute which can 3 be resolved only under the established civil law of the country and no criminal action is warranted and is maintainable against the petitioners. Therefore, continuation of proceedings would tantamount to abuse of process of law. In support of his contentions he relied on the judgments of the Apex Court in C.B.I, ACB, Mumbai v. Narendra Lal Jain and others1, Gold Quest International Private Limited v. State of Tamil Nadu and others2 and Central Bureau of Investigation, New Delhi v. B.B.Agarwal and others3.
Learned Special Public Prosecutor for C.B.I. Cases appearing for the respondent/complainant would submit that merely because the loan amount had been paid would not absolve the petitioners/A-1 to A-3 and A-9 from the criminal liability and as such this Court ought not to have exercised inherent power when evidence had been adduced which is in fact required to be assessed by the trial Court at first instance. In support of his contention, he relied upon the un-reported judgment of the Apex Court in Criminal Appeal No.536 of 2017 (Arising out of SLP (Crl.) No.7147 of 2015) among Central Bureau of Investigation, State of A.P. represented by Inspector General of Police, CBI, ACB, Hyderabadi v. T.B.Shankar Rao and others.
In the light of the above arguments, the following points would arise for consideration of the Court:-
(1) Whether failure to repay the debt to the complainant (Bank) would amount to an offence of fraud or cheating?1
(2014) 5 SCC 364 2 (2014) 15 SCC 235 3 (2019) 15 SCC 522 4 (2) Whether a compromise between the de facto complainant and the petitioners/A-1 to A-3 and A-9 will entitle quashing of the charge sheet and related proceedings pending before the Special Judge to try the C.B.I. Cases?
Admittedly, the petitioners/A-1 to A-3 and A-9, representing their Corporate Entities, have availed various facilities from the Oriental Bank of Commerce. The bank initiated measures to enforce security interest under the provisions of Recovery of Debts due to the Banks and Financial Institutions Act, 1993 before the Debt Recovery Tribunal, Hyderabad in O.A.No.155 of 2003 and O.A.No.156 of 2003. In the charge sheet, it is alleged that the accused companies have taken local cheques for huge amounts without any sanctioned cheque purchase limits and this was permitted by the officers of the Bank (A-4 and A-8). It is also stated in paragraph No.3 of the charge sheet that the facilities are sanctioned on creation of equitable mortgage of property of a third party. It is alleged that they are bogus in nature. However, as seen from the record, admittedly those third parties are not shown as accused. It is in this state of affairs, the petitioners contended that the accusations of fraud and cheating are not attracting the penal provisions of law under the Indian Penal Code.
In this perspective, to gauge the sustainability of arguments of the petitioners, this Court critically examined the substance of the complaint. As a whole; as rightly pointed out by the learned Counsel for the petitioners, the grievance of the Bank is that it had to sustain 'loss' on account of the default committed by the accused persons, bank officers and the companies/partnership firms. The charge sheet shows that the 5 First Information Report was registered on 12.05.2003 and the charge sheet was filed on 29.03.2007.
Law in this regard is laid down by the Courts in certain judgments. In order to attract the ingredients of Section 420 read with 415 of I.P.C., there must be a fraudulent or dishonest inducement on the part of the person and thereby the other party must have parted with his property. To establish an offence under Section 420 of I.P.C., it must be shown that there was a fraudulent and dishonest intention at the time of commission of the offence and that the person practicing the deceit had obtained the property by fraudulent inducement and willful misrepresentation. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent, dishonest intention is shown at the beginning of the transaction i.e., at the time when the offence is said to have been committed. It is the intention which is the essence of the offence.
Mere use of the expression "cheating" in the complaint is of no consequence. It is notable, what happened subsequently can be taken into consideration for the purpose of finding out as to what could have been the intention of the person at the time when he made the representation. No doubt, the subsequent conduct is not the sole test. It will depend upon the facts of each case. It is conceivable that when a man makes a promise, he would expect to fulfil the promise, but subsequent circumstances and events may justify his inability to fulfil the promise. In these circumstances, it cannot be said that the person, who made the promise 6 made it falsely. (Vide Anil Mahajan v. Bhor Industries Limited and another4).
