Calcutta High Court (Appellete Side)
Bipin Kumar Vohra & Ors vs The State Of West Bengal & Ors on 12 July, 2019
Author: Shivakant Prasad
Bench: Shivakant Prasad
IN THE HIGH COURT AT CALCUTTA
CRIMINAL REVISIONAL JURISDICTION
APPELLATE SIDE
Present : The Hon'ble Justice Shivakant Prasad
CRR 607 of 2018
With
CRAN 1510 of 2018
Bipin Kumar Vohra & Ors.
-Vs.--
The State of West Bengal & Ors.
For the Petitioner : Mr. S.N. Mookherjee
Mr. Ayan Bhattacharya
Mr. AnandKeshari
Mr. S.K. Chakraborty
Ms. Shivangi Thard
For the O.P. No. 2 : Mr. Debasish Roy
Mr. Sanjoy Banerjee
Mr. Dipak Dey
Mr. DipanjanDey
For the State : Mr. Sudip Ghosh
Mr. Apurba Kr. Dutta
Mr. Bitasok Banerjee
Heard On : 20.06.2019
C.A.V. On : 20.06.2019
Judgment On : 12.07.2019
SHIVAKANT PRASAD, J.
The petitioners have assailed the proceedings in G.R. Case No. 193 of 2018 in connection with New Township Police Station (NTS), Durgapur, Case No. 16 dated 10th February, 2018 under Sections 420/406 of the Indian Penal Code, 1860 pending before the Court of the learned Additional Chief Judicial Magistrate at Durgapur inter alia on the grounds that the allegations leveled in the FIR do not make out any offence against the petitioners as evident from the recital of the FIR that the instant proceeding is manifestly attended with malafide and do not make out any cause of action giving rise to initiation of an investigation in order to harass and humiliate the petitioners for oblique purpose.
Mr. S.N. Mookherjee learned counsel for the petitioners at the outset submitted that the instant prosecution has been engineered by the Opposite Party No. 2 to overreach the orders of an ad-interim order passed by the learned District Judge, South 24 Parganas at Alipore in Misc. Case No. 783 of 2017 whereby and whereunder MSTC Ltd., its men and agents were restrained from giving effect to the letters issued by MSTC Ltd. on 31.11.2017 and 12.12.2017.
It is further submitted that allegations leveled in the impugned First Information Report narrating the grievances of the Opposite Party No. 2 is predominantly civil in nature which has no criminal outfit and the instant prosecution has been launched by the Opposite Party No. 2 in clear breach of the terms of settlement arrived at by and between the parties on 19.07.2014 in order to expose the petitioners to chilling possibility of arrest, harassment and prosecution.
For proper appreciation of the instant case, certain facts are germane for consideration in this revision:
SPS is a reputed company involved in the business of Iron and Steel Goods including Sponge Iron, Pig Iron, TMT Bar. The annual turnover of SPS was not less than Rs. 546 Crores. In order to enhance the business potential of SPS and at the invitation of MSTC, SPS and MSTC had entered into an agreement on 2nd March, 2010 whereby MSTC agreed to facilitate purchase goods from international and indigenous sources through the agreement. The agreement further provided that the goods so purchased through MSTC would be stored in the stockyard of SPS under the custody of a nominee of MSTC. The agreement further provided that SPS would be the owner of the goods stored in the warehouse. However, such goods were to remain pledged by SPS in favor of MSTC till physical delivery of such goods to SPS by the custodian thereof. The physical delivery of the goods under the said agreement was to be effected subject to a tripartite agreement to be entered into by and between SPS, MSTC and one M/s. Transafe Services Ltd., custodian of the goods, nominated by MSTC.
Accordingly, a tripartite agreement was entered into amongst SPS Steels Rolling Mills Ltd., MSTC and M/s. Transafe Services Ltd. on 2nd March, 2010.
Upto 30th September, 2013, there was no grievance of either of the parties regarding arrangement and lifting of goods. Substantial quantity of pledged materials had been lifted by SPS after making payments of the value thereof to MSTC.
On 30th September, 2013 materials valued at approximately Rs.266.17 crores remained pledged with MSTC, in accordance with the principal agreement, M/s. Transafe Services Ltd. was replaced by another company viz.
M/s. Ferro Scrap Nigam Ltd. (FSNL) as nominated and desired by MSTC. So another fresh tripartite agreement was entered into by and between MSTC, SPS and FSNL on 24th May, 2013.
In the meantime, on account of volatile condition in the international market, SPS suffered huge loss. SPS requested MSTC to pay off its dues by way of installments but MSTC rejected such proposal of SPS and dispute arose between MSTC and SPS which compelled SPS to refer the dispute to arbitration by filing an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the Court of the learned District Judge, South 24 Praganas at Alipore which was registered as Title Suit No. 51 of 2013 (SPS Steels Rolling Mills Ltd. Vs. MSTC Ltd.) wherein by an order dated 10.06.2013, the learned District Judge directed the parties to maintain status quo in respect of the said goods. Subsequently, the said application was withdrawn by SPS in view of the arbitration agreement as contained in Clause 21.1 of the agreement dated 2nd March, 2010 and arbitral proceedings commenced before the Hon'ble Justice Aloke Chakraborty (Retd.), Sole Arbitrator which disputes were settled during the pendency of the proceedings.
