Punjab-Haryana High Court
K.K.Vij And Others vs Gautam Goel on 20 September, 2010
Author: Sabina
Bench: Sabina
Criminal Misc. No.M-67589-M of 2005 (O&M) 1
In the High Court of Punjab and Haryana at Chandigarh
Criminal Misc. No.M-67589-M of 2005 (O&M)
Date of decision: 20.9.2010
K.K.Vij and others
......Petitioners
Versus
Gautam Goel
.......Respondent
CORAM: HON'BLE MRS. JUSTICE SABINA
Present: Mr. Ashok Aggarwal, Sr. Advocate with
Mr.Nilesh Bhardwaj, Advocate,
for the petitioner.
Mr. G.S.Sandhu, Advocate,
for Mr.G.C. Dhuriwala, Advocate,
for the respondent.
****
SABINA, J.
The petitioner has filed this petition under Section 482 of the Code of Criminal Procedure for quashing complaint No.17 dated 7.4.2003 under Section 406 of the Indian Penal Code ("IPC" for short) (Anexure P-1); orders dated 5.11.2003 and 3.5.2005 (Annexure P-2 and P-6) passed by the Judicial Magistrate, Ist Class, Chandigarh and order dated 16.9.2005 (Annexure P-7) passed by Criminal Misc. No.M-67589-M of 2005 (O&M) 2 Additional Sessions Judge, Chandigarh dismissing the revision petition.
The contents of the complaint (Annexure P-1) read as under:-
"1.That accused No. M/s Eicher Ltd is a company registered under the Company's Act 1956 and is engaged in the manufacture/sale of Tractors etc under the name and style of M/s Eicher Tractors, which is a unit of Eicher Ltd Company.
2. That accused No.2 R.C.Jain is a the Managing Director of the Company and accused No.3 is the Director Marketing and both the accused are managing and controlling the affairs of the company/unit and thus both the accused are jointly and severally responsible for the act and conduct of the business of the company/unit.
3. That accused No.4 is the Dy.General Manager (Mktg.) Punjab Region of the company/unit and accused No.5 is the Senior Marketing Manager of the company/unit and both these accused are managing and controlling the affairs of Chandigarh Police and thus both these accused are equally responsible for the act and conduct of the business of the company/unit, preferably the business of Chandigarh office. Criminal Misc. No.M-67589-M of 2005 (O&M) 3
4. That accused No.2 to 5 are the Principal Officers of the company i.e. accused No.1 and all these accused are jointly and severally responsible for the act and conduct of the business of the company as the whole business of the company is being conducted by accused No.2 to 5.
5. That the complainant was the sole Prop.of M/s Gautam Motors, Barnala and M/s Gautam Motors, Barnala was appointed a dealer for retail sales and services of the company product and the complainant Gautam Goyal signed the Dealership Agreement executed on 15.4.1998 for and on behalf of M/s Gautam Motors, Barnala.
6. That an amount of Rs.1,08,800/- was deposited by the complainant with the accused No.1 as a security. The said deposit was carrying interest @ 10% p.a.during the tenure of the agreement and the amount is still lying with the accused persons.
7. That the complainant issued a cheque no.373167 dated 31.3.2001 and another cheque 373168 dated 31.3.2001, both amounting to Rs.2 lac each in favour of company. Both the above said cheques were drawn on Indial Overseas Bank, Chandigarh Branch, Madhya Marg, Sector 7, Chandigarh. Both the above said Criminal Misc. No.M-67589-M of 2005 (O&M) 4 cheques have already been cleared and the proceeds of the above said cheques have already been credited to the account of the company i.e. accused No.1 maintained at State Bank of Patiala, Sector 26, Chandigarh. The Banker of the complainant cleared the cheques on April 7, 2001 and April 11, 2001 and since then accused persons utilized the above said amount.
8. That during the course of business, accused persons used to issue monthly State of Accounts. Complainant received monthly statement of Account for this period and complainant surprised to see the statement of Accounts as the same was not showing the credit of Rs. 4 lac i.e.the amount of above mentioned cheques. Complainant made representation dated 30.5.2001 to accused No.5 dated 30.5.2001 dated 28.6.2001, 30.7.2001 and another representation dated 22.2.2002, 24.3.2002 to the Sr.Manager (Finance) Faridabad and another representation dated 24.12.2001 to the accused No.5 at Chandigarh but inspite of this accused persons failed to reply to the above said representations, what talk to made necessary rectifications in the statement of accounts of the company/unit.
