Karnataka High Court
Hi Tech Leather Garments vs State By Peenya Police on 14 May, 2020
Equivalent citations: AIRONLINE 2020 KAR 984, 2020 (2) AKR 548
Author: G.Narendar
Bench: G.Narendar
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 14TH DAY OF MAY, 2020
BEFORE
THE HON'BLE MR.JUSTICE G.NARENDAR
CRIMINAL PETITION NO.5782 OF 2016
BETWEEN:
1. HI TECH LEATHER GARMENTS
BANGALORE PVT. LTD.,
A COMPANY INCORPORATED UNDER
PROVISIONS OF THE
COMPANIES ACT, 1956 AND
HAVING ITS MANUFACTURING UNIT
AT NO.18, SRINIVAS INDUSTRIAL ESTATE,
KANAKAPURA MAIN ROAD,
KONANKUNTE POST,
BENGALURU - 560 062.
BY ITS MANAGING DIRECTOR
2. MR. NAGENDRA
S/O. LATE K.V. LINGAPPAIAH,
AGED ABOUT 58 YEARS,
IN HIS INDIVIDUAL CAPACITY AND AS
MANAGING DIRECTOR/
INCUMBENT OFFICER OF
3. MS. DIVYASHREE K.N.
S/O. SRI. NAGENDRA
AGED ABOUT 40 YEARS,
IN HER INDIVIDUAL CAPACTIY
AND DIRECTOR.
ALL ARE RESIDING AT
JHANAVI NIVAS,
Crl.P.No.5782/2016
2
NO.113, 2ND CROSS, 12TH MAIN,
MANJUNATHA TEMPLE ROAD,
NSK III STAGE,
BENGALURU - 560 078.
... PETITIONERS
(BY SRI SHANKARAPPA, ADVOCATE)
AND:
1. STATE BY PEENYA POLICE,
PEENYA, BENGALURU.
REPRESENTED BY
PUBLIC PROSECUTOR
AT HIGH COURT OF KARNATAKA
2. SUNIL NARANG V.P
M/S. SHASHIKAR ENTERPRISES,
NO.437A, 12TH CROSS, 4TH PHASE,
PEENYA INDUSTRIAL AREA,
BENGALURU CITY - 560 058.
... RESPONDENTS
(BY SRI.VIJAYA KUMAR MAJAGE, ADDL. SPP FOR R1,
SMT. RATNA R. IYER, ADVOCATE FOR R2.)
THIS CRIMINAL PETITION IS FILED UNDER SECTION
482 OF CR.P.C. PRAYING TO QUASH THE PROCEEDINGS
IN CR. NO.485/2016 REGISTERED BY THE RESPONDENT
POLICE, PENDING BEFORE THE IV A.C.M.M. BENGALURU.
THIS CRIMINAL PETITION HAVING BEEN HEARD
AND RESERVED FOR ORDERS ON 21.10.2019, COMING
ON FOR 'PRONOUNCEMENT OF ORDERS', THIS DAY, THE
COURT MADE THE FOLLOWING:-
Crl.P.No.5782/2016
3
ORDER
Heard the learned counsel for petitioners, the learned Addl. SPP for first respondent and the learned counsel for second respondent - complainant.
2. The petitioners are before the Court being aggrieved by the order dated 16.05.2016 whereby the jurisdictional Magistrate has been pleased to exercise the powers vested in it under Section 156(3) of Cr.P.C and thereby directing the first respondent police to investigate and submit a report in Crime No.485/2016 (PCR No.2647/2016) preferred by the second respondent praying that the petitioners be prosecuted and punished for offences punishable under Sections 120B, 405, 417, 420 read with Section 34 of IPC.
3. The parties are referred to by their nomenclature before the jurisdictional trial Court. Crl.P.No.5782/2016 4
4. The gist of the facts leading to filing of the complaint is as under:
It is the case of the complainant that it is primarily involved in the manufacture and sale of ready to wear leather garments, woven textile apparels, clothing accessories and that it caters to both the domestic and international markets.
