Karnataka High Court
Sri Naveen Reddy vs Mr Jagannath Vainatheya Prasanna on 21 June, 2023
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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NC: 2023:KHC:21590
CRL.P No. 3540 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF JUNE, 2023
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CRIMINAL PETITION NO. 3540 OF 2022
BETWEEN:
SRI NAVEEN REDDY
S/O B.CHENNA REDDY,
AGED ABOUT 53 YEARS,
DOOR NO.84, 6TH MAIN
36TH CROSS, 5TH BLOCK,
JAYANAGAR,
BENGALURU - 560 011.
...PETITIONER
(BY SRI S.MAHESH, ADVOCATE)
AND:
Digitally signed MR. JAGANNATH VAINATHEYA PRASANNA
by PADMAVATHI S/O LATE SRI B.S.JAGANNATH,
BK
Location: HIGH AGED ABOUT 69 YEARS,
COURT OF NO.1501 A, ASPEN TOWER 2,
KARNATAKA
GODREJ WOODMAN ESTATE,
HEBBAL, BELLARY ROAD,
BENGALURU - 560 024.
...RESPONDENT
(BY MS.GEETHA R. SHINDHE, ADVOCATE)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482
OF CR.P.C., PRAYING TO QUASH THE ENTIRE PROCEEDINGS
AS AGAINST THE PETITIONER IN C.C.NO.3581/2019 INITIATED
BY THE RESPONDENT PENDING BEFORE THE XXX
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NC: 2023:KHC:21590
CRL.P No. 3540 of 2022
ADDL.C.M.M., BENGALURU FOR THE OFFENCE P/U/S 420 OF
IPC.
THIS CRIMINAL PETITION, COMING ON FOR ADMISSION,
THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioner is before this Court calling in question an order dated 10.01.2019 and the proceedings in C.C.No.3581/2019, pending before the XXX Additional CMM, Bengaluru, by which, the learned Magistrate takes cognizance of the offences while rejecting the 'B' summary report filed by the police after investigation.
2. Heard Sri S. Mahesh, learned counsel for the petitioner and Ms. Geetha R. Shindhe, learned counsel for the respondent.
3. Facts in brief, germane, are as follows:
A partnership firm in the name and style of 'Citi Lubs' gets reconstituted in terms of execution of reconstitution deed dated 01.11.2014, between the petitioner and the respondent.
The respondent - complainant enters into the partnership as a partner and later, on 13.01.2016, resigns as a partner from the aforesaid firm. After 11 months of the resignation, venting out certain grievances, respondent seeks to register a complaint -3- NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 before the jurisdictional police. The registration of a complaint becomes a crime in Crime No.60/2017, for the offence under Section 420 of the IPC. The police conducted investigation and filed a 'B' summary report before the concerned Court on 26.09.2017. The respondent then protests against the filing of the 'B' summary report before the concerned Court. On 10.01.2019, the learned Magistrate takes cognizance of the offence under Section 420 of the IPC and issues summons to the petitioner. It is then the petitioner has knocked at the doors of this Court in the subject petition.
4. The petition having been entertained by this Court, granted an interim order of stay on 19.04.2022 and the same is in subsistence even as on date.
5. Learned counsel for the petitioner would contend that the matter which is purely civil in nature is sought to be given a colour of crime. A civil / commercial dispute between the petitioner - accused and the respondent - complainant forms the subject matter of the crime. He therefore would submit that the very registration of the crime and taking cognizance by the learned Magistrate, are unsustainable.
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6. Learned counsel for respondent would vehemently refute the submissions of the learned counsel for petitioner to contend that there has been inducement right from the inception of the transactions between the petitioner and the respondent, as the assurance that were given to the complainant are not fulfilled at all, by the petitioner and therefore, the petitioner has cheated the complainant by receiving Rs.84/- lakhs at the time of entry of the complainant into the partnership firm, on reconstitution of the partnership.
He would submit that the petitioner has to undergo trial and come out clean. He seeks dismissal of the petition.
