Gujarat High Court
Patel Prahladbhai Mohanlal & 8 vs State Of Gujarat & 2 on 20 June, 2014
Author: R.D.Kothari
Bench: R.D.Kothari
R/CR.MA/663/2008 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION NO. 663 of 2008
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE R.D.KOTHARI
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1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India, 1950 or any
order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
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PATEL PRAHLADBHAI MOHANLAL & 8....Applicant(s)
Versus
STATE OF GUJARAT & 2....Respondent(s)
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Appearance:
MR BS PATEL, ADVOCATE for the Applicant(s) No. 1 - 9
MRS RANJAN B PATEL, ADVOCATE for the Applicant(s) No. 1 - 9
MR.HARESH JOSHI, ADVOCATE for M/S THAKKAR ASSOC., ADVOCATE
for the Respondent(s) No. 3
MS.C.M.SHAH, APP for the Respondent(s) No. 1
RULE SERVED for the Respondent(s) No. 2 - 3
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CORAM: HONOURABLE MR.JUSTICE R.D.KOTHARI
Date : 20/06/2014
Page 1 of 16
R/CR.MA/663/2008 JUDGMENT
ORAL JUDGMENT
1. In the present case, short question that also arises for consideration is, propriety and legality of enforcing the recovery under section 93 of the Gujarat Cooperative Societies Act (hereinafter referred to as 'Act') in this criminal proceedings.
2. Official Liquidator has filed present criminal complaint against the office bearer of Shri Merchant Cooperative Credit Society Limited, Visnagar (in liquidation), Mahesana for the offence under sections 406, 409, 420, 465, 468, 471, 477A read with section 114 of IPC. The said complaint is lodged before Visnagar Police Station on 11.1.2008. In substance the petitioners pray for quashing the said complaint.
3. Relevant facts are thus : Petitioners at the relevant time, were office bearer of the above referred cooperative society. It is the say of the complainant that during the relevant period i.e. 01.04.2001 to 31.03.2002 and 01.04.2003 to 31.03.2004, the petitioners have committed grave irregularity and misappropriation of criminal nature. Main grievance is about three irregularities said to have committed by the petitioners. One - giving Rs.18 lacs to North Gujarat University as a deposit / security and thereby incurring interest loss of Rs.4,13,655/. Secondly - the society has improperly written off dues of the society to the tune of Rs.5,63,083/. Thirdly - the society has improperly given loan to its staff members at a concessional rate of interest and thereby the society has incurred loss by giving loan at the rate i.e. lower by 6% Page 2 of 16 R/CR.MA/663/2008 JUDGMENT than the usual rate. It is say of the complainant that the petitioners by such acts of criminal breach of trust and cheating and forgery has caused loss to the society.
4. This Court by order dated 11.04.2008 has issued notice to the respondents and has also stayed further proceedings pursuant to the above referred FIR i.e. FIR I - C.R. No. 11 of 2008. Rule was issued on 02.09.2008.
5. Before referring to the submissions made by learned advocates for the parties, reference may also be made to the inquiry reports on record. There are two inquiry reports on record. First reference may be made to first inquiry report, it is dated 06.11.2006, it relates to period of 01.04.2002 to 31.03.2003. Its inquiry carried out by the Inquiry Officer under section 93 of the Act. Inquiry Officer in conclusion has found the present petitioners guilty of all the above referred three irregularities and has passed order that loss incurred to the society be recovered from the present petitioners with penal interest. The Officer has also imposed order of cost i.e. cost of under inquiry. It is assessed at Rs.7,500/. Another report is dated 03.08.2006 therein also, the Inquiry Officer has found all the petitioners to be guilty for above referred irregularities. The second report relates to period of 01.04.2003 to 31.03.2004.
6. Heard the learned advocates for the parties.
7. Learned advocate Mr.B.S.Patel at the time of hearing, Page 3 of 16 R/CR.MA/663/2008 JUDGMENT after referring the FIR on record and relevant material has submitted that there is no prima facie case against any of the petitioners for the offence alleged. Mr.Patel has submitted that the present FIR is filed with ulterior motive. It was submitted that petitioner No.1 was sitting M.L.A. of ruling party at the relevant time, lateron, he was not given ticket by the party. Thereupon, the petitioners contested the election as an independent candidate. It was submitted by Mr.Patel that bare reading of FIR would show that dispute is essentially of civil nature. Above all, it was submitted that FIR does not disclose any cognizable offence and therefore, relief as prayed for by the petitioners should be granted.