Mr. Mookherjee learned counsel for the petitioners contended that the charge under Section 420 of the I.P.C. is not attracted as "cheating and dishonestly inducing delivery of property" which are the ingredients for bringing home charge under Section 420 I.P.C. as defined. 'Mens rea' to cheat from the very inception is the most vital ingredient which differentiates cheating simpliciter from breach of agreement because mere failure of a person to keep promise subsequently cannot be construed as culpable intention right at the beginning. A distinction between mere breach of contract and the offence of cheating is the intention of the accused at the time of inducement. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent and dishonest intention is shown at the beginning of the transaction.
Mere use of the expressions like 'cheating', 'deception', and 'inducement' is of no consequence.
Accordingly, it is submitted that, the story portrayed by the opposite party no. 2 in the complaint at the most project non-fulfillment of contractual obligation on the part of SPS for which the petitioners cannot be entangled.
As regards the charge under Section 406 of I.P.C, it is submitted that the offence is not attracted in the facts and circumstances of the instant case because provision of punishment for criminal breach of trust as defined under Section 405 of the I.P.C. is again misplaced in view of the allegations made in the FIR and the agreements as the petitioners had not been entrusted with any property of the opposite party no. 2 which could have been misappropriated by them in absence of an element of 'entrustment' and 'misappropriation' thereof and as such, no offence of criminal breach of trust can at all be said to have been committed.
It is also argued that the opposite party no. 2 has roped the petitioners in a criminal case without their specific role or participation in the alleged offence with the sole purpose of settling the dispute with SPS. The petitioners do not have any personal role in the allegations and no specific allegation with regard to their role has been made out in the FIR. In this regard, Mr. Mookherjee argued that the concept of vicarious liability is unknown to criminal law and relied upon the observations in the case of Asoke Basak vs. State Of Maharashtra & Ors.
2010 (10) SCC 660 on the scope and ambit of the jurisdiction of the High Court under Section 482 of the Code to the effect that "It needs little emphasis that although the jurisdiction of the High Court under the said provision is very wide but it is not unbridled. The High Court is required to exercise its inherent powers under Section 482 of the Code sparingly, carefully and cautiously, ex debito justitiae to do real and substantial justice and to prevent abuse of the process of court. One of the situations when the High Court would be justified in invoking its powers is where the allegations in the first information report or the complaint, as the case may be, taken at their face value and accepted in their entirety do not constitute the offence alleged. (See: R.P. Kapur Vs. State of Punjab16 and RupanDeol Bajaj &Anr. Vs. Kanwar Pal Singh Gill & Anr.17.) AIR 1960 SC 866 (1995) 6 SCC 194."
Section 405, IPC defines "criminal breach of trust" to mean:
"405. Criminal breach of trust.--Whoever, being in any manner entrusted with 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 wilfully suffers any other person so to do, commits "criminal breach of trust".
Explanation 1.--A person, being an employer of an establishment whether exempted under section 17of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), or not who deducts the employee's contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund established by any law for the time being in force, shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution.
Mr. Mookherjee, by inviting my attention to the petition of complaint and the formal FIR registered thereupon, argues that the Company has not been made a party and therefore the allegations are restricted to the Directors as the allegation made against the petitioners as the Managing Director and Directors of the company are in their personal capacity which really appears to be vague.He relies upon the observations made in following paragraphs of decision in Sharad Kumar Sanghi Vs. Sangita Rane (2015) 12 SCC 781 "2. Bereft of unnecessary details, the facts which are necessary to be stated are that the appellant who is the Managing Director of M/s. Sanghi Brothers (Indore) Ltd., Indore which is a registered company duly incorporated and registered under the Companies Act, 1956 and is engaged in the business of automobile sale, finance and shipping, etc. having branches at various places including the city of Bhopal. The respondent complainant obtained a quotation from the Bhopal branch for purchase of a TATA diesel vehicle model SFC 709/38 LB in the month of April 1998 and the vehicle was delivered to the respondent on 1-5-1998 on payment of the price deposited at Bhopal vide bank draft issued from State Bank of India, Sarni, Betul. The respondent faced difficulty with the vehicle and eventually he came to know in the month of August 2000 that there was a discrepancy in the engine number of the invoice issued to him. On further enquiry, he found that there is a letter issued by Tata Engineering and Locomotive Company (Telco) on 7-11-2000 that in the course of transit from the company to Bhopal, the said vehicle had met with an accident as a result of which the engine was replaced by another engine. Coming to know of this, the respondent filed a complaint under Section 200 Cr.P.C. alleging that M/s. Sanghi Brothers (Indore) Ltd., Indore being represented by the Managing Director, Sharad Kumar Sanghi, had suppressed the information and deliberately cheated the respondent.