In order to hold a person guilty of cheating, it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up the promise subsequently such a culpable intention right at the beginning i.e., when he made the promise, cannot be presumed. If the core postulate of dishonest intention, in order to deceive the complainant, is not made out even accepting all the averments in the complaint on their face value, the complaint is liable to be quashed. (Vide Hridaya Ranjan Prasad Verma v. State of Bihar5). The intention to deceive should be in existence at the time when the inducement was made. It is necessary to show that a person had fraudulent or dishonest intention at the time of making the promise, to say that he committed an act of cheating.
"Dishonesty" has been defined in Section 24 of I.P.C., to mean deliberate intention to cause wrongful gain or wrongful loss; and when with such intention, deception is practiced, and delivery of property is induced then the offence under Section 420 of I.P.C. can be said to have been committed. To deceive is to induce a man to believe that a tilling is true which is falser and which the person practicing the deceit knows or believes to be false. It must also be shown that there existed a fraudulent and dishonest intention at the time of commission of the offence. (Vide 4 (2006) 1 SCC (Crl.) 746 5 (2000) 4 SCC 168 7 State of Kerala v. A. Pareed Pillaih and another6 and Dr.Sharma's Nursing Home v. Delhi Administration7).
In one of its judgments, erstwhile A.P. High Court dealt with the said legal position in clear terms. It is stated that either in the F.I.R. or in the charge sheet, it must be alleged, either expressly or by necessary implication that at the time when the representation was made it was not only false but also that the person who made such false representation knew that it was false and with that knowledge he had made such a representation making the other party believe such representation and had thereby induced the party deceived to deliver the property. It is only where a fraudulent representation leads to delivery of property, which is dishonestly retained, that the ingredients of Section 415 of I.P.C. are established. (Vide M.Sivaram and others v. State of A.P. and another8).
In Alpic Finance Limited v. P.Sadasivan and another9 the Supreme Court highlighted the grounds on which criminal proceedings are to be quashed under Section 482 of Cr.P.C., and noted the ingredients of Section 420 of I.P.C.
In fact, the Apex Court in Hari Prasad Chamaris v. Bishun Kumar Surekha and others10, Dr.Sharma's Nursing Home v. Delhi Administration (7 supra), Hridaya Ranjan Prasad Verma v. State of Bihar (5 supra), Alpic Finance Limited (8 supra), S.W.Palnitkar and others v. State of Bihar and another11 and Anil Mahajan v. Bhor Industries Limited and Another ( 4 supra) had either quashed or upheld the order 6 (1972) 3 SCC 661 7 (1998) 8 SCC 745 8 (2007) Crl.L.J. 1259 (A.P.) 9 (2001) 10 SCC 228 10 Manu/SC/0112/1973 11 (2002) 1 SCC 241 8 quashing the complaint on the ground that the complaint, when read as a whole and accepting its contents are true, did not attract the ingredients of Section 420 of I.P.C.
In Anil Mahajan V. Bhor Industries Limited and another (4 supra) a three Judge Bench of the Supreme Court considered a case relating to the issuance of process for the offences punishable under Sections 415, 418 and 420 of I.P.C. In that case also, the Bench analyzed the difference between 'breach of contract' and 'cheating'. In recent times, the Supreme Court reiterated these principles in Sushil Sethi and others v. State of Arunachal Pradesh12.
In the case on hand, apparently, the necessary ingredients of 'cheating' for attracting the offences under Sections 418, 420, 471, 467, 468 and 409 of I.P.C., have not been made out. All those offences are linked to the default in repayment of debt due by the petitioners and not to any different transaction. Because, nowhere it is alleged, both in F.I.R. and in the charge sheet, that even at the time of borrowing the loan from the Bank, the petitioners have entertained the evil intention of evading payment of debt to the bank by resorting to unsavory conduct and fraudulent transactions. Putting this circumstance to test on the footings of the law laid down by the Courts referred to above, this Court is of the considered opinion that the criminal proceedings in C.C.No.7 of 2007 are liable to be quashed.
