Madras High Court
K.Varadharajulu Naidu vs State Rep By on 13 October, 2014
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 13.10.2014 CORAM: THE HONOURABLE MR.JUSTICE S.NAGAMUTHU Crl.O.P.Nos.29778 & 29366 of 2013 and M.P.No.1 of 2013 Crl.O.P.No.29778 of 2013 K.Varadharajulu Naidu .. Petitioner - Vs - State rep by The Inspector of Police, Central Crime Branch, Team-II, Egmore, Chennai - 600 008. .. Respondent Prayer:- Criminal Original Petition filed under Section 482 of the Code of Criminal Procedure calling for the records in C.C.No.3862 of 2013 on the file of the learned Chief Metropolitan Magistrate, Egmore, Chennai and quash the same. For Petitioner : Mr.N.R.Elango SC for Mr.R.Vivekananthan For Respondent : Mr.M.Maharaja Addl. Public Prosecutor For intervenor : Mr.A.Natarajan, SC for Ms.A.Madhumathi Crl.O.P.No.29366 of 2013 M.Sathish .. Petitioner - Vs - 1. State by The Inspector of Police, Central Crime Branch, Team-II, Egmore, Chennai - 600 008. 2. Mrs.Ramah @ Ramah Iyengar (Impleaded as R2 as per order dated 10.01.14 in M.P.No.1/2013 .. Respondents Prayer:- Criminal Original Petition filed under Section 482 of the Code of Criminal Procedure to set aside the docket order passed by the learned Chief Metropolitan Magistrate, Egmore, Chennai in Crl.M.P.No.4862 of 2013 dated 16.08.2013 and direct the learned Magistrate to include the second accused Mrs.Ramah in the case. For Petitioner : Mr.A.Natarajan, SC for Ms.A.Madhumathi For Respondent 1: Mr.M.Maharaja Addl. Public Prosecutor For Respondent 2: No appearance - - - - - C O M M O N O R D E R
The petitioner in Crl.O.P.No.29778 of 2013 is the sole accused in C.C.No.3862 of 2013 on the file of the learned Chief Metropolitan Magistrate, Egmore, Chennai. The learned Magistrate has taken cognizance on the final report filed by the respondent police for offence under Section 420 of I.P.C. Seeking to quash the said criminal proceedings, the petitioner is before this Court with the criminal original petition in Crl.O.P.No.29778 of 2013.
2. In the F.I.R., apart from the petitioner in Crl.O.P.No.29778 of 2013, yet another person by name Mrs.Ramah @ Ramah Iyengar was arrayed as the second accused. But in the final report, the respondent police omitted her. On receipt of notice from the learned Magistrate, the petitioner in Crl.O.P.No.29366 of 2013 / the defacto complainant filed a protest petition opposing the omission of the said accused and the same was treated as a private complaint. But the learned Magistrate simply passed a one line order in Crl.M.P.No.4862 of 2013 dated 16.08.2013, to the following effect:
Taken on file Challenging the said order dated 16.08.2013, the petitioner in Crl.O.P.No.29366 of 2013 is before this Court.
3. Since common issues were raised in both these cases, they were heard together and are disposed of by means of this common order.
4. The facts of the case is as follows:
(i) The petitioner in Crl.O.P.No.29366 of 2013 is the defacto complainant in Crime No.459 of 2012. During the relevant point of time, the petitioner in Crl.O.P.No.29778 of 2013 (Accused No.1) was the Managing Director of a company known as M/s.Skat India Cloth Apparels Pvt. Ltd. The said company owned a building bearing Plot No.3, Door No.123/1, Bharathi Nagar, Redhills Road, Oragadam, Ambattur, Chennai 53, measuring an extent of two grounds. It was a vacant site.