5. That the first accused company, consisting of the second and third accused, who are holding the post of Managing Director and Director respectively, had with the deliberate intention of cheating and playing fraud on the complainant, portrayed themselves as manufacturers of ready to wear leather garments, woven textile apparels and clothing accessories. That they represented to the complainant that they had secured export order from a foreign entity named as GIII Apparel Group, based in New York, United States of America. That the order was for the supply of leather jackets and Crl.P.No.5782/2016 5 that the said purchase was backed by an irrevocable and transferable letter of credit for a value of 3,00,190 US dollars issued by the J P Morgan Chase Bank. That the order was for supply of 5,458 pieces of ladies jacket at the rate of 55 US dollars per jacket. That due to financial constraints, the accused were not in a position to execute the order and hence approached the complainant for the same.
6. In this context, the accused entered into a Memorandum of Understanding dated 23.05.2014 with the complainant. That under the MOU, certain duties and obligations were cast on the accused and pursuant to the MOU, the complainant was to part with a sum of Rs.1,65,00,000/- and that in four tranches, i.e., on 05.06.2014 (Namaste Exports, Chennai), 07.06.2014 and 10.06.2014 (first accused) and 12.06.2014 (Juveria Leathers, Chennai), the complainant paid various amounts. The total amount advanced was Crl.P.No.5782/2016 6 Rs.1,20,97,624/-. That as a measure of security, the accused had issued three post dated cheques bearing Nos.087907, 087909 and 087910, drawn on State Bank of India for a total value of Rs.1,65,00,000/-.
7. That as against the agreed quantum of 5,448 pieces of leather jackets, which the accused were required to supply under the purchase order, they have produced and supplied only 2,426 pieces within the validity period of the letter of credit. That the value of goods so supplied to the purchaser under the purchase order, amounts to Rs.71,66,064/-. It is alleged that despite persistent efforts by the complainant, the accused failed to get fresh letters of credit and thereby, accused have retained a sum of Rs.49,31,560/-.
8. That as per Clause 3 of the MOU, the surpluses realized from the execution of the export order would be apportioned between the contracting parties equally. Over and above that, it was also agreed Crl.P.No.5782/2016 7 that the accused would pay interest calculated at the rate of 11.8% per annum on the sum advanced by the complainant. That the accused have failed to adhere to the terms of the contract. That the attempt by the complainant to enforce the terms of the contract by attempting to encash one of the cheques also failed as the same was returned with the endorsement 'insufficient funds' resulting in the complainant causing a legal notice and a reply by the accused requesting the complainant not to precipitate the issue. That thereafter, the parties arrived at an understanding under which the accused agreed to repay a sum of Rs.53,96,972/- in three equated installments and in furtherance of the understanding, they issued three cheques bearing Nos.516079, 516080 and 516081. That the accused having honoured and paid the first installment, defaulted in paying Rs.7,98,991/- out of the second installment and have failed to pay the third installment also. That the complainant has presented Crl.P.No.5782/2016 8 the cheques for encashment but the cheque was dishonoured on 24.03.2015. Though the return of the cheque has been intimated, the accused have omitted to repay the amounts and have started avoiding repayments. Hence, it is concluded by the complainant that the omission to adhere to the terms of the contract is a premeditated act and designed with the intention of deceiving the complainant into parting with substantial amounts. That the accused induced the complainant by portraying that they are capable of securing export orders and further, they are also capable of meeting the demands of the exporter though they were aware that the satisfaction of purchase order was improbable.
9. Learned counsel for the petitioners would contend that the dispute is one, which is civil in nature and none of the ingredients which go on to constitute the offences under Sections 120B, 405, 417 or 420 and Section 34 of IPC are made out. He would submit that a Crl.P.No.5782/2016 9 bare reading of the complaint would demonstrate that the transaction between the parties is a contractual transaction and by no stretch of imagination can violation of Sections 405 and 417 of IPC be alleged against the accused. He would further contend that mere non compliance with the terms of contract can never be given a criminal colour. He would also take the Court through the complaint pleadings and would contend that there is not even a single pleading or iota of material to demonstrate that the accused had either induced the complainant to part with money and that from the very inception there was an intention on the part of the accused to cheat the complainant. He would further contend that mere non payment of the complainant's share of profits can by no stretch of imagination be construed as a criminal act. He would also contend that the complaint is bad and liable to be quashed as being violative of the law laid down by the Hon'ble Apex Court in the case of Priyanka Srivastava Crl.P.No.5782/2016 10 and Another vs. State of Uttar Pradesh and Others reported in (2015) 6 SCC 287. He would also place reliance on the ruling of the Hon'ble Apex Court in the case of Suresh Vs. Mahadevappa Shivappa Danannava and Another reported in (2005) AIR SCW
989.