7. I have given my anxious consideration to the submissions of the learned counsel for the parties and have perused the material on record.
8. The afore-narrated facts are not in dispute and requires no reiteration. The reconstitution of the partnership firm that comes about on 01.11.2014, the respondent totally invests Rs.85/- lakhs, which includes Rs.34/- lakhs, which was an additional investment brought into the firm by the respondent - complainant after entering the partnership. The -5- NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 respondent remains as a partner in the said reconstituted partnership firm - 'Citi Lubs' from 01.11.2014 to 13.01.2016.
It transpires that the respondent resigns as a partner from the firm on 13.01.2016. Eleven months thereafter, the respondent
- complainant seeks to register a complaint before the jurisdictional police. The complaint then becomes a crime in crime No.60 of 2017. In the light of the entire action springing from the complaint, so registered by the respondent -
complainant, certain paragraphs of the said complaint become germane to be noticed. They read as follows:
"6. After I paid up the said amount, Mr. Naveen Reddy provided me with the Profit and Loss Account and the Balance Sheet of the business for the year 2014-15. I saw that an overdraft of a staggering sum of Rs. 3, 60, 92, 043.76 was shown. I was shocked that such a vital aspect had been kept hidden from me. When I asked Mr. Naveen Reddy about this, he told me that I need not worry about the principal or the interest of the said overdraft as Mr. Naveen Reddy would be personally liable for the said overdraft. Mr. Naveen Reddy also assured me that the gross monthly profits shall not be diverted to the principal or interest of the said overdraft. Lastly, Mr. Naveen assured me that the said overdraft had been taken against his own personal sureties.
7. After due discussions, it was agreed that I should invest an amount of Rs. 84,00,000/- at a profit percentage of 30%, Mr. Naveen Reddy should invest an amount of Rs. 1,40,000/- at a profit percentage of 50%, and that Mrs. V Sharada should invest an amount of Rs. 56,00,000/- at a profit percentage of 20%. Thereafter, a Deed of Reconstitution dated 01/11/2014 was sgned by Mr. Naveen Reddy, Mrs. V Sharada. Mr. Ravinder Reddy, -6- NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 the retiring partner, resigned via the said Reconstitution Deed.
8. By 13/11/2014, I had paid a total sum of Rs. 84 lakhs towards my share of capital, which Mr. Naveen Reddy had assured me will be used for regular operations of CITILUBS. After I had signed the Deed of Reconstitution and invested the said amount, Mr. Naveen Reddy and Mrs. V Sharada assured me that they would look after the financial operations of the said business, and started doing the same. I did not interfere in either the books of accounts or the regular operations of the said business as the business had been newly constituted and I felt that I should appreciate the experience and capabilities of Mr. Naveen and Mrs. V Sharada in running the business. So far, I had not been made an authorized signatory with the bank nor an authorized signatory to sign any document.
9. Mr. Naveen Reddy and Mrs. Sharada asked me to sign certain documents. When I asked what those documents relate to, they told me that they needed my consent in order to renew the existing overdraft limit, and that they wanted to make me the additional authorized signatory. I signed the said documents, and after that Mr. Naveen Reddy did not share the net banking credentials with me; in fact, he kept them solely with himself, stating that he would need them for the easement of operations.
10. Since I had now been made the authorized signatory, I asked for the bank statements. I was shocked to see that all the amounts that I had contributed as capital investment had been channelized towards paying he overdraft for the Canara Bank account; i was further shocked to see that the capital investments were adjusted towards the various liabilities of the business. When I expressed concern over the same, Mr. Naveen Reddy and Mrs. V Sharada told me that they planned to bring in additional amounts of money into the business in order to replace the funds adjusted towards the previous liabilities.
11. I had also realized that, I had brought in a total of 84 lakhs into the business, and that Mr. Naveen Reddy had brought a total amount of Rs. 168 lakh into the said business, and that the total amount brought in was being used to discharge the liabilities of the said business, the -7- NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 said liabilities being an amount of Rs. 90 lakh to be paid to Mr. Ravinder Reddy as he was retiring from the partnership, and payments of Rs. 45 lakhs to Mr. Inderlala and Mr. Naveeth Kaul as advance towards expression of interest as partners in the said business.