(ii) The defacto complainant approached the petitioner and offered to purchase the said property. The first accused also agreed for the same. On negotiation, the sale consideration was fixed at Rs.2,75,00,000/-. At that time, the first accused disclosed to the defacto complainant that the said property had been mortgaged with the Allahabad Bank, Industrial Finance Branch at Chennai for a sum of Rs.2,00,00,000/- roughly. The defacto complainant believed the same.
(iii) But according to the defacto complainant (vide F.I.R. and Statement under Section 161 Cr.P.C.) the first accused told the defacto complainant that the exact amount due to the bank on account of the said loan could be known only by verifying the accounts with the bank.
(iv) Accordingly, they went to the bank and they found that the total sum due to the said bank under three loan accounts was Rs.2,05,60,000/-. It was also ascertained that the title deeds pertaining to the property in question were all deposited with the bank by creating a "mortgage by deposit of title deeds" in respect of the three loan accounts.
(v) In order to ascertain the encumbrance on the property, the defacto complainant applied for encumbrance certificate and came to know that the total amount of loan under various accounts from M/s.Skat India Cloth Apparels Pvt. Ltd., was Rs.14,31,25,000/- including the above said sum of Rs.2,05,60,000/- due under the above three loan accounts.
(vi) The defacto complainant further claims that when asked whether the first accused would return the original title deeds, the first accused assured him that as soon as the above said due amount of Rs.2,05,60,000/- is paid to the bank, the original documents would be returned.
(vii) The first accused and the defacto complainant went to the bank and ascertained from the Senior Manager of the bank Mrs.Ramah (second respondent in Crl.O.P.No.29366 of 2013) that the amount due under the above stated three accounts was only Rs.2,05,60,000/-. She also said that if the said amount is paid, the title deeds pertaining to the property in question would be returned.
(viii) It is the further case of the defacto complainant that believing these versions, he agreed to purchase the property for the above said consideration as agreed upon. Accordingly, a demand draft was taken for Rs.2,05,60,000/- in the name of the bank and the balance amount was paid to the first accused.
(ix) After receiving the said amount, the first accused, based on the Board Resolution passed by the company, executed a sale deed in respect of the property in question to the defacto complainant.
(x) After execution of the sale deed, the defacto complainant demanded return of the original title deeds which had been earlier deposited with the bank. On few occasions, he has taken the first accused also to the bank and the bank manager also said that the documents would be returned. On one occasion, the Senior Bank Manager wanted the defacto complainant and the first accused to meet one Assistant General Manager Mr.T.L.Sudhindar. Mr.T.L.Sudhindar told him that there were some irregularities in the accounts of M/s.Skat India Cloth Apparels Pvt. Ltd. and they were being rectified. He further stated that the bank would return the documents after the accounts were corrected. Even thereafter, the documents were not returned. The bank declined to return the documents and stated that the documents could be returned to M/s.Skat India Cloth Apparels Pvt. Ltd., provided all the loan outstandings to the said bank from the said company were cleared.
(xi) It is pertinent to note that so far as the deposit of title deeds in respect of the property in question is concerned, the loan was cleared off. But the head office of the bank claimed that the bank has lien to retain the documents for want of clearing of the other loan dues to the bank. Therefore, the bank declined to return the documents.
5. On these allegations, a complainant was made against the petitioner (first accused) and the Senior Manager Mrs.Ramah (second respondent in Crl.O.P.No.29366 of 2013). During the course of investigation, the respondent police examined many witnesses including Mr.T.L.Sudhindar, Assistant General Manager of the above said bank. On completing the investigation, on getting satisfied with the above facts, the respondent Inspector of Police, laid the final report against the first accused viz., Mr.K.Varadarajulu Naidu alone. The learned Magistrate took cognizance of the offence and issued summons to Mr.K.Varadarajulu Naidu (Petitioner in Crl.O.P.No.29778 of 2013).
6. As I have already pointed out, the defacto complainant filed a protest petition as against the omission of Mrs.Ramah and finally the learned Magistrate, recorded as Taken on File. That is how both these petitions are before this Court.