So far as the offences under the Prevention of Corruption Act, 1988 is concerned, in Ch.Sridhar v. V.S.Rajamannar, Manager (Credit), Regional Office, Punjab National Bank, Saifabad, Hyderabad and 12 Mau/SC.0119/2020 9 another13 a learned Single Judge of this Court held that when the substantive offences under I.P.C. are not made out in the F.I.R. and the complaint, there is absolutely no ground to proceed against the private individuals for the offences under the Prevention of Corruption Act.
One more ground propounded by the petitioners is that the de facto complainant had received the entire amount due from the petitioners in pursuance of a compromise entered into before the Debts Recovery Tribunal, Hyderabad.
A perusal of the material on record would show that basing on the complaint lodged by the Chief Vigilance Officer, Oriental Bank of Commerce, the crime was registered against the petitioners/A-1 to A-3 and A-9 and others alleging that owing to the fraudulent acts committed by the petitioners/A-1 to A-3 and A-9 and others, the bank sustained huge loss of Rs.517.00 lakhs plus interest. Apart from launching the present prosecution, the de facto complainant bank has also initiated recovery proceedings before the Debt Recovery Tribunal, Hyderabad, vide O.A.Nos.155, 193 and 156 of 2003 claiming the total amounts due to them. Subsequently, during the pendency of the said O.As., the accused entered into a compromise with the de facto complainant by paying the amounts due to the de facto complainant bank. The record further discloses that in view of the said compromise, the de facto complainant bank along with the petitioners/A-1 to A-3 and A-9 and their companies filed compromise memos before the Debts Recovery Tribunal at Hyderabad, seeking to issue Recovery Certificates and to dispose of O.A.Nos.155 and 156 of 2003 in terms of the compromise arrived at between the parties. By docket 13 Crl.P.No.1510 of 2009 (AP High Court) 10 orders, dated 08.05.2006, the Presiding Officer, Debts Recovery Tribunal, Hyderabad, closed the proceedings in O.A.Nos.155 and 156 of 2003 in terms of the compromise arrived at between the parties. The final report in this case has been filed on 29.03.2007. It seems that at least one year before filing of the charge sheet, the dispute between the petitioners/accused and the de facto complainant-bank has ended into a compromise.
It is submitted by the learned Counsel for the petitioners that had the respondents taken into consideration the fact that the de facto complainant had entered into compromise and the debt is fully discharged, the C.B.I. would not have filed the charge sheet. It is also brought to the notice of this Court that the material witnesses have been declared hostile and they did not support the prosecution case and there remain several witnesses to be examined and the prosecution could examine 7 witnesses only during the period of 16 months and there is ensured delay in conclusion of trial and this will affect adversely on the petitioners because, no purpose would be served by such long trial in the light of material witnesses turning hostile. It is argued that the time of the Court will be put to waste besides unnecessary expenditure to the State Exchequer.
The position that emerges from the above discussion can be summarized thus: the power of the High Court in quashing a criminal proceeding or F.I.R. or complaint in exercise of its inherent jurisdiction is distinct and different from the power given to a criminal Court for compounding the offences under Section 320 of the Code. Inherent power is of wide plentitude with no statutory limitation, but it has to be 11 exercised in accordance with the guidelines engrafted in such power viz.,
(i) to secure the ends of justice, or (ii) to prevent abuse of the process of any Court.
In Narinder Singh v. State of Punjab 14, the Apex Court laid down the following guiding principles to be observed by the High Courts while exercising power under Section 482 of the Code, in special reference to the non-compoundable cases, which are compromised between the victim and the accused. Those guidelines are as under:
"(i) Power conferred under Section 482 of the Code is to be distinguished from the power which lies in the Court to compound the offences under Section 320 of the Code. No doubt, under Section 482 of the Code, the High Court has inherent power to quash the criminal proceedings even in those cases which are not compoundable, where the parties have settled the matter between themselves. However, this power is to be exercised sparingly and with caution.
(ii)When the parties have reached the settlement and on that basis petition for quashing the criminal proceedings is filed, the guiding factor in such cases would be to secure: (a) ends of justice, or (b) to prevent abuse of the process of any Court.