5. Being aggrieved by the aforesaid order, he preferred an application under Section 482 Cr.P.C. before the High Court. It was contended before the High Court that the learned Magistrate had no territorial jurisdiction; that there was no deceit by the respondent; that the company was not made an accused in the complaint and, therefore, the complaint was not maintainable; and that there was no mens rea. The High Court, as is manifest from the order impugned repelled all the submissions and dismissed the application for quashment.
9. The allegations which find place against the Managing Director in his personal capacity seem to be absolutely vague. When a complainant intends to rope in a Managing Director or any officer of a company, it is essential to make requisite allegation to constitute the vicarious liability. In Maksud Saiyed v. State of Gujarat Maksud Saiyed v. State of Gujarat, 2008 5 SCC 668, it has been held, thus: (SCC p. 674, para 13)
11. In the case at hand as the complainant's initial statement would reflect, the allegations are against the Company, the Company has not been made a party and, therefore, the allegations are restricted to the Managing Director. As we have noted earlier, allegations are vague and in fact, principally the allegations are against the Company. There is no specific allegation against the Managing Director. When a company has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened under certain statutes. It has been so held by a three-Judge Bench in Aneeta Hada v. Godfather Travels and Tours (P) Ltd. in the context of the Negotiable Instruments Act, 1881.
13. When the company has not been arraigned as an accused, such an order could not have been passed. We have said so for the sake of completeness. In the ultimate analysis, we are of the considered opinion that the High Court should have been well advised to quash the criminal proceedings initiated against the appellant and that having not been done, the order is sensitively vulnerable and accordingly we set aside the same and quash the criminal proceedings initiated by the respondent against the appellant."
To fortify his arguments, Mr. Mookherjee further relied upon the decision in case of Sunil Bharti Mittal vs. CBI 2015 (4) SCC 609 with the submission that there are circumstances when a director or a person in charge of a company can also be prosecuted when the Company is an accused. But in the given facts of the case, the Company has not been arrayed as an accused. It is settled law that a corporate entity is an artificial person which acts through its officers, directors, managing director, chairman etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so.
It is argued that the proceeding under challenge was initiated on the basis of a complaint against the petitioners showing them as Managing Director and Directors of M/s. SPS Steel Rolling Mills Ltd. for unlawful removal, misappropriation and criminal breach of trust in respect of 19260.42MT of pig iron amongst other items but without arraying the Company as an accused.
Mr. Mookherjee has relied on a decision in case of M/s. Thermax Ltd. & Ors. vs. K.M.Johny & Ors. (2011) 13 SCC 412 to argue that there are certain situations where the wrong may be predominantly a civil wrong and may or may not amount to criminal offence and that in the instant case there is no criminal intention which can be gathered on perusal of the FIR. Because case in hand is essentially and predominantly civil in nature and it would be abuse of process of court to allow any further proceeding before a criminal court.
It has been observed in the following paragraphs by the Hon'ble Apex Court in case of Madhavrao Jiwaji Rao Scindia & Ors. vs. Sambhajirao Chandrojirao Ange & Ors. (1988) 1 SCC 692, thus-
"24 this Court, after pointing out the grounds on which the criminal proceedings be quashed under Section 482 of the Code at preliminary stage by the High Court highlighted that a case of breach of trust is both a civil wrong and a criminal offence. While elaborating the same, this Court further held that there would be certain situations where it would predominantly be a civil wrong and may or may not amount to criminal offence. Based on the materials in that case, the Court concluded that the case is one of that type where, if at all, the facts may constitute a civil wrong and the ingredients of the criminal offences are wanting.
42) We have already noted that the offence alleged in the criminal complaint filed by respondent No.1 is under Sections 405 and 420 IPC whereunder no specific liability is imposed on the officers of the company, if the alleged offence is by the Company. In the absence of specific details about the same, no person other than appellant No.1-Company can be prosecuted under the alleged complaint."
(See :Ajai Kumar Jain & Ors Vs The State Of West Bengal & Anr reported in 2016 SCC Online CAL 903).
Per contra: Mr. Debasish Roy, learned Counsel for Opposite party no. 2 and Mr Sudip Ghose, learned Counsel for the State Opposite party no. 1 have contended that the ingredients of offences under section 420/406 of IPC are not totally absent in the FIR. Whether or not allegations in the complaint are otherwise correct has to be decided on the basis of the evidence to be led at the trial in the complaint case but simply because of the fact that there is a remedy provided for breach of contract that does not by itself cloth the Court to come to a conclusion that civil remedy is the only remedy available to the petitioners. It is submitted that both civil as well as the criminal law remedy can be pursued in diverse situations as they are not mutually exclusive but coextensive and essentially differ in their content and consequence. The object of criminal law is to punish an offender who commits an offence against a person, property or the State for which the accused, on proof of the offence, is deprived of his liberty and in some cases even his life. This does not, however, affect civil remedies at all for suing the wrong doer in cases like arson, accidents etc. It is anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred and relied on the following paragraphs of decision in Trisuns Chemical Industry vs. Rajesh Agarwal And Others AIR 1999SC 3499:
"8. In the last referred case this court also pointed out that merely because an act has a civil profile is not sufficient to denude it of its criminal outfit. We quote the following observations: It may be that the facts narrated in the present complaint would as well reveal a commercial transaction or money transaction. But that is hardly a reason for holding that the offence of cheating would elude from such a transaction. In fact, many a cheatings were committed in the course of commercial and also money transactions.