7. I have heard Mr.N.R.Elango, learned senior counsel appearing for the first accused (petitioner in Crl.O.P.No.29778 of 2013), Mr.A.Natarajan, learned senior counsel appearing for the defacto complainant (petitioner in Crl.O.P.No.29366 of 2013) and Mr.M.Maharaja learned Additional Public Prosecutor appearing for the State. I have also perused the records carefully.
8. As I have already pointed out, the learned Magistrate has taken cognizance of offence under Section 420 of I.P.C. alone. Keeping in mind the facts which I have already narrated, let us have a quick look into the definition of the term cheating as defined in Section 415 of I.P.C., which reads as follows:
Section 415. 'Cheating' Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".
Explanation A dishonest concealment of facts is a deception within the meaning of this section."
9. A close reading of the said provision would make it clear that the act of the accused should amount to deception of any person and by means of such deception the person so deceived should have delivered any property to any person or to consent that any person shall retain any property. Such inducement of the deceived person should be by means of either fraud or dishonesty. In other words, to put it simply, the defacto complainant should have been deceived and he should have been induced either fraudulently or dishonestly to part with the money or enter into any sale agreement.
10. The term Fraud has been defined in Section 25 of the penal code, which reads as follows:
Section 25. "Fraudulently" A person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise.
11. Similarly, the term dishonestly is defined in Section 24 of the penal code, which reads as follows:
Section 24. "Dishonestly" Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing "dishonestly".
12. If we look into Sections 24 and 25 of the Indian Penal Code, to satisfy the term dishonestly there should be prima facie materials to infer that the intention of the accused was for wrongful gain to himself or wrongful loss to the defacto complainant. Similarly, in order to satisfy the term fraudulently there ought to be materials to infer that there was intention to defraud the defacto complainant.
13. Unless these ingredients are prima facie satisfied, by the materials collected during investigation, the prosecution cannot be allowed to proceed further.
14. In this case, in my considered opinion, none of the above ingredients as enshrined in Section 415 of I.P.C. is satisfied. For this conclusion, my reasons are as follows:
(i) Initially when the defacto complainant approached the first accused with an offer to purchase the property, the first accused did not deceive him in any manner and did not commit any fraud or dishonesty upon the defacto complainant. He had honestly said that the property was under mortgage with the bank and title deeds were with the bank only.
(ii) When the defacto complainant asked the first accused as to what was the exact amount due to the bank, the first accused stated that it must be roughly around rupees two crores and the exact amount could be known after verifying the accounts with the bank. In this statement, I do not find anything indicating dishonesty or fraud.
(iii) It is also in the statement of the defacto complainant that the first accused told that the company had a number of loan transactions with the bank and the total loan dues under various accounts may be around rupees sixteen crores. In making this statement, I do not find any material to infer there is fraud or dishonesty.
(iv) The defacto complainant thereafter verified the encumbrance certificate and came to know that a sum of Rs.14,31,25,000/- was due. Thus, the defacto complainant had knowledge that there were number of loan transactions and huge sum running to around Rs.14,31,25,000/- was due to the bank. Therefore, the defacto complainant cannot disown knowledge of the loan transactions and the exact amount due.
(v) Thereafter, it is stated that the first accused has taken the defacto complainant to the bank and from the bank, after verifying the accounts, they came to know that a sum of Rs.2,05,60,000/- was due under three loan accounts, for which the property in question was mortgaged by means of deposit of title deeds. The senior manager Mrs.Ramah also confirmed the same. Therefore, knowing fully well that the property in question is mortgaged only in respect of three accounts and the amount due in these three accounts is Rs.2,05,60,000/-, the defacto complainant entered into an agreement with the first accused to purchase the said property. Till this stage, I do not find any material to show that there is misrepresentation, fraud or dishonesty played on the part of the first accused.
