Allahabad High Court
U.P. Cylinders And Containers Pvt. Ltd. ... vs State Of U.P. And Others on 13 February, 2019
Author: Ajit Kumar
Bench: Ajit Kumar
HIGH COURT OF JUDICATURE AT ALLAHABAD A.F.R. Reserved on 06.02.2019 Delivered on 13.02.2019 Court No. - 72 Case :- MATTERS UNDER ARTICLE 227 No. - 4650 of 2018 Petitioner :- U.P. Cylinders And Containers Pvt. Ltd. And Another Respondent :- State Of U.P. And Others Counsel for Petitioner :- Girija Shanker Srivastava Counsel for Respondent :- Govt. Advocate,Vikas Budhwar Hon'ble Ajit Kumar,J.
1. Heard learned counsel for the parties.
2. By means of this petition under Article 227 of the Constitution of India, the petitioners have assailed the order dated 16th April, 2009 passed by the Additional Sessions Judge, Room No.17, Agra in Revision No.- 50 of 2009 and the order dated 24th December, 2008 passed by the Judicial Magistrate-I, Room No.-1, Agra dismissing the protest petition of the petitioners and accepting the final report submitted by the police under Section 173 (2) of the Code of Criminal Procedure, 1973 in respect of Sections 420, 467, 468 and 478 of Indian Penal Code complained of .
3. Briefly stated the facts of the case are that the petitioners and the respondent- Hindustan Petroleum Corporation Ltd. entered into an agreement for production of LPG cylinders to the corporation on 15th June, 1982. As per the terms and conditions of the agreement for the purposes of production and manufacture of cylinders the corporation was to supply necessary raw materials in terms of steel to meet the requirements of the production. In all 54,000 cylinders were produced and delivered between July, 1982 to March, 1983. However, in spite of necessary supply of raw materials, necessary number of cylinders could not be supplied as per the original schedule and so the corporation decided to further extend the period vide change order dated 07.09.1983, However, even by the extended period supply could not be made by the applicant and resultantly arbitration proceedings were drawn as per the terms and conditions of the agreement at the end of the Hindustan Petroleum Corporation Ltd. by means of Arbitration Suit No.1391 of 1985 instituted in the Bombay High Court. The Bombay High Court entertained the arbitration case and appointed the arbitrator but before the arbitrator could enter into the reference to adjudicate the issues between the parties arising out of the discord over compliance of the terms and conditions of the agreement, the parties entered into inter se agreement on 23th July, 1986 in the arbitration proceeding itself and as per the revised terms reached between the parties, it was agreed by the petitioners that they shall make requisite supply of cylinders and shall bear the cost of shortage and damages. It was further agreed that beyond the period of 90 days of the agreement, the corporation-plaintiff, opposite parties herein, shall not be bound to took delivery of cylinders. The said interim consent, the agreement so titled, was accepted by the Bombay High Court in the arbitration case and the suit stood disposed of in terms of interim consent vide order dated 27th October, 1988.
4. It is admitted in the writ petition that the petitioners could not make further supply of cylinders though agreed in terms of interim consent. According to the corporation such a situation led/forced it to forfeit the security amount.
5. The petitioners under the above circumstances took recourse to the criminal prosecution by lodging first information report through the application under Section 156 (3) of the Code of Criminal Procedure, 1973, in which the police submitted the final report. The petitioners filed the protest petition, however, final report was accepted by the learned Magistrate and the protest petition was dismissed vide impugned order dated 24th December, 2008. The revision petition filed against the said order by the petitioners also came to be dismissed vide order dated 16th April, 2009 and hence, this writ petition challenging both the above orders.
6. The grounds raised by the petitioners is that Indian Standard Institute denied to certify the cylinders and resultantly the respondents did not accept the supply and without informing the petitioners and without understanding the problems which were beyond the control of the petitioners forfeature of the security amount was not only wholly illegal but a fraud and clear case of cheating, an act punishable under the Indian Penal Code, 1868.
7. The arguments are of two folds: the first is that the case of the petitioners was covered by 'force majeure' clause of the terms of agreement; and the second point is that when the certificate of renewal was not granted by Indian Standard Institute by 12th December, 1984, the consent agreement was got fraudulently entered into on account of misrepresentation and fraud committed by corporation going beyond the arbitration clause, it was case of fraud and cheating and deliberate one and for that respondents are liable to be criminally prosecuted.