12. After all his happened, I started to worry as Mr. Naveen Reddy and Mrs. V Sharada had violated the terms of the Deed of Reconstitution. When I asked about the execution of the understanding that Mr.Naveen Reddy Had Red and Mrs. V Sharada had entered into with me, they told me that the business will run on the existing market outstanding of Rs. 1 crore. They reassured me that they will be solely responsible for paying off the said overdraft and for bringing in the capital they had expended for the reasons earlier mentioned.
13. Later on, Mr. Naveen Reddy and Mrs. V Sharada told me that such happenings are quite common in such businesses, and that I should forget whatever concerns I had raised earlier. In the same conversation, they asked me to bring in an additional amount of Rs. 50 lakhs. They also informed me that since they are on good terms with the officials of Canara Bank, they could raise an additional overdraft amount of Rs. 50 lakhs, and then, with all that additional capital, the business could easily be operational. Since 1 was worried about the investment that I had already made, I brought in an additional amount of only Rs. 35 lakhs, and Mr. Naveen Reddy and Mrs. V Sharada then raised an additional overdraft amount of Rs. 50 lakhs from Canara Bank.
14. Days and months passed by, but Mr. Naveen Reddy and Mrs. V Sharada could not bring in the money that they had earlier promised to bring in. As a result, the business was not doing great in terms of profits, and was in fact doing hand to mouth on a month to month basis. By this time, I had started finding it difficult to manage ends as I had invested all my savings and earnings into the said business, and was not getting back anything in terms of profits.
15. Meanwhile, the Castrol management had insisted upon adopting a new system of payment to be followed by all the distributors across the country, namely, signing up of automated clearing house systems -8- NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 (ACH) for the present RTGS system for ordering materials. However, such a payment system could be adopted only by persons who had sufficient cash balance available in the account.
16. Months with nothing but the same results passed by this time I was highly disappointed by the high expectations and promises made by Mr.Naveen Reddy and Mrs.V.Sharada. The minimal profits that the business was managing to earn were all diverted to was payment of the overdraft amount, which was contrary to the understanding that we had earlier had. Due to such diversion. I was deprived of my basic earnings. It as almost at the end of December 2015 that I realized that it was the modus operandi of Mr.Naveen and Mrs.Sharadha to rotate and launder money in the name of business and investments. Thereafter, without any unduly delay on my part, I informed Mr. Naveen Reddy and Mrs.V Sharada that could not continue in the said business without a earning profit"
The narration in the complaint is that, the complainant has not been allowed access to the finances of the firm as was assured and the assurance that was laid at the time of investing total capital of Rs.84/- lakhs were breached, as no profit is shown, as projected by the petitioner at the time of his investment. The complainant then alleges fraud and misrepresentation as well.
9. Based upon the said complaint, investigation takes place and jurisdictional police file a 'B' summary report before the concerned Court. The respondent - complainant protests to the filing of 'B' summary report, which leads the concerned -9- NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 Court to take cognizance for the offence under Section 420 of the IPC. Though the concerned Court in so many words has not rejected the 'B' summary report, nonetheless, the concerned Court bearing in mind the principles, takes cognizance of the offence and the reasons rendered is in great detail, but, what merits consideration is whether the learned Magistrate could take cognizance of the offence particularly, for the offence punishable under Section 420 of the IPC. The ingredients for an offence under Section 420 of the IPC is as found in Section 415 of the IPC. Section 415 of the IPC, reads as follows:
"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"."
Section 415 of the IPC directs that the accused must have lured the victim to part certain property right from the inception and transaction between the parties. The case at
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 hand is a reconstitution of a partnership firm by which, the complainant gets into the firm as a partner and stays for 2 years. It is the happening of two years, the complainant makes out grievances in the complaint. After registration of the complaint, the parties to the lis are also before the Arbitrator.