(vi) When the defacto complainant asked about the parent documents viz., title deeds, it is alleged that the first accused told him that as soon as the entire sum of Rs.2,05,60,000/- is paid to the bank, the loan accounts would be settled and the title deeds would be returned. This representation was made by the first accused. Then they approached the bank. The bank manager also told that if Rs.2,05,60,000/-, for which the property in question is mortgaged, is paid the parent documents would be returned. Believing this, according to the case of the prosecution, the defacto complainant paid Rs.2,05,60,000/- to the bank by means of demand draft and the balance sale consideration to the first accused. As promised, the first accused after getting necessary resolution from the Board of Directors had executed the sale deed and the title for the property has been duly conveyed to the defato complainant.
15. Now, according to the learned senior counsel Mr.A.Natarajan, fraud or dishonesty is very obvious from the fact that the first accused told the defacto complainant that after Rs.2,05,60,000/- is paid the loan accounts would be cleared and the documents would be returned. According to the learned senior counsel, later on the bank declined to return the documents. Being a regular customer of the bank, the first accused would have known that the documents won't be returned because the loan outstanding from other accounts, pertaining to the mortgage, if not paid, the documents won't be returned, he contended.
16. In this regard, the learned senior counsel Mr.N.R.Elango appearing for the first accused would take me through the documents viz., the letter addressed by the Assistant General Manager Mr.T.L.Sudhindar, who was cited as one of the witnesses. He has sent a letter to the Deputy General Manager, Zonal Office, Chennai informing the clearing of the loan amount of the above stated three accounts by paying a sum of Rs.2,05,60,000/-. In the said letter it is stated as follows:
Commencement of repayment in both the term loans (IV & V) has been synchronized to be effective from 01.01.2012 and the account has been considered as restructured once.
An amount of Rs.40.80 lakhs was disbursed in TL-V (Rs.21.35 lakhs on 31.01.2011 & Rs.19.45 lakhs on 02.02.2011) towards cost of construction direcctly to the contractor, upon realizing necessary margin.
Since no progress in construction was observed from the date of disbursement, a metting was called for with the Promoter in May 2011 who advised that the contractor has been demanding 20% hike in the contract value which the company found to be a stress on its financial arrangement. The company was advised to work out modalities for overcoming the problem and approach the bank with a concrete proposal in view of the fact that any further delay in completing the construction and commencement of repayment will attract adverse IRAC norms.
The company, vide their letter dated 09.09.2011 (copy enclosed) advised that they have decided to sell the Oragadam property and have deposited DDs aggregating to Rs.205.59 lakhs from a prospective buyer and requested for release of mortgage charge. The company is agreeable to close all the existing term loans from sale proceeds.
The company's request has been examined by us in terms of collateral security coverage and the same was found favourable as per computation given below (Rs./Lakhs):
Particulars Existing collateral coverage Collateral coverage upon release Limits PC: 460.00 CC: 90.00 FBP/N: 600.00 TL-II: 11.57 TL-IV: 157.78 TL-V : 206.92 LC : 100.00 BG : 15.00 Total: 1641.27 PC: 460.00 CC: 90.00 FBP/N: 600.00 LC : 100.00 BG : 15.00 Total: 1265.00 Collateral Security: WDV of Plant & Machinery (as per ABS 2010): Land & Building at Arumbakkam (Valuation report dated 26.04.2008): Land at Oragadam: Total :
170.69 436.35 156.00 763.04 170.69 436.35 0.00 607.04 Security Coverage 46.49% 47.99% Collateral Security coverage based on residual values:
WDV of Plant & Machinery (as per ABS 2010):
Land & Building at Arumbakkam: Land at Oragadam: Total :
159.12 424.78 0.00 587.90 170.69 436.35 0.00 607.04 Security Coverage 35.82% 47.99% Since the Demand Drafts sent in clearing will be realized by 12.09.2011 and we may have to release the title deeds to the company, we request you to permit us to release the Oragadam property after closing all the term loan accounts from sale proceeds.
Kindly accord your approval at the earliest.