8. Per contra, the argument advanced by the learned counsel for the respondents is that entire contract was written one and as per the terms of agreement respondents were to make necessary supply of cylinders. The attention was drawn of the Court to the documents by which the necessary supply of requisite cylinders were to be made to the petitioners in time and further the change order by which period from March, 1983 was further extended up to the September, 1984 vide letter dated 7th September, 1983 which has been filed as Annexure- CA-1 to the counter affidavit filed by the respondent No.5, and yet it is contended that petitioners failed to make necessary supply. It is argued that the non-renewal of certification by the Indian Standard Institution was done only in December, 1984 i.e. 12.12.1984 whereas the time was extended much prior to that expired before that date. It is further argued that as per the interim consent to which the petitioners are party and signatory on the basis of which arbitration proceedings were closed, cannot be held to be an act of fraud or cheating and it was not open for the petitioners to raise any grievance. It is, therefore, urged that it is a case of contract in which relevant arbitration clause was invoked and if the petitioners had any grievance against the consent order they could have approached same court again and there is no element of criminality involved here which may warrant criminal prosecution.
9. I have perused the record and have examined the orders of the court below.
10. From the bare reading of the pleadings and the documents that have been appended along with the writ petition, it clearly transpires that agreement was in writing between the parties and there was an arbitration clause for the parties to raise grievance, if any. Clause 14 of the agreement dated 15.06.1982 reads as under:-
"14. Arbitration: In the event of any question of dispute arising under these conditions or in connection with this contract (except as to any matters the decision of which is specially provided for in these conditions) the matter in dispute shall be dealt with in accordance with Indian Arbitration Act, 1940 and the rules framed there under and any statutory modification or re-enactment thereof and the rules made there under and for the time being in force."
11. It is admitted to the petitioners that they could not make necessary supply within time as was required as per the agreement and it was not disputed by them that necessary raw materials were supplied well within time. Learned counsel for the petitioners also could not dispute that the initial time period of supply of the requisite supply of cylinder was from July, 1982 to March, 1983 which came to be extended by a change order issued by the corporation on 7th September, 1983. The change order runs as under:-
"This change order is issued to extend the delivery period of our above order upto end September, 1984, to enable you supply the entire balance quantity of cylinders against our above purchase order.
Rest of the terms and conditions of our original order remain unchanged.
Reference: Your telegram dated 26-8-1983 and our letter PUR/ SKC dated September 7, 1983.
Please acknowledge receipt of this change order."
12. It is worth noticing at this stage that Indian Standard Institute passed the order only on 12th December, 1984 refusing the renewal license and also directed that no more product will be marked as ISI certified. Since this order was passed only on 12th December, 1984 and the changed work order as quoted hereinabove placed the last date as September, 1984 vide order date as 7th September, 1983, it does not lie in the mouth of the petitioners to suggest that it is a case of non-renewal of license of the petitioners by ISI as the main cause that the petitioners could not produce and make necessary supply of cylinders as per the work order. Further, I find that the interim consent written between the parties carried many clauses and of which clause 11, 12, 13, 14, 15, 16 and 17 are very important and are reproduced hereunder:-
"11. Agreed and declared that in respect of cylinders supplied by the Defendants to the Plaintiffs as mentioned in Clauses 7 to 10 above, the Plaintiffs shall pay to the Defendants fabrication charges at the rate of Rs.95/- per cylinder, the Defendants shall submit to the Plaintiffs bills for fabrication costs, together with receipts from Plaintiffs' Plant Manager at Shakurbasti in respect of the quantity of cylinders mentioned therein. Such bills will be paid within 15 (fifteen) days from the date of receipt thereof.
12. The Defendants agree that the Plaintiffs suffered damages (inclusive of loss/ shortage of their imported steel mention in Clause 3 above and their legal expenses) in the sum of Rs.2,68,224.12/-
13. Agreed and declared that after adjusting the said damages in the said sum of Rs.2,68,224.12/- against the sum of Rs.10,55,000/- received by the Plaintiffs from State Bank of India, Mathura, a balance sum of Rs.7,86,775.88/- is available for refund by the Plaintiffs and for appreciation toward further damages, if any, suffered by the Plaintiffs pursuant to Clause 15 and 16 hereof. The Defendants shall not be entitled to receive any interest on the said sum of Rs.7,86,775.88/- or any part thereof.