10. Per contra, learned counsel for the complainant - second respondent would submit that in view of the fact that the accused have failed to complete the manufacture and supply of the indented goods by the foreign purchaser, would suffice to demonstrate the intention of the accused. The learned counsel for complainant would endeavor to support the order of taking cognizance by inviting the attention of the Court to the multiple occasions on which the cheques issued by the accused have been dishonoured. She would submit that the cheques issued pursuant to execution of the MOU and again subsequently to the understanding, after the expiry of the period specified Crl.P.No.5782/2016 11 under the letter of credit, would clearly go to demonstrate that the intention of the accused from inception was to cheat the complainant. She would contrive to support the legality of the proceedings. The learned Addl. SPP would submit that pursuant to the orders of the trial Court, the respondent police have commenced investigation.
11. This Court has considered the materials on record and the statements made in the complaint. The fact that there was an order by a foreign company for supply of ready to wear leather apparels is not denied. The fact that 50% of the purchase order having been satisfied is not denied. The fact that the complainant had parted with amounts is also not denied. The factum of the cheques having been bounced is also not denied. In this background, the short point that requires consideration by this Court is whether mere non reparation of profits can be a ground to initiate Crl.P.No.5782/2016 12 prosecution and set-in motion the criminal law. The said issue is no more res integra. The complaint statements, more particularly, at paragraph Nos.3, 5, 6, 8, 9, 10 and 11 leave no doubt in the mind of the Court that the transaction between the parties is a business transaction and evidenced by a written contract styled as MOU which contract enumerates the do's and don't's and also details the reliefs the parties are entitled to in the event of breach of the contract. The entire transaction is apparently civil in nature and the dispute between the parties is evidenced by the statement in paragraph Nos.8 and 14 of the complaint, i.e., the agreement to share profits and failure to pay the complainant's share of the profits. Assuming that the accused had indeed made profits and failed to share the same, can by no stretch of imagination be construed as a criminal act enabling the jurisdictional Magistrate to take cognizance and prosecute the accused for the offence of cheating etc. As rightly contended by the Crl.P.No.5782/2016 13 learned counsel for the petitioners, the complaint pleadings do not disclose even a iota of material or the ingredients which go to constitute the offences punishable either under Sections 405, 417 or 420 of IPC. The learned Magistrate has woefully failed to apply his mind to the statements in the complaint. The learned Magistrate has failed to take note of the fact that none of the ingredients which go to constitute the above offences have even been set out in the complaint. On the contrary, the complaint details an out and out contractual transaction and the dispute is non sharing of profits. Assuming the same to be correct, there is no statement as to what was the profits made by the accused. And even assuming for arguments sake that the accused had indeed made profits, then the remedy for non reparation would definitely not be under the penal laws but a suit instituted under Section 9 of CPC or any other remedy before the Companies Act, if available to the complainant.
Crl.P.No.5782/201614
12. With regard to dishonour of the cheques the complainant is provided with remedy before the appropriate forum. The complaint averments leave no doubt in the mind of this Court that the transaction is a contractual transaction and the dispute is a civil dispute which is sought to be given a criminal colour and on this ground alone, the complaint requires to fail. In this regard, reliance is placed on the ruling of the Hon'ble Apex Court reported in 2005 AIR SCW 989 at paragraph Nos.10 to 13 extracted hereunder:-
'10. It is pertinent to notice that the alleged agreement to sell was xecuted on 25.12.1988. A legal notice was issued to the appellant herein on 11.07.1996 calling upon the appellant to execute the sale deed in respect of the premises in question. Thus the complaint was submitted after 7 1/2 years of splendid silence from the date of the alleged agreement to sell i.e. 25.12.1988. It is further to be noticed that the appellant herein responded to the legal notice dated 11.07.1996 by his reply dated 18.07.1996 through his lawyer specifically denying the alleged agreement and the payment of Rs.1,25,000/- as advance. Nothing was heard thereafter and the complainant after Crl.P.No.5782/2016 15 keeping quiet for nearly 3 years filed private complaint under Section 200, Cr.P.C before the IV Addl. CMM, Bangalore on 17.05.1999.