9. We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring the disputes to arbitration is an effective substitute for a criminal prosecution when the disputed act is an offence. Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator cannot conduct a trial of any act which amounted to an offence albeit the same act may be connected with the discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold itself. The investigating agency should have had the freedom to go into the whole gamut of the allegations and to reach a conclusion of its own. Pre-emption of such investigation would be justified only in very extreme cases as indicated in State of Haryana vs. Bhajaj Lal (Supra)."
On behalf of the opposite party nos. 1 & 2 reliance is placed on the following paragraphs of the decision in M/s. Medchl Chemicals & Pharma P Ltd. vs. M/s. Biological E. Ltd. & Ors. AIR 2000 SC 1869 to argue that the power of the High Court to invoke inherent jurisdiction u/s. 482 of Code of Criminal Procedure to quash the criminal proceeding, being the FIR or Charge Sheet, at the initial stage should be exercised in exceptional cases.
"18.On careful reading of the complaint, in our view, it cannot be said that the complaint does not disclose the commission of an offence. The ingredients of the offences under Sections 415, 418 and 420 cannot be said to be totally absent on the basis of the allegations in the complaint. We, however, hasten to add that whether or not the allegations in the complaint are otherwise correct has to be decided on the basis of the evidence to be led at the trial in the complaint case but simply because of the fact that there is a remedy provided for breach of contract, that does not by itself clothe the Court to come to a conclusion that civil remedy is the only remedy available to the appellant herein. Both criminal law and civil law remedy can be pursued in divers situations. As a matter of fact they are not mutually exclusive but clearly co-extensive and essentially differ in their content and consequence. The object of criminal law is to punish an offender who commits an offence against a person, property or the State for which the accused, on proof of the offence, is deprived of his liberty and in some cases even his life. This does not, however, affect civil remedies at all for suing the wrongdoer in cases like arson, accidents etc. It is anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred. The two types of actions are quite different in content, scope and impart [vide Pratibha Rani v. Suraj Kumar (supra)]."
Mr. Roy further referred to a case in Lalmuni Devi vs. State Of Bihar & Ors. 2001(2) SCC 17 and relied on the observation in the following paragraphs-
"8. There could be no dispute to the proposition that if the complaint does not make out an offence it can be quashed. However, it is also settled law that facts may give rise to a civil claim and also amount to an offence. Merely because a civil claim is maintainable does not mean that the criminal complaint cannot be maintained. In this case, on the facts, it cannot be stated, at this prima facie stage, that this is a frivolous complaint. The High Court does not state that on facts no offence is made out. If that be so, then merely on the ground that it was a civil wrong the criminal prosecution could not have been quashed."
Reliance is also made to a case of Kamaladevi Agarwal vs State of West Bengal and Ors. AIR 2001 SC 3846 wherein it has been held, "while exercising powers under Section 482 of the Code, the High Court should be slow in interfering with the proceedings at the initial stage and that merely because the nature of the dispute is primarily of a civil nature, the criminal prosecution cannot be quashed because in cases of forgery and fraud there is always some element of civil nature. In a case where the accused alleged that the transaction between the parties are of a civil nature and the criminal court cannot proceed with the complaint because the factum of document being forged was pending in the civil court, the court observed "accepting such a general proposition would be against the provision of law inasmuch as in all cases of cheating and fraud, in the whole transaction, there is generally some element of civil nature. However, in this case, the allegations were regarding the forging of the document and acquiring gains on the basis of such forged documents. The proceedings could not be quashed only because the respondents had filed a civil suit with respect to the aforesaid documents. In a criminal court the allegations made in the complaint have to be established independently, notwithstanding the adjudication by a civil court. Had the complainant failed to prove the allegations made by him in the complaint, the respondents were entitled to discharge or acquittal but not otherwise. If mere pendency of a suit is made a ground for quashing the criminal proceedings, the unscrupulous litigants, apprehending criminal action against them, would be encouraged to frustrate the course of justice and law by filing suits with respect to the documents intended to be used against them after the initiation of criminal proceedings or in anticipation of such proceedings. Such a course cannot be the mandate of law. Civil proceedings, as distinguished from the criminal action, have to be adjudicated and concluded by adopting separate yardsticks. The onus of proving the allegations beyond reasonable doubt, in criminal case, is not applicable in the civil proceedings which can be decided merely on the basis of the probabilities with respect to the acts complained of."