The claim of the complainant is that, the learned Arbitrator in terms of his award dated 27.04.2018, accepts the claim of the complainant partially and passes the following award:
"39. The claimant has not produced any supporting document of income or loss for the month of December, 2015. Therefore, his claim of the Firm having made the profit of Rs. 18,917.70 for the month of December, 2015 is inadmissible. The claimant is entitled to the profit of Rs.8,19,922.9, which is rounded off to Rs.8,19,923/- (Rupees Eight Lakhs Nineteen Thousand Nine Hundred And Twenty Three Only).
40. Section 48 of the Indian Partnership Act, 1932 also prescribes on the sequence or priority in which various outgoings are to be applied. First the liabilities due to outsiders are to be paid out, then the advances made by the parties have to be paid, next the capital invented by each partner is to be paid back to him and finally the residue, if any, shall be divided among the partners in the proportions in which they were entitled to share the profits.
41. The reconstitution deed does not provide for the refund/return of the capital. Partners are not considered as debtor and creditor inter se until the partnership is wound up or until there is binding settlement of the accounts. Therefore the request for the return of capital is not tenable. The respondents' failure to return Rs.78,00,000/- (Rupees Seventy Eight Lakhs only) to the claimant does not amount to the breach of any clause of the reconstitution deed.
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42. Thus, the Issue No. 1 is answered in the affirmative by holding that there is breach of the terms of the contract (clauses 8 and 12 of the reconstitution deed). Issue No.2 is answered partly in the affirmative and partly in the negative, holding that the claimant is not entitled, at this stage, for the return of Rs.78,00,000/-
(Rupees Seventy Eight Lakhs Only) invested by way of capital, but he is entitled for interest on Rs.78,00,000/- (Rupees Seventy Eight Lakhs Only) at the rate of 12% from 13.11.2014 till the date of return, Issue No.3 is answered in affirmative holding that the claimant is entitled to claim profit Rs.8,19,923/- (Rupees Eight Lakhs Nineteen Thousand Nine Hundred and twenty Three Only), from 01.11.2014 to 31.12.2015.
43. In re Issue No.4 - The claimant has sought Rs.7,50,000 (Rupees Seven Lakhs Fifty Thousand Only) towards mental agony at trauma, Except stating that the delay in refunding the amount caused mental torture, no material particulars are furnished in the claim petition in support of the prayer sought for. Besides, there is not even sentence in the affidavit filed by way of examination-in-chief to the effect that the claimant has suffered trauma. That apart the claimant has filed the police compliant against the respondents. The compliant proceeding culminated in issuance of 'B' report. What is purely a civil matter ought not to have been taken up with the police authorities. Attempting criminalize the civil dispute disentitles the claimant to damages.
44. It is also not in dispute that the respondent No.2 is an a lady and a sleeping partner in the Firm. She is the mother of respondent No. 1. It is argued by the learned counsel for the respondent that both the respondents have suffered mental trauma on account the untenable complaint filed by the claimant. As there is no count claim by the respondents for damages towards their mental trauma there is no question of awarding damages to them. Suffice to hold that the claimant is not entitled to damages for two reasons: (a) Material particulars of the trauma are not furnished in the claim petition & there is absolutely no statement in the affidavit filed by way examination-in-chief that the claimant has suffered
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 mental trauma. The remotest chance of his getting the damages is further erased by his unjustifiable conduct of taking up a purely civil dispute with the Police.
45. Therefore, Issue No.4 is answered in the negative to the effect that the claimant is not entitled to Rs.7,50,000/- towards mental agony and trauma.
46. In re Issue No.5- Although the claimant has sought a sum of Rs.24,05,000/- (Rupees Twenty Four Lakhs Five Thousand only) towards the loss of business opportunities, there are no foundations for it in the claim petition, much less in the affidavit filed by way of examination-in- chief. I therefore answer Issue No.5 in the negative by holding that the claimant is not entitled to any amount towards the loss of business opportunities.