8. Learned Additional Public Prosecutor Ms.C.M.Shah opposing the present petition, has made available the report of P.I.Visnagar. Said report is taken on record. It was submitted that there are more than couple of criminal cases pending against the present petitioners, therefore, considering the seriousness, this Court should not interfere in the present case at this stage.
9. Learned advocate Mr. Haresh Joshi, for the original complainant has drawn attention to detailed affidavit inreply filed by the complainant. Relying on the same, it was submitted that there is case for trial against the present petitioners, therefore, petition should be rejected. Learned advocate has drawn attention to the case of State of A.P. Versus Aravapally Venkanna and Anr. reported in 2009 (2) G.L.H. 572 and other case laws.
10. On the next date, i.e. today, learned Senior Advocate Page 4 of 16 R/CR.MA/663/2008 JUDGMENT Mr.P.M.Thakkar appears for original complainant. Learned Senior Advocate in his brief submissions has submitted that any person can put into motion criminal machinery when any cognizable offence is committed. It was submitted that for registering FIR, no preliminary inquiry is required to be conducted. Further, in the present case, the say of the complainant is not ipse dixit - but it is supported by two inquiry reports. It was submitted that said inquiry report has become final. It was pointed out that these irregularities were noticed in audit report. Pursuant to that, inquiry was carried out wherein present petitioners were given opportunity to offer explanation, however, petitioners have opted to remain absent. The Inquiry Officer has concluded against the present petitioners. The complainant in his affidavit has specifically asserted that said inquiry has become final. The FIR based on such inquiry report, ought not to be interfered with by this court at this stage.
11. I am inclined to consider the case as under ; Case of prosecution is for offence under sections 406, 409, 420, 465, 468, 471, 477A and 114 of IPC. Inquiry is carried out under section 93 of the Act. Section 93 of the Act contemplates different situations in which Registrar may order an inquiry. Learned advocates for both the sides have referred and relied on Section 93 of the Act and inquiry report and it reads thus : "93. Power of Registrar to assess damages against delinquent, promoters, etc. (1) Where, in the course of or as a result of an audit under Section 84, or an inquiry under Section 86 or an Page 5 of 16 R/CR.MA/663/2008 JUDGMENT inspection under Section 87, or the winding up of a society, the Registrar is satisfied on the basis of the report made by the auditor or the person authorised to make inquiry under Section 86, or the person authorised to inspect the books under Section 87, or the Liquidator under Section 110, that any person who has taken any part, in the organisation or management of the society or any deceased,or past or present officer of the society has, within a period of five years prior to the date of such audit, inquiry, inspection or order for winding up, misapplied or retained, or become liable or accountable for, any money or property of the society, or has been guilty of misfeasance or breach of trust in relation to the society, the Registrar or a person authorised by him in that behalf may investigate the conduct of such person or persons and after framing charges against such person or persons, and after giving a reasonable opportunity to the person concerned and in the case of a deceased person to him representative who inherits his estate, to answer the charges, make an order requiring him to repay or restore the money or property or any part thereof, with interest at such rate as the Registrar or the person authorised under this section may determine, or to contribute such sum to the assets of the society by way of compensation in regard to the misapplication, retention, misfeasance or breach of trust, as he may determine.
(2) The Registrar or the person authorised under subsection (1) in making any order under this section, may provide therein for the payment of the costs or any part thereof of such investigation, as he thinks just, and he may direct that such costs or any part thereof shall be recovered from the person against whom the order has been issued.
(3) This section shall apply, notwithstanding that the act is one for which the person concerned may be criminally responsible."