Bestowing upon the principles of law held in the cited decisions referred to by the rival parties, I am of the view that there is no straitjacket formula to consider a proceeding for to be quashed or not to be quashed but it is equally a principle of law that the facts scenario of the complaint has to be taken note of while construing as to whether the offences alleged have at all been committed. Therefore, it is apt to appraise the contents of the allegations made in the FIR and the circumstances leading to lodgement of the FIR against the Managing Director and Directors of the Company, as the company has not been arraigned as an accused in the FIR.
Mr. Mookherjee, learned Senior Counsel for the petitioners has argued by pressing in service pendency of an application under section 7 of Insolvency and Bankruptcy Code 2016 (in short I.B.C.) filed by Allahabad Bank. It appears from the order dated 22nd of December 2017 passed by the National Company Law Tribunal, Calcutta Bench that the said petition for initiation of corporation insolvency process under Section 7 of IBC was admitted and Mr. Vijaya kumar Iyer was appointed an interim resolution professional which reflects that moratorium under section 14 of IBC was considered by NCLT.
It would appear that the opposite party MSTC Ltd accepted payment of an aggregate sum of Rs. 1.30 crores on 2nd December, 2017 and further sums of Rs. 20 lakhs and Rs. 30 lakhs and also Rs. 50 lakhs on 12th of December 2017, 22nd December, 2017 and 26th December, 2017 respectively but did not release any material as it was obliged in accordance with the terms of the award dated 19th July, 2017 read with the written terms of settlement dated 3rd of November, 2017. Yet, the opposite party no. 2 MSTC Ltd registered a complaint with the Officer in charge against the petitioners as the directors of M/s. SPSRM LTD alleging unlawful removal, misappropriation and criminal breach of trust in respect of 19,360.42 M.T. pig iron amongst other items.
In this context Mr. Roy and Mr. Ghosh appearing for the opposite parties argued that the criminal liability of a corporate body for acts committed by it through its Directors, Agents and Officials is well settled. The company does not have a mind to think or connive or hands to remove the unpaid pledge materials belonging to the complainant company MSTC. It is submitted that reference to the National Company Law Tribunal, Calcutta Bench of the said company is immaterial and it is irrelevant whether the complainant MSTC had participated in the proceedings as a creditors of a company pursuant to the Corporate Insolvency Resolution Process initiated against the company by the financial creditors of the company.
I am unable to agree with the contention raised by Mr. Roy and Mr. Ghosh inasmuch as I find in affidavit in opposition to CRAN 1510 of 2018 and its annexures that the MSTC participated in such Corporate Insolvency Resolution Process and filed an application before NCLT, inter alia, praying for confirming the status of the claim of MSTC complainant as a secured creditor in priority to the claims of the financial creditor and that to declare outstanding claims of Rs.300.44 crores arising out of transactions with the respondent company SPS Steel Rolling Mills and further prayed for to remove or utilise any material held on pledge without prior permission. The contentions made before the NCLT is to the effect that the MSTC Ltd being the operational creditor should be given priority in payment over that of the financial creditors as per amendment of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process For Corporate Persons) Regulations 2016 amended vide the Fourth Amendment dated 5th October, 2018.
Therefore, mere claim for investigation into the matter by Police Agency should not be allowed as the opposite party no.2 was well aware of the arbitration award in terms of settlement, the order of injunction in a Miscellaneous case under Section 9 of Arbitration and Conciliation Act, 1996 before the Court of District Judge, Alipore and the proceeding under IBC before NCLT. It is settled principle of law that IBC is a complete code providing jurisdiction of a special Court for inquiry and trial in respect of offences committed as alleged under the said Code.
Plain reading of the allegation made in the complaint would reveal that pursuant to the agreements dated 2nd March, 2010 and addendum dated 25th of August, 2017 between MSTC and SPS steel Rolling Mills Ltd, MSTC agreed to stock pig iron for the said SPS steel Rolling Mills Ltd under the said agreement. The essential terms of the said agreements provide that MSTC will finance the procurement of materials for and on behalf of SPS steel Rolling Mills Ltd and upon such procurement the same shall be pledged by SPS in favour of MSTC for being released from time to time from the designated stockyard against retail authorisations by MSTC.
In pursuance of the terms of the agreement, the pledged materials are to be kept under custody of third-party custodian i.e. M/s. Ferro Scrap Nigam Ltd (FSNL in short). It further reveals that on receipt of the payments from SPS steel Rolling Mills Ltd materials are to be released by MSTC from time to time to SPS steel Rolling Mills Ltd from custody of such third party custodian. Accordingly a tripartite agreement dated 24th of May 2013 was executed between MSTC, SPS Steel Rolling Mills Ltd and FSNL.
It is alleged that in terms of the aforesaid agreement on or about November, 2017 the SPS Steel Rolling Mills Ltd illegally removed/consumed 19360.42M Pig Iron amounting to more than Rs. 65 crores which were kept under pledge to MSTC by SPS Steel Rolling Mill Limited by letter dated 27.11.2017. It is further alleged that the said SPS Steel Rolling Mills wrongly informed regarding shortage of the materials by way of waste or inadvertent consumption by SPS Steel Rolling Mills Ltd.