17. Referring to this, the learned senior counsel Mr.N.R.Elango submitted that the first accused believed the bank that after the loan amount of the three accounts were cleared, the documents would be returned. Regarding this, there can be no dispute. On the part of the bank also, the Assistant General Manger Mr.T.L.Sudhindar, stated in his submission that the documents were liable to be returned because the loan was cleared and that is reflected in the letter to the Zonal Office seeking permission to release the documents. But the Zonal Office informed him not to release the documents because there were other loan outstanding to the bank, which does not fall outside the scope of the loan transaction for which mortgage was created in that property. The learned senior counsel would submit that the bank was not right in retaining the documents and therefore the first accused had initiated civil proceedings before the Debts Recovery Tribunal for the return of the documents. He would further submit that as soon as the documents were returned by the bank, the same would be handed over to the defacto complainant.
18. In my considered opinion, I find every justification in the said statement made by the learned senior counsel Mr.N.R.Elango. It is not as though the representation made by the bank manager and the first accused would amount to deception or fraud or dishonesty. Since the entire loan amount pertaining to the loan transactions in question was settled, the first accused believed that the documents would be returned and the bank manager also confirmed that the documents would be returned. Thereafter, the Zonal Office of the bank had informed that the bank has got lien over the documents and refused to return the documents. It is only because of this reason, the documents could not be returned.
19. From the above narrations it could be clearly ascertained that at no point of time, either the first accused or the bank manager (the second accused in the F.I.R.) had made any false representation reflecting dishonesty or fraud. I do not find any materials to show even a semblance of deception played by the first accused or the second accused. It is ipso facto clear that the dispute is purely civil in nature.
20. The learned senior counsel Mr.A.Natarajan would submit that having parted with the entire sale consideration, the defacto complainant is not able to develop the property and the defacto complainant has suffered huge loss on account of the same. I find every justification in the said submission of the learned senior counsel. But this will not make out an offence of cheating. In this regard, the remedy for the defacto complainant lies only before the Civil Court.
21. In the present proceedings, we are not concerned with the liability of the first accused to return the documents and the liability of the first accused to pay compensation to the defacto complainant for his failure to return the documents by getting the same returned by the bank. We are concerned in this case only with the offence of cheating. As I have already pointed out, the admitted facts and the available records, on the face of it, do not make out an offence under Section 420 of I.P.C. because the allegations made do not satisfy any of the ingredients of Section 415 of I.P.C. As has been held by the Hon'ble Supreme Court in State of Haryana Vs. Bhajan Lal reported in 1992 Supp (1) SCC 335, this is a fit case where this Court should exercise its inherent power to quash the entire proceedings because absolutely there is no material warranting trial of either the first accused or the second accused. This case, in my considered opinion, is clearly an abuse of process of law. Therefore, I am inclined to quash the proceedings in C.C.No.3862 of 2013 on the file of the learned Chief Metropolitan Magistrate, Egmore, Chennai.
22. Since I am quashing the case in C.C.No.3862 of 2013, the Crl.O.P.No.29366 of 2013 is liable to be dismissed because there is no material to make out any offence of cheating on the part of the second respondent Mrs.Ramah @ Ramah Iyengar.
23. In the result,
(i) The Crl.O.P.No.29778 of 2013 is allowed and the proceedings in C.C.No.3862 of 2013 on the file of the learned Chief Metropolitan Magistrate, Egmore, Chennai is hereby quashed.
(ii) The Crl.O.P.No.29366 of 2013 is dismissed.
Consequently, the connected miscellaneous petition is closed.
13.10.2014 Index: Yes kk S.NAGAMUTHU,J.
kk To
1. The Inspector of Police, Central Crime Branch, Team-II, Egmore, Chennai - 600 008.
2. The Public Prosecutor, Madras High Court.
Crl.O.P.Nos.29778 & 29366 of 2013 and M.P.No.1 of 2013 13.10.2014