Page 6 of 16R/CR.MA/663/2008 JUDGMENT
12. At the time of hearing, it was pointed out that in a inquiry under section 93 of the Act, the petitioners have opted not to remain present. Inquiry Officer has recorded that though opportunity was given to the office bearer to submit explanation, however, on the date of hearing, none has remain present. Inquiry Officer also records that the Manager had made available the necessary record for inspection. Beside that, it was submitted by learned advocate for the respondent that inquiry report has become final and the same is not challenged either in appeal or before any other forum. On this point, learned Senior Advocate Mr.Thakkar has submitted that original complainant has made specific assertion about non filing of appeal by the petitioners against the report of Inquiry Officer. This assertion of the complainant in affidavit has remain uncontroverted. While Mr.Patel, at the time of hearing has submitted that the petitioners have filed an appeal before the appropriate authority alongwith the application for condonation of delay, same is pending. Be that as it may, we may take it that inquiry report has become final. In the circumstances of the case, is it possible to infer from those inquiry reports commission of any criminal offence by any of the petitioner ? Learned advocate Mr.B.S.Patel for the petitioners had drawn attention to the case of Laxmidas Kurjibhai & Ors. Versus District Registrar Cooperative Societies & Ors. reported in 2003 (1) GLR 462, wherein considering the section 93 alongwith section 65 and 66 of the Act, 1961, this Court has held that an expenditure may not be strictly legal, but where the General Body approved the proposal and pursuant thereto the expenditure was incurred, it is not proper to Page 7 of 16 R/CR.MA/663/2008 JUDGMENT hold anybody responsible under section 93 of the Act.
13. Conclusion in both the inquiry reports are same. As referred above two reports relate to two different period i.e. two different years. In the later report, two additional points are referred. They are : one, disposal of contessa car and second, payment of higher interest to certain account holders. As to the former point, it is stated that the society has purchased contessa car at price of Rs. 4,10,600/. The said car now sold at Rs.50,000/. It is say of the Inquiry Officer that thereby the damage and loss is caused to the society. Then, payment of higher rate of interest to certain account holders is another head of loss, identified by the Inquiry Officer.
13.1 Inquiry under Cooperative Societies Act and initiation of criminal proceedings are two distinct matters. This would be apparent from subsection (3) of section 93 of the Act also. On same set of facts, there can be inquiry under section 93 of the Act and also criminal case can be lodged against the person concerned. In this regard, it may be borne in mind that consideration for initiation of inquiry and consideration for initiation of criminal proceedings would be different. That being so, Inquiry Officer holding against the present petitioners by itself would not make much difference or would not make out case for criminal action. It is say of the complainant that despite order passed by Inquiry Officer, petitioners have not deposited the amount and thereby committed breach of trust and other offences.
Page 8 of 16R/CR.MA/663/2008 JUDGMENT
14. Section 406 and 409 relates to criminal breach of trust. Generally speaking criminal breach of trust involves anyone of the four positive acts i.e. misappropriation, or conversion or user or disposal of the property. Taking assertion made by the complainant in the complaint, as it is, and read it with inquiry reports can it be said that on the basis of allegation made by the complainant in complaint, petitioners have committed offence of criminal breach of trust ?
15. Learned advocate for the original complainant has drawn attention to State of State of A.P. Versus Aravapally Venkanna and Anr. (supra) (S.C.). Reliance was placed on Para. 8, it was held that while exercising powers under section 482 of Cr.P.C., Court does not function as Court of the appeal or revision. It appears to be case under Prohibition and Excise Act and also under I.P.C. It was held that inherent power should not be exercised to stifle a legitimate prosecution. That it is not necessary that there should be meticulous analysis of the case before the trial to find out whether the case would end in conviction or acquittal. In the facts of that case, it was found that FIR discloses commission of an offence. Similarly, in the case of State of Andhra Pradesh versus Vangaveeti Nagaiah reported in (2009) 12 SCC 466. It was held that quashing of FIR is not justified inasmuch as, in that case it was possible to say that FIR does disclose the commission of an offence.
16. It is not the case of the complainant that petitioners have committed misappropriation. Going even by dictionary meaning, no allegation to believe case of misappropriation.
Page 9 of 16R/CR.MA/663/2008 JUDGMENT Further, fastening of criminal liabilities would only takes place if there is dishonest intention. Nor it is the case of use of property by any of the petitioners or disposal of the property. No such allegation in the circumstances of the case, it cannot be said that petitioners have committed conversion of the property, therefore, no case of criminal breach of trust.