47. In re Issue No.6- Apart his entitlement to the interest on Rs.78,00,000/- (Rupees Seventy Eight Lakhs Only) and to the profit of Rs.8,19,923/- (Rupees Eight Lakhs Nineteen Thousand Nine Hundred and Twenty Three Only), the claimant is also entitled to the costs of litigation. Hence, I proceed to pass the following:
AWARD
(i) The claim petition is allowed in part.
(ii) The claimant is not entitled to seek the refund of capital amount of Rs.78,00,000/-
(Rupees Seventy Eight Lakhs Only) without seeking the rendition of accounts and/or dissolution of the Firm.
(iii) The claimant is entitled to interest @ 12% per annum on Rs.78,00,000/- (Rupees Seventy Eight Lakhs Only) from 13.11.2014 till the date of payment.
(iv) The claimant is entitled to the profit of Rs.8,19,923/- (Rupees Eight Lakhs Nineteen Thousand Nine Hundred and Twenty Three Only), for the period from 01.11.2014 to 31.12.2015.
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(v) The claimant is not entitled to any amount towards damages and towards loss of business opportunities.
(vi) The claimant is entitled to the cost of these proceedings.
(vii) Stamp duty is payable as per the Karnataka Stamp Act, 1957.
(viii) The award is signed and issue in four originals one for the record of the centre and rest of the three to each of the parties."
(Emphasis supplied) Learned Arbitrator declines to accept the plea of the complainant on awarding of damages on the ground of the case as projected by the complainant is criminalising a civil dispute.
The aforesaid is referred not as a binding / finding but only as a circumstance that the learned Arbitrator indicates in his order and declines to grant damages. Even otherwise, commercial transaction between the parties is sought to be given a colour of crime, as no ingredients of Section 415 of the IPC are found in the case at hand, as deception from the inception is not found in the complaint, for the accused having received Rs.84/-
lakhs from the complainant. Therefore, permitting further proceedings to continue against the petitioner in the teeth of the aforesaid facts would run foul of the judgement of the Apex
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 Code in the case of MITESH KUMAR J. SHA V. STATE OF KARNATAKA AND OTHERS1, wherein it has held as follows:
"27. In order to ascertain the veracity of contentions made by the parties herein, it is imperative to firstly examine whether the relevant ingredients of offences which the appellants herein had been charged with, are prima facie made out. The relevant sections read as follows:--
"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 17 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), or not] who deducts the 1 2021 SCC OnLine SC 976
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 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 to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.] [Explanation 2.--A person, being an employer, who deducts the employees' contribution from the wages payable to the employee for credit to the Employees' State Insurance Fund held and administered by the Employees' State Insurance Corporation established under the Employees' State Insurance Act, 1948 (34 of 1948), 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 to the said Fund in violation of the said Act, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.]
406. Punishment for criminal breach of trust--Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.
419. Punishment for cheating by personation--Whoever cheats by personation shall be punished with imprisonment of either
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 description for a term which may extend to three years, or with fine, or with both.
420. Cheating and dishonestly inducing delivery of property-- Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine."
28. In the instant case, the complaint levelled against the Appellants herein is one which involves commission of offences of criminal breach of trust and cheating. While a criminal breach of trust as postulated under section 405 of the Penal Code, 1860, entails misappropriation or conversion of another's property for one's own use, with a dishonest intention, cheating too on the other hand as an offence defined under section 415 of the Penal Code, 1860, involves an ingredient of having a dishonest or fraudulent intention which is aimed at inducing the other party to deliver any property to a specific person. Both the sections clearly prescribed 'dishonest intention', as a pre- condition for even prima facie establishing the commission of said offences. Thus, in order to assess the relevant contentions made by the parties herein, the question
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 whether actions of the Appellants were committed in furtherance of a dishonest or fraudulent scheme is one which requires scrutiny.
29. Coming to the facts of the case at hands, the contested contention between the parties is that the builder company had sold four excess flats beyond its share, in terms of the JDA and supplementary agreement entered into between the parties. Respondent No. 2 contends that builder company which was entitled to sell only 9 flats in its favour, has instead executed sale deed for 13 flats in total. Thus, the company simply could not have sold the flats beyond 9 flats for which it was authorized and resultantly cannot evade criminal liability on a mere premise that a civil dispute is already pending between the parties.