14. Agreed and declared that the sum of Rs.786,775.88/- mentioned in Clause 13 hereof will be refunded only upon the Defendants fabricating and supplying to the Plaintiffs 3967 Cylinders duly fitted with Valves in the manner and within the time stipulated hereinabove and after complying with the provisions of Clause 16 hereof.
15. Agreed and declared that if, within the stipulated time of 90 days from the date hereof, the Defendants fail to deliver to the Plaintiffs 3967 cylinders, duly fitted with valves or any party thereof as provided above, the Defendants shall return to the Plaintiffs all the unutilized steel, out of the quantity of 79.34 MT mentioned in Clause 3 above, on the basis of 1 MT of steel for every 50 cylinders not delivered and the plaintiffs shall be further entitled to appropriate from the sum of Rs.7,88,775.88/-, further damages, for cylinders not delivered, incurred by the Plaintiffs.
16. Agreed and declared that after the stipulated time of 90 (ninety) days the Defendants shall account for and return to the Plaintiffs, the valves, if any, lying unutilized with the Defendants and that, if the Defendants fails to do so, the Plaintiffs shall be entitled to appropriate from the said sum of Rs.7,86,775.88/-, an amount equivalent to the replacement cost of the Valves, calculated at Rs.30/- per valve.
17. In view of these Consent Terms, the learned Arbitrator, Mr. Justice Tulza Purkar need not for the present enter on the reference in terms of the order passed on the 24th March, 1986 by this Hon'ble Court in the present suit."
13. Considering the above terms and conditions of the revised interim consent it clearly transpires that the petitioners having failed to make necessary requisite supply of cylinders well within time as per the terms and conditions originally agreed for the revised consented terms but then again failed to comply the same and then instituted criminal proceedings against the opposite parties by lodging first information report. It is sought to be urged that causes for non-production of cylinders were much beyond the control and, therefore, in view of the clause 6 of the agreement, entire action by the respondents was wholly illegal and tainted with ill motive and no subsequent consent would have overridden or watered down impact of clause 6 .
14. For a better appreciation of the provision of clause 6 as contained in the original agreement between the parties, the same is reproduced hereinunder:-
"6. Force Majeure: Delivery of chylinders by manufacturers and acceptance of same by HPCL are both subject to force Majeure as detailed below:-
If at any time during the continuance of the contract the performance in whole or part by either party or any obligation under this contract shall be prevented or delayed by reasons or any war, hostility, acts of public enemy, civil commotion, sabotage, fire, flood, explosion, epidemics, quarantine (statutory restrictions), strikes , lock-outs, go-slow by labour or acts of God (hereinafter referred to as events) then provided notices or the happening of any such event/s is given by either party to the either within 21 days from the date of occurrence thereof, neither party shall by reason of such events be entitled to terminate this contract nor shall either party have any claim for damage against the other in respect of such non-performance of delay in performance and deliveries under the contract shall be resumed as soon as practicable after such event has come to an end or ceased to exist. Decision of the Director-marketing, HPCL as to whether the deliveries have been so resumed or not, shall be final and conclusive. Force Majeure will also include non-availability of LPG Body steel/ valves, and breakdown of Main press, performance and Main Transformer for which accessory proof should be furnished to HPCL's satsifaction. In case of temporary inability of HPCL to accept Cylinders, HPCL shall not be responsible for any losses sustained by Cylinder Manufactures. "
15. From the bare perusal of the aforesaid force majeure clause, I do not find that there existed any such condition as argued by learned counsel for the the applicant, nor, the interim consent even referred to the order of ISI dated 12th December, 1984. What is sought to be urged as force majeure, in the opinion of the Court that there are no such traces of such an element in the entire chain of events.
16. The element of fraud, forgery and cheating, it is strenuously argued by the learned counsel for the petitioners, have not been considered and appreciated and which according to him is clearly borne out of the records, while accepting the final report. I find that looking to the factum of the interim consent reached between the parties before the arbitrator Justice Tulza Purkar, the plea of fraud, forgery and cheating is certainly not tenable and no such element is there to constitute offences complained of, is reflected from the records.