(iii) While exercising the power the High Court is to form an opinion on either of the aforesaid two objectives.
(iv) Such a power is not be exercised in those prosecutions which involve heinous and serious offences of mental depravity or offences like murder, rape, dacoity, etc."
In Nikhil Merchant v. C.B.I. and another15 where a civil dispute is involved in a prosecution and the dispute is ended in compromise, the Supreme Court observed that prosecution of criminal proceedings would 14 (2014) 6 SCC 466 15 (2008) 2 ALD (Crl.) 591 (SC) 12 be in futility and therefore, the High Court is justified in quashing the charge sheet under Section 482 of the Code.
In Gold Quest International Private Limited v. State of Tamil Nadu and others (2 supra) the Apex Court held as under:
" xxxx in the disputes which are substantially matrimonial in nature, or the civil property disputes with criminal facets, if the parties have entered into settlement, and it has become clear that there are no chances of conviction, there is no illegality in quashing the proceedings under Section 482 Cr.P.C. read with Article 226 of the Constitution. However, the same would not apply where the nature of offence is very serious like rape, murder, robbery, dacoity, cases under Prevention of Corruption Act, cases under Narcotic Drugs and Psychotropic Substances Act and other similar kind of offences in which punishment of life imprisonment or death can be awarded. After considering the facts and circumstances of the present case, we are of the view that learned Single Judge did not commit any error of law in quashing the FIR after not only the complainant and the appellant settled their money dispute but also the other alleged sufferers entered into an agreement with the appellant, and as such, they too settled their claims."
In C.B.I, ACB, Mumbai v. Narendra Lal Jain and others (1 supra) the Apex Court held as under:-
"10. In the present case, as already seen, the offence with which the accused-respondents had been charged are under Section 120- B/420 of the Indian Penal Code. The civil liability of the respondents to pay the amount to the bank has already been settled amicably. The terms of such settlement have been extracted above. No subsisting grievance of the bank in this regard has been brought to the notice of the Court. While the offence under Section 420 IPC is compoundable the offence under Section 120- B is not. To the latter offence the ratio laid down in B.S. Joshi (supra) and Nikhil Merchant (supra) would apply if the facts of the given case 13 would so justify. The observation in Gian Singh (supra) (para 61) will not be attracted in the present case in view of the offences alleged i.e. under Sections 420/120B IPC."
Recently in Central Bureau of Investigation, New Delhi v. B.B.Agarwal and others (3 supra) the Apex Court held as under:
"12. The High Court was of the view that on resettlement of accounts, the parties obtained the consent decree from DRT and paid the entire sum, therefore, there is no live issue, which now survives. The High Court then examined the question as to whether the issue of criminality is involved so as to allow the trial Court to continue on its merits. After examining this issue with reference to charges and documents, the High Court held that no criminality issue is found involved notwithstanding the settlement of the case between the parties."
In the present case also during pendency of the investigation, the matter has been settled in terms of compromise and the entire amount has been paid. It is also not in dispute that the de facto complainant-bank has also issued certificates stating that there are no outstanding dues payable by Shakti Steels and Arien Steels Limited.
Considering the above settled law and also taking into consideration the fact that entire case involved default in repayment of debt to the bank and even before filing of the charge sheet, the liability to make good the monetary loss suffered by the de facto complainant-bank had been mutually settled between the parties and even though trial is commenced, but the material witnesses did not support the prosecution case and more time will be consumed to conclude the trial which is of no use that results in waste of time of the Court and public money, this Court finds that continuation of proceedings against the petitioners/A-1 to A-3 and A-9 would be an abuse of process of law.
14
Accordingly, the Criminal Petition is allowed and the proceedings initiated against the petitioners/A-1 to A-3 and A-9 in C.C.No.7 of 2007 on the file of the Special Judge for C.B.I. Cases, Hyderabad, are hereby quashed.
Miscellaneous petitions, if any, pending, shall stand closed.
_____________________ JUSTICE G. SRI DEVI 05.05.2020 gkv/Gsn 15