Accordingly the complaint was lodged to the effect that the petitioners have acted in breach of the agreement and trust reposed on them illegally by consuming the materials or by removal of the same causing wrongful loss to the MSTC. Mr. Mookherjee, learned senior counsel for the petitioners has invited my attention to the first agreement dated 02.3.2010 between the petitioners and opposite party no. 2 containing an arbitration clause 20 that in the event of any dispute, difference between the parties relating to the interpretation, construction, fulfilment or otherwise of the agreement, such dispute or difference shall be settled by the process of arbitration by a sole arbitrator to be appointed by the Chairman cum Managing Director of MSTC Ltd and further adverted my attention to a tripartite agreement dated 2nd day of March, 2010 between MSTC , SPS Steel Rolling Mills Ltd and Transafe Services Ltd. which relates to receipt, storage ,custody and issue of pledged materials.
Said tripartite agreements clearly spell out that the SPS Steel Rolling Mills has to arrange for a warehouse with well-developed open space which is to be given to MSTC for warehousing of the raw materials and MSTC thereafter shall become the Licensee for a period of one year from the date of the agreement and pledged goods are to be fully lifted, and MSTC self-paced sum of Rs.10 per month as consolidated license fees to FSNL, however, the agreement was to remain in force with effect from February, 2010 i.e. from the date of arrival of the stock under custody of Transafe services Ltd. and the developed warehouse has to be handed over to transit, however, running cost of these facilities was to be borne by the SSRML. But the complainant opposite party no.2 and its nominated representative had unfettered access to the warehouse. Clause 5 of tripartite agreement reflects that on receiving possession of the said warehouse, MSTC will hand over the warehouse to TRANSAFE for the purpose of inventory and storage of the materials and any other items brought by MSTC for SSRML. It also reveals that supervision of unloading, checking, and delivery at and from designated warehouse has to be done by Transafe and to maintain proper records and registers for incoming and outgoing materials. Security round-the-clock was also provided by Transafe.
Clause 9 of the agreement provides that SPSRML shall arrange for transit insurance of the materials from the dispatch port to the designated Warehouse as well as Storage Insurance of the materials for theft, burglary, fire and pilferage etc. Storage Insurance shall be valid till the period the said material is being lifted by SSRML. Both Transit as well as the Storage Insurance shall mention MSTC as beneficiary. Original Insurance Policies shall be provided by SSRML to M/s. TRANSAFE before effecting the movement of goods from the port. M/s. TRANSAFE shall hand over such policies to MSTC in case of any claim. Clause 11 specifically provides that deliveries of the materials shall be allowed by TRANSAFE to SSRML only against authorisation letter issued by MSTC to TRANSAFE. Such delivery shall be made by TRANSAFE to SSRML between 9 AM to 5 PM & weekly & restricted holiday is applicable. In the said tripartite agreement, clause 15 provides for arbitration clause that in case of any dispute under the agreement the parties to the dispute shall appoint an arbitrator and appointed arbitrator shall nominate an umpire and they would constitute an arbitral tribunal to decide the procedure for holding the arbitration.
My attention is also drawn to various clauses 2, 3, 4, 5, 11, 12 and15 of the third agreement entered on 24th day of month of May 2013 between MSTC LTD., FERRO SCRAP NIGAM LTD. and SPS STEEL ROLLING MILLS LTD. to argue that the disputes between the petitioners and opposite party no. 2 is essentially a civil dispute. It reveals that warehousing area will be 50m X 50m approximately inside plant premises and in case of increase in area/volume of material/type of material in future, service charges will be revised after mutual discussion.
Clause 2 provides that MSTC shall use the said warehouse for one year from 10/04/2013 or till the pledged goods are fully lifted, whichever is later and shall pay token sum of Rs.10/- per month as consolidated license fee to SPS. Clause 5 provides that on receiving the possession of the said warehouse/stockyard in ready to operate conditions, MSTC shall hand over the said warehouse/stockyard to FSNL for the purpose of inventory and storage of the materials bought by MSTC for SPS and pledged by SPS to MSTC. The unloading/loading and physical handling of the material whether at the time of receipt or delivery or during any periodic stock verifications shall be done by SPS. Supervision of unloading, checking and delivery at/from the designated warehouse/stockyard will be done by FSNL and FSNL shall also maintain proper records and registers for incoming and outgoing of material.
It is curious to note that FSNL has not been made party to the petition of complaint whereas clause 11 clearly provides that deliveries of materials shall be allowed by FSNL to SPS only against authorisation letter issued by MSTC to FSNL. Further, clause 12 provides that FSNL shall keep and maintain proper registers and records with regard to nature and quantity of material received, issued and kept in the warehouse/stockyard and FSNL shall send weekly stock report to MSTC by FAX/E-mail and in case of any anomaly/variations observed, it shall be immediately informed and reported to MSTC. This third agreement also provides for arbitration clause for referring any dispute or differences between the parties for settlement by process of arbitration of a Sole Arbitrator to be appointed by the Chairman -cum Managing Director of MSTC.