Criminal Misc. No.M-67589-M of 2005 (O&M) 5
9. That ultimately complainant decided to resign/relinquish from the above said dealership and wrote letter dated 22.7.2002 vide which a request was made to cancel the dealership. Accordingly, the accused persons accepted the request of the complainant and dealership of M/s Gautam Motors was canceled and an information regarding this fact was circulated to all other dealers by the company.
10. That as the dealership agreement was revoked and hence the complainant have become entitle to get back security amounts and other amounts lying with the accused persons and for the same, complainant made number of requests to refund the security amount and other amounts lying with the accused persons but all in vain.
11. That on 20.11.2002, complainant got served a legal notice upon the accused persons through Sh.Prem Kumar Bansal, Advocate vide which a request was made to arrange the payment along with interest @ 18% p.a within 15 days of the receipt of notice, but, inspite of notice accused persons failed to make the compliance of the notice.
12. That, after the notice, complainant was asked to visit Faridabad and accordingly, complainant visited at Criminal Misc. No.M-67589-M of 2005 (O&M) 6 the office of Faridabad but inspite of this, nothing fruitful came out.
13. That as the statement of accounts of the accused No.1 are got prepared by the accused No.1 and the accused No.1 is working under the supervision of accused No.2 to 5 and accused No.2 to 5 are the controlling authority and hence, accused No.2 to 5 are responsible for the act, conduct and omissions for and on behalf of accused No.1. As stated above, the accused No.1 used to send statement of accounts to the complainant and there was irregularity in the statement of account as the credit of Rs.4 lac i.e. the amount of two cheques were not shown in the statement of accounts. Complainant made number of letters/reminders as mentioned in aforesaid paras, but inspite of all the above said letters, the accused persons failed to rectify the error in the statement of accounts and it seems that it was not error but it was an intentionally fabrication of the statement of accounts and it amounts to criminal misappropriation/embezzlement of funds, as the accused persons dishonestly misappropriated the amount and converted the same to their own use i.e. for the use of the accused No.1. Moreover, it is Criminal Misc. No.M-67589-M of 2005 (O&M) 7 criminal breach of trust and for the above said acts, the accused persons made themselves liable for punishment under the Indian Penal Code.
14. That the complainant deposed the above said cheques in good faith knowing it very well that there is no balance against him but the accused persons failed to stand on the same footings.
15. That accused persons utilized the money of the complainant for wrongful gain and wrongful loss to the complainant and thus the accused persons have also committed a fraud with the complainant.
16. That from the above stated facts, it is clear that the accused persons dishonestly misappropriated the cheque amount and convert the same for their own use and thus the accused persons have committed an offence of criminal misappropriation as the accused persons were legally bound to give the credit of cheque amounts in the accounts statement of M/s Sautam Motors and the accused persons intentionally failed to give the credit inspite of number of verbal and written reminders. It is pertinent to mention that a lost further legal notice dated 3.1.2003 was served upon the accused persons and the accused persons were specifically asked to make necessary correction in the Criminal Misc. No.M-67589-M of 2005 (O&M) 8 statement of accounts but till today the accused persons failed to do so.
17. That the accused persons also committed an offence of criminal breach of trust and as well as an offence of cheating.
18. That the accused persons illegally retained the cheques amount along with other amounts and caused wrongful loss to the complainant for their wrongful gain and hence all the accused made themselves liable for the punishments for committing of above said offences as the accused No.2 to 5 were responsible for preparing the correct record/statement of accounts but the accused persons failed to perform their duties as per law.
19. That this Hon'ble Court has got jurisdiction to entertain, try and decide the present complaint as the Regional Office of the accused No.1 is/was situated at Chandigarh within the territorial of this Court. Further the cheques were deposited and encashed at Chandigarh and the accused No.4 and 5 have their offices at Chandigarh.