30. The Appellants on the other hand contend that in terms of a subsequent MoU dated 19.02.15, it was mutually agreed between the parties, that partial payment for a loan amount borrowed by Respondent No. 2 from Religare Finvest Ltd., would be paid out from the sale proceeds of the said development project undertaken by both the parties. Pursuant to this MoU, the Appellants had agreed to get an NOC for 15 flats by making payment of Rs. 40,00,000/- for each flat.
31. The key contention, and also the central point of dispute, made by the
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 Appellants is that, it was specifically agreed between the parties that the Appellants would be entitled to sell additional flats beyond their share, as adjustments for payment made to Religare Finvest Ltd. on behalf of Respondent No. 2. It is further contended that Respondent No. 2 had also agreed to execute a ratification deed to the JDA and GPA eventually, which would have formally authorised the Appellants to sell additional apartments.
32. Nonetheless, the ratification deed was never made and Respondent No. 2 subsequently even revoked the GPA unilaterally, contending that the terms of JDA were not followed.
33. It was only after revocation of GPA that the company filed an application for arbitration seeking interim orders to restrain the Respondent No. 2 from alienating the disputed property. Simultaneously, while this dispute was pending adjudication before the arbitrator Respondent No. 2 filed a criminal complaint against the Appellants.
34. At this juncture, it further becomes pertinent to mention that eventually though both the parties partly succeeded before the arbitrator, in terms of their respective claims, the arbitrator observed that GPA indeed could not have been revoked unilaterally at the instance of Respondent No. 2. Aggrieved, Respondent No. 2 thereafter even preferred a challenge to the award passed by the
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 arbitrator. Moreover, pending arbitration proceedings issue regarding selling of excess flats at the instance of Appellants, was also withdrawn by Respondent No. 2 seeking liberty to pursue his claim with regard to selling of four excess flats in pending civil proceedings.
35. Upon a careful assessment of such facts, by no stretch can it be concluded that the Appellants herein have deceptively or intentionally tried to sell excess flats if any, as contended by Respondent No. 2. Here, it must also be borne in mind that subsequent to the revocation of GPA, it was the Appellants herein who had first resorted to arbitration proceedings on 02.03.16 for redressal of dispute between the parties, to which Respondent No 2 had accordingly filed his statement of objections dated 09.03.16. It was only on 29.03.16 that Respondent No. 2 had filed the FIR in question bearing Crime No. 185/2016 against the Appellants. Moreover, it was Respondent No. 2 who had withdrawn his prayer with respect to selling of four excess flats by the Appellants, only to pursue the same in civil proceedings.
36. At this stage, by placing reliance on the judgment of this Court in Priti Saraf v. State of NCT of Delhi (Supra) and Sri Krishna Agencies v. State of Andhra Pradesh (Supra), it has been further submitted by Respondent No. 2 that Appellants cannot evade a criminal case by merely contending that the person whose property has been sold has filed a civil suit for
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 recovery of the property, or that the dispute had been referred to arbitration.
37. Although, there is perhaps not even an iota of doubt that a singular factual premise can give rise to a dispute which is both, of a civil as well as criminal nature, each of which could be pursued regardless of the other. In the instant case, the actual question which requires consideration is not whether a criminal case could be pursued in the presence of a civil suit, but whether the relevant ingredients for a criminal case are even prima facie made out. Relying on the facts as discussed in previous paragraphs, clearly no cogent case regarding a criminal breach of trust or cheating is made out.
38. The dispute between the parties, could at best be termed as one involving a mere breach of contract. Now, whether and what, is the difference between a mere breach of contract and an offence of cheating has been discussed in the ensuing paragraphs.
Whether sale of excess flats even if made amounts to a mere breach of contract?
39. This Court in the case of Hridaya Ranjan Prasad Verma v. State of Bihar6, has observed:--
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 "15. ....that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time to inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test.
Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. 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..."
40. Applying this dictum to the instant factual matrix where the key ingredient of having a dishonest or fraudulent intent under sections 405, 419 and 420 is not made out, the case at hand, in our considered opinion is a suitable case necessitating intervention of this Court.
Whether the dispute is one of entirely civil nature and therefore liable to be quashed?
41. Having considered the relevant arguments of the parties and decisions of this court we are of the considered view that existence of dishonest or fraudulent intention has not been made out against the Appellants. Though the instant dispute certainly involves determination of issues which are of civil nature, pursuant to which Respondent No. 2
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 has even instituted multiple civil suits, one can by no means stretch the dispute to an extent, so as to impart it a criminal colour. As has been rightly emphasised upon by this court, by way of an observation rendered in the case of Indian Oil Corporation v. NEPC India Ltd.7, as under:--
"14. While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law."
42. It was also observed:--
"13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors....There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure though criminal prosecution should be deprecated and discouraged."
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43. On an earlier occasion, in case of G. Sagar Suri v. State of UP8, this Court has also observed:--
"8. Jurisdiction under Section 482 of the Code has to be exercised with a great care. In exercise of its jurisdiction High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this Section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice."
44. Furthermore, in the landmark judgment of State of Haryana v. Ch. Bhajan Lal9 regarding exercise of inherent powers under section 482 of CrPC, this Court has laid down following categories of instances wherein inherent powers of the can be exercised in order to secure the ends of justice. These are:--
"(1) where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused;
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 (2) where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code;
(3) where the uncontroverted allegations made in the FIR or 'complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused;
(4) where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code;
(5) where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused;
(6) where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party;
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 (7) where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge."
45. Applying this dictum to the instant factual matrix, it can be safely concluded that the present case clearly falls within the ambit of first, third and fifth category of the seven categories enlisted in the above said judgment. The case therefore warrants intervention by this Court, and the High Court has erred in dismissing the petition filed by the Appellants under section 482 CrPC. We find that there has been attempt to stretch the contours of a civil dispute and thereby essentially impart a criminal color to it.
46. Recently, this Court in case of Randheer Singh v. The State of U.P.10, has again reiterated the long standing principle that criminal proceedings must not be used as instruments of harassment. The court observed as under:--
"33. ....There can be no doubt that jurisdiction under Section 482 of the Cr.P.C. should be used sparingly for the purpose of preventing abuse of the process of any court or otherwise to secure the ends of justice. Whether a complaint discloses criminal offence or not depends on the nature of the allegation and
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022 whether the essential ingredients of a criminal offence are present or not has to be judged by the High Court. There can be no doubt that a complaint disclosing civil transactions may also have a criminal texture. The High Court has, however, to see whether the dispute of a civil nature has been given colour of criminal offence. In such a situation, the High Court should not hesitate to quash the criminal proceedings as held by this Court in Paramjeet Batra (supra) extracted above."
47. Moreover, this Court has at innumerable instances expressed its disapproval for imparting criminal color to a civil dispute, made merely to take advantage of a relatively quick relief granted in a criminal case in contrast to a civil dispute. Such an exercise is nothing but an abuse of the process of law which must be discouraged in its entirety."
(Emphasis supplied) In the light of the facts obtaining in the case at hand and the judgment of the Apex Court, permitting further proceedings to continue against the petitioner would become an abuse of the process of law and would result in miscarriage of justice.
Therefore, I deem it appropriate to obliterate the proceedings against the petitioner.
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NC: 2023:KHC:21590 CRL.P No. 3540 of 2022
10. For the aforesaid reasons, the following:
ORDER a. The criminal petition is allowed.
b. The proceedings in C.C.No.3581/2019 pending before the XXX Additional CMM Court, Bengaluru, stand quashed.
c. The findings rendered herein will not come in the way of the complainant agitating any pending proceedings or initiating proceedings before any other fora except the one considered in the subject petition.
Sd/-
JUDGE NVJ List No.: 1 Sl No.: 53