17. Learned counsel for the petitioners has relied upon the judgment of this Court in the case of Tapas Adhikari v. State of U.P. and another, 2009 (65) ACC 850, Prem Shankar Yadav v. State of U.P. and others, 2009 (65) ACC 852 and the judgment dated 24th October, 2008 passed by the Apex Court in the case of R. Kalyani v. Janak C. Mehta, LAWS(SC)-2008-10-95 and also in the case of Arun Bhandari v. State of U.P. and others, LawSuit(SC) 21. There is no doubt regarding the proposition that merely because dispute is if civil nature one cannot get absolved of criminal liability and criminal proceeding and civil proceeding both can run together. The agreement and revised order (changed order) and the interim consent that has been reached between the parties, show that on every occasion the Corporation tried to help the respondents to reel out of the mess and the petitioners themselves having admitted their liability to pay for damages in the event of default of supply of cylinders, they were liable to face consequences and now they cannot be permitted to raise the plea of fraud and misrepresentation nor, they can be permitted to question such consent as one result of fraud and, therefore, in the opinion of the Court, the allegations in the application under Section 156(3) of the Code of Criminal Procedure, 1973 and the protest petition, turns out definitely to be a case of afterthought.
18. Vide para 7 of the judgment of R. Kalyani v. Janak C. Mehta (supra), the court has quoted another judgment of Apex Court in Rajesh Bajaj v. State of NCT of Delhi and others, 1999 3 SCC 259 and runs as under:
"7. After quoting Section 415 of IPC learned judges proceeded to consider the main elements of the offence in the following lines:
"A bare reading of the definition of cheating would suggest that there are two elements thereof, namely, deception and dishonest intention to do or omit to do something. In order to bring a case within the first part of Section 415, it is essential, in the first place, that the person, who delivers the property should have been deceived before he makes the delivery; and in the second place that he should have been induced to do so fraudulently or dishonestly. Where property is fraudulently or dishonestly obtained, Section 415 would bring the said act within the ambit of cheating provided the property is to be obtained by deception....................."
19. Applying the above definition to the facts of the present case, I find after the changed order was passed on 07.09.1983 and the requisite supply of cylinders were not made even by extended period of March, 1984, and then arbitration proceedings were drawn, it was open for the present applicants to have contested the arbitration case. However, instead of contesting the same, the way they entered into the consent agreement with strict conditions favouring the corporation that had already suffered the loss due to non supply of requisite cylinders in time, it shows that applicants themselves took the opportunity to explore for oxygen for their already sinking away production unit. Clauses 13, 14 and 15 quoted above in the earlier part of judgment are quite reflective of the same. Thus none of the two ingredients of cheating and fraud are traceable in the entire episode of agreement to arbitration then forfeiture of security amount in the present case.
20. Learned counsel for the respondents has relied upon the judgment of the Apex Court in the case of Bal Kishan Das v. P.C. Nayar, 1991 (2) SCC 412 whereby the Court has even observed that in cases were in arbitration proceeding the matter is referred and pending, it would be purely a civil dispute and thus quashed the criminal proceedings. Learned counsel for the respondents has also relied upon the judgment of the Apex Court in the case of Binod Kumar and others v. State of Bihar and another, 2014 (10) SCC 663 wherein the Apex Court has observed thus:-
"11. Referring to the growing tendency in business circles to convert purely civil disputes into criminal cases, in paragraphs (13) and (14) of Indian Oil Corporation v. NEPC India Ltd., (2006) 6 SCC 736, it was held as under:-
"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. Such a tendency is seen in several family disputes also, [pic]leading to irretrievable breakdown of marriages/families. 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 through criminal prosecution should be deprecated and discouraged. In G. Sagar Suri v. State of U.P., (2000) 2 SCC 636 this Court observed: (SCC p. 643, para 8) "It is to be seen if a matter, which is essentially of a 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 the 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.'
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. One positive step that can be taken by the courts, to curb unnecessary prosecutions and harassment of innocent parties, is to exercise their power under Section 250 CrPC more frequently, where they discern malice or frivolousness or ulterior motives on the part of the complainant. Be that as it may."