The learned Magistrate on the same date directed his office to register the case as PCR and referred the same to the local police for investigation and to submit a report as per Section 156(3), Cr.P.C. A charge sheet was filed on 04.08.2000 by the police against the appellant/accused No.1 only for offence under Section 420, IPC. The learned Magistrate took cognizance of the alleged offence under Section 190 (1) (b), Cr.PC and issued summons to the accused/appellant herein. Aggrieved by the aforesaid process order dated 04.08.2000 passed by the Magistrate, the appellant accused preferred the above criminal revision which was dismissed by the High Court for the reasons stated therein.
11. We have also perused the Annexures P1-P3 which are copies of the pleadings/documents which form part of the records of the case in the High Court against whose order leave to appeal was sought for in this appeal. We have carefully perused the order passed by the High Court. The High Court, in our opinion, has passed the order in a mechanical way without applying its mind. A perusal of the complaint would show that the entire dispute raised by the complainant is based on the alleged agreement to sell dated 25.12.1988 nearly 11 years prior to the filing of the private complaint on 17.05.1999. The existence of any such agreement or any advance taken has been specifically denied Crl.P.No.5782/2016 16 by the appellant by way of his reply dated 06.07.1996 in response to the legal notice dated 11.07.1996 sent by the complainant through his lawyer. For nearly 3 years from the date of reply, the complainant kept quiet before filing his complaint on 17.05.1999 before the Magistrate. It is stated that even as per the police report, no offence is made out against accused Nos. 2-4. Despite this, the Magistrate issued process against accused Nos. 2-4 as well which clearly shows the non- application of mind by the Magistrate. A perusal of the complaint would only reveal that the allegations as contained in the complaint are of civil nature and do not prima facie disclose commission of alleged criminal offence under Section 420, IPC. The Magistrate, in our opinion, has not considered the report filed by the police under Section 156(3), Cr.P.C judicially. Irrespective of the opinion of the police, the Magistrate may or may not take cognizance under Section 190(1) of Cr.P.C. In the instant case, as could be seen from the records, that the police has given a clean chit to accused Nos. 2-4. In our opinion, the Magistrate ought not to have taken cognizance of the alleged offence against the accused No.1, the appellant herein and that the complaint has been made to harass the accused No.1 to come to terms by resorting to criminal process.
12. As already noticed, the complaint was filed on 17.05.1999 after a lapse of 11-1/2 years and, therefore, the very private complaint filed by the respondent No.1 is not at all maintainable at this distance of time. It Crl.P.No.5782/2016 17 is the specific case of accused No.1 that he has not executed any agreement to sell or received any advance payment. In our view, the complaint does not disclose the ingredients of Section 415 of Cr.P.C and, therefore, we have no hesitation to set aside the order passed by the Magistrate taking cognizance of the offence alleged. It is also not clearly proved that to hold a person guilty of cheating, it is necessary to show that he had a fraudulent or dishonest intention at the time of making the promise. The order of the Magistrate and of the High Court requiring the accused No.1 appellant herein to face trial would not be in the interest of justice. On the other hand, in our considered opinion, this is a fit case for setting aside the order of the Magistrate as confirmed by the High Court of issuance of process and the proceedings itself.
13. We, therefore, set aside the impugned order of the High Court and of the Magistrate. The complaint is liable to be dismissed on the question of inordinate latches on the part of the complainant himself. Viewed from any angle, we do not find any good reasons to maintain the order passed by the learned single Judge of the High Court confirming the orders of the Magistrate. Accordingly, this appeal stands allowed and the judgment and order dated 17.02.2004 in Criminal Revision Petition No. 932/2000 of the High Court of Karnataka at Bangalore is set aside.' Crl.P.No.5782/2016 18
13. That apart, the learned Magistrate has also failed to take note of the law laid down by the Hon'ble Apex Court and has proceeded to invoke the provisions of Section 156(3) of Cr.P.C without insisting upon the complainant to file an affidavit as mandated by the Hon'ble Apex Court in the case of Priyanka Srivastava and Another (supra). Hence, the petition is entitled to succeed on the cumulative grounds as stated supra.
Accordingly, the petition is allowed. The order dated 16.05.2016 directing investigation and report by the jurisdictional police is set aside. Consequently, Crime No.485/2016 registered by the respondent police pending on the file of IV Additional Chief Metropolitan Magistrate, Bengaluru City stands quashed.
The petition is ordered as above.
Sd/-
JUDGE dn/-
CT-HR