Mr. Mookherjee adverted my attention to the minutes of the 11th sitting of the parties held by Sole Arbitrator on July 19, 2014 which reflects that the award was passed in terms of the settlement arrived by and duly signed by the representatives of the parties and also by their learned advocates. Terms of settlement being part of the award reveals that there was balance of Rs. 276.92 crores to be paid. My attention is specifically invited to clause 10 and 11 of the Terms of Settlement which provides thus:
"10. Material proportionate to the payment received shall be released through the custodian at the revised issue price calculated as on 30.06.14. Shortages, if any, shall be to the account of respondent only.
11. In addition to the payment as aforesaid, the respondent agrees and undertakes to pay a sum of Rs.1 lakh only per month to the claimant toward reimbursement of custodian charges which shall be paid on demand, till the total material as per books of MSTC Ltd is lifted. Volumetric assessment of material will be done by the claimant through an independent inspection agency within the panel of MSTC in consultation with the respondent herein every year in the month of February. If any shortage detected beyond the tolerance limit, as may be mentioned in the relevant Volumetric Assessment report, the value of such shortage will be paid by the respondent to the claimant herein immediately and in default the respondent shall pay the value of such shortage as per issue price within six months, which claimant shall adjust against the subsequent instalments due from the respondent company in terms hereof. In any event, the claimant shall not be liable for such shortage."
It is submitted that in view of the award in terms of settlement being the part of the award, the respondent indubitably agreed and undertook to withdraw the Title Suit No. 51 of 2013 pending in the court of the learned District Judge Alipore 24- Parganas (s) and to communicate the order of withdrawal to the claimant or its advocate forthwith which is reflected from the clause 16 of the terms of settlement and in terms thereof the suit was withdrawn in which the opposite party no. 2 MSTC and its men and agents were restrained. It would also reveal from the order dated May 8, 2016 of the sole arbitrator that in view of the settlement, the application under Section 17 of the Arbitration and Conciliation Act, 1996, the award dated November 3, 2017 in terms of the terms of settlement, the petitioners and the opposite party no.2 had mutually agreed to protect interest of both the parties and the terms of the award dated 19th of July, 2014 was modified providing for the terms and the manner in which the payment of Rs. 216.92 Crores as on 16 May 2017 was due and payable to MSTC, however, all other terms of the Award dated 19th July, 2014 remained in full force and effect.
Accordingly, it is submitted with force that there is no element of cheating on the part of the petitioner since inception of the agreement entered by and between the petitioners and the opposite party no. 2 and question of misappropriation alleged by the complainant does not find place to bring home the charges under section 420 and 406 of the Indian Penal Code.
It would be apt to reproduce the extracts of the letter Ref.No. SSR ML/MSTC/11/27/2017/01 dated 27.11.20174 for profitable consideration which reads thus:
"As you know in terms of award dated July 19, 2014 read with order dated May 8, 2016 and in terms of settlement taken on record by the said order as well as the award dated November 3, 2017, we have been regularly making payments of Rs.2 crores to you against which you have been releasing players materials. Accordingly, upon our making payment, you issued release order dated October 26, 2017 for 920.227 MT & November 2, 2017 for 922.437MT of pig iron.
Consequently, at our end, necessary instructions were issued to obtain release of the said material and utilise the same. However, we were informed by our representative at Durgapur factory that the quantity of the pig iron appeared to be far less than the quantity found on April1, 2017 at the time of verification in presence of representatives of all concerned.
In view of such report, we caused an enquiry to be made and have found that there is shortage of approximately 19,500 metric ton of Pig Iron. Such shortage has occurred by reasons of wastage and/or inadvertent consumption. We are in process of ascertaining the circumstances under which such shortage has taken place and would keep you posted with the developments in respect thereof. In the meantime, considering the fact that clause 11 of the terms of the settlement filed on July 19, 2014 provides that " if any shortage is detected beyond the tolerance limit, as may be mentioned in the relevant Volumetric Assessment report, the value of such shortages will be paid by the respondent to the claimant herein immediately and in default the respondent shall pay the value of such shortage as per issue price within six months, which claimant shall adjust against the subsequent instalments due from the respondent company in terms hereof. In any event, the claimant shall not be liable for such shortage", we deem it our duty to bring the aforesaid facts to your notice."
The said communication was made by SPSRML to the Chairman and Managing Director of MSTC Ltd with a copy to General Manager (Marketing) MSTC. It clearly exhibits that the petitioners had no criminal intention to cheat the opposite party no.2 /complainant from very inception of the said tripartite agreements entered by and between them.
Having gone through the observations of the Hon'ble Supreme Court in the cited decisions; I fully agree with contentions of Mr. Mookherjee that it is well settled principle of law that the concept of 'vicarious liability' is unknown to criminal law save and except in certain enactments, such as, Section 141 of the Negotiable Instruments Act, 1881 which specifically provides that if the person committing an offence under Section 138 of the Act 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. Likewise, Section 32 of the Industrial Disputes Act, 1947 provides that where a person committing an offence under this Act is a company, or other body corporate, or an association of persons, every director, manager, secretary, agent or other officer or person concerned with the management thereof shall, unless he proves that the offence was committed without his knowledge or consent, be deemed to be guilty of such offence.