12. Coming to the facts of this case, it is no doubt true that the dispute relates to the non-payment of bill amount of Rs.34,505/- pertaining to the contract executed by respondent 2. It is also pertinent to note that respondent 2 preferred CWJC No. 5803 of 1999 wherein an order dated 5.4.2000 was passed by Patna High Court directing the Vice-Chancellor of Bhagalpur University to release the balance amount of Rs.34,505/- with interest at the rate of 18% w.e.f. 1.10.1994 till the date of payment and pay the interest at the rate of 11% on the sum of Rs.14,000/- from 1.10.1994 till 9.12.1996. Aggrieved by the said order, Bhagalpur University preferred LPA No.716/2000 wherein it was directed that since it was not a statutory contract, no direction for payment of money could be issued and the respondent No.2 can pursue other remedies available in law for the recovery of money. Aggrieved by the said order, respondent No. 2 filed SLP(C) No... CC 4832 of 2001 which was dismissed as withdrawn by this Court by Order dated 30.7.2001 granting him liberty to approach the appropriate forum. Respondent No.2 thereafter filed Money Suit No. 2/2002 before the Court of Sub Judge 1st Court, Lakhisarai on 20.4.2002 for recovery of Rs. 69,010/- i.e. double the amount of Rs.34,505/- and the said suit is pending. Second appellant representing the university had also filed Money Suit No.2/2006 before the same Court on 4.2.2006 claiming a sum of Rs.1,44,437/- with interest against the second respondent-contractor. These acts of the parties show that the parties have already had recourse to the civil remedies that are available to them in law.
15. Section405 IPC deals with criminal breach of trust. A careful reading of the Section 405 IPC shows that a criminal breach of trust involves the following ingredients:
(a) a person should have been entrusted with property, or entrusted with dominion over property;
(b) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or wilfully suffer any other person to do so;
(c) that such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust.
16. Section 406 IPC prescribes punishment for criminal breach of trust as defined in Section 405 IPC. For the offence punishable under Section 406 IPC, prosecution must prove:
(i) that the accused was entrusted with property or with dominion over it and
(ii) that he (a) misappropriated it, or (b) converted it to his own use, or (c) used it, or (d) disposed of it.
The gist of the offence is misappropriation done in a dishonest manner. There are two distinct parts of the said offence. The first involves the fact of entrustment, wherein an obligation arises in relation to the property over which dominion or control is acquired. The second part deals with misappropriation which should be contrary to the terms of the obligation which is created.
17. Section 420 IPC deals with cheating. Essential ingredients of Section 420 IPC are:-
(i) cheating;
(ii) dishonest inducement to deliver property or to make, alter or destroy any valuable security or anything which is sealed or signed or is capable of being converted into a valuable security, and
(iii) mens rea of the accused at the time of making the inducement.
18. In the present case, looking at the allegations in the complaint on the face of it, we find no allegations are made attracting the ingredients of Section 405 IPC. Likewise, there are no allegations as to cheating or the dishonest intention of the appellants in retaining the money in order to have wrongful gain to themselves or causing wrongful loss to the complainant. Excepting the bald allegations that the appellants did not make payment to the second respondent and that the appellants utilized the amounts either by themselves or for some other work, there is no iota of allegation as to the dishonest intention in misappropriating the property. To make out a case of criminal breach of trust, it is not sufficient to show that money has been retained by the appellants. It must also be shown that the appellants dishonestly disposed of the same in some way or dishonestly retained the same. The mere fact that the appellants did not pay the money to the complainant does not amount to criminal breach of trust."
21. Again the chapter of contract and business agreement in terms of demand and supply after a lot of ifs and buts came to a close with the expiry of 90 days from the order dated 24.10.1988 by the Bombay High Court accepting the interim consent and closing the arbitration suit. The forfeiture of security took place pursuant thereto for non compliance and so any complaint thereof after 19 years in 2007 is certainly with ulterior motive. Here in a case where the applicants chose to remain silent not to question arbitration case, makes it clear that they have initiated these criminal proceedings knowingly that the merit of their claim has run out of even civil remedies otherwise available in common law. Such grievance therefore, is not genuine and has no justification and such criminal proceedings are totally unwarranted in the given facts and circumstances of the present case.
22. Further admittedly the petitioners are chiefly responsible for non supply of requisite materials within time and, moreover they having failed to obtain certificate of quality standard from ISI, the respondents were fully justified in not accepting cylinders with no ISI mark. The LPG cylinders are mainly for public consumption and so no compromise with standard could have been done. I do not find any element of criminality in the matter in issue rather I find that this is a clear case of abuse of process of law and court at the end of the petitioners and, therefore, I do not find any justification to interfere with the orders passed by the court below rejecting the protest petition.
23. The petition lacks merit and is, accordingly, dismissed.
Order Date :- 13.2.2019 Atmesh