20. That the complaint is within limitation." Learned senior counsel for the petitioners has submitted that in fact, no case under Section 406 IPC was made out against Criminal Misc. No.M-67589-M of 2005 (O&M) 9 the petitioners. Mens rea was necessary ingredient and without the same breach of trust could not be said to be a criminal breach of trust. The dispute involved in the present case could be said to be at the most a civil dispute. Learned senior counsel has further submitted that the complainant had issued a cheuqe dated 31.1.2002 amounting to Rs. 7.5 lacs in favour of the company which showed that there was no question of any criminal breach of trust on the part of the company. In support of his arguments, learned senior counsel has placed reliance on S.W. Palantkar and others vs. State of Bihar and another (2002) 1 SCC 241, wherein, it was held as under:-
"Every breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of a mental act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person wronged may seek his redress for damages in a civil court but a breach of trust with mens rea gives rise to a criminal prosecution as well."
Learned senior counsel has further placed reliance on Kailash Verma vs. Punjab State Civil Supplies Corporation and another (2005) 2 SCC 571, wherein, it was held that in a case involving civil dispute, no criminal case could be said to be made out.
Learned counsel for the respondent, on the other hand, has opposed the petition.
Criminal Misc. No.M-67589-M of 2005 (O&M) 10
The Apex Court in State of Haryana and others vs. Bhajan Lal, 1992 Supp (1) SCC 335 has given a word of caution, which reads as under:-
We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the Court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whim or caprice." In Pawan Kumar v. State of Haryana, 2006(2) RCR (Criminal) 162, this Court, after considering the judgments of the Apex Court in Bal kishan Dass v. P.C.Nayar, 1991 (3) RCR (Criminal), 374, Kalash Verms vs. Punjab State Civil Supplies Corporation (SC), 2005(1) DCR 425 and Trisuns Chemical Industry vs. Rajesh Agarwal and others, JT 1999 (6) SC 618, held as under:-
The last contention raised by the counsel for the petitioner that as pursuant to the arbitration clause, in the agreement, arbitration proceedings are pending, the present FIR should be quashed, in my considered opinion, lacks merit. It is no doubt true that an arbitration Criminal Misc. No.M-67589-M of 2005 (O&M) 11 clause exists and binds parties to seek adjudication of their disputes, before an Arbitrator. The existence of an arbitration clause, in my considered opinion, cannot, in the facts and circumstances of the present case, be construed to be a bar to criminal proceedings. As already held hereinbefore, a given set of facts may give rise to both civil and/or criminal consequences. The existence of one would not necessarily rule out the other. An arbitration clause enables parties to seek adjudication of the civil consequences of the violation of a contract. An arbitration clause does not envisages adjudication of criminal consequences of an alleged breach of contract. The Arbitrator, would obviously adjudicate the civil consequences of the violation of the the contract and if this violation leads to the commission of a criminal offence, the Arbitrator would have no jurisdiction to investigate or launch prosecution, in respect thereof. The mere existence of an arbitration clause or the pendency of arbitration proceedings would, in my considered not opinion, not oust the jurisdiction of criminal Courts, to consider whether on the facts narrated in the FIR, a criminal offence has been committed. The judgments relied upon by learned counsel for the petitioner namely; Bal Kishan Das vs. Criminal Misc. No.M-67589-M of 2005 (O&M) 12 P.C.Nayar (Supra), and Kailash Verma Vs. Punsup and another, (supra), in my considered opinion, do not aid the petitioner in any manner.
In the aforementioned judgments the Hon'ble Supreme Court has not laid down any absolute proposition of law that the existence of an arbitration clause or the pendency of arbitration proceedings would entail an automatic quashing of an FIR. In Bal Kishan Das (supra), after examining the facts of the case and specifically taking note of the fact that after registration of a case under Section 409 of the IPC, the Vigilance Department dropped the case and that arbitration proceedings were pending for more than 17 years, the Hon'ble Supreme Court quashed criminal proceedings. This judgment, in my considered opinion, cannot be construed to be a precedent for the proposition that the existence of an arbitration clause bars the filing of a complaint or any FIR for an offence under Sections 406/409 of the IPC etc. The next judgment namely: Kailash Verma's case (supra) also does not set down any absolute proposition that the existence of an arbitration clause would necessarily oust the right of an aggrieved party to lodge an FIR nor does the aforementioned judgment lay down any absolute rule of law that the Criminal Misc. No.M-67589-M of 2005 (O&M) 13 existence of an arbitration clause would bar criminal proceedings. In Kailash Verm's case (supra), the appellant was discharged by the trial Court. The said order was reversed and the matter remitted to the trial Court. The Supreme Court held that as there was no prima facie evidence of entrustment of paddy or shortage of rice supplied to the Corporation, and the dispute disclosed being civil in nature, the petitioner could not be prosecuted.