17. Case of prosecution is also of cheating. In order to constitute an offence under section 420 of IPC, there should not only be cheating but as a consequence of such cheating, the accused should have dishonestly induced the person deceived, either to deliver any property to any person or he should have dishonestly induced such deceived person to make or alter or destroy wholly or in part valuable security or anything signed or sealed and which is capable of being converted into valuable security.
18. In the present case, it is not the case of complainant that any of the accused had tried to deceive, the complainant or the society by making false and misleading representation or by any other action or omission nor it is his case that they offer him any fraudulent or dishonest inducement to deliver any property. In the circumstances of the case, it is not possible to believe that petitioner/s by fraudulent action have made society to deliver any property. It cannot be said that any of the accused person by conducting the affairs of the society and thereby, placing as security deposit before North Gujarat University had deceived the complainant or society in any manner. Nor it can be said that by Page 10 of 16 R/CR.MA/663/2008 JUDGMENT giving loan, at a concessional rate to the staff members of the society, the petitioners have deceived the society. In this regard reference may be made to important submissions made by learned Senior Advocate Mr.Thakkar. It was submitted that it is kind of largesse to the staff employees with the purpose. That it is convenient way to keep the staff member silent and happy. That it make easier for the petitioners to carry out their "other" activities by such concession. Attractive submissions is not possible to accept because there is no such allegation i.e. deriving personal benefit by deceiving the society. No such cumulative inferences, as suggested, can be drawn. Further, it was rightly pointed out that decision of giving loan at a concessional rate to the staff, is not decision of petitioners but the same was passed in General Board meeting. It is different thing that affairs of the society could have been managed in better fashion. However, commission of criminal breach of trust or cheating etc. is not possible to infer from the circumstances of the case.
19. As to the commission of offence under section 465, 468, 471 of IPC i.e. offence of forgery is concerned, section 463 of IPC defines forgery, it says : "463. Forgery. [Whoever makes any false documents or false electronic record or part of a document or electronic record, with intent to cause damage or injury], to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into any express or implied contract, or with intent to commit fraud or that fraud may be committed, Page 11 of 16 R/CR.MA/663/2008 JUDGMENT commits forgery."
20. Section 464 defines making false documents. In short, making of false documents take place in either of following three situations. One - if a person makes or execute a document claiming to be someone else or authorized by someone else. Second - person alters or tampers with the documents or, third - a person obtain a document by practicing deception on a person who is not in control of his sense i.e. if such person is of unsound mind or is in the state of intoxication.
21. Considering the allegations made by the complainant in the complaint, it is not possible to say that in the present case, prima facie case of forgery or making false document exists against the petitioners. In fact no such case alleged by the complainant. The allegations are not that anyone of the petitioners either himself or all the petitioners themselves have executed any document wherein they have introduced themselves as someone else. Nor there is any allegation of tampering with any document in any manner nor there is case that they have carried their act by practicing deception on a person who is not in control of himself.
22. FIR also refers section 477A of IPC. It says of offence of falsification of accounts. Considering the provisions and the allegations made by the complainant about the alleged irregularities by the petitioners, it can be said that section 477A is not even remotely attracted in the present case. No case of making false accounts.
Page 12 of 16R/CR.MA/663/2008 JUDGMENT
23. At the time of hearing, strong reliance was placed on inquiry report and on the affidavit of the complainant. No case of cheating, forgery or criminal breach of trust. As observed above, consideration of action under Section 93 of the Act and arising of criminal liability for the said act under the Code are two different thing. In the complaint and also at the time of hearing, strong reliance was placed on inquiry report. On perusal of report, it would appear that it does not discuss or even refer to the relevant record made available by the Manager of the society to the to the Inquiry Officer. That apart, say of the complainant that petitioners have committed criminal breach of trust and also other offences by not making payment as per the order passed by Inquiry Officer, is clearly erroneous. Initiation of criminal proceedings mainly on that ground is bad and erroneous. There is a provision for enforcement of recovery of dues of the society (Section 157). Further Chapter XII, deals with offences and penalties. Section 147 mentions various offences under different provisions of the Act. It does not mention Section 93 of the Act. Non payment pursuant to order passed under Section 93 of the Act is not made penal. It may be stated that while all criminal breach of trust may entail civil liability as well but all civil action would not attract criminal action. Section 93 of the Act says about criminal breach of trust. How and when criminal liability would be attracted ? Intention is a gist of an offence of breach of trust. Sans intention there would not be offence of breach of trust. It is true that intention would be exposed only in evidence, however evidence in any given case would be on the line on the allegation made about the offence and Page 13 of 16 R/CR.MA/663/2008 JUDGMENT evidence would not be outside the allegation or foreign to it. Hence, the reasonable guess and inferences about the intention may be drawn from the case advanced by the prosecution i.e. from the allegation. It has to make out prima facie case that needs trial. Considering the material on record, such "intention" that would attract the offence of breach trust is not possible to infer. What is said for breach of trust would be applicable equally to the offence of forgery and cheating. Forgery also requires "intention to defraud" (Section 463) and cheating too require intention. All deception do not amount to cheating. In order to constitute cheating deception must be with fraudulent intention. In short intention rules of the offences alleged herein.