It is argued that the offence alleged in the instant case filed by the opposite party no. 2 is under Sections 406 and 420 of the I.P.C. where under no specific liability is imposed even on the officers of SPS, if the alleged offence is committed by the said company. In the absence of specific details about the same, no person other than SPS can be prosecuted under the impugned FIR and reference is made to a decision of the Hon'ble Supreme Court in Vesa Holdings P. Ltd. & Anr. vs. State Kerala & Ors. 2015 (8) SCC 293 to the observations in the following paragraphs -
"12. From the decisions cited by the appellant, the settled proposition of law is that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In other words for the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of the Indian Penal Code can be said to have been made out.
13. It is true that a given set of facts may make out a civil wrong as also a criminal offence and only because a civil remedy may be available to the complainant that itself cannot be a ground to quash a criminal proceeding. The real test is whether the allegations in the complaint disclose the criminal offence of cheating or not. In the present case there is nothing to show that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420 IPC. In our view the complaint does not disclose any criminal offence at all. Criminal proceedings should not be encouraged when it is found to be malafide or otherwise an abuse of the process of the court. Superior courts while exercising this power should also strive to serve the ends of justice. In our opinion, in view of these facts allowing the police investigation to continue would amount to an abuse of the process of court and the High Court committed an error in refusing to exercise the power under Section 482 Criminal Procedure Code to quash the proceedings."
Pursuant to the terms of the agreement, the pledged materials are to be kept under the custody of 3rdparty custodian i.e. M/s. Ferro Scrap Nigam Ltd (FSNL in short). It further reveals that on receipt of the payment from SPS Steel Rolling Mills Ltd' materials are to be released by MSTC from time to time to SPS Steel Rolling Mills Ltd from the custody of such 3rd party custodian. Accordingly, a tripartite agreement dated 24th of May 2013 was executed between MSTC, SPS Steel Rolling Mills Ltd and FSNL.
In the context of what has been discussed above and taking cue from the principle of law laid down by the Hon'ble Apex Court particularly in Medchl Chemical & Pharma (supra), I find that there is no element of cheating on the part of the petitioner since inception of the agreement entered by and between the petitioners and the opposite party no. 2 and question of misappropriation alleged by the complainant does not find place to bring home the charges under Sections 420 and 406 of the Indian Penal Code. Since 'mens rea' to cheat from the very inception is the most vital ingredient which differentiates cheating simpliciter from breach of agreement because mere failure of a person to keep promise subsequently cannot be construed as culpable intention right at the beginning.
At the conclusion of the argument, Mr. Debasish Roy, learned counsel for the opposite party no. 2 candidly submitted that in the said insolvency proceedings before the National Company Law Tribunal, Kolkata, MSTC is receiving its dues.
I do find that offence under Section 406 IPC is also not evident in the given facts of the case as the entrustment of any material with the Petitioners, in particular is missing, rather, this Court finds that as per the tripartite agreement, at the first instance, M/s. Transafe was the custodian of the material stored in the warehouse provided by the Petitioners' Company and thereafter FSNL was inducted by a second tripartite agreement to hold the stock in the warehouse provided by the Petitioners' Company. Therefore it cannot be said that the materials being pig iron, etc. were stored under the custody of entrusted with the Petitioners.
This fact cannot be lost sight of that the Petitioners had instituted a Title Suit in the Court of District Judge, Alipore wherein the Complainant MSTC and its men and agent were injuncted from giving effect to letter issued by MSTC and MSTC entered into an agreement with the Petitioners on certain conditions and the Petitioners had agreed to withdraw the said suit. Accordingly, the suit was withdrawn at the instance of MSTC.
For the aforesaid reasons discussed in the foregoing paragraphs, I hold that the complaint against the Petitioners does not disclose allegations of cheating under Section 420 and misappropriation of any property under Section 406 I.P.C. and the complaint appears to have been lodged to give vent vindictiveness of the officials of MSTC through a legal process because the dispute between the parties is essentially Civil dispute which is under the process of Insolvency proceeding, hence, continuance of the proceeding would amount to misuse of the process of the Court.
Ergo, the proceeding in G.R. Case No. 193 of 2018 in connection with New Township Police Station (NTS), Durgapur, Case No. 16 dated 10th February, 2018 under Sections 420/406 of the Indian Penal Code, 1860 pending before the Court of the learned Additional Chief Judicial Magistrate at Durgapur is hereby quashed.
Accordingly, revisional application being CRR 607 of 2018 and CRAN 1510 of 2018 are disposed of.
Urgent certified photocopy of this Judgment, if applied for, be supplied to the parties upon compliance with all requisite formalities.
(SHIVAKANT PRASAD, J.)