In the present case, however, there are specific allegations or entrustment of paddy, failure of the petitioner to deliver rice and, therefore, the above mentioned judgment cannot be pressed into service by the petitioner to pray for quashing of the FIR and the proceedings initiated thereon. The conclusion that the existence of an arbitration clause is not a bar to the initiation of criminal proceedings, despite the pendency of arbitration proceedings is fortified by a judgment of the Hon'ble Supreme Court in Trisuns Chemical Industry v. Rajesh Aggarwal, 1994(4) RCR (Crl.) 223 (SC)(supra)." In Trisuns Chemical 's case (supra), it was held as under:-
"We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring the Criminal Misc. No.M-67589-M of 2005 (O&M) 14 disputes to arrbitration 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 Bhajan Lal v. State of Haryana (supra)"
A perusal of the complaint reveals that there are serious allegations against the petitioners-accused. The complainant had entered in a dealership agreement with the petitioners-accused. The complainant had handed over two cheques of Rs. 2 lac each in favour of the company dated 31.3.2001. The complainant, however, came to know that the said cheques had not been entered by the accused in the statements of accounts. Despite requests, the accused failed to rectify the said error. The complainant has alleged that the accused has misappropriated the cheque amount and had converted the same for their own use.Criminal Misc. No.M-67589-M of 2005 (O&M) 15
Para 5 of the petition reads as under:-
"That it was mentioned that the complainant had issued cheque bearing 373168 dated 31.1.2002 amount to Rs. 7.5 lacs in favour of the company. The cheque was issued much after the cheques which are the basis of the complaint. The cheque dated 31.1.2002 clearly indicates that the complainant owed an amount of Rs.7.5 lacs towards the company on 31.1.2002. There is no question of any criminal breach of trust on the part of the company."
Reply to the said para, filed by the respondent, reads as under:-
"That the contents of para No.5 are wrong. The account statement issued by the petitioners does not show any amount outstanding against the answering respondent rather the cheque for Rs.7.5 lacs was issued only with a view to get the supply of goods from the petitioners and when it came to the notice of the answering respondent regarding the non-entry of credit of Rs. 4 lacs in the accounts of the answering respondent, the cheque worth Rs.7.5 lacs was not made to be paid to the petitioners. Rather the petitioners have to pay the amount to the answering respondent besides Rs. 4 lacs which were not credited in the account of the answering Criminal Misc. No.M-67589-M of 2005 (O&M) 16 respondent."
Thus, there is no force in the argument raised by the learned senior counsel for the petitioners that there was no criminal breach of trust by the accused. A perusal of the reply filed by the complainant shows that the cheque amounting to Rs. 7.5 lacs was issued by the complainant to get the supply of goods but when he realised that there was no entry qua credit of Rs. 4 lacs in the accounts of the company, he sought for cancellation of dealership on 22.7.2002 and stopped the payment of the cheque amounting to Rs.7.5 lacs. All these facts leads to the inference that prima facie a case under Section 406 IPC was made out against the accused. The fact that there was an arbitration clause in the agreement (Annexure P-8) does not lead to the inference that the criminal proceedings could not be initiated against the accused. The arbitration clause 24 in the dealership agreement (Annexure P-8) is to the effect that in the event of any dispute or differences arising out of the agreement or in connection with interpretation of the agreement, the same shall be referred to arbitration. This lead to the inference that so far as arbitration is concerned, it is a remedy for affording relief to the party affected by breach of agreement but the arbitrator cannot conduct a trial with regard to the amount misappropriated by the petitioners.
In these circumstances, it would not be in the interest of justice to scuttle the criminal proceedings at the very threshold. The judgments relied upon the the learned senior counsel fail to advance Criminal Misc. No.M-67589-M of 2005 (O&M) 17 the case of the petitioners as these are on different facts.
Accordingly, this petition is dismissed.
(SABINA) JUDGE September 20, 2010 anita