24. It may be that the petitioners may not have conducted the affairs of the society in ideal manner. That society could have been managed in better way. However, bearing in mind the ideal, standard or any role model of the society, petitioners cannot be held guilty for the commission of criminal act as alleged against them by drawing inference. That by comparing with ideal, standard or any role model society, acts and functioning of the petitioners cannot be assessed. Irregularities or lapses found in audit report is one thing, however, it would be erroneous to say that since there is a room for better arrangement of financial affairs, person incharge of such affairs at the relevant time are liable for action under the criminal law. There is no allegation that would justify initiation of action under criminal law. The case of prosecution is not possible to accept, even prima facie. Therefore, Page 14 of 16 R/CR.MA/663/2008 JUDGMENT interference is called for.
24.1 It was stated at the time of hearing that there are couple of cases pending against the petitioner/s for offence under section 465 and offence analogous to it. Learned advocate for the petitioners has conceded this. Merely because there are other cases pending against the petitioner/s, case against the petitioners herein cannot be believed. Submission of learned APP that weightage should be given to the said fact, cannot be accepted.
25. Learned advocate Mr.Joshi, for the complainant has drawn attention to Ravindra Kumar Madhanlal Goenka and Another versus Rugmini Ram Raghav Spinners Private Limited reported in (2009) 11 SCC 529. It appears that in that case, complaint was filed under section 406, 420 and 384 of IPC. The accused in support of his prayer for quashing, sought to produce certain material and placed reliance on it, disapproving this it was held that when there are prima facie material available against the accused, material furnished by the defence cannot be looked into that the accused would have ample opportunity to raise all the issues urged now at a appropriate later stage in trial. This decision has no applicability to the present case.
26. In Madhavrao Jiwaji Rao Scindia and another etc. versus Sambhajirao Chandrojirao Angre and others etc. reported in AIR 1988 SC 709, it was held : "The legal position is wellsettled that when a prosecution at the initial stage is asked to be quashed, the test to be applied by the Court is as to whether the uncontroverted allegations as made prima facie establish the offence. It is also for the Court to take into consideration any Page 15 of 16 R/CR.MA/663/2008 JUDGMENT special features which appear in a particular case to consider whether it is expedient and in the interest of justice to permit a prosecution to continue. This is so on the basis that the Court cannot be utilised for any oblique purpose and where in the opinion of the Court chances of an ultimate conviction are bleak and, therefore, no useful purpose is likely to be served by allowing a criminal prosecution to continue, the Court may while taking into consideration the special facts of a case also quash the proceeding even though it may be at a preliminary stage."
27. The petitioners herein are far better placed than the accused in Madhavrao Jiwaji Rao Scindia and another etc. case (supra). In the cited case, there was allegations against the accused that document of tenancy is forged one. Therein, it was held that dispute is of civil nature.
27.1 The question raised in the opening part of the judgment may be answered thus ; merely because order is passed in inquiry under Section 93 of the Act, it would not be proper and legal to initiate criminal proceedings only on that basis. There should be germs on record for initiation of criminal proceeding against the person concerned. Such virus may be in the form of facts of the case or in the form of circumstance of the case pointing towards the needs and justification to resort to such remedy.
28. In view of above, the present petition is allowed. FIR filed before Visnagar Police Station being FIR No. I - C.R. No.11 of 2008 is hereby quashed and set aside. Rule is made absolute.
(R.D.KOTHARI, J.) Amar Page 16 of 16